Lecturer: Ellis E. Confer

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Ecommerce Website Engineering ECT 455 Winter 2004

• Lecturer Ellis E. Confer
• E-mail econfer_at_cs.depaul.edu
• Office Hours Monday 430 600 pm

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Session Number 2

• Session Date January 10, 2005
• Session Objectives
• Introductions Administrative Items
• Course Overview
• Subject Matter Topics
• Consumer-oriented Internet Commerce
• Web Site Development Strategies Practices
• Enabling Technology Web Server Function

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Discussion Agenda

• Review of eCommerce Growth
• Characteristics of Consumer Internet Commerce
• Types of Consumers and Purchases
• Business Models and Value Propositions
• Commerce Value Chain
• Mercantile Model Customer Perspectives
• Implications for Strategies and Design
• Enabling Technology Web Server Function

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Setting the Stage
Growth of World GDP Per Person, 1000 100
Now Information Age
1890s 1950s Electric Power and Car
1840s 1890s Railway Age
1780s 1840s Industrial Revolution in Great
Britain
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eCommerce Growth in US2000 vs.2004

• US will remain world leader in ecommerce
• (for now).
• B2C will grow from 39 billion to 184.5 billion.
• B2B trading will grow from 450 billion to 4-6
  trillion in 2004, about 53 from e-marketplace.
• Total online trading will grow from 489 million
  to 4-6 trillion.

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Worldwide eCommerce Growth
Rest of world
8,000
Latin America
Western Europe
7,000
Asia Pacific
North America
6,000
Regions in the graph follow the
5,000
same order as in the legend
4,000
3,000
2,000
1,000
0
2004
2000
2001
2002
2003
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Global E-Commerce Growth

• Global e-commerce -- both B2B and B2C -- will hit
  6.8 trillion in 2004, 8.6 of the global sales
  of goods and services.
• U.S. will reach 3.2 trillion in 2004.
• Asia-Pacific -- 1.6 trillion
• West Europe -- 1.5 trillion
• Latin America -- 82 billion
• Source Forrester Research Global e-Commerce
  Approaches Hypergrowth, 4/18/2000

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eCommerce Will Penetrate Business and Consumer
Markets
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Online Retail 2003 Holiday Season

• Revenue growth strong.  59 of retailers reported
  revenue growth for the 2003 online holiday season
  of 25 percent or higher 30 reported revenue
  increases of 50 percent or more. 
• Customer satisfaction increases.  89 consumers
  were satisfied with online shopping experience
  84 in 2002  
• Free shipping remains the king of online
  marketing promotions (59), followed by an
  online-only sale (27), and free shipping with no
  conditions (24). 
• Despite spam concerns, retailers continue to have
  success with email.  86 citing their own email
  promotions as one of their most successful
  marketing vehicles. 38 percent of merchants
  stated their email open rates had increased
  significantly or somewhat from last year. 
• Search engines and affiliate marketing help
  retailers find customers, remained the second
  (58) and third (50) most successful marketing
  vehicle for retailers.  "
• Shop.org/BizRate 2003 eHoliday Mood study.
  January 2004

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Desirable Characteristics of an Electronic
Marketplace

• Critical Mass of buyers and sellers
• Opportunities for independent evaluation and for
  customer dialogue and discussion.
• Negotiation and bargaining.
• New products and services
• Seamless interface.
• Recourse for disgruntled buyers.

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Business and Consumers Move Their Buying Online

• Corporations reinvent their supply chain.
• 6.3 trillion in 2004
• eMarketplace
• eBusiness Networks
• Consumer will redefine requirement for retailers.
• 454 billion in 2004.
• Empowerd consumer

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A Quick Poll

• What types of shoppers are you?
• How do you shop online?

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Online Shopping Experience

• Important Features
• Quality of Information 78.4
• Easy Ordering 76.6
• Reliability 74.3
• Security 73.2
• Variety 73
• Quick Delivery 67.3

• Why use Web?
• Convenience 82
• Save Time 73.8
• Vendor Information 73.2
• No Pressure 62.7

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Types of Consumers

• Types of Buyers
• Impulsive Buyers quick purchasing
• Patient Buyers price comparison
• Analytical Buyers research first
• Shopping Experiences
• Utilitarian task-completion and rational
• Hedonic involvement and entertainment

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Types of Online Purchases

• Specifically Planned Purchases
• Generally Planned Purchases
• Reminder Purchases
• Unplanned Purchases
• Implications for Strategies and Design?

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Motivators of online purchasing

• 75 Saving money/lower prices
• 50 More convenience/less travel
• 48 More choice/variety
• 29 More fun than traditional shopping

EY Internet Shopping Study
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Customer Expectations

• Merchandize assortment
• About the same number of products available as
  the retail store (21)
• About the same number of products plus specials
  (51)
• More online SKUs than store or catalog (39)

(Global Online Retailing Report)
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Online Shopping Experience

• Time Spent Searching
• 5-15 minutes 35.2
• Exit/Abandon
• up to 10 min 21.4
• 10-20 min. 50.5
• Dissatisfying Factors
• Confusing Web Site 59
• Cant find information 66.8
• Download Too slow 55

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Demographic Profile of Web Users
GVU Web User Survey
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The Multichannel Consumer Embraces The Net
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Womans World Wide Web

• Mediametrix Report (May 2000 data)
• Women accounted for 50.4 of Web users
• Women 25-34 contributed to 10.5 of Web traffic
  (unique visitors)
• Women 35-44 contributed to 10.8 of Web traffic
• Source http//mediametrix.com/data/MMXI-JUP-WWWW.
  pdf

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Implications for Strategies and Design?

• Products Content
• What kind of products or content are suited for
  online retailing?
• Software Interface
• Easy search
• Attract repeat visit
• Process
• Shopping and Order fulfillment

• Pricing
• Willingness to pay
• Payment
• Secure methods
• Market Penetration
• Distribution channel
• Critical mass

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Why consumers didnt buy online?

• 97 Uncomfortable sending credit car data across
  Net
• 53 Preferred to see product before purchased
• 18 Couldnt talk to a sales representative
• 16 Couldnt get enough product information to
  make decision

EY Internet Shopping Study
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Meeting Customer Expectations

• Top 3 Reasons for Shopping Online
• Good selection of items
• Competitive pricing
• Convenience
• Shopping carts are frequently abandoned
• Placed products in the cart but did not complete
  the purchase (78) because
• Shipping cost too high (45)
• Price check (37)
• Changed mind (34)
• Price to high (24)
• Check out process was long/unclear (18)

EY Global Retailing
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Amazon

• How does Amazon site support different types of
  shoppers, purchases, and shopping behaviors?

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Amazon

• What are their customer value propositions?
• What are their business value propositions?
• What are their business models?
• Who are their competitors?

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Amazon

• How does Amazon site implement the e-commerce
  value chain?
• Attract
• Interact
• Act
• React

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Value Propositions

• For Consumers/Customers/Users
• For the Firm/Organization

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The Internet Value Proposition

• Transform customer relationship
• Customer centered, self service, 11 choices
  delivery to customer location customer needs
• Displace traditional source of values
• Physical vs. digital value (information)
• Economies of scale vs economy of scope
• Mass produced vs mass customized
• Information vs. knowledge value
• Distribution as constraints vs. enabler
• Local vs. global

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• A Technographics View of New consumer Internet
  Adoption

Mainstream
Number of new online consumers
Early adopters
Laggards
Time
Forrester Now or Never
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Value Proposition for Customers

• Transform customer relationship from
  supplier-centered to customer-centered values
• self service, 11 choices delivery to customer
  location customer needs choice of service hours
• Displace traditional source of values
• Physical vs. digital value (information)
• Economies of scale vs economy of scope
• Mass produced vs mass customized
• Information vs. knowledge value
• Distribution as constraints vs. enabler
• Local vs. global

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Value Proposition for Provider/Supplier Firms

• Ability to reach a global market
• Reduced marketing and selling expense
• Increased efficiency of operation
• Ability to target consumers more precisely
• Ability to convey more accurate product and
  availability information

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The Commerce Value Chain
Get and keep customer interest
Turn interest into orders
Service customers
Manage orders
Attract
Act
React
Interact
Catalog Sales static dynamic
AdvertisingMarketing channels media
Order capture-- Shopping Cart Payment Fulfillment
goods
Customer service Order tracking
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Attract Customers (Marketing)

• Purpose
• Build brand awareness, attract customers, and
  entice them to buy
• Merchandizing Methods
• Advertising
• Coupons
• Sales and Promotions
• Frequent buyer programs
• 11 marketing

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Interact with Customers (Sales)

• Purpose
• Turn interest into orders
• Catalog, Product and Service
• Techniques
• Registration with Internet search engines
• Hyperlinks
• Onsite product search
• Product and price comparison
• Dynamic vs. static contents
• Pricing

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Act on Customer Instructions (Order Management)

• Purpose Manage order and shopping experience
• Order Processing
• Shopping cart and order aggregation
• Order validation Application of coupons or
  discounts
• Cross selling
• Calculation of sales, taxes, shipping and
  delivery charges, rolled-up order
• Payment handle multiple payment methods (cash,
  credit, credit cards, debit cards)
• Act Fulfillment
• Delivering the goods ordered to their destination
• Transmission of order information to warehouse,
  packing or order assembly for shipping, shipping
  and delivery

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React to Inquiries (Service)

• Purpose customer satisfaction, experience, and
  repeat visits
• Methods
• 24X7 service capacity
• Proactive and Immediate feedback voice and
  email
• Access to status information
• Self-help (FAQ)
• Multi-language support

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Four Ecommerce Go-to Market Strategies

• Channel Master Channel Master
• Integrate the commerce value chain with existing
  operations build deeper relationship with
  customers
• Examples Cisco, Amazon
• Customer Magnet
• Community and knowledge sharing
• Examples Yahoo, Excite, MSN
• Value Chain Pirate
• Use the Internet to bypass existing distribution
  chains, offering a more efficient buyer/supplier
  relationship.
• Examples - Autobytel.com, etrade
• Digital Distributor
• Unbundle traditional groupings of products and
  then "rebundle" some of them for efficient
  delivery by means of Internet.
• Example Monster.com
• Remember the principles of disintermediation and
  re-intermediation

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Ecommerce Go-to Market B2C Business Models for
Generating Revenues Profits

• Merchant Model
• Virtual Merchants
• Click Brick
• Multi-Channel
• Shopping Malls
• Advertising/Subscription Model
• Horizontal portal
• Vertical portal
• Personalized portal

• Sponsorship/Brokerage/Intermediary
• Buy/sell fulfillment
• Buyer/demand aggregator
• Virtual mall
• Hypermediary (financial settlement)
• Auction broker
• Reverse auction

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Merchant Models

• Applies to Virtual Merchant, Click Brick,
  Multi-channel, Online Shopping Malls
• Advantages
• Enables merchants to sell products on the Web
• Conduct business 24-by-7, worldwide
• An e-commerce storefront should include
• Online catalog of products
• Order processing (robust shopping cart)
• Secure online payment
• Timely order fulfillment
• Click Brick or Multi-channel physical
  location, brand recognition, established customer
  base, cannibalization, channel integration
• Virtual Merchant (i.e., the internet
  pure-play) avoids the cost of physical stores

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Advertising/Subscription Model

• Delivered through preponderance of portals.
• Portal sites Give visitors the chance to find
  almost everything they are looking for in one
  place
• Horizontal portalsPortals that aggregate
  information on a broad range of topics
• Yahoo!, AltaVista, Google
• Vertically-focused, special interest portals
  Portals that offer more specific information
  within a single area of interest
• WebMD, IMDB, FirstGov
• Requires fresh and abundant content, and robust
  search engine to draw traffic
• Heavy reliance on advertising revenue, decline in
  effectiveness of online advertising

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Example of Sponsorship/Brokerage/Intermediary
Model-Auction Models

• Online auction sites
• Act as forums through which Internet users can
  log-on and assume the role of either bidder or
  seller.
• Collect a commission on every successful auction.
• Sellers post items they wish to sell and wait for
  buyers to bid.
• Reserve price
• The minimum price a seller will accept in a given
  auction.
• Reverse auctions
• Allow the buyer to set a price as sellers compete
  to match or even beat it.

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Dynamic Pricing Models

• The Web has changed the way products are priced
  and purchased
• Comparison pricing model
• Web sites using shopping bot technology to find
  the lowest price for a given item
• Demand-sensitive pricing model
• Group buying reduces price as volume of sales
  increase
• Name-your-price model
• Name-your-price for products and services

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The State of Retailing Online 6.0 (2003-4 Report
by shop.org/BCG)

• 2000-2002 Profitable online operations, 43
  (2000) ? 56 (2001) - 70 (2002)
• 2000-2003 Shoppers spent 51.3 b online in 2001,
  up 21 from 2000. 76 b in 2002, up 58 from
  2001 approximately 26 in 2003 to 96 b.
• 2002 Marketing costs/order 20 ? 12 customer
  acquisition costs 29? 14 repeat buyers 4?53
  of revenue.
• 2003 Marketing costs in 2003 Web based
  retailers (10/per order), store-based (5), and
  catalog-based (7) shifting toward performance
  based affiliate marketing and search engine
  marketing (investment in operational efficiency).
• 2003 Most popular product categories in 2003
  computer HW/SW (40), tickets (17), books (12)
• 2003 Cross Channel customer behaviors 45
  online customers shopped offline and 17 offline
  shoppers go online
• 2004 91 percent of merchants have seen online
  growth during 2004 holiday season, with 17
  percent experiencing sales more than twice as
  high as a year ago.
• 2004 According to a recent survey, 95 percent of
  consumers have been satisfied with their online
  purchases this holiday season, nine percent more
  than the same time in 2003.
• 2004 Most successful website feature for driving
  sales has been a gift idea center (56), where
  consumers can browse for suggested gifts by
  gender, price, or category.
• 2004 Other popular website features have
  included a "suggested items" page (32),
  clearance or sale page (32), and a featured sale
  item page (31).
• 2004 Free shipping was the most successful
  marketing promotion among merchants (60).
• 2004 45 percent of consumers use a catalog to
  conduct research, then buy online. 21 percent of
  consumers research products online, then purchase
  from a catalog. Merchants recognize the
  importance of catalogs to their business, with
  over half of retailers (53) reporting that
  catalog mailings have been the most successful in
  driving consumers to their website.

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Net Results - Transition of an E-Customer
Interactive Marketing Transaction Processing
Online Relationship
Casual Visitor
Prospect
Buyer
Repeat Buyer
Evaluate interest Allow comparison
Support/Interact present options Enable
Transaction Develop relationship Prove
reliability
Push Offers
Conversion Gartner Group
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What Is a Web Server?
A computer (HW/SW combo) that delivers (serves
up) Web pages.
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Web Server Characteristics

• Is connected to a network.
• Every web server has an IP address and possibly a
  domain name.
• Provides ports of entry.
• Responds to client requests.
• Translate a URL into a filename.
• Translate a URL into a program name.
• Return the results to the client (browser).

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Connected to Networks

• How is a machine on a network identified?
• IP address
• DNS

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IP Addressing

• Consist of 4 byte blocks
• x.x.x.x
• Where x (0-255)
• Two parts
• Network (on left)
• Host (on right)

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Some IP Address Examples

• The CCSU DNS
• 168.28.242.99
• 168.28.240.240
• www.apache.org
• 63.211.145.10

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DNS?

• Domain Name Service
• Converts server name to IP address
• One of a web servers services
• Reduces need to remember IP addresses

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Finding Out More

• Visit a domain name search site
• www.networksolutions.com/cgi-bin/whois/whois
• No name (RIVEN4-HST)
• Hostname RIVENDELL.CSC.PEACHNET.EDU
• Address 168.28.242.99
• System ? running ?
• Record last updated on 15-Nov-1996.
• Database last updated on 29-Aug-2000 064455
  EDT.

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Sequence of Events

• Browser breaks URL into 3 parts
• Protocol (http)
• Server Name (www.amazon.com)
• File Name (home.html)
• Browser converts server name to IP address via
  name server.
• Browser forms connection to server at given IP
  address on port 80.
• Browser sent GET request is processed by server.
• Locates and retrieves web page
• Sends page to requestor (along with cookies as
  instructed).
• Browser reads HTML tags, formats and displays
  page on requestor screen.

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More About Ports

• Two-byte number
• Optionally appended to IP address
• i.e. http//www.kahuna.clayton.edu8900/
• Different services attach to different ports

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Ports (cont.)

• Numbers less than 1024are reserved for admin
  (root)
• NNTP (news) 119
• SMTP (mail) 25
• DNS (domain name) 53
• HTTP (Web) 80
• Telnet 23

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Responding to Client Requests

• Deciphers the request
• Matches the request to a service
• Checks out the path
• Determines the proper response based upon the
  configuration of the Web server

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Returning Info to the Client

• Uses the HTTP protocol weve discussed before
• Typically returns an HTML-formatted page in the
  data portion of the HTTP response

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HTTP Guts

• Client
• GET /index.html HTTP/1.0
• META-DATA
• UPLOAD-DATA
• Server
• HTTP/1.0 OK
• DATE
• SERVER
• FILE META-DATA
• CONTENT

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Web Servers Minimal Functionality

• Main Goal Run as fast as possible!
• Minimize intrusive access (maximize security)
• Multitask
• Offer service to many clients simultaneously
• Allow maintenance w/out shutting down
• Robust reliability error handling
• Act as a proxy server

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From Administering IIS 5.0

• 128MB of RAM is unbearably slow
• Probably want to have at least
• Pentium III 500 processors
• 512MB RAM
• 100 MB Ethernet cards
• 5 GB hard disk space

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Windows Server 2003 IIS 6.0

• 733 mHz cpu
• 1-64 Gb of RAM
• Up to 8 processors
• 4 flavors
• Standard, Enterprise, Datacenter, Web

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Web Access Control Security in Layers

• Implement security by restricting access
• Four common layers providing security measures
  and controls.
• IP address - Is the IP valid?
• User - Is the Users ID valid?
• Web Server permissions - Do the activated Web
  Server services allow access to the requested
  file?
• OS file-level permissions - Does the OS allow
  accessto the requested file?

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Multitasking

• The OS needs to be able to run multiple tasks
  (threads/processes) simultaneously
• Multiple users connected
• Upgrade/maintain without taking the system down

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Error Handling

• Deal with the situations where the client is
  requesting
• Nonexistent page
• Invalid port
• Shut-down service

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Proxies

• (In large systems) typically more than one
  machine handling the Web requests.
• Proxy acts as a controller
• Proxy can also cache popular pages.

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Most Used Web Servers (SW)

• Apache 61
• IIS 26

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Apache

• Begun in 1994
• Written by a team of volunteers
• Free (do not forget support costs!)
• Runs on many platforms
• Various flavors of UNIX
• WinTel 32-bit
• FreeBSD
• Etc.
• A server consisting of existing code based upon
  the NSCA (National Center for Supercomputing
  Applications) base software plus patches.
• Reflecting the adaptability and resourcefulness
  of the Apache American Indian tribe.

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Microsoft's Internet Information Services

• Version 5.0 ships with Win2000
• Version 5.1 ships with WinXP
• Version 6.0 ships with 2003 Server
• Free (w/ purchase of OS)
• Only runs on Win32 (and Win64) machines

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Services Typically Provided by Web Servers

• HTTP, SMTP, FTP, NNTP
• Active Server Pages (JScript, VBScript, etc.)
• Server Side Includes (via API calls - server does
  the work)
• Site Reporting Tools
• Logging of activity

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Next Session Highlights

• Review reading assignments
• T S Ch 5 Powell Ch 2, 4, 6
• Deliverable B Due