E-COMMERCE - SEMESTER 02 - Midterm exam preparation

Duration: 75 minutes
Closed book examination, allowed to have handwritten notes (4sheets = 8pages of A4)
Theories: 2 questions (50 points) + Case: 1 case (50 points)

Review
1) Define e-commerce, understand how e-commerce differs from e-business, identify
the primary technological building blocks underlying e-commerce, and recognize
major current themes in e-commerce. (chapter1)
E-commerce involves digitally enabled commercial transactions between and among organizations and
individuals.
• E-business refers primarily to the digital enabling of transactions and processes within a firm, involving
information systems under the control of the firm. For the most part, unlike e-commerce, e-business does
not involve commercial transactions across organizational boundaries where value is exchanged.
• The technology juggernauts behind e-commerce are the Internet, the Web, and increasingly, the mobile
platform.
• From a business perspective, one of the most important trends to note is that all forms of e-commerce
continue to show very strong growth. From a technology perspective, the mobile platform has finally
arrived with a bang, driving astronomical growth in mobile advertising and making true mobile
e-commerce a reality. At a societal level, major issues include privacy and government surveillance,
protection of intellectual property, online security, and governance of the Internet.
2) Identify and describe the unique features of e-commerce technology and discuss
their business significance. (chapter1)
There are eight features of e-commerce technology that are unique to this medium:
• Ubiquity—available just about everywhere, at all times, making it possible to shop from your desktop, at
home, at work, or even from your car.
• Global reach—permits commercial transactions to cross cultural and national boundaries far more
conveniently and cost-effectively than is true in traditional commerce.
• Universal standards—shared by all nations around the world, in contrast to most traditional commerce
technologies, which differ from one nation to the next.
• Richness—enables an online merchant to deliver marketing messages in a way not possible with
traditional commerce technologies.
• Interactivity—allows for two-way communication between merchant and consumer and enables the
merchant to engage a consumer in ways similar to a face-to-face experience, but on a much more massive,
global scale.
• Information density—is the total amount and quality of information available to all market participants.
The Internet reduces information collection, storage, processing, and communication costs while increasing
the currency, accuracy, and timeliness of information.
• Personalization and customization—the increase in information density allows merchants to target their
marketing messages to specific individuals and results in a level of personalization and customization
unthinkable with previously existing commerce technologies.
• Social technology—provides a many-to-many model of mass communications. Millions of users are able
to generate content consumed by millions of other users. The result is the formation of social networks on a
wide scale and the aggregation of large audiences on social network platforms.
3) Identify the key components of e-commerce business models.
A successful business model effectively addresses eight key elements:
• Value proposition—how a company’s product or service fulfills the needs of customers. Typical e-
commerce value propositions include personalization, customization, convenience, and reduction of
product search and price delivery costs.
• Revenue model—how the company plans to make money from its operations. Major e-commerce revenue
models include the advertising model, subscription model, transaction fee model, sales model, and affiliate
model.
• Market opportunity—the revenue potential within a company’s intended marketspace.
• Competitive environment—the direct and indirect competitors doing business in the same marketspace,
including how many there are and how profitable they are.
• Competitive advantage—the factors that differentiate the business from its competition, enabling it to
provide a superior product at a lower cost.
• Market strategy—the plan a company develops that outlines how it will enter a market and attract
customers.
• Organizational development—the process of defining all the functions within a business and the skills
necessary to perform each job, as well as the process of recruiting and hiring strong employees.
• Management team—the group of individuals retained to guide the company’s growth and expansion.
4) Describe the major B2C business models.
There are a number of different business models being used in the B2C e-commerce arena. The major
models include the following:
• Portal—offers powerful search tools plus an integrated package of content and services; typically utilizes
a combined subscription/advertising revenue/transaction fee model; may be general or specialized (vortal).
• E-tailer—online version of traditional retailer; includes virtual merchants (online retail store only),
bricksand-clicks e-tailers (online distribution channel for a company that also has physical stores), catalog
merchants (online version of direct mail catalog), and manufacturers selling directly to the consumer.
• Content provider—information and entertainment companies that provide digital content; typically
utilizes an advertising, subscription, or affiliate referral fee revenue model.
• Transaction broker—processes online sales transactions; typically utilizes a transaction fee revenue
model.
• Market creator—uses Internet technology to create markets that bring buyers and sellers together;
typically utilizes a transaction fee revenue model.
• Service provider—offers services online.
• Community provider—provides an online community of like-minded individuals for networking and
information sharing; revenue is generated by advertising, referral fees, and subscriptions.
5) Explain / understand the business concepts and strategies applicable to e-commerce.
E-commerce has had a major impact on the business environment in the last decade, and has affected:
• Industry structure—the nature of players in an industry and their relative bargaining power by changing
the basis of competition among rivals, the barriers to entry, the threat of new substitute products, the
strength of suppliers, and the bargaining power of buyers.
• Industry value chains—the set of activities performed in an industry by suppliers, manufacturers,
transporters, distributors, and retailers that transforms raw inputs into final products and services by
reducing the cost of information and other transaction costs.
• Firm value chains—the set of activities performed within an individual firm to create final products from
raw inputs by increasing operational efficiency.
• Business strategy—a set of plans for achieving superior long-term returns on the capital invested in a firm
by offering unique ways to differentiate products, obtain cost advantages, compete globally, or compete in a
narrow market or product segment.
6) Understand the questions you must ask and answer, and the steps you should take,
when developing an e-commerce presence.
Questions you must ask and answer when developing an e-commerce presence include:
• What is your vision and how do you hope to accomplish it?
• What is your business and revenue model?
• Who and where is the target audience?
• What are the characteristics of the marketplace?
• Where is the content coming from?
• Conduct a SWOT analysis.
• Develop an e-commerce presence map.
• Develop a timeline.
• Develop a detailed budget.
7) How to build an e-commerce website. B2C
Answer:
Here are the steps to building an e-commerce website.
Step 1: Define e-commerce business models.
 E – Tailer
 Community provider (Facebook)
 Content creator (movie, music, news, magazines ..)
 Market creator (sales, on-demand service, sharing service)
 Service provider (cloud storage, software, applications)
 Affiliate (Access trade in Vietnam)
 Portal (gate way)
 Transaction broker (online payment services)

Step 2: Choose an e-commerce platform: here are some famous platforms.

 Shopify: Shopify is the most popular software-as-a-service (SaaS) platform because

it’s robust and easy to use. There are tons of add-on tools and features that allow for
drop shipping and omnichannel selling, so you can sell through your website, on
social media and beyond.
 Wix: As a web builder, Wix has an easy drag-and-drop method that offers many
customizable templates and design features. To use it as an e-commerce platform,
you’ll need to a paid plan. Wix has all the features you’d need, such as tracking
orders, omnichannel selling and add-on tools.
 BigCommerce: This e-commerce platform is used by enterprise-level software
companies offering plenty of customization to suit your needs. It also enables
powerful features such as SEO tools and international selling.
Step 3: Start customizing your website.
 Homepage (what customers will see first)
 Category pages (including a product page for browsing and selecting)
 Shopping cart and checkout page
  About us (who you are, what you sell, your brand’s mission)
 Contact information.
 Search engine. (within in your site)
 Email subscription form.
 Legal information (terms, conditions and privacy policies)
Step 4: Set up an online store.
 High quality product photos
 Brand consistent product description.
 Inventory matches the number of the website.
 Payment should be connected to business bank accounts.
 Navigation, make sure it is easy for your customers to search.
Step 5: Launch your website.

 After you launch your website, the next steps you have to take advantage of digital
marketing to attract your customers to get to know your site.
8) Understand the scope of EC crime and security problems, the key dimensions of EC
security, and the tension between security and other values.
• While the overall size of cybercrime is unclear, cybercrime against e-commerce sites is growing rapidly,
the amount of losses is growing, and the management of e-commerce sites must prepare for a variety of
criminal assaults.
• There are six key dimensions to e-commerce security: integrity, nonrepudiation, authenticity,
confidentiality, privacy, and availability.
• Although computer security is considered necessary to protect e-commerce activities, it is not without a
downside. Two major areas where there are tensions between security and website operations are:
- Ease of use—The more security measures that are added to an e-commerce site, the more difficult it
is to use and the slower the site becomes, hampering ease of use. Security is purchased at the price of
slowing down processors and adding significantly to data storage demands. Too much security can
harm profitability, while not enough can potentially put a company out of business.
- Public safety—There is a tension between the claims of individuals to act anonymously and the needs of
public officials to maintain public safety that can be threatened by criminals or terrorists.
9) Identify the major e-commerce payment system in use today in Vietnam. (Chapter 5
slides). From a business point of view, which payment do you prefer to use. Why?
(pls provide short answer)
Most payment in VN:
 E-wallet (Momo, VnPay, Zalopay,…)
 Bank transfer (bank account)
 Credit card, Debit card
- The major e-commerce payment system in use today in Vietnam is VNPay.

- From a business point of view, I prefer to use VNPay due to its widespread adoption,
user-friendly interface, and seamless integration with various e-commerce platforms,
which helps streamline transactions and enhance customer experience.
 - Because it's widely accepted, easy for customers to use, and integrates smoothly with
e-commerce platforms, making transactions seamless and enhancing overall
customer satisfaction.

NOTE: FOR THE CASE, YOU JUST NEED TO READ & UNDERSTAND THE CONTENT,
NO QUESTIONES PROVIDED UPFRONT.

Case: Are biometrics the solution for e-commerce security? (chap5)

ARE BIOMETRICS THE SOLUTION FOR E-COMMERCE SECURITY?
As e-comerce continues to grow and constitute an increasing share of overall commerce, cybercriminals have
followed suit. Even consumers that take necessary precautions online are susceptible to identity theft and other
forms of cybercrime. Malicious actors have honed techniques for bypassing traditional techniques of online
verification, including stealing credit card numbers, PIN numbers, and answers to security questions. However,
biometric security promises to revolutionize the way users verify themsleves, potentially rendering many of the
methods used by today’s identity thieves obsolete.

Biometrics involves identifying individuals based on physiological characteristics that are unique to each person.
These characteristics include fingerprints, the shape of each person’s face, and the patterns withinthe irises of each
person’s eyes as well as other methods such as voice regcognition, analysis of heart rhythms, and even analysis of
vein patterns in the palm. Whereas traditional credit cards in tandem with private knowledge such as passwords, PIN
numbers, and security questions, biometric systems use physical attributes to verify identities, which are in theory
much more difficult for criminals to spoof. You can forget a password, but you can’t forget your face. E-commerce
companies are excited about the potential os biometrics, which could also reduce the number of abandoned shopping
cards due to forgotten passwords by as much as 70%. The use of biometrics to authenticate mobile payment
transactions is expected to skyrocket, with Juniper Research pedicting an increase from $332 billion in 2022 to $1.2
trillion by 2027, as biometric authenticaion supplants traditional password-based methods as the most common
method of facilitating payments.

The ideas behind biometric technologies ave been around for a while, but it’s only recently that widely available
technology such as smartphones has become advanced enough to offer them. Not surprisingy, Apple is the leader in
this area, fist ofering Touch ID fingerprint verification on older generations of Iphones, and later unveiling its Face
ID uses an advanced camera to a 3-D model of the user’s face with 30,000 invisible dots. This model is then
encrypted and is stored locally-it’s never uploaded online, further protecting it from thieves. Face ID has replaced
Touch ID as Apple’s preferred method to unlock its phones and make payments, and Apple claims that its false-
positive rate is approximately one in a million, a significant improvement from Touch ID’s 1 in 50,000. Face ID is
now also available on the iPad Pro.

Other smartphone manufacturers are doing their best catch up to Apple. Samsugn introduced a feature called
Intelligent Scan for its Galaxy S9 and S9+ phones, which combines irirs and facial scanning in one system. Samsung
replaced the Intelligent Scan system in its S10 and S20 smartphones with as system simply called Facial
Recognition. In contrast to Apple’s Face ID, both Samsung systems employ a simple 2-D camera for facial
recognition, which is less secure than Face ID.

Credit card companies and various banks are also working on their oen biometric solutions In 2019, Mastercard
rolled out a feature it calls Mastercard Identity Check, also known informally as Selfie Pay-users simply take a quick
selfie to confirm their identities when making credit card transactions In May 2022, building on its previous efforts,
Mastercard launched a new Biometric Checkout Program, which it characterized as a first-of-its-kind technology
framework outlining a set of standards that banks, merchants, and gtechnology providers can adhere to in order to
ensure the security and prvacy of personal data when people pay biometrically. The European Union’s Payment
Services Directive 2 requires banks to provide strong customer authentication with at leats two of three elements:
something the custmer knows (password or PIN), something the customer has (phone or hardware token), and
something the customer is fingerprint of facial recognition).

Cybercriminals will undoubtedly be working hard to overcome to additional chllenges posed by biometrics. The
stakes are particularly high with bometrics because a stolen password can easily be changed, but you can’t easily
change your face, fingerprint, or iris. Researchers have claimed to be able to unlock iPhones with Face ID using
masks, and although duplicating this technique is unlikely to be cost-effective, it does demonstrate proof of concept.
Biometrics ensure only that the person that signed up for that servic; a trusted authority is still required to confirm
identities when uses sign up for various services. There are also privacy concerns that accompany facial recognition
and other biometric technologies. In the EU, facial recognition images may not be used to investigate a citizen’s
private life, but some countries such s China, where smartphone manufacturers Huawei, ZTE, and OnePlus, were
found to be secretly transmitting their Chinese user’s data to the government, may abuse the technology for
surveilance. Legal precedentt is also mixed on whether law enforcement can compel users to unlock their phones
using biometric information, whereas it is clear that users cannot be compelled to provide their passwords for more
traditionally protected devices.

An emerging approach that may overcome some of these limitations to biometrics is behavioral biometrics, which
measures and analyzes human activity patterns to generate a unique profile for each user. Systems using behavioral
biometrics analyze patterns in keystrokes (including speed, key pressure, and finger positioning) along with
geographic information such as IP address and geolocation. Once a profile is formed for a user, sufficiently larger
deviations from that profile trigger a warrning. Companies like BioCatch are offring behavioral biometrics solutions
that allow retailers and banks to create these types of profiles for their users and accurately detect instances of fraud.
Behavioral biometrics do little to quell fears about the erosion of privacy, however. Smartphone users will simply
have to determine whether the considerable benefits of biometrics outweigh the similarly significant privacy
concerns.

Case: Behind the scenes at Etsy

In 2005, two NYU college students, Rob Kalin and Chris Maguire, were doing freelance web development work to
help pay their tuition. They did a revamp of an online community chat forum site dedicated to crafting. In the
process, they had a chance to engage with site members and learned that many of them wished they had a better
place to sell the goods they were making. Trying to sell through physical venues, such as craft fairs and consignment
shops, was inefficient. Most also felt that eBay was too bis, too expensive, and too impersonal. Kalin and Maguire
banded together with another friend, Haim Schoppik, and develo-ped a prototype: a bare-bones e-commerce website
dedicated to handmade crafts. As the prototype neared completely, Kalin began to focus on a name. He knew that a
short website name would be easier to remember and also wanted a made-up word that they could build a brand
around. The tam settled on Etsy. At the same time, Kalin was making the rounds lokking for seed funding, ultimately
securing around $315,000 from three investors.

After three months of working on the site Etsy launched in June 2005. Gthe term prioritized going live as soon as
possible with what is known as a minimum viable product, or MVP, and then adding functionality and features
afterward. The site was initially free, enabling crafters to put up listings and sell their products wothout charge,
because Etsy did not yet have a billing system. Search tools were also very rudimentary at first. But crafters signed
on and began to use the site, and momentum started to build.

Behind the scenes, the Etsy team continued to work feverishly on fizing problems and adding features. For instance,
it quickly became clear that more robust search functionality would be required. One of the forst tools added was the
ability to search items by color, something that proved so useful that Esty ended up patenting the technology. Chat
forums ưere another tool that sellers wanted. A geolocator was added so that shoppers could view good from a
particular country or city. Finally, after several months, Etsy implemented a transaction fee revenue model, initially
charging 10 cents per listing and a 3.5% fee on items sold. By then, Etsy was gaining traction and was able to secure
its first roung of venture capital financing in November 2006, with follow-on rounds in 2007. By Jyly 2007, 1
million items had been sold to be the platform. But it was clear that Etsy still needed additional funds if it was going
to continue to grow. In January 2008, it received an additional $27 million in venture capital investment, and
subsequent rounds of funding raised the total to $97.3 million. In 2015, Etsy went public, raising $267 millon and
valuing the company at more than $3 billion. By that time, it had more than 54 million members, including 1.4
million active sellers, and was generating more than $1.9 billion in gross merchandise sales (GMS) on its platform.

Over the years, Etsy’s technology infrastructure has aslo evolved. When Etsy first launched, it relied on a single web
server and database. In the early years, it would take weeks to write code to fix bugs or launch new features. Almost
every deployment caused website downtime. However, in 2009, Etsy started making slow but significant changes to
its web develoment approach. It adopted DevOps (a software development methodology discussed more extensively
in Chapter 4) and implemented a continuous intergration/continuous elivery systems that enables it to integrate new
code frequently throughout the day without discrupting operaions. Today, the platform enables millions of sellers
and buyers to smoothly transact across borders, languages, ad devices.

For years, Etsy had hosted its services in its own data centers, but in 2018, it began shifting to Google’s Cloud
Platform. Doing so has enabled Etsy to adjust to changes in traffic volume much more easily. Shifting to the cloud
has also enhanced Etsy’s overall infrastructure by providing faster processing speed, improved page load time, and
more nimble technology on an as-needed basis.

Etsy’s marketplace relies on the collection of large volumes of data, which it uses to enhance the performance of the
platform and test website features. Highlighting the right product for the right buyer at the right time from the more
than 120 million products listed on the websites is a major challenge. Etsy uses proprietary aftificial intelligence and
machine learning technologies to personalize searches and recommendations and to help buyers browse, filter, and
firm the items they want more easily. Search results and reccomendations are adjusted based on transaction data and
previous browsing history. In 2021, Etsy launched a proprietary capability called Xwalk that uses more than 4
billion data points to capture semantic meaning and improve conversion rate by showing more relevant inveentory
to buyers.

Etsy is now a global platform, with more than 40% of its GMS generated from buyers and/or sellers located outside
United States. Etsy uses machine translation technology to translate listings, reviews, ads, and conversations
between buyers and sellers to enable them to interact even when they do not speak the same language. Etsy has also
invested in localization to create a more localized experience for buyers and sellers within their own countries.

The mobile platform has also become an increasingly important part of both Etsy’s business model and its
technological infrastructure. Almost two-thirds of its GMS originates from purchases on mobile devices. Etsy’s
mobile website and mobile app include search and discovery, curation, personalization, augmented reality, and
social shopping features. In 2021, downloads pfits mobile app increased by almost 50%, and the mobile app has the
highest conversion rate among its various channels.

Although the Etsy of today has grown into giant, with more than 95 million active buyers in nearly every country if
the world and 7.7 million active sellers, it continues to share much of its DNA with the Etsy that debuted in 2005. Its
started missions is to “Keep Commerce Human”, which it says is rooted in its belief that although automation and
commoditization are parts of modern life, human creativity cannot be automated, and human connection cannot be
commoditized. Etsy’s ongoing challenges are to continue to hold fast to that mission statement while at the same
time to employ the technological infrastructure required to support millions of buyers and sellers and also to satisfy
the demands of its investors for revenues and profits.

Case: Klook sets its sight on new vistas (chapter 4)

Klook, which stands for “keep looking”, provides a tourism app with a simple value prolposition: it does away with
the inconveniences of pretrip and in-destination planning. It provides an online concierge service that aims to make
the travel experience as enjoyable ad hassle-free for its user base as possible. There is also a clear focus on
affordability and competitive pricing. A direct link to in-destination attractions and services means that prices are
considerably lower, as no commission is added to the sale cost.