ECom - CheatSheet

eCom – CheatSheet
This file includes all the chapters at one place.

Without all duplicated & bullshit slides (i.e. references and stuff)
Except ITC4072-Lecture 10.pdf
The First Thirty Seconds
• First 20 years of e-commerce
– Just the beginning
– Rapid growth and change
• Technologies evolve at exponential rates

– Disruptive business change
– New opportunities
• Why study e-commerce

– Understand opportunities and risks
– Analyze e-commerce ideas, models, issues
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Introduction to E-commerce
• Use of Internet to transact business
– Includes Web, mobile browsers and apps
• More formally:
– Digitally enabled commercial transactions
between and among organizations and
individuals
The Difference Between E-commerce and E-
business
• E-business:
– Digital enabling of transactions and processes
within a firm, involving information systems
under firm’s control
– Does not include commercial transactions
involving an exchange of value across
organizational boundaries
The Difference Between E-commerce and E-
business
E-commerce primarily involves transactions that cross firm boundaries. E-business primarily involves
the application of digital technologies to business processes within the firm.
Technological Building Blocks Underlying
E-commerce
• Internet
• World Wide Web
– HTML
– Deep Web vs. “surface” Web
• Mobile platform
– Mobile apps
The mobile platform provides the ability to access the Internet from a variety
of mobile devices such as smartphones, tablets, and other ultra-lightweight
laptop computers via wireless networks or cell phone service.
Technological Building Blocks Underlying
E-commerce (Deep Web vs. “surface” Web)
Deep Web is reportedly 500 to 1,000 times greater than the surface Web. The deep Web
contains databases and other content that is not routinely indexed by search engines such
as Google
Unique Features of E-commerce Technology
 E-commerce technologies
provide 8 unique features
that have impacted the
conduct of business.
 These unique
dimensions of e-
commerce technologies
suggest many new
possibilities for
marketing and selling—a
powerful set of
interactive, personalized,
and rich messages are
available for delivery to
segmented, targeted
audiences.
1. Ubiquity:
– Available just about everywhere, at all times.
– Marketspace is virtual (migration from marketplace to
marketspace).
– Transaction costs reduced (the costs of participating in a market).
– Example: being able to surf the web on your mobile device while
riding a bus or train.
2. Global reach
– Transactions cross cultural and national boundaries.
– The potential market size for e-commerce merchants is roughly
equal to the size of the world’s online population.
3. Universal standards:
– Standards that are shared by all nations around the world.
– lower market entry costs—the cost merchants must pay just to
bring their goods to market.
– Reduce search costs—the effort required to find suitable products.
– Price discovery becomes simpler, faster, and more accurate.
– Possible to easily find many of the suppliers, prices, and delivery
terms of a specific product anywhere in the world
4. Information richness
– Refers to the complexity and content of a message.
– Supports video, audio, and text messages.
– Are interactive and can adjust the message to individual users.
5. Interactivity
– technology that allows for two-way communication between
merchant and consumer and among consumers.
– Interactivity allows an online merchant to engage a consumer in
ways similar to a face-to-face experience.
– Comment features, community forums, and social networks with
social sharing functionality such as Like and Share buttons all
enable consumers to actively interact with merchants and other
users.
– Example: using a chat window to interact with technical support
at a merchant’s website.
6. Information density
– the total amount and quality of information available to all
market participants, consumers and merchants alike.
– information becomes more plentiful, less expensive, and of
higher quality.
– reduction in information asymmetry among market
participants (consumers and merchants).
– More Price transparency: the ease with which consumers can
find out the variety of prices in a market.
– More cost transparency: the ability of consumers to discover
the actual costs merchants pay for products.
– Allows for greater market segmentation and price
discrimination: selling the same goods, or nearly the same
goods, to different targeted groups at different prices.
7. Personalization/customization
– personalization: merchants can target their marketing
messages to specific individuals by adjusting the message to a
person’s name, interests, and past purchases.
– customization—changing the delivered product or service
based on a user’s preferences or prior behavior.
– A result of increased information density.
8. Social technology
– much more social by allowing users to create and share content
with a worldwide community.
– E-commerce technologies provide a unique, many-to-many
model of mass communication.
Review Fig: 1.2, Page 64
Types of E-commerce
• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Consumer-to-Consumer (C2C)
• Mobile e-commerce (M-commerce)
• Social e-commerce
• Local e-commerce
Social E-commerce
 Social e-commerce is e-commerce that is enabled
by social networks and online social relationships.
 The growth of social e-commerce is being driven by a
number of factors, including:
– social sign-on (signing onto websites using your
Facebook or other social network ID)
– network notification (the sharing of approval or
disapproval of products, services, and content),
– online collaborative shopping tools.
– social search (recommendations from online
trusted friends), and
– the increasing prevalence of integrated social
commerce tools such as Buy buttons
Local E-commerce
 form of e-commerce that is focused on engaging the consumer
based on his or her current geographic location.
 Local merchants use a variety of online marketing techniques to
drive consumers to their stores.
Figure 1.8: The relative size of different
types of E-commerce in the US
 B2B e-commerce
dwarfs all other
forms of e-
commerce;
 mobile, social,
and local e-
commerce,
although growing
rapidly, are still
relatively small in
comparison to
“traditional” e-
commerce.
E-commerce: A Brief History (2 of 4)
1995–2000: Invention
– Sale of simple retail goods
– Limited bandwidth and media
– Euphoric visions of (page 71-74)
 Friction-free commerce: a vision of commerce in which information is equally
distributed, transaction costs are low, prices can be dynamically adjusted to
reflect actual demand, intermediaries decline, and unfair competitive
advantages are eliminated.
 First-mover advantages
 Internet and digital markets have changed the way

companies conduct business
 Information asymmetry reduced:
– refers to any disparity in relevant market information among parties in a
transaction.
– nearly perfect competitive market: where price, cost, and quality information are
equally distributed.
 Menu costs, search and transaction costs reduced.

– national or regional prices in traditional retailing (what are called menu costs)
that one national price was the norm.
– merchants know much more about consumers and are able to use this
information more effectively than was ever true in the past.
– It is possible for merchants to know more about other merchants than was ever
true in the past.
 For merchants & Producers (friction-free commerce):

– direct access to hundreds of millions of customers.
– the cost of searching for customers would also fall, reducing the need for
wasteful advertising.
– advertisements could be personalized to the needs of every customer.
– producers could dynamically price their products to reflect actual demand,
ending the idea of one national price, or one suggested manufacturer’s list
price.
– Allow for price discrimination: selling the same goods, or nearly the same
goods, to different targeted groups at different prices.
– Unfair competitive advantages (which occur when one competitor has an
advantage others cannot purchase) would be reduced.
 For real-world entrepreneurs:

– The e-commerce marketspace represented access to millions of
consumers worldwide who used the Internet and a set of marketing
communications technologies (e-mail and web pages) that was universal,
inexpensive, and powerful.
– Allows better segmentation, targeting, and positioning.
– Extraordinary profits would go to first movers—those firms who were first
to market in a particular area and who moved quickly to gather market
share.
– inhibit competitors (new entrants) by building in switching costs for their
customers through proprietary interface designs and features available
only at one site. The idea for entrepreneurs was to create near monopolies
online based on size, convenience, selection, and brand.
– creating a network effect that occurs where users receive value from the
fact that everyone else uses the same tool or product.
– The emphasis was on disrupting (destroying) traditional distribution
channels and disintermediating existing channels, using new pure online
companies who aimed to achieve impregnable first-mover advantages.
 For Consumers:
– search costs—the cost of searching for prices, product descriptions,
payment settlement, and order fulfillment—would all fall drastically.
– Prices and even costs would be increasingly transparent to the
consumer, who could now know exactly and instantly the worldwide
best price, quality, and availability of most products (reduced
information asymmetry).
 For Distributors and Wholesalers:

– Disintermediation: displacement of market middlemen who traditionally
are intermediaries between producers and consumers by a new direct
relationship between producers and consumers.
The Benefits of Disintermediation to the Consumer
2001–2006: Consolidation
– Emphasis on business-driven approach: large traditional firms

learned how to use the Web to strengthen their market positions.
– Traditional large firms expand presence
– More complex products and services sold: such as travel and
financial services.
– Growth of search engine advertising: targeted to user queries,
rich media and video ads, and behavioral targeting of marketing
messages based on ad networks and auction markets.
– Business Web presences expand: included websites, e-mail,
display, and search engine campaigns; multiple websites for
each product; and the building of some limited community
feedback facilities.
2007–Present: Reinvention (table 1.4; Pg. 75)
 e-commerce has been transformed by the rapid growth

of:
– Web 2.0 (a set of applications and technologies that enable user-generated
content, such as online social networks, blogs, video and photo sharing
sites, and wikis),
– widespread adoption of mobile devices such as smartphones and tablet
computers,
– the expansion of e-commerce to include local goods and services, and
– the emergence of an on-demand service economy enabled by millions of
apps on mobile devices and cloud computing.
 Entertainment content develops as major source of revenues
Digital Goods
• Goods that can be delivered over a digital network

• Cost of producing first unit is almost entire cost of
product
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly
variable
• Industries with digital goods are undergoing
revolutionary changes (publishers, record labels,
etc.)
Assessing E-commerce (1 of 2)
• Stunning technological success
• Early years a mixed business success
– Few early dot-coms have survived
– Online sales growing rapidly
– Thousands of firms have failed, and those few that have survived
dominate the market.
– The idea of thousands of suppliers competing on price has been
replaced by a market dominated by giant firms.
– Consumers use the Web as a powerful source of information
about products they often actually purchase through other
channels, such as at a traditional store.
• Many early visions not fulfilled
– Price dispersion: Prices are sometimes lower online, but the low
prices are sometimes a function of entrepreneurs selling products
below their costs. In some cases, online prices are higher, as
consumers are willing to pay a small premium for the convenience of
buying online.
– The concept of one world, one market, one price has not occurred
in reality as entrepreneurs discover new ways to differentiate their
products and services.
– Merchants have adjusted to the competitive Internet environment by
engaging in “hit-and-run pricing” or changing prices every day or
hour (using “flash pricing” or “flash sales”) so competitors never
know what they are charging (neither do customers); by making their
prices hard to discover and sowing confusion among consumers.
• Many early visions not fulfilled
– brands remain very important in e-commerce—consumers trust some
firms more than others to deliver a high-quality product on time and
they are willing to pay for it.
– The “perfect competition” model of extreme market efficiency has not
come to pass.
– e-commerce has created many opportunities for middlemen to
aggregate content, products, and services and thereby introduce
themselves as the “new” intermediaries.
• Other surprises
– First-mover advantage appears to have succeeded only for a
very small group of companies, albeit some of them extremely
well-known, such as Google, Facebook, Amazon, and others.
– Fast-follower advantages: firms with the right complement of
financial, marketing, legal, and production assets needed to
develop mature markets, and this has proved true for e-commerce
as well.
– Start-up costs (not lower than traditional physical in some cases).
– Impact of mobile platform: understanding of personal behavior
than even Google has achieved.
– Emergence of on-demand e-commerce: enables people to use
their mobile devices to order up everything from taxis, to
groceries, to laundry service.
Understanding E-commerce: Organizing
Themes
• Technology:
– Development and mastery of digital computing and
communications technology
• Business:
– New technologies present businesses with new ways
of organizing production and transacting business
• Society:
– Intellectual property, individual privacy, public welfare
policy
Major Trends in E-commerce
• Business trends include:
– All forms of e-commerce show very strong growth
• Technology trends include:

– Mobile platform has made mobile e-commerce reality
• Societal trends include:

– Increased online social interaction and sharing
Academic Disciplines Concerned with
Technology
• Technical
– Computer science, management science,
information systems
• Behavioral
– Information systems research, economics,
marketing, management, finance/accounting,
sociology
E-commerce Business Models
Business model
• Set of planned activities designed to result in a profit

in a marketplace
Business plan
• Document that describes a firm’s business model
E-commerce business model
• Uses/leverages unique qualities of Internet and Web
Eight Key Elements of a Business Model
Value Revenue Market

proposition model opportunity
Competitive Competitive Market

environment advantage strategy
Organizational Management
development team
Copyright
Copyright ©
© 2018,
2018, 2017,
2017, 2016
2016 Pearson
Pearson Education,
Education, Inc.
Inc. All
All Rights
Rights Reserved
Reserved
1. Value Proposition
• “Why should the customer buy from you?”
• Successful e-commerce value propositions:
– Personalization/customization
– Reduction of product search, price discovery costs
– Facilitation of transactions by managing product delivery
2. Revenue Model
• “How will you earn money?”
• Major types of revenue models:
– Advertising revenue model(YouTube, Yahoo)
– Subscription revenue model(Netflix)
 Freemium strategy(Google Colab)
– Transaction fee revenue model (Fiverr, upwork)
– Sales revenue model(Daraz, Amazon)
– Affiliate revenue model (Amazon)
3. Market Opportunity
• “What marketspace do you intend to serve and
what is its size?”
– Marketspace: Area of actual or potential commercial value in
which company intends to operate
– Realistic market opportunity: Defined by revenue potential in each
market niche in which company hopes to compete
• Market opportunity typically divided into smaller

niches
4. Competitive Environment
• “Who else occupies your intended marketspace?”
– Other companies selling similar products in the same
marketspace
– Includes both direct and indirect competitors
• Influenced by:
– Number and size of active competitors
– Each competitor’s market share
– Competitors’ profitability
– Competitors’ pricing
5. Competitive Advantage
• “What special advantages does your firm bring to
the marketspace?”
– Is your product superior to or cheaper to produce than your
competitors’?
– Anything that you do better than your competition typically adds to

your competitive advantage. Examples include: variety, quality
6. Market Strategy
• “How do you plan to promote your products or
services to attract your target audience?”
– Details how a company intends to enter market and attract
customers
– Best business concepts will fail if not properly marketed to
potential customers
7. Organizational Development
• “What types of organizational structures within the
firm are necessary to carry out the business
plan?”
• Describes how firms will organize work
– Typically, divided into functional departments
– As company grows, hiring moves from generalists to specialists
8. Management Team
• “What kind of backgrounds should the company’s
leaders have?”
• A strong management team:
– Can make the business model work
– Can give credibility to outside investors
– Has market-specific knowledge
– Has experience in implementing business plans
Product Hunting
• Also known as market research, product research,
All about Analysing Market trends to get winning
product.
• (Product high in demand and low competition is
winning product)
Amazon Product Research
• Amazon Product Research is all about analyzing current market
trends to choose “winning” items – something that can generate
high sales.
• The idea is to search for products that you can get for cheap and
yet sell for competitive prices with a good profit margin in return.
• You need to list down the best selling products on Amazon, which
you desire to sell. Then, do a deep analysis if similar items are
making enough sales. This step is imperative because you will
never want to trade items that people are not even searching for.
• After you have jotted down the list of potentially profitable
products, the further steps involved in looking at their statistics
like sales, reviews, keyword search volume, and similar products.
Key Elements Of An Amazing Product
Opportunity
Great To Have
Must Have
Huge demand Lightweight items
Decent profit margins Small items
Low competition Products with a room for improvement
Low seasonality
No legal issues
Products > 18 dollars
Checklist Of Amazon Product Research
Requirements
• Product prices that fall between the range $10 and $50
• Products that make at least 10 sales a day
• Similar products that feature best seller rank of at least 5,000 in
the main category
• The top 3 related keywords have 50,000+ monthly searches on
Amazon
• Not seasonal products. They can be sold year-round
• 2-3 products with less than 50 reviews on the first page
• Small and lightweight products (under 2 to 3 pounds)
• No brand names or trademarks associated with the product
Checklist Of Amazon Product Research
Requirements (contd.)
• Proper room for product optimization and improvement of
present listings
• Multiple product-related keyword opportunities
• Quick and easy product sourcing from China
• The product should not be fragile
• Ability to expand your brand with related products
• Can make a superior product over similar products in the
market
• Product encourages recurring purchases
• The product should not have any legal issues
How To Do A Product Research On
Amazon?
• There are two types to perform an Amazon
Product Research:
– Manually
– Automated tools
Top Amazon Research Tactics For Sellers
• Amazon Lists
– Amazon Bestsellers page
– Amazon product research
– New Releases
– Use Movers and Shakers
– Most Wished
– Most Gifted
• Spy on Your Competitors

• Utilize Google Trends
• Investigate the ‘Customers Also Bought’ and ‘Frequently
Bought Together’ Sections
– frequently bought together on Amazon
Automated Tools
• sellerapp
• Datahawk
• Jungle scout
• Helium 10
• Viral launch chrome extension
• Merchant word
• Google trends
Categorizing E-commerce Business Models
• No one correct way
• Text categorizes according to:
– E-commerce sector (e.g., B2B)
– E-commerce technology (e.g., m-commerce)
• Similar models appear in different sectors

• Companies may use multiple business models
(e.g., eBay)
• E-commerce enablers
B2C Business Models
• E-tailer (online retail store)
• Community provider (Facebook, LinkedIn, Twitter)
• Content provider(CNN, BBC)
• Portal (Yahoo, MSN)
• Transaction broker(e.g. TCS)
• Market creator
• Service provider(Google Maps, Google Docs, and Gmail)
B2C Models: E-tailer
• Online version of traditional retailer
• Revenue model: Sales
• Variations:
– Virtual merchant
– Bricks-and-clicks
– Catalog merchant
– Manufacturer-direct
• Low barriers to entry
B2C Models: Community Provider
• Provide online environment (social network)
where people with similar interests can transact,
share content, and communicate
– Examples: Facebook, LinkedIn, Twitter, Pinterest
• Revenue models:
– Typically hybrid, combining advertising, subscriptions, sales,
transaction fees, and so on
B2C Models: Content Provider
• Digital content on the Web:
– News, music, video, text, artwork
• Revenue models:
– Use variety of models, including advertising, subscription; sales of
digital goods
– Key to success is typically owning the content
• Variations:
– Syndication
– Aggregators
B2C Business Models: Portal
• Search plus an integrated package of content and
services
• Revenue models:
– Advertising, referral fees, transaction fees, subscriptions for
premium services
• Variations:
– Horizontal/general
– Vertical/specialized (vortal)
– Search
B2C Models: Transaction Broker
• Process online transactions for consumers
– Primary value proposition—saving time and money
• Revenue model:
– Transaction fees
• Industries using this model:

– Financial services
– Travel services
– Job placement services
B2C Models: Market Creator
• Create digital environment where buyers and
sellers can meet and transact
– Examples: Priceline, eBay
– Revenue model: Transaction fees, fees to merchants for access
• On-demand service companies (sharing

economy): platforms that allow people to sell
services
– Examples: Uber, Airbnb
B2C Models: Service Provider
• Online services
– Example: Google—Google Maps, Gmail, and so on
• Value proposition
– Valuable, convenient, time-saving, low-cost alternatives to
traditional service providers
• Revenue models:
– Sales of services, subscription fees, advertising, sales of
marketing data
B2B Business Models
• Net marketplaces
– E-distributor
– E-procurement
– Exchange
– Industry consortium
• Private industrial network
B2B Models: E-distributor
• Version of retail and wholesale store, MRO
(maintenance, repair, and operations ) goods, and indirect goods
• Owned by one company seeking to serve many
customers
• Revenue model: Sales of goods
B2B Models: E-procurement
• Creates digital markets where participants
transact for indirect goods
– B2B service providers, SaaS and PaaS providers
– Scale economies
– supply-chain management
• Revenue model:
– Service fees, supply chain management, and fulfillment services
B2B Models: Exchanges
• Independently owned vertical digital marketplace
for direct inputs
• Revenue model: Transaction, commission fees
• Create powerful competition between suppliers
• Tend to force suppliers into powerful price
competition
B2B Models: Industry Consortia
• Industry-owned vertical digital marketplace open
to select suppliers
• More successful than exchanges
– Sponsored by powerful industry players
– Strengthen traditional purchasing behavior
• Revenue model: Transaction, commission fees
Private Industrial Networks
• Digital network used to coordinate among firms
engaged in business together
• Typically evolve out of large company’s internal
enterprise system
– Key, trusted, long-term suppliers invited to network
• Example: Walmart’s network for suppliers
How E-commerce Changes Business
• E-commerce changes industry structure by
changing:
– Rivalry among existing competitors
– Barriers to entry
– Threat of new substitute products
– Strength of suppliers
– Bargaining power of buyers
• Industry structural analysis
Industry Value Chains
• Set of activities performed by suppliers,
manufacturers, transporters, distributors, and
retailers that transform raw inputs into final
products and services
• Internet reduces cost of information and other
transactional costs
• Leads to greater operational efficiencies, lowering
cost, prices, adding value for customers
Figure 2.4: E-commerce and Industry Value
Chains
Firm Value Chains
• Activities that a firm engages in to create final
products from raw inputs
• Each step adds value
• Effect of Internet:
– Increases operational efficiency
– Enables product differentiation
– Enables precise coordination of steps in chain
Figure 2.5: E-commerce and Firm Value
Chains
Firm Value Webs
• Networked business ecosystem
• Uses Internet technology to coordinate the value
chains of business partners
• Coordinates a firm’s suppliers with its own
production needs using an Internet-based supply
chain management system
Figure 2.6: Internet-enabled Value Web
Business Strategy
• Plan for achieving superior long-term returns on
capital invested: that is, profit
• Five generic strategies
– Product/service differentiation
– Cost competition
– Scope
– Focus/market niche
– Customer intimacy
Building an E-commerce Presence:
A Systematic Approach
Most important management challenges:
• Developing a clear understanding of business objectives
• Knowing how to choose the right technology to achieve those objectives
Pieces of the Site-Building Puzzle
Main areas where you will need to make decisions:
• Human resources and organizational capabilities
• Creating a team with the skill set needed to build and manage a successful site
• Hardware/software
• Telecommunications
• Site design
Planning: The Systems Development Life Cycle
Methodology for understanding business
objectives of a system and designing an
appropriate solution
Five major steps:
• Systems analysis/planning
• Systems design
• Building the system
• Testing
• Implementation
Web Site Systems Development Life Cycle
• Figure 4.5, Page 131
System Analysis/Planning
• Business objectives
List of capabilities you want your site to have
• System functionalities
List of information system capabilities needed to achieve business objectives
• Information requirements
Information elements that system must produce in order to achieve business objectives
System Analysis/Planning
• Table 4.2, page 132

Systems Design:
Hardware and Software Platforms
• System design specification
• Description of main components of a system and their relationship to one another
• Two components of system design:

• Logical design
• Data flow diagrams, processing functions, databases
• Physical design
• Specifies actual physical, software components, models, etc.
In-House vs. Outsourcing
• Outsourcing: Hiring vendors to provide services
involved in building site
• Build own vs. outsourcing

Build your own requires team with diverse skill set; choice of software tools; both risks and
possible benefits
• Host own vs. outsourcing

Hosting: Hosting company responsible for ensuring site is accessible 24/7, for monthly fee
Co-location: Firm purchases or leases Web server (with control over its operation), but
server is located at vendor’s facility
Testing, Implementation, and Maintenance
• Testing
Unit testing
System testing
Acceptance testing
• Implementation and maintenance

Maintenance is ongoing
Maintenance costs: Similar to development costs
Benchmarking
E-commerce Merchant Server Software
• Provides basic functionality for sales
• Online catalog
• List of products available on Web site
• Shopping cart
• Allows shoppers to set aside, review, edit selections, and then make purchase
• Credit card processing
• Typically works in conjunction with shopping cart
• Verifies card and puts through credit to company’s account at checkout
Merchant Server Software Packages
• Integrated environment that includes most of
functionality needed
• Three general ranges of price and functionality
• Basic: free, open source
• Midrange
• High-end
Tools
Online merchant services: yahoo Abaco small business, shopify
Cloud based services: Netsuite, IBM commerce on cloud
Choosing Hardware
• Hardware Platform
refers to all the underlying computing equipment that the system uses
to achieve its e-commerce functionality
• Right-sizing your hardware platform: the demand side

• simultaneous users in peak periods
• the nature of customer requests
• the type of content
• the number of items in inventory
• the number of page requests
• Right-sizing your hardware platform: the supply
side
• Vertical scaling
• Horizontal scaling
Other E-Commerce Site Tools
Website design: basic business considerations
• Tools for search engine optimization
• Metatags, titles, page contents
• Identify market niches
• Offer expertise
• Get linked up
• Tools for interactivity and active content

• Personalization tools
• The information policy set
• Privacy policy
• Accessibility rules
Developing a Mobile Web Presence
Developing a Mobile Web Presence
• Design considerations
• Platform constraints: Smartphone/tablet
• Performance and cost

• Mobile Web site
Least expensive
• Mobile app
Can utilize browser API
• Native app
Most expensive; requires more programming
Building a Mobile Presence
• What are the key differences between user
experience on a Web site and on a mobile
device?
• Why would a mobile Web site or app from the
same merchant need different content or
functionality?
• In which cases would a merchant want to
develop a mobile app over a mobile Web site?
Chapter 5
E-commerce Security and Payment Systems
Lecture 15, 16
Copyright © 2016 Pearson Education, Ltd.

Slide
1-106
The E-commerce Security Environment

• Overall size and losses of cybercrime unclear
– Reporting issues
• Costly cybercrimes were those caused by denial

of service, malicious insiders, and malicious code
• 2013 survey: Average annualized cost of
cybercrime was $11.56 million/year
• Underground economy marketplace:
– Stolen information stored on underground economy servers

Slide
1-107

Slide
1-
108
What Is Good E-commerce Security?

• To achieve highest degree of security
– New technologies
– Organizational policies and procedures
– Industry standards and government laws
• Other factors
– Time value of money
– Cost of security vs. potential loss
– Security often breaks at weakest link

Slide
5-
109
The E-commerce Security Environment
Figure 4.1, Page 242

Slide
5-110
Table 4.3, Page 244

Slide
1-111
The Tension Between Security and
Other Values
• Ease of use
– The more security measures added, the more difficult a site is to
use, and the slower it becomes
• Public safety and criminal uses of the Internet

– Use of technology by criminals to plan crimes or threaten nation-
state

Slide
1-112
Security Threats in the
E-commerce Environment
• Three key points of vulnerability in

e-commerce environment:
1. Client
2. Server
3. Communications pipeline (Internet
communications channels)
Slide
5-113
A Typical E-commerce Transaction

Slide
5-114
Vulnerable Points in an E-commerce

Transaction

Slide
1-115
Most Common Security Threats in the

E-commerce Environment
• Malicious code (malware) – threat at both
client and server level
– Exploits and exploit kits
– Drive-by downloads
 malware that comes with a downloaded file that a user
requests
– Viruses
 a computer program that has the ability to replicate or make
copies of itself, and spread to other files
– Worms
 malware that is designed to spread from computer to computer
Slide
1-116
– Ransomware
 prevents you from accessing your computer or files and
demands that you pay a fine
 Cryptolocker
– Trojan horses
 appears to be benign, but then does something other than
expected.
– Backdoors
 feature of viruses, worms, and Trojans that allows an attacker to remotely
access a compromised computer

Slide
1-117
– Bots
 covertly installed on a computer when connected to the
Internet
– Botnets
 collection of captured bot computers

Slide
1-118
Most Common Security Threats (cont.)

• Potentially unwanted programs (PUPs)
– Browser parasites
– Adware
– Spyware
• Phishing
– Social engineering
– E-mail scams
– Spear phishing
– Identity fraud/theft

Slide
1-119

• Hacking
– Hackers vs. crackers
– Types of hackers: White, black, grey hats
– Hacktivism
• Cybervandalism:
– Disrupting, defacing, destroying Web site
• Data breach
– Losing control over corporate information to outsiders

Slide
1-120

• Credit card fraud/theft
• Identity fraud/theft
• Spoofing
• Pharming
• Spam (junk) Web sites
– Link farms
• Denial of service (DoS) attack

– Site flooded with useless traffic to overwhelm network
– Distributed denial of service (DDoS) attack

Slide
1-121
Insight on Business: Class Discussion
Hackers Infiltrate Target

• What organizational and
technological failures led to the data
breach at Target?
• What technical solutions are
available to combat data breaches?
• Have you or anyone you know
experienced a data breach?

Slide
1-122

• Sniffing
– Eavesdropping program that monitors information
traveling over a network
– Man-in-the-middle
• Insider attacks
• Poorly designed software
– SQL injection attacks
– Heartbleed bug
• Social network security issues

Slide
1-123
• Mobile platform security issues

– Vishing, smishing, madware
• Cloud security issues

Slide
1-124
Technology Solutions
• Protecting Internet communications
– Cryptography
• Securing channels of communication

– SSL, TLS, VPNs, Wi-Fi
• Protecting networks
– Firewalls, proxy servers, IDS, IPS
• Protecting servers and clients

– OS security, anti-virus

Slide
5-125
Tools Available to Achieve Site Security

Slide
1-126
Encryption
• Encryption
– Transforms data into cipher text readable only by
sender and receiver
– Secures stored information and information
transmission
– Provides 4 of 6 key dimensions of e-commerce
security:
 Message integrity
 Nonrepudiation
 Authentication
 Confidentiality

Slide
1-127
Symmetric Key Cryptography

• Sender and receiver use same digital key to
encrypt and decrypt message
• Requires different set of keys for each transaction
• Strength of encryption
– Length of binary key used to encrypt data
• Data Encryption Standard (DES)

• Advanced Encryption Standard (AES)
– Most widely used symmetric key algorithm
– Uses 128-, 192-, and 256-bit encryption keys
• Other standards use keys with up to 2,048 bits
Slide
1-128
Public Key Cryptography

• Uses two mathematically related digital keys
– Public key (widely disseminated)
– Private key (kept secret by owner)
• Both keys used to encrypt and decrypt

message
• Once key used to encrypt message, same key
cannot be used to decrypt message
• Sender uses recipient’s public key to encrypt
message; recipient uses private key to decrypt
Slide
5-
129
Public Key Cryptography: A Simple Case

Slide
1-130
Public Key Cryptography using Digital

Signatures and Hash Digests
• Hash function:
– Mathematical algorithm that produces fixed-length number called
message or hash digest
• Hash digest of message sent to recipient along

with message to verify integrity
• Hash digest and message encrypted with
recipient’s public key
• Entire cipher text then encrypted with recipient’s
private key—creating digital signature—for
authenticity, nonrepudiation
Slide
5-131
Public Key Cryptography with Digital

Signatures

Slide
1-132
Digital Envelopes
• Address weaknesses of:
– Public key cryptography
 Computationally slow, decreased transmission speed,
increased processing time
– Symmetric key cryptography
 Insecure transmission lines
• Uses symmetric key cryptography to

encrypt document
• Uses public key cryptography to encrypt
and send symmetric key
Slide
5-
133
Creating a Digital Envelope

Slide
1-134
Digital Certificates and
Public Key Infrastructure (PKI)
• Digital certificate includes:
– Name of subject/company
– Subject’s public key
– Digital certificate serial number
– Expiration date, issuance date
– Digital signature of CA
• Public Key Infrastructure (PKI):
– CAs and digital certificate procedures
– PGP(Pretty Good Privacy)

Slide
5-135
Digital Certificates and Certification

Authorities

Slide
1-136
Limits to Encryption Solutions

• Doesn’t protect storage of private key
– PKI not effective against insiders, employees
– Protection of private keys by individuals may be haphazard
• No guarantee that verifying computer of merchant

is secure
• CAs are unregulated, self-selecting organizations

Slide
1-137
Securing Channels of Communication

• Secure Sockets Layer (SSL)/Transport Layer
Security (TLS)
– Establishes secure, negotiated client–server session
• Virtual Private Network (VPN)

– Allows remote users to securely access internal network via the
Internet
• Wireless (Wi-Fi) networks

– WPA2

Slide
5-
138
Secure Negotiated Sessions Using SSL/TLS

Slide
1-139
Protecting Networks
• Firewall
– Hardware or software that uses security policy to filter
packets
 Packet filters
 Application gateways
– Next-generation firewalls
• Proxy servers (proxies)

– Software servers that handle all communications from
or sent to the Internet
• Intrusion detection systems
• Intrusion prevention systems
Slide
5-
140
Firewalls and Proxy Servers

Slide
1-141
Protecting Servers and Clients

• Operating system security enhancements
– Upgrades, patches
• Anti-virus software
– Easiest and least expensive way to prevent threats to system
integrity
– Requires daily updates

Slide
1-142
Management Policies, Business Procedures,
and Public Laws
• Worldwide, companies spend more than $71

billion on security hardware, software, services
• Managing risk includes:
– Technology
– Effective management policies
– Public laws and active enforcement

Slide
1-143
A Security Plan: Management Policies

• Risk assessment
• Security policy
• Implementation plan
– Security organization
– Access controls
– Authentication procedures, including biometrics
– Authorization policies, authorization management
systems
• Security audit
Slide
5-
144
Developing an E-commerce Security Plan

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eCom – CheatSheet

This file includes all the chapters at one place.

• Technologies evolve at exponential rates

• Why study e-commerce

 Internet and digital markets have changed the way

 Menu costs, search and transaction costs reduced.

 For merchants & Producers (friction-free commerce):

 For real-world entrepreneurs:

 For Distributors and Wholesalers:

– Emphasis on business-driven approach: large traditional firms

 e-commerce has been transformed by the rapid growth

 Entertainment content develops as major source of revenues

• Goods that can be delivered over a digital network

• Technology trends include:

• Societal trends include:

• Set of planned activities designed to result in a profit

• Document that describes a firm’s business model

E-commerce business model

• Uses/leverages unique qualities of Internet and Web

Value Revenue Market

Competitive Competitive Market

• Market opportunity typically divided into smaller

– Anything that you do better than your competition typically adds to

Huge demand Lightweight items

Decent profit margins Small items

Low competition Products with a room for improvement

Products > 18 dollars

• Spy on Your Competitors

• Similar models appear in different sectors

• Low barriers to entry

• Industries using this model:

• On-demand service companies (sharing

• Private industrial network

• Revenue model: Transaction, commission fees

• Example: Walmart’s network for suppliers

• Industry structural analysis

• Figure 4.5, Page 131

• Table 4.2, page 132

• Two components of system design:

• Build own vs. outsourcing

• Host own vs. outsourcing

• Implementation and maintenance

• Right-sizing your hardware platform: the demand side

• Tools for interactivity and active content

• Performance and cost

Copyright © 2016 Pearson Education, Ltd.

The E-commerce Security Environment

• Costly cybercrimes were those caused by denial

Copyright © 2016 Pearson Education, Ltd.

Copyright © 2016 Pearson Education, Ltd.

What Is Good E-commerce Security?

Copyright © 2016 Pearson Education, Ltd.

The E-commerce Security Environment

Figure 4.1, Page 242

Table 4.3, Page 244

• Public safety and criminal uses of the Internet

Copyright © 2016 Pearson Education, Ltd.

• Three key points of vulnerability in

A Typical E-commerce Transaction

Figure 4.2, Page 246

Vulnerable Points in an E-commerce

Figure 4.3, Page 247

Most Common Security Threats in the

Copyright © 2016 Pearson Education, Ltd.