E-commerce and Digital

Marketing
IT0041
 MODULE 1

E-Commerce: Mechanisms,
Platforms, and Tools
Upon the completion of this module, the students are
expected to:
• Describe the major electronic commerce (EC) activities and processes and the mechanisms that
support them.
• Describe electronic catalogs, search engines, and shopping carts.
• Describe the major types of auctions and list their characteristics.
• Describe bartering and negotiating online.
• Describe virtual communities.
• Describe social networks as EC mechanisms.
• Describe the emerging technologies of augmented reality and crowdsourcing.
• Describe Web 3.0 and define Web 4.0.
• Define e-marketplaces and list their components.
• List the major types of e-marketplaces and describe their features.
• Discuss the benefits and limitations of e-auctions. Understand virtual worlds and their use in EC.
The major activities are information dissemination and
presence, online trading, collaboration, entertainment,
and search. The major mechanisms are marketplaces,
webstores, shopping carts, catalogs, search engines, Web
2.0 tools, and virtual worlds.

Most of the activities are between sellers and buyers.

However, there also are collaboration activities among
supply chain members as well as among people within
organizations. EC attempts to automate the interaction
process for the above activities.
The Online Purchasing Process

 Customers buy goods online in different ways. The most common is purchasing from catalogs at fixed prices. Sometimes prices
may be negotiated or discounted.

 Another way to determine price is dynamic pricing , which refers to non-fixed prices such as those in auctions or stock
(commodity) exchanges.

 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 Account.” 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 (now available on
smartphones). Some sellers (e.g., American Airlines, Amazon.com) provide price comparisons showing competitors. 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
bag).

 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 (e.g., standard,
next day).

 Finally, a payment option is selected. For example, newegg.com allows you to pay by credit card, PayPal, check after billing, in
installments, and so on. After checking all the details for accuracy, the buyer submits the order.
 The place where buying and selling occurs is called an e-marketplace.

 Electronic markets play a central role in the digital economy, facilitating the exchange of information, goods,
services, and payments. In executing the trading process, e-marketplaces create economic value for buyers,
sellers, market intermediaries, as well as for society at large.

 Markets (electronic or otherwise) have four major functions:

(1) enabling transactions to occur by providing a meeting place for buyers and sellers;
(2) enabling the flow of relevant information;
(3) providing services associated with market transactions, such as payments and escrow; and
(4) providing auxiliary services such as legal, auditing, and security
Electronic Markets

 The electronic market is the major venue for conducting EC transactions.

 An e-marketplace (also called e-market, virtual market, or marketspace ), is an electronic space where sellers
and buyers meet and conduct different types of transactions.

 Customers receive goods and services for money (or for other goods and services, if bartering is used).

 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
various support services, such as rapid and smooth executions of transactions.
Components of and the Participants in E-Marketplaces

The major components and players in a marketspace are customers, sellers, products and services (physical or
digital), infrastructure, a front end, a back end, intermediaries and other business partners, and support services
such as security and payments. A brief description of each follows:

 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.

 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. Although both types of markets can sell
physical products, they can also sell digital products .
 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, and all other activities related to placing orders.

 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 business.

 Intermediaries. In marketing, an intermediary 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. The role of these electronic intermediaries. For example, online intermediaries
create and manage the online markets. They help match buyers and sellers, provide escrow services, and help
customers and/or sellers complete transactions.
Types of E-Marketplaces

The term marketplace differs once it refers to the Web. It is sometimes refers to as e-marketplace or marketspace. We distinguish two
types of e- marketplaces: private and public.

Private E-Marketplaces

Private e-marketplaces are those owned and operated by a single company. starbucks.com , dell. com, target.com , and united.com
sell from their websites. Private markets are either sell-side or buy-side.

 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-to-many .
 buy-side e-marketplace, a company purchases from many potential suppliers; this type of purchasing is considered to be many-to-
one , and it is a B2B activity.

Public E-Marketplaces

Public e-marketplaces are in many cases B2B markets. They often are owned by a third party (not a seller or a buyer) or by a
group of buying or selling companies (referred to as a consortium ), and they serve many sellers and many buyers. These
markets also are known as exchanges (e.g., a stock exchange). They are open to the public and usually are regulated by the
government or the exchange’s owners.
Several kinds of interactions exist among sellers, buyers, and e-marketplaces. The major B2C mechanisms are
webstores (storefronts) and Internet malls .

Webstores

 A webstore ( or storefront) refers to a single company’s (or individual seller’s) website where products and services
are sold.
 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 products in the catalog;
 an electronic shopping cart for holding items until checkout;
 e-auction facilities where auctions take place;
 a payment gateway where payment arrangements can be made;
 a shipment center where shipping arrangements are made; and customer services , which include product and
warranty information and CRM.
Several kinds of interactions exist among sellers, buyers, and e-marketplaces. The major B2C mechanisms are
webstores (storefronts) and Internet malls .

Webstores

 A webstore ( or storefront) refers to a single company’s (or individual seller’s) website where products and services
are sold.
 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 products in the catalog;
 an electronic shopping cart for holding items until checkout;
 e-auction facilities where auctions take place;
 a payment gateway where payment arrangements can be made;
 a shipment center where shipping arrangements are made; and customer services , which include product and
warranty information and CRM.
Microsites

A 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, commercial, or educational material.

Electronic Malls

In addition to shopping at individual webstores, consumers can shop in electronic malls (e-malls). Similar to malls in
the physical world, an e-mall (online mall) is an online shopping location where many stores present their catalogs.
The mall charges commission from the sellers based on their sale volume.

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.
Types of Portal

 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 , google.com , and msn.com .
 Corporate (private) portals. Corporate portals provide organized access to internal corporate information. These
also are known as enterprise portals or enterprise information 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 .An increasing number of
portals are accessible via mobile devices.
 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.
 Knowledge portals. Knowledge portals enable easy access to knowledge by knowledge workers and facilitate
collaboration.
 Communities’ portals. These are usally parts of online communities. they are dedicated to some theme and may
be sponsor by a vendor such as SONY.
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 include electronic catalogs, search engines, and shopping
carts; all are intended to facilitate the electronic trading process.

Electronic Catalogs

Electronic catalogs (e-catalogs) consist of a product database,

directory, and a presentation function. They are the backbone
of most e-commerce 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.
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.
The three major types of EC searches are:

 Internet/Web Search-This is the most popular search that involves looking for any documents on the Web.
 Enterprise Search- describes the search for information within the fi les and databases of an organization.
 Desktop Search- involves a search of a user’s own computer.
 Voice-Powered Search -To ease searching, especially when using a smartphone, Google introduced a voice-powered tool that
allows you to skip the keyboard altogether.
 Video and Mobile Search- There are dozens of dedicated search tools and sites that will search for videos and other images.
 Visual Shopping Search Engine- Visual search means looking for information that is presented visually (photos, images, etc.)
 Social network search - also known as social search is a class of online search engines that help people find material about
social networking activities, such as in user generated content, discussion groups, or recommendations.
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.

Product Configuration (Self Customization)

A key characteristic of EC is the ability to
self- customize products and services.
 An online auction is an electronic space where sellers and buyers meet and conduct different types of
transactions.
 A Dynamic pricing refers to prices that are not fixed, but are allowed to fluctuate, and are determined by
supply and demand.
Types of Auctions
• One Buyer, One Seller
• One Seller, Many Potential Buyers
• One Buyer, Many Potential Sellers
• Many Sellers, Many Buyers

 A bidding fee auction , also called a penny auction , is a new

type of online forward auction in which participants must
pay a small nonrefundable fee each time they place a bid
(usually in small increments above the previous bid).
Benefits of E-auctions
Limitations of E-auctions

Minimal Security
Some of the C2C auctions conducted on the Internet are not secure because they are done in an
unencrypted (or poorly protected) environment. This means that credit card numbers can be stolen during
the payment process.

Possibility of Fraud
In many cases, auction items are unique, used, or antique. Because the buyer cannot see and touch the
items, the buyer may receive something different than she (or he) had in mind. In addition, products may
be defective. Buyers may also commit fraud (e.g., by receiving goods or services without paying for them).

Limited Participation
Some auctions are by invitation only; others are open only to dealers. Limited participation may be a
disadvantage to sellers, who usually benefit from as large a pool of buyers as possible. Buyers also may be
unhappy if they are excluded from participation.
Online Bartering

 Bartering , the exchange of goods and services, is the oldest method of trade.

 E-bartering (electronic bartering) – bartering conducted online – can improve the

matching process by attracting more partners to the barter.

 Dynamic prices also can be determined by negotiation . Negotiated pricing is commonly

used for expensive or specialized products. Negotiated prices also are popular when large
quantities are purchased.
• A community is a group of people with common interests who interact with
one another.

• A virtual community is one where the interaction takes place over a

computer network, mainly the Internet.

• Most virtual communities are Internet-based, known also as Internet

communities .

• Communities can be designated as public , meaning that their membership

is open to anyone. The owner of the community may be a privately held
corporation (e.g., Twitter,Facebook),

• Private communities belong to a company, an association, or a group of

companies and their membership is limited to people who meet certain
requirements (e.g., work for a particular employer or work in a particular
profession).
Another option is to classify the members as traders, players,just friends, enthusiasts , or friends in need . A more
common classification recognizes six types of Internet communities:

(1) transaction,
(2) purpose or interest,
(3) Relations or practices,
(4) fantasy,
(5) social networks, and
(6) virtual worlds.

social network site as a company, such as Facebook, that provides free Web space and tools for its community
members to build profiles, interact, share, connect, and create and publish content.

Social network services (or sites) are companies that host social communities. They are also known as social networks .
• Social network sites are growing rapidly, with some having over 100 million members.

• Although Facebook, Pinterest, Twitter, Google+, and other social networks attract the majority of media attention in
the United States.

• Business-oriented social networks , also known as professional social networks , are social networks whose primary
objective is to facilitate business.The prime example here is linkedin.com .

• Mobile social networking refers to social networking where members chat and connect with one another using any
mobile device.
A virtual world is a site for online communities in a computer-generated setting, where users socialize and work
with one another through the use of avatars. The creation of objects, jobs, homes, and businesses in the 3D
environment, which are owned by their residents, is the foundation of these worlds. It is an interactive
environment, which is fun and satisfying. The major features are:

Residents of virtual worlds can represent themselves by 2-D or 3-D

images known as avatars. Avatars are interactive, animated,
computerized (characters) that are graphical images designed to
look like humans and are programmed to exhibit people’s behavior.
Avatars have unique names and can move around.
Augmented Reality

• An increasing number of business applications use the technology of augmented reality (AR).

• According to Wikipedia, augmented reality is “a live, copy, view of a physical, real-world environment whose
elements are augmented (or supplemented) by computer-generated sensory input such as sound, video,
graphics or GPS data”.
Crowdsourcing

Another platform for e-commerce is crowdsourcing. Crowdsourcing is a platform for collective intelligence in e
commerce and social commerce.

The term crowd refers to any group of people such as a group of consumers, employees of a corporation, or
members of a social network who offer expertise. A crowd is frequently referred to a large group.

Crowdsourcing utilizes crowds to collectively execute

tasks such as solving problems, innovating, or getting
large projects completed by dividing the work among
many people.

Elements of crowdsourcing
The Process of Crowdsourcing Benefits of Crowdsourcing
• Problems can be analyzed or solved at comparative little cost.
(Payment can be determined by the results; however, sometimes
there is no monetary payment, just praise or accolades).
• Solutions can be reached quickly since many people work on
the needed research project simultaneously. Also, designs of
products may be expedited.
• The contributing crowd may reside within the organization;
therefore, talents may be discovered.
• By listening to the crowd, organizations gain first hand insight
into the desires of their customers (or employees). There is
built-in market research when the crowd is composed of
customers.
• Crowdsourcing can tap into the global world of ideas. The
crowd may include business partners, customers, academicians,
etc., and the members of the
crowd can reside in different countries.
• Customers tend to be more loyal if they participate in a
company’s problem solving project
 Web 3.0 is projected to deliver a new generation of business applications that will see business and social
computing converge.

 According to several experts, Web 3.0 could have the following capabilities:

• Make current applications smarter by introducing new intelligent features.

• Provide easier and faster interaction, collaboration and user engagement.
• Facilitate intelligent-based powerful search engine.
• Provide more user-friendly application creation capabilities.
• Increase the wisdom and creativity of people.

 One of the major possible platforms of Web 3.0 technologies is the Semantic Web. It is basically a group of
methods that focus on machines. The technology attempts to enable computers to understand the semantics
(i.e., the meaning) of information, by using natural language understanding tools.
Concerns
The following are a few concerns regarding the implementation of Web 3.0 and the future of EC.

• Future Threats. According to Stafford ( 2006 ), Laurent ( 2010 ), and the authors’ experiences, the following
trends may slow the growth of EC and Web 3.0, and may even cripple the Internet.
• Security concerns. Shoppers, as users of e-banking and other services, and members of social networks, worry
about online security. The Web needs to be made safer.
• Lack of Net neutrality. If the big telecommunications companies are allowed to charge companies for a
guarantee of faster access, critics fear that small innovative Web companies could be demolished by the big
companies that can afford to pay more for efficient Internet usage.
• Copyright complaints. The legal problems of YouTube, Craigslist, Wikipedia, and others may result in a loss of
originality, dedication, and creativity of user- generated content.
• Insufficient connectivity. Upstream bandwidths are still constraining applications, making uploading of video
files a time- consuming task.
• Language Fitness. There will be a need to reconsider the existing spoken languages with Web 3.0 taxonomies
and schemes.
• Standards. There will be a need for architectural standards for Web 3.0.
Web 4.0 is the Web generation after Web 3.0. It
is still an unknown entity. It is known as Symbiotic
Web. However, Coleman and Levine ( 2008 )
envision it as being based on islands of
intelligence and on being ubiquitous.

Web 5.0
According to Patel ( 2013 ), “Web 5.0 is still an
underground idea in progress and there is no
exact definition of how it would be. Web 5.0 can
be considered as Symbionet Web, decentralized.”
If you have any question, kindly leave a
comment on the discussion for Module 2.