E-Commerce: The Present and the Future

By David Ríos

Today’s Points• What is E-Commerce? E-Business?• B2B and B2C Models• Emerging Business Models• M-Commerce• Hands on: eBook Reader, Japanese mobile phone• Web 2.0 Design Technologies• Hands on: Ajax (Carmax and Netflix)• Marketing: Customer Relationship Mgmt (CRM)• Security and Encryption

What is E-Commerce?• Definition: – Commercial transactions taking place over the

internet and the world wide web• Examples: Amazon.com, eBay

– Commercial transactions take place in the real world but…• the exchange of value is initiated over the web, and/or • the web application serves as a viable means of

attracting significant numbers of customers• Example: CarMax.com

What is not E-Commerce?

• Web sites that simply introduce the company• Systems that manage procurement• Systems that manage supply chain and

logistics• Customer Relationship Management Systems• Although they support E-Commerce, these are

best described as E-Business

Business-to-Consumer ModelsBusiness Model Examples Description Revenue Model

Portal YahooGoogleAmazonWalmart.comDell.com

Offer content, searching, email/chat, services and products, distribution channels, direct-to-customer sales

Advertising Subscription feesTransaction feesAffiliate referral feesSale of goods

Content Provider CNN.comESPN.com

Information, news, and other content.

AdvertisingSubscription feesAffiliate referral fees

Transaction Broker

ScottradeTravelocityHotels.comOrbitz

Stock and travel transactions. Helps people get things done quicker.

Transaction fees

Market Creator eBayPriceline

Create markets that bring buyers and sellers together

Transaction fees

Service Provider VisaNow.com Selling a service rather than a product

Sales of services

Community Provider

FacebookMySpace

Social networking sites AdvertisingSubscriptionAffiliate referral fees

Business-To-BusinessBusiness Model Examples Description Revenue Model

Network Marketplace

E-distributor Grainger.comPartstore.com

Single-firm online version of retail and wholesale store; supply, maintenance, repair goods.

Sale of goods

E-procurement AribaPerfectcommerce

Single firm creating digital markets where sellers and buyers transact for indirect inputs.

Fees for market-making services; supply chain management, and fulfillment services.

Exchange Farms.com Independently owned vertical digital marketplace for direct inputs.

Fees and commissions on transactions.

Industry Consortium ElemicaExostarQuadrem

Industry-owned vertical digital market open to select suppliers.

Fees and commissions on transactions.

Business-To-BusinessBusiness Model Examples Description Revenue Model

Private Industrial Network

Single Firm Wal-MartProctor & Gamble

Company-owned network to coordinate supply chains with a limited set of partners

Cost absorbed by network owner and recovered through production and distribution efficiencies.

Industry-wide 1 SYNCAgentrics

Industry-owned network to set standards, coordinate supply and logistics for the industry

Contributions from industry member firms and recovered through production and distribution efficiencies; fees for transactions and services.

Which represents more money in annual sales? Business-To-Consumer or Business to Business?

•In 2007, B2C E-Commerce totaled $225 billion dollars in sales

•In 2007, B2B E-Commerce totaled $3.6 trillion dollars in sales

Other Business ModelsBusiness Model Examples Description Revenue Model

Consumer-to-consumer eBayHalf.com

Consumers connect with consumers to do business.

Transaction fees

Peer-to-peer KazaaCloudmark

Enable consumers to share files via the web.

Subscription feesAdvertisingTransaction fees

M-Commerce eBay AnywherePayPal MobileCheckoutAOL Moviefone

Extending business applications using wireless technology.

Sales of goods and services

B2B and B2C constitute about 75% of the E-Commerce Market

M-Commerce

• A small market in the US but growing fast• M-Commerce limited to purchases on laptops,

PDAs, and now eBook readers

• A BIG market in Europe, Japan, South Korea• Mobile phones contain credit cards• Train companies use RFID chip smart cards• Cell phones contain barcode scanners for ads

Mobile Phone Security

• Mobile phone and security key.

• Must be within 2 meters of each other to work.

• If the phone is stolen but not the key, the phone cannot be used to buy anything.

Smart Cards

• Suica card

• JR Railway in Japan

• Is a contactless smart card (debit)

• Contains an RFID (Radio frequency ID) chip

QR (Quick Response) Bar Code• Invented in Japan in

1994• Stores addresses or

URLs• Often included in ads• Are everywhere in

Japan• Can be read with a cell

phone• http://www.iuhw.ac.jp/

m/

E-Book Readers

Amazon Kindle

• http://www.amazon.com/

Barnes & Noble “Nook”

• http://www.barnesandnoble.com/nook/features/?cds2Pid=30195

Web 2.0 Design Elements and Technologies

E-Commerce sites stages Technology-centered (1995-2000) Product-centered (2000-2005) Customer-centered (2006-Today)

Today’s e-commerce site More interactive Uses audio, video, animation Richer GUI with more features

Technologies• Ajax (Asynchronous Javascript and XML)• Adobe Flex (Flash and Action Script)• Microsoft Silverlight, ASP.Net Ajax• Java FX• Java Server Faces• Adobe Integrated Runtime and Google Gears

(for offline work – synchronized later)• APIs (Amazon web services), Mashups (Google

Maps + real estate listings), Widgets, Gadgets

Classic Web Application

AJAX enabled web application

Web 2.0 Ajax WebsitesCarmax.com: A no-haggle auto retailer that sells quality used cars in over 100 stores nationwide

Netflix.com: An online DVD rental service with home delivery and no late fees

Marketing• How and why do customers shop online?

Brick-and-Mortar Shopping/Browsing and Traditional Ads influence Online Shopping

Online Shopping/Browsing and Internet Ads influence Brick-and-mortar Shopping

Most people use search engines to find online retailers or go directly to a known site

Banner ads, Facebook ads (community sites), affiliate marketing

CRMs (a total view of the customer)

Customer Relationship Management System (CRM)

• Track all contact with the customer

• Enable up-selling and cross selling

• Create more sales opportunities

• Enable all employees to provide unparalleled service.

Security

• Cybercrime is becoming a big problem.

• The Internet and Web are increasingly vulnerable to large-scale attacks (February 2007 – Verisign).

• The Internet has been business driven and grown faster than security measures and practices have.

• The Internet was not originally designed to be a global marketplace.

Why is the Web such a Tempting Target?

• Products, services, cash and information are in abundance

• It’s less risky b/c you can do it anonymously

• The Web lacks basic security features found in older networks (broadcast TV, telephone)

The Top 5 Cyber Crimes are…

• #5 – Phishing

• #4 – Laptop/Mobile device theft

• #3 – Nigerian Letter Fraud

• #2 – Virus

• #1 – Insider Abuse

Key Dimensions of E-Commerce Security

Dimension Explanation

Integrity The ability to ensure that information displayed on the web or information transmitted/received over the internet is authentic.

Nonrepudiation The ability to ensure that e-commerce participants don’t deny their online actions (a buyer denies the purchase after receipt of goods).

Authenticity The ability to identify the identity of the customer.

Confidentiality The ability to ensure that messages and data are available only to authorized personnel.

Privacy The ability to ensure that the information is used in the manner for which it was intended.

Availability The ability to ensure the e-commerce site continues to function as intended.

Potential Threats

• Viruses, worms, bots, Trojan horses• Spyware• Phishing• Denial of Service (DoS)• Distributed Denial of Service (DDoS)• Hackers• Spoofers (redirect your site)

Two Main Lines of Defense• Technology Solutions– Encryption, Digital Signatures, Digital Envelopes– Secure Socket Layers (SSL) – encrypted session– Firewalls, Proxy Servers

• Policy Solutions– Perform a risk assessment (rank your assets & risks)– Develop security policies– Develop an implementation plan– Create a security organization/team– Perform a security audit.

Encryption

• Reorganizes the content of a message so it can’t be understood

• Uses a cipher or a key– Cipher: Substituting one symbol for another or

transposing letters (easy to break)– Key: Mathematical formula that creates a string

that must be decoded using the same key or another (harder to break)

Types of Encryption Strategies• Symmetric Key: Uses the same key to encrypt and

decrypt

• Public Key Encryption: Uses a public and private key to encrypt (128 to 512 bits).

• Digital Signature: uses hash digests and double encryption

• Digital envelope: Encrypts a document with a symmetric key and a public key to encrypt the symmetric key

• Digital Certificate: Issued by a third party that identifies you, contains your public key, a serial number, and an expiration date (to solve identity issues).

Public Key Encryption

Digital Signature

Pros and Cons

• Good security protects your customers• Attracts Customers• Keeps costs and bad publicity down

• The more security, the more expensive• The more security, the more inconvenient

Future of E-Commerce (my predictions)

• Greater Security• Internet Content Providers (sell channels)• Product interaction online (cars, homes)• Interactive entertainment (Fahrenheit 451)• Ubiquitous E-Marketing (Minority Report)• Sale of B2C and C2C Services (i.e., Long

Distance Education) will become global

Getting a job in e-Commerce

• Know one language or platform inside and out• Have a portfolio of at least one impressive

project• Be focused on what you can give them• A technology degree isn’t of much value

without knowledge and skills to back it up• Story: The MIS guy who didn’t get hired