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Web Technology Fundamentals COMP1130 (CS14K) : 

Web Technology Fundamentals COMP1130 (CS14K) Session 1: An Introduction to Electronic Commerce Dr. Paul Walcott Department of Computer Science, Mathematics and PhysicsUniversity of the West Indies, Cave Hill CampusBarbados © 2005/2006 Dr. Paul Walcott Created 27/01/05. Updated 18/01/06

Session Objectives : 

Session 1: An Introduction to Electronic Commerce 2 Session Objectives Define electronic commerce Describe the first and second waves of electronic commerce Compare and contrast the first and second waves of electronic commerce Distinguish between the general categories of electronic commerce

Session Objectives Cont’d : 

Session 1: An Introduction to Electronic Commerce 3 Session Objectives Cont’d Define marketing Describe marketing strategies used by e-commerce initiatives Describe the following Web marketing methods: E-mail marketing Affiliate marketing Viral marketing

Session Objectives Cont’d : 

Session 1: An Introduction to Electronic Commerce 4 Session Objectives Cont’d Describe legal issues relating to e-commerce including: Jurisdiction Contracts Conditions of Use statements Intellectual Property Copyright Data privacy

Session Objectives Cont’d : 

Session 1: An Introduction to Electronic Commerce 5 Session Objectives Cont’d Describe e-commerce payment methods Compare and contrast e-commerce payment methods

An Introduction to E-Commerce1 : 

Session 1: An Introduction to Electronic Commerce 6 An Introduction to E-Commerce1 What is e-commerce? What are the advantages and disadvantages of e-commerce? What were the 1st and 2nd waves of e-commerce characterised by? What are the categories of e-commerce?

What is Commerce : 

Session 1: An Introduction to Electronic Commerce 7 What is Commerce Traditional commerce may be defined as: From Webster's Revised Unabridged Dictionary Commerce : \Com"merce\, noun. The exchange or buying and selling of commodities; esp. the exchange of merchandise, on a large scale, between different places or communities; extended trade or traffic.

What is E-Commerce : 

Session 1: An Introduction to Electronic Commerce 8 What is E-Commerce “E-commerce is a general term for any type of business, or commercial transaction that involves the transfer of information across the Internet. This covers a range of different types of businesses from consumer-based retail sites, like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchanges trading goods or services between corporations.” Gordon Whyte (http://www.mangojar.com/knowledge-centre/e-commerce-faq.htm)

What is E-Commerce Cont’d : 

Session 1: An Introduction to Electronic Commerce 9 What is E-Commerce Cont’d In summary, e-commerce is the use of electronic communication to do business Specifically, the transfer of information (transactions), over the Internet Some people use the term e-business to refer to all the categories of e-commerce E.g. IBM defines e-business as: The transformation of key business processes through the use of internet technologies

Matching a Business Process to a Type of Commerce : 

Session 1: An Introduction to Electronic Commerce 10 Matching a Business Process to a Type of Commerce Some business processes are better suited for electronic commerce, while others are better suited for traditional commerce In some cases a combination of electronic commerce and traditional commerce is more appropriate for the given business process Examples for each of these combinations are listed below

Matching a Business Process to a Type of Commerce : 

Session 1: An Introduction to Electronic Commerce 11 Matching a Business Process to a Type of Commerce Business Processes better suited to E-commerce Sale/purchase of books and CDs, travel services, investments and insurance services Online delivery of software Online shipment tracking

Matching a Business Process to a Type of Commerce : 

Session 1: An Introduction to Electronic Commerce 12 Matching a Business Process to a Type of Commerce Business Processes better suited to e-commerce and traditional commerce Sale/purchase of automobiles and residential real estate (e.g. do research online then buy from a dealer or real estate agent) Online banking Roommate matching service

Matching a Business Process to a Type of Commerce : 

Session 1: An Introduction to Electronic Commerce 13 Matching a Business Process to a Type of Commerce Business Processes better suited to traditional commerce Sale/purchase of impulse items for immediate use, high fashion jewelry and antiques (personal inspection required; consumers prefer to touch, smell or examine closely) Small denomination purchases and sales (since there is not yet a standard for transferring small amounts of money)

Advantages of E-commerce : 

Session 1: An Introduction to Electronic Commerce 14 Advantages of E-commerce Increases sales and decreases cost Allows small businesses to have access to a global customer base Reduced cost through electronic sales enquires, price quotes and order taking Provides purchasing opportunities for buyers (businesses can identify new suppliers and partners) Increase speed and accuracy for exchanged information, thus reducing cost

Advantages of E-commerce Cont’d : 

Session 1: An Introduction to Electronic Commerce 15 Advantages of E-commerce Cont’d Business can be transacted 24hrs a day The level of detail of purchase information is selected by the user Digital products can be delivered instantly Tax refunds, public retirement and welfare support costs less when distributed over the Internet Allows products and services to be available in remote areas, e.g. remote learning

Disadvantages of E-commerce : 

Session 1: An Introduction to Electronic Commerce 16 Disadvantages of E-commerce Inability to sell some products (e.g. high cost jewelry and perishable foods, although supermarkets like www.Tesco.com deliver to your home) The newness and (fast) evolution of the current technology Many products require a large number of people to purchase to be viable High capital investment

Disadvantages of E-commerce Cont’d : 

Session 1: An Introduction to Electronic Commerce 17 Disadvantages of E-commerce Cont’d Difficulty in integrating current databases and transaction processing systems into e-commerce solutions Cultural and legal obstacles Transmission of credit card details Some consumers resistant to change Laws are unclear Shipping profile: Products with a low value-to-weight ratio that can not be efficiently packed and shipped are unsuitable (use traditional commerce)

The 1st Wave of E-commerce : 

Session 1: An Introduction to Electronic Commerce 18 The 1st Wave of E-commerce The 1st wave was from the mid 1990s to 2003 Dot-com boom (over $100 billion in investment): Rapid growth from mid-1990s to 2000 Dot-com bust: in 2000 Gloom years: 2000 –2003 (over $200 billion in investment)

Characteristics of the 1st Wave : 

Session 1: An Introduction to Electronic Commerce 19 Characteristics of the 1st Wave It was primarily a U.S. phenomenon Web pages were in English Internet technologies were slow and inexpensive (e.g. dial-up lines) Bar codes and scanners used to track parts (B2B and Business processes) Email was a tool used for unstructured communication On-line advertising was the main revenue source

The 2nd Wave of E-commerce : 

Session 1: An Introduction to Electronic Commerce 20 The 2nd Wave of E-commerce In 2003 e-commerce began to show signs of new life Companies like Amazon.com (books), and eBay.com (auctions) who survived the downturn were beginning to show profits There has been continuous growth of B2C sales: 20-30% each year since 2000

Characteristics of the 2nd Wave : 

Session 1: An Introduction to Electronic Commerce 21 Characteristics of the 2nd Wave International scope where sellers do business in many countries and languages Faster, cheaper connections (x20 faster), broadband at home (although more expensive) Radio frequency ID devices (used for package tracking) and smart cards (used for security and a method of payment) Fingerprint readers and retina scanners (biometric technologies) used for tracking Email is now an integral part of marketing

Characteristics of the 2nd Wave : 

Session 1: An Introduction to Electronic Commerce 22 Characteristics of the 2nd Wave E-commerce is an integral part of marketing and customer contact strategy Some categories of on-line advertising, e.g. employment services (job want ads) have replaced traditional advertising outlets Problems Language conversions Currency conversions

E-commerce Categories : 

Session 1: An Introduction to Electronic Commerce 23 E-commerce Categories There are five general e-commerce categories: Business to Consumer (or B2C) e-commerce Business to Business (or B2B) e-commerce (sometimes called e-procurement) Business processes that support buying and selling activities Consumer-to-consumer (or C2C) e-commerce Business-to-government (or B2G) e-commerce

B2C e-commerce : 

Session 1: An Introduction to Electronic Commerce 24 B2C e-commerce Description Businesses sell products or services to individual customers (consumers) Example Walmart.com sells merchandise to consumers through its Web site Web site www.walmart.com

B2B E-commerce : 

Session 1: An Introduction to Electronic Commerce 25 B2B E-commerce Description Businesses sell products or services to other businesses Example Grainger.com sells industrial supplies to large and small businesses through its Web site Web site www.grainger.com

Business Processes : 

Session 1: An Introduction to Electronic Commerce 26 Business Processes Description Businesses and other organisations maintain and use information to identify and evaluate customers, suppliers and employees (and to support buying, selling hiring, planning and other activities). More and more of this information is being shared Example Dell Computer uses secure internet connections to share current sales and forecasts with suppliers who use it to plan their production, therefore they deliver the right quantities of components at the right time

C2C e-commerce : 

Session 1: An Introduction to Electronic Commerce 27 C2C e-commerce Description Participants in an online marketplace can buy and sell goods from each other Example Consumers (and businesses) trade with each other on eBay.com Web site www.ebay.com

B2G e-commerce : 

Session 1: An Introduction to Electronic Commerce 28 B2G e-commerce Description Businesses sell goods or services to governments and government agencies Example Cal-Buy portal allows businesses to sell products/services online to the State of California Web site www.pd.dgs.ca.gov/calbuy/default.htm

E-commerce Categories: An Example : 

Session 1: An Introduction to Electronic Commerce 29 E-commerce Categories: An Example You are a computer manufacturing company who performs the following activities on the Internet: Sells computers to individuals (B2C) Purchases parts (e.g. hard drives, power supplies etc.) from a supplier (B2B) Hires staff, manage customer accounts, advertise, etc. (Business processes) Sells computers to the Government to be used in schools (B2G) Provides a Web site (like eBay.com) which allows individuals to buy and sell used computers (C2C)

Relative Sizes of E-commerce Categories : 

Session 1: An Introduction to Electronic Commerce 30 Business processes Relative Sizes of E-commerce Categories B2C B2B

Relative Sizes of E-commerce Categories : 

Session 1: An Introduction to Electronic Commerce 31 Relative Sizes of E-commerce Categories

An Introduction to Marketing : 

Session 1: An Introduction to Electronic Commerce 32 An Introduction to Marketing What is marketing? Marketing strategies Market segmentation Web advertising Email marketing Affiliate marketing Viral marketing

What is Marketing? : 

Session 1: An Introduction to Electronic Commerce 33 What is Marketing? This is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to satisfy customers (www.cfdccariboo.com/glossary.htm).

Marketing : 

Session 1: An Introduction to Electronic Commerce 34 Marketing Marketing is more than sales; it is those set of activities that Grabs a potential customer Encourages them to buy your product Actually gets them to purchase your product Makes them a repeat customer

Marketing Strategies : 

Session 1: An Introduction to Electronic Commerce 35 Marketing Strategies Marketing strategies may come in two forms Product-based marketing strategy Customer-based marketing strategy

Product-based Marketing Strategy : 

Session 1: An Introduction to Electronic Commerce 36 Product-based Marketing Strategy When a customer is likely to buy or think about products in categories, a product-based marketing strategy is appropriate: An example is an office supplier store where a customer may be looking for an office desk; the customer immediately thinks about the product category “office furniture” See http://www.officedepot.com/

Customer-based Marketing Strategies : 

Session 1: An Introduction to Electronic Commerce 37 Customer-based Marketing Strategies Due to the great flexibility of Web sites (as opposed to traditional mass media) they can offer products and services that are targeted towards specific type of customers First the customer type must be identified A Web site’s home page might allow the visitor to select the required customer type This approach is more common on B2B sites than on B2C sites

Market Segmentation : 

Session 1: An Introduction to Electronic Commerce 38 Market Segmentation Market segmentation is the identification and targeting of specific portions of a market Demographic characteristics are usually used to create market segments E.g. age, gender, martial status, income level and geographic location Ring tones on Cell phones target market might be younger people between the ages of 10-20

Web Market Segmentation : 

Session 1: An Introduction to Electronic Commerce 39 Web Market Segmentation The design of the site can immediate appeal to different market segments, for example For the young fashion-conscious buyer you might have a Web site with a wide variety of typefaces, bold graphics and bright colour product photos For the older more established buyer you may have a more muted conservative style

Web Advertising : 

Session 1: An Introduction to Electronic Commerce 40 Web Advertising Advertising is about communication Communication may be between a company and Its current customers Potential customers Or former customers that the company is trying to regain

Banner Advertising : 

Session 1: An Introduction to Electronic Commerce 41 Banner Advertising Most Web advertising uses banner ads A small rectangular object normally at the top of the Web page which displays stationary or moving graphics These ads are created using animated GIFs, or objects created in Shockwave, Java or Flash) These ads must be attention grabbing

Banner Advertising : 

Session 1: An Introduction to Electronic Commerce 42 Banner Advertising Web ads have been standardised by an organisation called the Interactive Advertising Bureau (IAB) which is responsible for Creating banner size standards (e.g. 728x90, 160x600, 300x250, or 180x150) Encourage effective Internet advertising

Other Web Ad Formats : 

Session 1: An Introduction to Electronic Commerce 43 Other Web Ad Formats The pop-up ad is an ad that appears in its own window when the user opens or closes a page The pop-behind ad is a pop-up ad that is behind the existing browser window Ad-blocking software prevents these ads from displaying Rich media ads (active ads) generate graphics that float over the Web page These ads are attention grabbing, but intrusive

E-Mail Marketing : 

Session 1: An Introduction to Electronic Commerce 44 E-Mail Marketing E-mail may well be one of the greatest tools created for communication in the 20th century Some of the ways that email has been used for marketing are: Permission marketing is the sending of emails to people who request further information on a product or service (for example) Combining content (e.g. articles or news stories that are of interest to the target market) with advertising messages

Affiliate Marketing : 

Session 1: An Introduction to Electronic Commerce 45 Affiliate Marketing In affiliate marketing a Company’s Web site includes product or services offered for sale by another company in exchange for a commission The affiliate site benefits from the selling site’s brand in exchange for the referral Amazon.com has over 800,000 affiliate sites

Viral Marketing : 

Session 1: An Introduction to Electronic Commerce 46 Viral Marketing Viral Marketers rely on non-customers being told about products or services by existing customers The number of customers increase the way a virus increases An example of a viral marketing campaign is Blue Mountain Arts When an electronic greeting card is sent to a person, a link to Blue Mountain is included. The person receiving the card would then click on the link to read the card, and is likely to search for and send a card themselves

Legal Issues : 

Session 1: An Introduction to Electronic Commerce 47 Legal Issues Jurisdiction Contracts Terms of service Intellectual property

E-Commerce and the Law : 

Session 1: An Introduction to Electronic Commerce 48 E-Commerce and the Law Brick and mortar and Web business are governed by the same legal requirements However, for Web businesses two additional factors exist: Traditional boundaries no longer apply With increased speed and efficiency of modern communication violations of the law are identified and acted on much quicker

Borders and Jurisdiction : 

Session 1: An Introduction to Electronic Commerce 49 Borders and Jurisdiction Businesses contained within a given (traditional) boundary is govern by the laws defined within the boundary

Borders and Jurisdiction Cont’d : 

Session 1: An Introduction to Electronic Commerce 50 Borders and Jurisdiction Cont’d Crossing a boundary is usually characterised by passport or document control This typically includes a change in language and culture and as a result a change in law

Jurisdiction and the Internet : 

Session 1: An Introduction to Electronic Commerce 51 Jurisdiction and the Internet Since traditional geographic boundaries do not exist on the Internet, enforcing jurisdiction is difficult E.g. a Swedish e-commerce company may have a .com (therefore not clear that it is Swedish) Website in English which is hosted in Canada, but maintained by people in Australia If a Mexican citizen buys a product from the company and is dissatisfied, who does he file a suit with? Physical-border law and jurisdiction does not help

Jurisdiction in International Commerce : 

Session 1: An Introduction to Electronic Commerce 52 Jurisdiction in International Commerce Jurisdiction across international borders is governed by treaties Companies should hire an attorney if they want to engage in international commerce

Contracts in E-commerce : 

Session 1: An Introduction to Electronic Commerce 53 Contracts in E-commerce A contract comprises of three parts: An offer An acceptance Consideration A contract is formed when one party accepts the offer of another party An implied contract is when two parties act as if a contract exist, even though it does not

Contracts on the Web : 

Session 1: An Introduction to Electronic Commerce 54 Contracts on the Web Although case law is limited, one must assume that it is a legally binding contract if a user: Clicks a button on a Web page Entered information on a Web form Downloads a file from a Web site Also, ordinary signatures are replaced by digital signatures (to reduce forgeries)

Terms of Service : 

Session 1: An Introduction to Electronic Commerce 55 Terms of Service Terms of Service is sometimes called “Conditions of Use” or “User agreement” These are rules Web sites visitors must follow The purpose is to limit the owner’s liability for what might be done with the information In most cases the visitor is held to the terms, even if they did not read the text or click on an accept button; the visitor is bound by simply using the site E.g. see Amazon.com “Conditions of Use”

Intellectual Property : 

Session 1: An Introduction to Electronic Commerce 56 Intellectual Property This is a general term which includes all tangible and intangible products of the mind Intellectual property includes copyrights, patents, trademarks and service marks (similar to trademarks, used to identify services provided)

Copyright : 

Session 1: An Introduction to Electronic Commerce 57 Copyright The right granted by a government to the author or creator of a literary or artistic work Includes books, music and computer software A copyright gives sole and exclusive rights to print, publish or sell In the US works are copyrighted for the person’s lifetime plus 70 years For corporations, copyright is for 95 years from the date of publication or 120 years from the date of creation, whichever is earlier

Copyright Cont’d : 

Session 1: An Introduction to Electronic Commerce 58 Copyright Cont’d In the US In the past the creator had to register material for it to be copyrighted Registration however is no longer required A work that does not include the words “copyright” that was created after 1977 is copyrighted automatically unless released in the public domain

Copyright Cont’d : 

Session 1: An Introduction to Electronic Commerce 59 Copyright Cont’d Most Web pages are protected by copyright because graphics, words etc. are arranged in such a way to make original work The problem with a Web server is that it sends a copy of a Web page to the client Is this copy legal?

Copyright Cont’d : 

Session 1: An Introduction to Electronic Commerce 60 Copyright Cont’d US copyright law includes an exception from infringement for fair use of copyrighted works This includes copying for the purpose of criticism, comment, news, reporting, teaching, scholarship or research The term fair use may be difficult to interpret To avoid charges of plagiarism a citation to the original work should be included

Copyright Cont’d : 

Session 1: An Introduction to Electronic Commerce 61 Copyright Cont’d Napster provided a network of millions with copies of music in MP3 format Napster was sued by music recording companies Napster argued that it only provided the machinery (VCR manufacturers do a similar thing, i.e. provide VCRs that can copy) The US District and Federal Appellate Court held that Napster was guilty of vicarious copyright infringement; an entity is guilty of this if 1) it is capable of supervising the activity and 2) it benefited financially from it

Copyright Cont’d : 

Session 1: An Introduction to Electronic Commerce 62 Copyright Cont’d Napster was held liable (although it did not transfer copies of copyrighted materials) because it: Failed to monitor its network, although it could have done It profited by selling advertising Napster agreed to pay $26 million in damages, filed bankruptcy in 2002 and was bought out by Roxio who now offers legal music downloads

Data Privacy : 

Session 1: An Introduction to Electronic Commerce 63 Data Privacy Web sites should include a statement specifying how any personal information collected is used This gives the user the confidence that their personal information will not be sold to other vendors or organisations Also, the user should be provided with a secure method of entering this information (e.g. some type of cryptography should be used)

Payment Systems : 

Session 1: An Introduction to Electronic Commerce 64 Payment Systems Credit cards Debit cards Charge cards Other payment methods Paypal Metered payments www.paylessbills.com/ credit_cards.htm

Payment Systems: The Basics : 

Session 1: An Introduction to Electronic Commerce 65 Payment Systems: The Basics Payment systems are still evolving Electronic payments are far cheaper than mailing paper checks Cost of billing a person by mail ranges from US$1 to US$1.50 Billing a person electronically cost about US$0.50 Replacing paper bills also saves trees

Primary Payment Methods : 

Session 1: An Introduction to Electronic Commerce 66 Primary Payment Methods There are currently four primary payment methods: Cash Checks Credit cards (most popular method online) Accounts for more than 85% worldwide consumer transactions Debit cards In the US electronic transfer is also a growing payment method

Payment Cards : 

Session 1: An Introduction to Electronic Commerce 67 Payment Cards The main categories of payment cards are: Credit cards (e.g. Visa) Spending limit based on credit history Interest is charged on outstanding balances not paid off within a given time Accepted worldwide User protection facilitated by a 30-day period that a purchase may be disputed Merchant account (that accepts credit card payments) required by the business

Payment Cards Cont’d : 

Session 1: An Introduction to Electronic Commerce 68 Payment Cards Cont’d Debit cards The sale amount is removed from user’s account and transfers to the sellers account Limited by funds in account plus overdraft (if present) Charge cards (e.g. American Express) Has no spending limit The amount due on the card is due at the end of the billing period They do not accumulate interest payments

Payment Cards Cont’d : 

Session 1: An Introduction to Electronic Commerce 69 Payment Cards Cont’d Some vendors provide single-use-cards which are valid for a single transaction A unique card number is issued This helps with card details security

Payment Cards Cont’d : 

Session 1: An Introduction to Electronic Commerce 70 Payment Cards Cont’d Advantages of Payment Cards In the US card holder’s liability is limited to US$50 when used fraudulently Accepted worldwide Currency conversion handled by card issuer Ease of use, no special hardware required

Payment Cards Cont’d : 

Session 1: An Introduction to Electronic Commerce 71 Payment Cards Cont’d Disadvantages of Payment Cards Service companies charge merchants per-transaction and monthly processing fees Price of goods for the consumer might be slightly higher as a result A limit is placed on the minimum amount allowed to spend (e.g. 5 pounds in the UK)

Payment Acceptances and Processing : 

Session 1: An Introduction to Electronic Commerce 72 Payment Acceptances and Processing The merchant authenticates the payment card to ensure it is valid and not stolen The merchant checks with the payment card issuer to ensure that credit or funds are available and puts a hold on the credit line or the funds needed to cover the charge Settlement occurs, usually a few days after the purchase, which means that funds travel between banks and are placed into the merchant’s account

Other Payment Methods : 

Session 1: An Introduction to Electronic Commerce 73 Other Payment Methods For other payment methods read the following presentations: PayPal http://scitec.uwichill.edu.bb/cmp/online/comp3210/presentations/DanaBabb.ppt Metered Payments http://scitec.uwichill.edu.bb/cmp/online/comp3210/presentations/LeeHarvey.ppt E-Wallets http://scitec.uwichill.edu.bb/cmp/online/comp3210/presentations/ShawnHolder.ppt

References : 

Session 1: An Introduction to Electronic Commerce 74 References [1] Schneider, Gary, P., “Electronic Commerce: The second wave”, Thomson Course Technology, Fifth Annual Edition, 2004