Electronic Commerce Security

Chapter2
Electronic Commerce

Dr. Farah Zawaideh

 :CONTENTS

.Definition of E-Commerce •
.History of E-Commerce •
.Advantages and Disadvantages of E-Commerce •
.Types of E-Commerce •
.E-Commerce Examples •
Some of E-Commerce Websites •

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 ?WHAT IS E-COMMERCE

Commerce refers to all the activities that purchase •

.and sales of goods or services
Marketing, sales, payment, fulfillment, customer service •
E-commerce refers to buying and selling products or services •
over electronic systems such as the Internet and other computer
.networks
Electronic commerce commonly known as e-commerce or •
.eCommerce
Using technology such as Electronic Data Interchange (EDI) •
.and Electronic Funds Transfer (EFT)
?What is EDI •
?What is EFT •
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 Electronic Data Interchange and Electronic Funds Transfer

EDI •
Is the structured transmission of •
data between organizations by
.electronic means
It is used to transfer electronic •
documents or business data from one
computer system to another
.computer system
EFT •
Is the electronic exchange or transfer •
of money from one account to
.another

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 History of E-Commerce
1970s: Electronic Funds Transfer (EFT) •
Used by the banking industry to exchange account information over secured •
networks
Late 1970s and early 1980s: Electronic Data Interchange (EDI) for e-commerce within •
companies
Used by businesses to transmit data from one business to another •
The growth and acceptance of credit cards, automated teller machines (ATM) and •
.telephone banking in the 1980s were also forms of electronic commerce
1990s: the World Wide Web on the Internet provides easy-to-use technology for •
information publishing and dissemination
Cheaper to do business (economies of scale) •
Enable diverse business activities (economies of scope) •
By the end of 2000, many European and American business companies offered their •
.services through the World Wide Web
Since then people began to associate a word “E-Commerce" with the ability of •
purchasing various goods through the Internet using secure protocols and electronic
.payment services
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 Advantages of e-commerce
:For the seller
Increases sales •
Decreases costs •
Makes promotion easier for smaller firms •
Can be used to reach narrow market segments •

:For the buyer

Makes it easier to obtain competitive bids •
Provides a wider range of choices •
Provides an easy way to customize the level of •
detail in the information obtained
Providing price quotes •
Determining product availability •6
 Advantages of e-commerce
:In general
Increases the speed and accuracy with which businesses •
can exchange information
Electronic payments (tax refunds, paychecks, etc.) cost •
less to issue and are more secure
Can make products and services available in remote areas •
Enables people to work from home, providing scheduling •
flexibility

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 Advantages of e-commerce

Faster buying/selling procedure, as well as easy to find •

.products
.Buying/selling 24/7 •
Low operational costs •
.Better quality of services •
.Easy to start and manage a business •
.No need of physical company set-ups •
Customers can easily select products from different •
.providers without moving around physically

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 Disadvantages of e-commerce
Some business processes are not suited to e-commerce, •
even with improvements in technology
Many products and services require a critical mass of •
potential buyers (e.g. online grocers)
Loss of ability to inspect products from remote •
locations
Costs and returns on e-commerce can be difficult to •
quantify and estimate
Cultural impediments: People are reluctant to change in •
order to integrate new technology
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Disadvantages of e-commerce

The legal environment is uncertain: Courts and •

legislators are trying to catch up
There is no guarantee of product quality •
There are many hackers who look for opportunities •

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 E-commerce Business Models

:Business model •
Set of planned activities designed to result in a profit in a •
marketplace
:Business plan •
Describes a firm’s business model •
:E-commerce business model •
Uses unique qualities of Internet and Web •

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Key Elements of a Business
Model
Value proposition .1
Revenue model .2
Market opportunity .3
Competitive environment .4
Competitive advantage .5
Market strategy .6
Organizational development .7
Management team .8

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 Value Proposition )1(

Is a business or marketing statement that summarizes why a •

.consumer should buy a company's product or use its service
This statement is often used to convince a customer to purchase a •
particular product or service in order to add a form of value to their
.lives
.A value proposition is an important part of a company's branding •
Branding is the process by which you create a unique image of a •
.product or service in the mind of the consumer
.Successful branding can create loyal customers •
:Successful e-commerce value propositions •
Product customization •
Reduction of product search and price discovery costs •
Facilitation of transactions by managing product delivery •
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 Revenue Model )2(
Is a conceptual structure that states and explains the revenue earning strategy of •
the business
:Major types •
Advertising revenue model ·
the online company publishes free content – videos, articles, pictures, -
that drives hundreds, thousands or millions of visitors to the site on a
monthly basis
Subscription revenue model •
a customer must pay a recurring price at regular intervals for access to a -
.product
Transaction fee revenue model •
charges a fee to a seller for every transaction made through them -
Sales revenue model •
company derives profit by direct selling products or providing services •

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 Market Opportunity )3(

?What marketspace do you intend to serve and what is its size •

Area of actual or potential commercial value in which •
company intends to operate

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Competitive Environment )4(

Is the dynamic external system in which a business competes •

.and functions
More sellers of a similar product or service, the more •
competitive the environment in which you compete
?Who else occupies your intended marketspace •
Other companies selling similar products in the same •
marketspace
Includes both direct and indirect competitors •
:Influenced by •
Number and size of active competitors •
Each competitor’s market share •
Competitors’ pricing •
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 Competitive Advantage )5(

Conditions that allow a company to produce a good or •

service of equal value at a lower price or in a more
desirable fashion
These conditions allow the productive entity to generate •
more sales
Competitive advantages are attributed to a variety of •
factors including cost structure
Achieved when firm produces superior product or can ·
bring product to market at lower price than competitors

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 Market Strategy )6(

Reaching prospective consumers and turning them into •

customers of the products or services the business
provides
How do you plan to promote your products or services to •
attract your target audience

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 Organizational )7(
Development
What types of organizational structures within the firm •
?are necessary to carry out the business plan
Describes how firm will organize work •
Typically divided into functional departments •

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 Management Team )8(

Group of individuals that operate at the higher levels of an •

organization and have day-to-day responsibility for
managing other individuals and maintaining responsibility
.for key business functions
Responsible for putting together the business strategy and •
ensuring the business objectives are met
What kinds of experiences and background are important •
?for the company’s leaders to have
Strong management team may not be able to solve a weak ·
business model, but should be able to change the model
and redefine the business as it becomes necessary

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 Online Marketplace
?What Is an Online Marketplace •
An e-commerce site where third-party companies can •
.sell their products or services to consumers
All of the transactions are processed through the website •
owner
:For example •
when you visit Amazon's online market, you can •
purchase books and other goods directly from
Amazon, but you can also find - and buy - products
from sellers all over the world

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 Portal
Portal •
Website that serves as a gateway or a main entry point ('cyber door') on the internet to •
a specific field-of-interest or an industry
: A portal provides at least four essential services •
search engine(s) (2) Email )1(
.links to other related sites (4) personalized content )3(
provide facilities such as chat, members list, free downloads •
Portals such as Microsoft Network (MSN), America Online (AOL) •
)MSN( •
network includes web-based programs and services offered by Microsoft •
Corporation
offers a range of services including news, search engines, e-mail, and •
services to connect to the internet
)AOL( •
is a digital media company that has developed and maintains multiple •
online businesses including websites, a search engine, Internet connectivity,
email service
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 Example Horizontal Portal

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 Horizontal and Vertical E-Commerce

horizontal e-commerce businesses •

.sell products from a large number of categories •
The most famous horizontal e-commerce business is •
Amazon.com, it sells books, furniture, food, toys, software,
.music, and a whole lot more
vertical e-commerce businesses •
Specialists •
an online retailer that only sells baby products is a vertical •
e-commerce business

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 Pure and Partial Ecommerce
Pure •
Everything happens on the internet •
Buying music or movies •
Buying Antivirus •
Partial •
A company will sell good through the internet but the •
fulfillment of goods will need to take place in “real”
word
Buying book on amazon that will have to send to you •
it physically

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 Category E-commerce Business Models

:We categorize business models according to

E-commerce sector 
B2B (Business-to-Business)
B2C (Business-to-Consumer)
C2B (Consumer-to-Business)
C2C (Consumer-to-Consumer)
B2B ECOMMERCE
 B2B ECOMMERCE

Business-to-Business e-commerce (B2B EC) •

Transactions between businesses conducted electronically •
over the Internet, extranets, intranets, or private networks;
also known as eB2B (electronic B2B) or just B2B
B2B can be open to all interested parties or limited to •
specific, pre-qualified participants (private electronic
.market)

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 B2B ECOMMERCE
The Basic Types of B2B Transactions and Activities •
Sell-side •
is e-commerce transactions between a supplier organization and •
its customers, possibly through intermediaries
Buy-side •
are e-commerce transactions between a purchasing organization •
and its suppliers, possibly through intermediaries
Buy side is where the organization purchases from suppliers, sell •
.side is when that organization sells it on to its customers
Marketplace •
a World Wide Web site where goods and services can be bought from •
a wide range of suppliers

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 Public sale Model

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 Public sale Model

eBay home page. (These materials have been reproduced by Prentice Hall
with the permission of eBay, Inc. COPYRIGHT EBAY, INC. ALL RIGHTS
31 ).RESERVED
 B2B CHARACTERISTICS
Parties to the Transaction: Sellers, Buyers, and Third party ·

An online third party that brokers a transaction online between a buyer and ·
a seller; may be virtual or click-and-mortar
Virtual ·
.is a company that focuses only on a particular product or activity ·
used to describe e-commerce businesses that only sell through one ·
.channel (online or offline ), and not through other channels
Click-and-mortar ·
has both online and offline operations, which typically include a website ·
and a physical store
customers shop over the Internet on electronic ' websites ·
.able to physically visit the brick-and-mortar store ·

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 BUSINESS TO CONSUMER (B2C)

Based on transactions between a company, that sells •

products or services, and individual customers who are the
.end-users of these products
Businesses selling to the general public typically through •
.catalogs utilizing shopping cart software
.Provides direct selling through online •
If you want to sell goods and services to customer so that •
anybody can purchase any products directly from supplier’s
.website
Most Internet users are familiar with the B2C ecommerce •
.model

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 B2C Business Models: Portal
Types: Horizontal Portal, Vertical Portal •
Horizontal Portal •
They're called "horizontal" because their list of websites cover a broad •
range of topics (such as News, Search, and email )
:Examples
Yahoo.com, MSN.Com, Google.com, Aol.com •
Vertical Portal •
Vertical portals are narrow, covering only one topic or one type of •
.Products or Services
:Examples •
Convert-Files.com •
provides a method for users to input their audio files to be •
.converted to a different format
:Revenue models •
Advertising, subscription fees, transaction fees •
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 Example Horizontal Portal

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 B2C Models: E-tailing
Requires companies to tailor their business models to capture Internet •
sales
Include building out distribution channels such as warehouses, Internet •
.webpages, and product shipping centers
e-tailing companies include •
an engaging website •
online marketing strategy •
efficient distribution of products or services •
.customer data analytics •
Successful e-tailing requires strong branding •
Websites must be engaging and regularly updated to meet consumers' •
.changing demands
:Revenue model •
Sales •
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B2C Models: E-tailing (cont)
Physical Retail Stores •
:Variations •
Virtual merchant (Click-and-Click) •
Bricks-and-Mortar (Only have Physical Store’s) •
Bricks-and-clicks (Online as well offline) •

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 B2C Models: E-tailing (cont)

Virtual merchant (Click-and-Click) ·

establishing a merchant bank account, companies can ·
.accept credit and debit card transactions as payment
a website that sells goods and services to the public via ·
online transactions with debit and credit card processing
consumers can virtually visit a store to browse goods, ·
purchase them fully online and receive them in the mail
.several days later
-:Examples •
Amazon, DrugStore •

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 B2C Models: E-tailing (cont)
Bricks-and-Mortar (Only have Physical Store’s) •
Company has an offline store (the bricks) •
Customers can do shopping physically in one of their •
.stores
Customers pick-up their order directly at a local branch of •
.the store

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 B2C Models: E-tailing (cont)
Bricks-and-clicks (Online as well offline) •
Brick-and-Click is a business model in which a company •
operates both an online store (the clicks) and an offline
store (the bricks) and integrates the two into a single retail
.strategy
Customers can do tasks like shopping when they have spare •
.time and do not have to be at a computer
A popular example is when a chain of stores allows the •
customer to order products either online or physically in
.one of their stores
Also allowing them to either pick-up their order directly at •
.a local branch of the store or get it delivered to their home

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B2C Models: Transaction Broker
Is a third-party that offers real estate services to buyers and sellers •
Primary value proposition—saving time and money ·

:Things they can do for buyer •

preparing an offer on a home •
communicating with the seller •
writing the contract of sale •
helping with closing •
:Things they can do for sellers •
setting a competitive list price •
communicating with the buyer •
writing the contract of sale •
helping with closing •
:Revenue model •
Transaction fees ·
:Industries using this model ·

financial services •
travel services •
41 job placement services •
 C2C (Consumer-to-Consumer)

A consumer directly sells goods or services to another •

consumer
Example of C2C •
E-Bay, OpenSooq •
OnLine eXchange (OLX) •
is a global online marketplace •
is a platform for buying and selling services and •
goods such as electronics, furniture, household
goods, and cars

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 ??? HOW DOES C2C WORKS
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B
 CONSUMER TO BUSINESS
(C2B)
A consumer posts his project with a set budget online and •
within hours companies review the consumer's
.requirements and bid on the project
The consumer reviews the bids and selects the company •
.that will complete the project

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