Make your own free website on
Introduction to Information Systems
Session 11
Session 1
Session 2
Session 3
Session 4
Session 5
Session 6
Session 7
Session 8
Session 9
Session 10
Session 11
Session 12
Session 13
Session 14
Session 15

Objectives: Electronic Commerce Fundamentals

  1. Give examples of several ways that companies can implement business-to-consumer and business-to business electronic commerce on the Internet.
  2. Identify and give examples of several ways that electronic commerce applications provide significant business value to a company and its customer
  3. Discuss several electronic payment challenges and solutions for electronic payment security on the Internet.
A Real World Case
B. Electronic Commerce

1. Electronic commerce encompasses the entire online process of developing, marketing, selling, delivering, servicing, and paying for products and services. The Internet and related technologies and E-commerce web sites on the World Wide Web serve as the technology and business platform for E-commerce among internet worked communities of customers and businesses, including the use of Internet technologies to improve and integrate the supply chain relationships and process among business partners. (See figure 2.1)

<figure 2.1 Trends in B2C and B2B E-commerce, and the business strategies and value driving these trends>

2. Business-to Consumer (B2C) E-Commerce. In this form of electronic commerce, businesses must develop attractive electronic marketplaces to entice and sell products and services to consumers. For example, many companies offer E-commerce web sites that provide virtual storefronts and multimedia catalogs, interactive order processing, secure electronic payment systems, and online customer support.

3. Business -to Business (B2B) E-Commerce. This category of electronic commerce involves both electronic business marketplaces and direct market links between businesses. For example, amy companies offer secure Internet or extra net E-commerce web sites for their business customers and suppliers. Others may rely on electronic data interchange (EDI) via the Internet or extranets for computer-to computer exchanges of E-commerce documents with their larger business customers and suppliers. Also very important are B2B E-commerce portals that provide auction and exchange markets for businesses.

4. Consumer-to -Consumer (C2C) E-Commerce. The huge success of online auctions like e-Bay, where consumers (as well as businesses) can buy and sell with each other in an auction process at an auction web site, makes this E-commerce model an important E-commerce business strategy. Thus, participating in or sponsoring consumer or business auctions is an important E-commerce alternative for B2C or B2B E-Commerce. Electronic personal advertising of products or services to buy or sell by consumers at electronic newspaper sites, consumer E-Commerce portals, or personal web sites is also an important form of C2C E-commerce.

C. Business -to Consumer E-Commerce

1 Most people agree that an effective Web site is one that creates an attractive presence and meets the many and varied needs of its visitors. E-commerce start-ups must decide whether they will build and operate the Web site themselves or outsource this function. Web site hosing services and storefront brokers provide alternatives to building your own Web site. It is also critical to build traffic to your Web site by registering a domain name that is relevant to your business, making your site search-engine- friendly by including a meta tag in your home page, and using Web site traffic data analysis software t attract additional customers.

2. Let's take a look at these factors, which help make a retail web site a success.

  • Performance and Service. People don't want to be kept waiting when browsing, selecting , or paying for products in an electronic store. A site must be efficiently designed for ease of access, shopping, and buying, with sufficient server power and telecommunications capacity. Marketing, ordering, and customer service processes must also be friendly and helpful, as wheel as quick and easy.
  • Personalization. Personalizing your shopping experience encourages you to make return visits. many sites register you as a customer or have you fill out a personal interest profile. Then when you return, you are welcomed and guided just to those parts of a site that you are interested in . A lot of sites automatically record details of your visits and build similar user interest profiles.
  • Community. Giving online customers with similar interests a feeling of belonging to a unique group of like-minded individuals helps build customer loyalty and value. We-based relationship marketing and affinity marketing promote such virtual communities of customers, suppliers, company representatives, and other consumers through a variety of techniques. Examples include customer discussion forums and chat rooms, product focus groups, bulletin board systems, and cross-links to related web sites and newsgroups.
  • Look and Feel. E-Commerce sites can offer you an attractive web storefront. This may range from providing an exciting shopping experience with audio, motion, and striking graphics, to a more rational look and fell, including a virtual department store of related web pages. For example, most E-commerce software lets shoppers browse product sections, select products, drop them into a virtual shopping cart, and go to a virtual checkout stand to pay for the order.
  • Incentives. Web stores must offer shoppers incentives to buy and return. Typically, this means coupons, discounts, special offers, and vouchers for other web services, sometimes at other cross-linked web sites. Some sites provide you with an electronic wallet where you can accumulate coupons for future use, as well as receipts and credit card information.
  • Security and reliability. As a customer of a web store, you must feel confident that your credit card, personal information, and details of your transactions are secure form unauthorized use. Having your orders filled as you requested and in the time frame promised are important measures of a web store's reliability.

Exercise:(30 minutes )Evaluation of a few top-rated retail web sites. Use the factors of a success web site listed above to evaluate the following web sites. Find out the reasons of their success.
The E-commerce pioneer offers more than 5 million books, thousands of CD and video titles, sports equipment, electronics, gemstones, collectibles, clothing, E-mail greetings, and just about everything else known to humankind. Amazon's auction section aims to challenge eBay.
Bluefly discounts designer brands such as Donna Karan, Tommy Helfiger, and Calvin Klein. The MyCatalog section lets users create a personal catalog by size, designer, and type of merchandise. A housewares section has goods ranging form candle holders and crystal t pet accessories.
The fabled auction site operates the world's biggest electronic flea market, with everything form antiques, computers, and coins to Pez dispensers and baseball cards. This site boasts more than 1.5 billion page views per month, and has 3 million items for sale in 2,000 categories.
Now is merged by Barnes & Noble.
Fogdog is the largest seller of sports equipment online with 60,000 items and 500 brands. User can shop by sport or bran, and can visit the specialty shops, which include fan memorabilia, golf, tennis, soccer, baseball gear, and an outdoor store.


Cyberian Outpost Cyberian Outpost added a back-end system to improve its ability to interact with customers. Using software form Broadvision that can track user behavior and analyze pattern of activity, the online computer retailer can better target customers by geography, demographics, past purchasing habits, and other attributes. Cyberian use that type of data to design tow direct E-mail promotion offers whose response rate substantially exceeded expectations.
CDNow CDNow launched a frequent-buyer program giving shoppers points for purchases, which they can redeem for merchandise. By the third quarter of its first year, 59 percent of the sites's customers were repeat buyers. In addition, the music seller has started to use Net Perceptions' GroupLens "recommendation engine" to generate suggestions about what additional music a shopper might like. Such software, also known as collaborative filtering, looks at a user's tastes and purchasing patterns and tries to match them to patterns of choices made by others. The retailer also uses personalization to let users customize the site for their tastes
D. Business-to Business E-Commerce

1. Business-to-business electronic commerce is the wholesale and supply side of the commercial process, where business buy, sell, or trade with other business. For example, let's suppose a company wants to build and sell a product to other business. Then it must buy raw materials and variety of contracted services from other companies. The interrelationships with other business needed to build and sell a product make up a net worked of business relationships that is called the supply chain. Electronic commerce system like extranets with business partners, B2B exchange and auction portals, and business management processes like supply chain management, seek to reengineer and streamline traditional supply chain processes.

2. Wholesaling on the Web. Wholesale electronic commerce relies on many different information technologies, most of which can be implemented on the Internet, the World Wide Web, and corporate intranets and extranets. These include E-mail, electronic purchasing forms, electronic trading systems, electronic data interchange, electronic funds transfers, websites with electronic product catalogs, and interactive order processing system,and so on.

E. The E-Commerce Transaction Cycle.


Exercise: Use your word processor to create a diagram as the one above. ( 25 minutes)

F. E-Commerce Exchanges and Auctions.

1. Businesses of any size can now buy everything form chemicals to electronic components, excess electrical energy, construction materials, or paper products at business to business E-commerce websites. THese web trading platforms may offer an electronic catalog shopping and ordering sites for products form many suppliers in an industry. Or they may serve as an exchange for buying and selling at negotiated process. Very popular are electronic auction websites for business to business auctions of products and services. The figure below illustrates a B2B trading system that offers exchange, auction, and reverse auction (where sellers bid for the business of a buyer) electronic markets.

2. These B2B E-Commerce portals are developed and hosted by third-party market maker companies who serve as informediaries that bring buyers and sellers together in catalog, exchange, and auction markets. Informediaries are companies that serve as intermediaries in E-business and E-commerce transactions. Examples are Ariba, Commerce One, NetBuy, and Chemdex, to name a few. All make heavy use of Internet and other web-based information technologies to power their web portals for E-commerce transactions.

Exercise: visit the portals websites.

G. Terms to Learn

EDI (Electronic Data Interchange)

OLTP (Online Transaction Processing System)

Exercise: Use Search Engine to find out the meaning of these terms. Give examples of using the technologies in E-commerce.Then, use Word Processor to summarize your findings. Students who include diagrams to explain the terms will be rewarded with extra bonus.

H. Payment and Security Issues

I. Terms to Learn
  • Web page construction software: software that uses Web editors to produce both static and dynamic Web pages
  • E-commerce software: software that supports catalog management, product configuration, shopping cart facilities, and e-commerce transaction processing.
  • Catalog management software: software that automates the process of creating a real-time interactive catalog and delivering customized content to a userís screen.
  • Product configuration software: software used by buyers to build the product they need on-line.
  • Electronic shopping cart: a model used by many e-commerce sites to track the items selected for purchase, allowing shoppers to view what is in their cart, add new items to it, and remove items from it.
  • E-commerce transaction processing software: software that provides the basic connection between participants in the e-commerce economy, enabling communications between trading partners regardless of their technical infrastructure.
  • Web site traffic data analysis software: software that processes and analyzed data from the Web log file to provide useful information to improve Web site performance.
  • Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site.
  • Electronic cash: an amount of money that is computerized, stored, and used as cash for e-commerce transaction.
  • Electronic wallet: a computerized stored value that holds credit card information, electronic cash, owner identification and address information.
  • Smart card: a credit card-sized device with an embedded microchip to provide electronic memory and processing capability.

Ps. Electronic cash is an amount of money that is computerized, stored, and used as cash for e-commerce transactions. A consumer must open an account with a bank to obtain electronic cash. Whenever the consumer wants to withdraw electronic cash to make a purchase, he or she accesses the bank via the Internet and presents proof of identity Ė typically a digital certificate. After the bank verifies the consumerís identity, it issues the consumer the requested amount of electronic cash and deducts the same amount from the consumerís account. The electronic cash is stored in the consumerís electronic wallet on his or her computerís hard drive, or on a small card.

Customers can spend their electronic cash when they locate e-commerce sites that accept electronic cash for payment. The consumer sends electronic cash to the merchant for the specified cost of the goods or services. The merchant validates the electronic cash for payment. The consumer sends electronic cash to the merchant for the specified cost of the goods or services. The merchant validates the electronic cash to be certain it is not forged and belongs to the customer. Once the goods or services are shipped to the consumer, the merchant presents the electronic cash to the issuing bank for deposit. The bank then credits the merchantís account for the transaction amount, minus a small service charge.

J. In the Lab Exercise