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Unformatted text preview: E-Commerce: Mechanisms,
Infrastructure, and Tools 2.1 ELECTRONIC COMMERCE
MECHANISMS: AN OVERVIEW
The many EC models and types of
(presented in Chapter 1) are enabled by
To begin with, most B2C applications are
conducted on the Internet.
In addition, the generic enablers of any
information system including databases,
networks, security, software and server
software, operating systems, hardware (Web
servers), and hosting services need to be
established. 1-2 2.1 ELECTRONIC COMMERCE ECHANISMS:
Added to the above are the specific EC
mechanisms presented in this chapter, such
as electronic markets, shopping carts, ecatalogs, and support services such as
payment and order fulfillment.
In addition to of all of the above, there are
different methods for executing EC, such
as buying at a fixed price or at an
auction, and each method has a different
Finally, there are the Web 2.0-based
collaboration and communication 1-3 EC Activities and Support Mechanisms
EC activities are divided into six categories,
which are listed on the left side of Figure2.1 .
Each activity is supported by one or more
EC mechanisms, which are shown on the right
side of Figure2.1. Additional mechanisms exist for special
activities, such as payment, security, and order
fulfillment. Also, standard IT technologies
such as RFID, EDI, and extranets are
described in Online Tutorial T2. 1-4 1-5 SELLERS BUYERS, AND TRANSACTIONS
The Purchasing Process
Customers buy goods online in different ways.
most common is purchasing from catalogs at
Sometimes prices may be negotiated or
Another way to determine price is
dynamic pricing, which refers to non-fixed
prices such as those in auctions or stock
1-6 SELLERS BUYERS, AND TRANSACTIONS
The Purchasing Process
The process starts with a buyer logging on to
a seller’s website, registering (if needed), and
entering an online catalog or the buyer’s “My
E-catalogs can be very large, so using a
search engine may be useful.
Buyers usually like to compare prices;
therefore, an online price comparison service
can be useful. If not satisfied, the buyer may abandon the
seller’s site. If satisfied, the buyer will place
the chosen item in a virtual shopping cart (or 1-7 SELLERS BUYERS, AND TRANSACTIONS
The Purchasing Process
The buyer may return to the seller’s catalog
to choose more items. Each selected item is
placed in the shopping cart.
When the item selection is completed, the
buyer goes to a checkout page, where a
shipment option is selected from a menu.
Finally, a payment option is selected. After
checking all the details for accuracy, the
buyer submits the order. This process is
illustrated in Figure2.2 .
The place where buying and selling occurs is
called an e-marketplace, which we introduce 1-8 1-9 2.2 E-MARKETPLACES
Electronic markets play a central role in the
digital economy, facilitating the exchange of
information, goods, services, and payments. In executing the trading process, emarketplaces create economic value for
buyers, sellers, market intermediaries, as well
as for society at large.
Markets have three major functions:
(1) enabling transactions to occur by providing
meeting place for buyers and sellers;
(2) enabling the flow of relevant information;
(3) providing services associated with market
transactions, such as payments and
1-10 1-11 Electronic Markets
The electronic market is the major venue for
conducting EC transactions.
An e-marketplace (also called e-market,
virtual market, or market space), is an
electronic space where sellers and
buyers meet and conduct different types
of transactions. Customers receive goods
and services for money.
The functions of an e-market are the same as
those of a physical marketplace; however,
computerized systems tend to make
electronic markets much more efficient by
providing more updated information and
1-12 EC has increased market efficiency by expediting and or improving the functions
listed in Table2.1 .
Furthermore, EC has been able to
significantly decrease the cost of
executing these functions.
The emergence of electronic
marketplaces, especially Internet-enabled
ones, has changed several of the
processes used in trading and supply
1-13 In many cases, these changes, driven by technology, have frequently resulted in:
- Greater information
- Lower information search time and cost
- Diminished information asymmetry.
- Possibly less time between purchase and
- The ability of buyers, sellers, and the
market to each to be in a different
1-14 Components of and the Participants in EMarketplaces The major components and players in a
marketspace are: customers. More than 2 billion Internet
users worldwide are potential buyers of goods
and services offered on the Internet. These
consumers are looking for bargains,
customized items, collectors’ items,
entertainment, socialization, and more.
Sellers. Millions of webstores are advertising
and offering a huge variety of items. These
stores are owned by companies, government
agencies, or individuals. Every day it is
possible to find new offerings of products and1-15 Components of and the Participants in EMarketplaces
Products and services. One of the major differences between the marketplace and the
marketspace is the possible digitization of
products and services in a marketspace.
Infrastructure. The marketspace
infrastructure includes electronic networks,
databases, hardware, software, and more.
Front end. Customers interact with a
marketspace via a front end. The major
components of the front end can include the
seller’s portal, electronic catalogs, a
shopping cart, a search engine, an
auction engine, a payment gateway, and1-16 Components of and the Participants in EMarketplaces
Back end. All the activities that are related to order aggregation and fulfillment, inventory
management, purchasing from suppliers,
accounting and finance, insurance, payment
processing, packaging, and delivery are done
in what is termed the back end of the
Intermediaries. is typically a third party that
operates between sellers and buyers.
Intermediaries of all kinds offer their services
on the Web. Some intermediation is done
manually; many are done electronically.
1-17 Types of E-Marketplaces
1. Private E-Marketplaces Private e-marketplaces are those owned and
operated by a single company.
starbucks.com ,dell. com, and sell from
their websites. Private markets are either sellside or buy-side.
In a sell-side e-marketplace , a company,
(e.g.,net-a-porter.com or cisco.com ) will
sell either standard or customized products to
individuals (B2C) or to businesses (B2B); this
type of selling is considered to be one-tomany.
In a buy-side e-marketplace, a company
purchases from many potential suppliers; this1-18 Types of E-Marketplaces
2. Public E-Marketplaces
- Public e-marketplaces are in many cases B2B
- They often are owned by a third party (not a
seller or a
buyer) or by a group of buying or selling
(referred to as a consortium), and they serve
sellers and many buyers.
- These markets also are known as exchanges 1-19 2.3 CUSTOMER SHOPPING MECHANISMS:
STOREFRONTS, MALLS, AND PORTALS
Several kinds of interactions exist among sellers,
buyers, and e-marketplaces. The major B2C
mechanisms are webstores (storefronts) and
- refers to a single company’s (or individual seller’s)
where products and services are sold.
- Webstores may target an industry, a location, or a
market (e.g.,cattoys.com ).
- The webstore may belong to a manufacturer
(dell.com ), to
a retailer (e.g.,amazon.com A webstore includes tools known as merchant
software (available in a suite), that are necessary
for conducting online sales.
The most common tools are:
- an electronic catalog;
- a search engine that helps the consumer find
- an electronic shopping cart for holding items
- e-auction facilities where auctions take place;
- a payment gateway where payment
arrangements can be
- a shipment center where shipping arrangements
are made; Microsites
microsite is a webpage(s) that acts as a supplement
to a primary website, but is external to it.
It expands on the content by adding editorial,
Similar to malls in the physical world, an e-mall is
an online shopping location where many stores
present their catalogs. The mall charges
commission from the sellers based on their sale
For example, (emallofmaine.com ) is an e-mall
that aggregates products, services, and providers in
the state of Maine. When a consumer indicates the
category he or she is interested in, the consumer is
transferred to the appropriate independent This kind of mall does not provide any shared services; it is merely a directory. Other malls, such as choicemall.com do provide
some shared services. Both yahoo.com and
ebay.com operate electronic malls. 1-23 Types of Stores and Malls
There are several different Stores and Malls:
General stores / malls. These are large
marketspaces that sell all kind of products.
Special stores / malls. These sell only one
or few kinds of products, such as shoes,
Regional versus global stores. Some
stores that serve customers live nearby.
Pure and play versus click-and-mortar
Stores. 1-24 Web (Information) Portals
A portal is an information gateway that is
used in e-marketplaces, webstores, and other
types of EC (e.g., in e-collaboration,
intrabusiness, and e-learning).
A Web (information) portal is a single point
of access, through a Web browser, to critical
business information located inside and
outside of organizations.
This information is aggregated and is
accessed and presented in a consistent way. Many Web portals personalize for users. Note
that wireless devices are becoming portals for
both enterprise and Internet access. A
schematic view of a portal is shown in Figure 1-25 1-26 Web (Information) Portals
Information sources (external and internal)
are shown on the left side, and integrated and
process data are shown as output on the
Web portals offer some generic services such
as e-mail, news, stock prices, entertainment,
shopping capabilities, and so forth. 1-27 Types of Portals
One way to distinguish among them is to look
at their content, which can vary from narrow to
broad, and their community or audience, which
also can differ. The major types of portals are as
Commercial (public) portals. These
popular portals offer content for anyone.
Although they can be customized by the user,
they are still intended for broad audiences
and offer fairly routine content, some in real
time (e.g., a stock ticker and news). Examples
of such sites are yahoo.com and
Corporate (private) portals. Corporate
1-28 Types of Portals
Publishing portals. These portals are
intended for communities with specific
interests and involve relatively little
customization of content; however, they
provide extensive online search features and
some interactive capabilities. Examples of
such sites are techweb.com and zdnet.com
Mobile portals. Mobile portals are portals
that are accessible from mobile devices. One
example of such a mobile portal is i-mode.
Voice portals. Voice portals are websites,
usually portals, with audio interfaces. This
means that they can be accessed by a
standard telephone or a cell phone. AOL by 1-29 Types of Portals
Personal portals. These target specific filter
information for individual. (netvibes.com) Knowledge portals. Knowledge portals
enable easy access to knowledge by
knowledge workers and facilitate
Communities’ portals. These are usually
parts of online communities. they are
dedicated to some theme and may be sponsor
by a vendor such as SONY. An example is
17173.co-- portal for gamers in China. 1-30 The Roles and Value of Intermediaries in EMarketplaces Intermediaries, such as brokers, play an important role in commerce by providing
value-added activities and services to buyers
(well-known intermediaries are wholesalers
The two major types of online intermediaries are brokers and infomediaries.
A broker in EC is a person or a company that facilitates
transactions between buyers and sellers. The following
are different types of brokers:
Trading. A company that aids online trading (e.g.,
E*TRADE or eBay).
Organization of online malls A company that
organizes many online stores in one place (e.g., Yahoo!
Shopping and Alibaba.com).
Comparison agent. A company that helps consumers
compare prices, encourages user comments, and
customer service at different stores (e.g., Bizrate for a
great diversity of products).
Shopping aids provider. A company that helps
online shopping by providing escrow, payments,
shipping, and security (e.g., PuntoMio, Inc).
Matching services. These services match entities
such as jobs to applicants, and buyers to sellers Infomediaries.
Electronic intermediaries that provide and / or control
information flow in cyberspace, often aggregate
information and selling it to others. Distributors in B2B
A special type of intermediary in e-commerce is the
B2B e-distributor . These intermediaries connect
manufacturers with business buyers (customers),
such as retailers (or resellers in the computer
E-distributors aggregate product information from
many manufacturers, sometimes thousands of
them, in the e-distributor’s catalog. The distributor
buys the products and then sells them, as
supermarkets do. (grainger.com).
Changing Role and Location of intermediaries
acted mostly between two parties in a markets 1-33 2.4 MERCHANT SOLUTIONS: ELECTRONIC
CATALOGS, SEARCH ENGINES, AND SHOPPING
To enable selling online, a website usually needs EC merchant server software.
Merchant software includes several tools and
platforms. Such software offers basic tools that
catalogs, search engines, and shopping
carts; all are
intended to facilitate the electronic trading
Examples of such software are oscommerce.com
and smallbusiness.yahoo.com/ecommerce .1-34 Electronic Catalogs
Catalogs have been printed on paper for
Recently, electronic catalogs on a DVD (or CDROM) and on the Internet have gained popularity.
Electronic catalogs (e-catalogs) consist of a
product database, directory, and a presentation
function. They are the backbone of most ecommerce sales sites.
For merchants, the objective of e-catalogs is to
advertise and promote products and services.
For the customer, the purpose of such catalogs
is to locate information on products and services.
E-catalogs can be very large; for example,
Amazon.com’s catalog contains millions of
1-35 Electronic Catalogs
Most early online catalogs were static
presentations of text and messages from paper
However, online catalogs have evolved to become
more dynamic, customizable, and integrated with
selling and buying procedures, shopping carts,
order taking, and payment.
E-catalogs may include video clips. The tools for
building them are being integrated with merchant
software suites and Web hosting tools.
Although used only occasionally in B2C
commerce, customized catalogs are used
frequently in B2B e-commerce
1-36 EC Search Activities, Types, and Engines
Search activities are popular in EC, and many
tools for conducting searches are available.
A study by Stambor (2010 ) published in Internet
Retailer revealed that 94% of shoppers conduct
research online before making any purchase, and
61% use a search engine when shopping online.
Consumers may search inside one company’s
catalog to find a product or service, or use Google
or Bing to find companies that sell the product
Let us now look at three major types of searches. 1-37 Types of EC Searches
Internet/Web Search. This is the most popular
search that involves looking for any documents on
the Web. (finding information is one of the most
frequent activities done on the Web)
Enterprise Search. Describes the search for
information within the files and databases of an
organization. (Google has a powerful Enterprise
Search Appliance known as GSA).
Desktop Search. Involves a search of a user’s
own computer files (e.g.,
1-38 Search Engines
Customers tend to ask for information (e.g.,
requests for product information or pricing) in
similar ways. This type of request is repetitive,
and answering such requests manually is costly.
Search engine is a computer program that can
access databases of Internet or intranet
resources, search for specific information or
keywords, and report the results.
Google and Bing are the most popular search
engines in the U.S. Baidu is the primary search
engine in China.
Thousands of different public search
engines are available. Each of these tools
excels in one area. These can be very specialized
with different capabilities.
1-39 Software (Intelligent) Agent
Unlike Search Engines a Software (Intelligent)
agent can be used to perform routine task
that require Intelligence (monitoring activities
and working as an assistant).
Question and Answers Online
Intelligent Search Engines can answer user
questions. A leading engine is ask.com , Ask.com
had over 300 million questions and answers in its
database. The Q&A service matches answers from
the database to questions users ask.
A competing engine is answers.com , a question
and answer (Q&A) site, which comprises
1-40 Voice-Powered Search
To ease searching, especially when using a
smartphone, Google introduced a voice-powered
tool that allows you to skip the keyboard
The first product was included as part of iPhone’s
mobile search application. It allows you to talk
into your phone, ask any question, and the results
of your query are provided on your iPhone.
In addition to asking questions by talking into
your iPhone, you can also listen to search engine
results. 1-41 Video and Mobile Search
There are dozens of dedicated search tools and sites
that will search for videos and other images.
Some of them, such as bing.com/videos will search
across multiple sites; others, such as YouTube will
search only for their own content.
Several search engines are adapted to mobile
search. Notable are Google, Clusty, and Yahoo! 1-42 Visual Shopping Search Engine
Visual search means looking for information that
is presented visually (photos, images, etc.). This
technology can be used to support e-commerce. For
example, Like.com provides a visual search engine
based on machine learning and computer vision that
focuses on consumer products. 1-43 Shopping Carts
An electronic shopping cart (also known as
shopping bag or shopping basket ) is software that
allows customers to accumulate items they wish
to buy before they arrange payment and check
out, much like a shopping cart in a supermarket.
The electronic shopping cart software program
automatically calculates the total cost, and adds
tax and shipping charges when applicable.
Customers can review and revise their shopping
list before finalizing their purchase by clicking on
the “submit” button 1-44 Shopping Carts
Shopping carts for B2C are fairly simple
(amazon.com , but for B2B, a shopping cart may
be more complex. Shopping cart software is sold
or provided free to store builders as an
independent component outside a merchant suite
(e.g., see networksolutions.com/ecommerce/index-v3.jsp . Free online shopping carts (trials and demos) are
available at volusion.com and 1freecart.com
For shopping cart applications for Facebook, see
com/facebook-app.html and the Ecwid app
page on Facebook at facebook.com/ecwid 1-45 2.5 AUCTIONS, BARTERING, AND NEGOTIATING
One of the most interesting market mechanism...
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- Fall '16
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- Social network service, shopping cart