Chapter 2

E-COMMERCE :
MECHANISMS,
INFRASTRUCTURE,
AND TOOLS
 LAST WEEK REVIEW

• Electronic Commerce (EC) : the process of

buying, selling, or exchanging products,
services, or information via computer.
• EC can take several forms depending on the
degree of digitization (transformation from
physical to digital) : Traditional Commerce
- Partial EC - Pure EC
 LAST WEEK REVIEW

• EC applications are supported by

infrastructure (hardware, software,
networks) and by the following five support
areas : people, public policy, marketing and
advertising, support services, and business
partnerships.
 LAST WEEK REVIEW

EC Business Models :
• A method of doing business by which a
company can generate revenue to sustain
itself (Turban, 2008)
• A business model describes the rationale of
how an organization creates, delivers, and
captures value (Osterwalder in Business
Model Generation, 2009)
Electronic Commerce
Mechanisms: An Overview
 The EC trading activities are divided into
six categories.
 Each activity is supported by one or
more EC mechanisms.
Sellers, Buyers, & Transactions
Market
Markets (electronic / otherwise) have three main
functions :
1. Matching buyers & sellers
2. Facilitating the exchange of information,
goods, services, and payments associated
with market transactions
3. Providing an institutional infrastructure (e.g.
legal & regulatory framework)
Electronic Market (e-market)
• E-market / e-marketplace / marketspace :
 A virtual market in which sellers & buyers
meet & conduct different types of
transactions.
 A marketplace in which sellers and buyers
exchange goods and services for money (or
for other goods and services), but do so
electronically.
• The major place for conducting EC transactions.
Example : e-marketplace
Components Of And The
Participants In E-Marketplaces
The 7 major components of e-marketplace :
1) Customers
2) Sellers
3) Products & services
 Marketspace can sell physical & digital products
4) Infrastructure (hardware, software, electronic
network, etc)
Components Of And The
Participants In E-Marketplaces
5) Front end
 The portion of an e-seller’s business
processes through which customers
interact (e.g. seller’s portal / website,
electronic catalogs, shopping cart, search
engine, and payment gateway)
 Seller’s Website

Search Engine Shopping Cart

Payment Gateway
Components Of And The
Participants In E-Marketplaces
6) Back end
 Activities that are related to online order
fulfillment, inventory management,
purchasing from suppliers, accounting &
finance, insurance, payment processing,
packaging, and delivery
Components Of And The
Participants In E-Marketplaces
7) Intermediaries
 A third party that operates between sellers
and buyers. They provide relevant
information and offer value-added services.
 Disintermediation : elimination of
intermediaries between sellers and buyers.
The opposite : reintermediation.
 Example : www.bhinneka.com
E-Marketplaces Pricing Mechanisms

Source : www.businessmodelgeneration.com
 Types Of E-Marketplaces
Three types of e-marketplaces :
A. Private E-Marketplaces
 Online markets owned & operated by a
single company (e.g. Dell sells from their
website).
 May be open only to selected members and
are not publicly regulated.
 It may be either sell-side and/or buy-side e-
marketplaces
 Types Of E-Marketplaces
A.1. Sell-side e-marketplace : a private e-
marketplace in which a company sells either
standard and/or customized products to
customers (B2C) or to businesses (B2B).
Considered to be One-to-Many.
A.2. Buy-side e-marketplace : a private e-
marketplace in which a company purchases
from many potential suppliers (B2B).
Considered to be Many-to-One.
 Example : E-Marketplaces
• Sell-side e-marketplace (www.dell.com)
 Example : E-Marketplaces
• Buy-side e-marketplace (Shell Chemicals)
 Types Of E-Marketplaces
B. Public E-Marketplaces
 Online markets that serve many sellers &
many buyers (many-to-many) and usually
owned & managed by an independent
third party (not a seller or a buyer)
 Open to the public and also known as
exchanges (e.g. stock exchange,
commodities exchange)
 Example : E-Marketplaces
• Public e-marketplace (www.Alibaba.com)

• -----Gambar website Alibaba.com------

 Types Of E-Marketplaces
C. Consortia E-Marketplaces
 Online markets that owned & managed by
a group of buying or selling companies
(referred to as a consortium)
 Example : E-Marketplaces
Consortia e-marketplace (http://www.mln.lib.ma.us)
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
a) Webstore (storefront)
 A single company’s website where products
and services are sold.
 The storefront may belong to a manufacturer,
to a retailer, to individuals selling from home,
or to another type of business.
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
b) Electronic Malls (e-mall / online mall)
 An online shopping center where many
online stores are located.
 E-mall basically a directory that will transfer
customer to the appropriate independent
storefront and may provide some shared /
extra services.
Example : E-Mall
 4 Types of Stores & Malls
I. General Stores / Malls
 Sell all kinds of products (e.g. amazon.com,
walmart.com, yahoo.com, msn.com)
II. Specialized Stores / Malls
 Sell only one / a few kinds of products (e.g.
cars.com sell cars, cattoys.com sell cat
toys)
 4 Types of Stores & Malls
III. Regional vs Global Stores
 Parknshop.com : serves the Hong Kong
community (local) only. It will not deliver
outside of Hong Kong.
 Hothothot.com : local store that sell to
customers in other countries if the
customer is willing to pay all costs.
 4 Types of Stores & Malls
IV. Pure-play vs Click-and-mortar Stores
 Pure-play / virtual : don’t have physical
stores (e.g. Blue Nile, amazon.com)
 Click-and-mortar stores : physical stores
that also sell online (e.g. Walmart &
walmart.com)
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
c) Web (Information) Portals
 Portal : an information gateway that
is used in e-marketplaces, e-stores,
and other types of EC.
 Portals present information from
diverse sources in a unified way.
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
 Web Portal : a single point of access,
through a web browser, to critical business
information located inside (via intranet) and
outside (via internet) of an organization.
 Web portals can be personalized for the
users and offer other services such as e-
mail, news, stock prices, entertainment,
shopping capabilities, and other features.
Customer Shopping Mechanisms :
Storefronts, Malls, and Portals
 7 Types of Portals
I. Commercial (public) portals
 Intended for broad audiences, offer content
for diverse communities, offer fairly routine
content (some in real time).
 Example : yahoo.com, aol.com, msn.com.
 7 Types of Portals
II. Corporate (enterprise) portals
 Provide organized access to rich content
within relatively narrow corporate and
partners’ communities.
III. Publishing portals
 Intended for communities with specific
interests.
 Example : techweb.com, zdnet.com
 7 Types of Portals
IV. Personal portals
 Target specific filtered information for
individuals. They offer relatively narrow
content & typically very personalized.
 Example : netvibes.com that lets individuals
assemble their favorite widgets, websites,
blogs, e-mail, social networks, search
engine, instant messenger, and everything
else they enjoy on the web on a single
dashboard.
 7 Types of Portals
V. Mobile portals
 Portals that are accessible from mobile
devices.
VI. Voice portals
 Portals with audio interfaces that can be
accessed by a standard telephone / cell
phone.
 Example : AOL by phone, tellme.com
 7 Types of Portals
VII. Knowledge portals
 Enable access to knowledge by knowledge
workers and facilitate collaboration.
Intermediaries In E-Marketplaces
Intermediaries play an important role in
commerce by providing value-added activities &
services to buyers & sellers.
Two major types of online intermediaries :
• Brokers : person / company that facilitates
transactions between buyers & sellers.
• Infomediaries : intermediaries that provide
and/or control information flows to and from
buyers & sellers.
 Auctions, Bartering, and
Negotiating Online
I. Auction
 A competitive process in which a seller
solicits consecutive bids from buyers
(forward auctions) or a buyer solicits
bids from sellers (backward auctions)
 They can be conducted in public
auction sites (e.g. eBay) or in private
auction sites (by invitation only).
 Auctions, Bartering, and
Negotiating Online
 Auctions are based on dynamic pricing
(prices that change based on supply &
demand relationships at any given
time).
 4 Types Of Auctions
There are 4 types of auctions based on
how many buyers & sellers are involved :
a) One Buyer, One Seller
 One can use negotiation, bargaining, or
bartering. Resulting price will be determined
by each party‘s bargaining power, supply &
demand in the item’s market, and (possibly)
business environment factors.
 4 Types Of Auctions
b) One Seller, Many Potential Buyers
 Forward Auctions : an auction in which a
seller entertains bids from buyers.
 Four major types of forward auctions :
 English & Yankee auctions : bidding prices
increase as the auction progresses.
 Dutch & free-fall auctions : bidding prices
decline as the auction progresses.
Example of Forward Auction

2-49
 4 Types Of Auctions
c) One Buyer, Many Potential Sellers
There are two popular types : reverse auctions
& name-your-own-price auction.
 Reverse auctions (tendering) : auction in
which the buyer places an item for bid
(tender), potential suppliers (sellers) bid on
the job, with the price reducing sequentially,
and the lowest bid wins. Primarily B2B/G2B.
 4 Types Of Auctions
 Name-your-own-price auctions : auction
model in which a would-be buyer specifies
the price (and other terms) he / she willing
to pay to any willing and able seller. It’s a
C2B model pioneered by Priceline.com
 4 Types Of Auctions
d) Many Sellers, Many Buyers (Double Action)
 When there are many sellers & buyers,
buyers and their bidding prices are matched
with sellers and their asking prices based
on the quantities on both sides.
 Example : stocks & commodities markets
 Auctions, Bartering, and
Negotiating Online
II. Bartering
 Bartering : the exchange of goods &
services
 E-bartering : bartering conducted online,
usually in a bartering exchange
 Bartering exchange : a marketplace in which
an intermediary arranges barter transactions
(e.g. u-exchange.com, barterdepot.com)
 Auctions, Bartering, and
Negotiating Online
III. Online Negotiating
 Dynamic prices determined by
negotiation. Negotiated prices result
from interactions & bargaining among
sellers & buyers.
 Commonly used for expensive or
specialized products. Also popular
when large quantities are purchased.
 Social Software Tools : Blogs,
Twitter, Wikis
Social Software
 A software product that enables people to
rendezvous, connect, and collaborate through
computer-mediated communication
 Example : Facebook (social sites), Flickr &
YouTube (media sites), Amazon.com & eBay
(commercial sites)
 Social Software Tools :
Blogs, Twitter, Wikis
I. Blogging (Weblogging)
 Blog : a personal website that is open to
the public to read and to interact with;
dedicated to specific topics / issues.
 Vlog (video blog) : blog with video content.
 Mostly as personal online diaries. Many
blogs provide commentary / news on a
particular subject.
 Example : blogger.com, wordpress
 Social Software Tools : Blogs,
Twitter, Wikis
II. Microblogging & Twitter
 Microblogging : a form of blogging that
allows users to write messages (usually up
to 140 characters) and publish them.
 Example : Twitter  It is a social media tool
for broadcasting information. It is the digital
equivalent of word of mouth.
 Social Software Tools : Blogs,
Twitter, Wikis
III. Wiki (Wikilog)
 A blog that allows everyone to participate
as a peer; anyone may add, delete, or
change content.
 Example : Wikipedia,
Intellipedia
Virtual Communities & Social Networks

• Virtual Community : A group of people with

similar interests who interact with one
another using the Internet.
• Social Network : A place where people
create their own space / homepage on
which they write blogs; post pictures,
videos, or music; share ideas; and link to
other web locations they find interesting
9 Types of Online Communities
1. Associations
 Many physical associations have a web presence.
These range from Parent-Teacher Associations to
professional associations. Example : a retirement
community (myretirement.org)
2. Affinity Portals
 Communities organized by interest (e.g. hobbies,
technical topic, vocations, political parties, etc).
9 Types of Online Communities
3. Ethnic Communities
 Many communities are country / language specific
4. Gender Communities
 Communities based on gender (e.g. Women.com 
female-oriented community sites)
5. Catering to young people
 Teens & people in their early twenties (e.g.
Alloy.com & Bolt.com that concentrates on cell
phone users).
9 Types of Online Communities
6. Communities of Practice
 Members are professionals and practitioners who
share an area of practice. Members also share
knowledge in discussion groups (e.g. Linux online)
7. Neighborhood Communities
 Websites for local communities (e.g. Foursquare)
9 Types of Online Communities
8. Social Networks Sites
 Socially oriented online mega communities in which
millions of members can express themselves, find
friends, exchange photos, etc (e.g. Facebook,
LinkedIn)
9. Virtual Worlds
 Interactive 3-D communities / virtual environments
where the users take the form of avatars; A user-
defined world in which people can interact, play, and
do business (e.g. Second Life)