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Online Domain Beginners Guide

CBC-Technology

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Online Domain Beginners Guide

Table of Contents
1.0

Introduction ................................................................................................................................ 4

2.0

Ecommerce & Online Domain Overview .................................................................................... 5

3.0

4.0

5.0

6.0

7.0

8.0

2.1.

What is Ecommerce? .......................................................................................................... 5

2.2.

Ecommerce Technologies ................................................................................................... 6

2.3.

Ecommerce: History and Evolution..................................................................................... 7

2.4.

Overview of End Business Domains .................................................................................... 8

Industry Forces and Business Models ....................................................................................... 14


3.1.

Online Industry Forces at play ....................................................................................... 14

3.2.

Ecommerce Business Models............................................................................................ 15

3.3.

Revenue Models ............................................................................................................... 18

Ecommerce Ecosystem ............................................................................................................. 21


4.1.

Ecommerce Ecosystem Players ......................................................................................... 21

4.2.

Ecommerce System Overview........................................................................................... 23

Customer Management ............................................................................................................ 26


5.1.

Customer Acquisition ........................................................................................................ 26

5.2.

Customer Conversion ........................................................................................................ 26

5.3.

Customer Retention .......................................................................................................... 27

Inventory Management ............................................................................................................ 28


6.1.

Forecasting ........................................................................................................................ 29

6.2.

Inventory Replenishment.................................................................................................. 29

6.3.

Inventory On-boarding...................................................................................................... 30

6.4.

Stock Update ..................................................................................................................... 30

6.5.

Inventory Data Synchronization........................................................................................ 30

6.6.

Automated Notifications................................................................................................... 30

Content & Catalog Management .............................................................................................. 33


7.1.

Workflow........................................................................................................................... 33

7.2.

Benefits ............................................................................................................................. 34

7.3.

Catalog Management........................................................................................................ 35

Trading ...................................................................................................................................... 38
8.1.

Pre-Buying Processes ........................................................................................................ 40

8.2.

Buying Processes ............................................................................................................... 41

8.3.

Post-Buying processes ...................................................................................................... 43

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9.0

10.0

11.0

12.0

13.0

14.0

Online Marketing & Advertising ............................................................................................... 46


9.1.

Online Marketing Techniques ........................................................................................... 46

9.2.

Online Branding ................................................................................................................ 47

9.3.

Market Research ............................................................................................................... 47

9.4.

Advertising ........................................................................................................................ 47

Analytics / Business Intelligence ............................................................................................... 50


10.1.

Web Analytics ............................................................................................................... 50

10.2.

Data Analytics ............................................................................................................... 52

10.3.

Data Mining ................................................................................................................... 55

10.4.

Dashboards and Reporting............................................................................................ 56

Customer Service ...................................................................................................................... 58


11.1.

Shopping Assistance...................................................................................................... 59

11.2.

Profile Management ..................................................................................................... 59

11.3.

Order tracking ............................................................................................................... 60

11.4.

Complaint Management ............................................................................................... 60

11.5.

Payment Assistance ...................................................................................................... 60

Trust, Safety and Security ......................................................................................................... 63


12.1.

Buyer Protection ........................................................................................................... 63

12.2.

Escrow Services ............................................................................................................. 63

12.3.

Fraud Protection and Prevention.................................................................................. 64

12.4.

Authentication .............................................................................................................. 65

12.5.

Authorization ................................................................................................................ 65

12.6.

Data Security ................................................................................................................. 66

12.7.

Payment Security .......................................................................................................... 66

12.8.

Protection from Cybercrime ......................................................................................... 66

12.9.

Trust Management........................................................................................................ 66

12.10.

Benefits of Trust & Safety Management....................................................................... 67

Infrastructure ............................................................................................................................ 68
13.1.

Hosting Solutions .......................................................................................................... 68

13.2.

Architecture .................................................................................................................. 71

Next Steps ................................................................................................................................. 76

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Online Domain Beginners Guide

1. 0 I N T R O D U C T I O N
The purpose of this online domain guide is to give an overview of the online domain and a basic
understanding of the different subject areas within the ecommerce world. The document intends to
lay the foundation of building a business perspective of what online customers do and connect it
with their business and revenue model. It will also provide an overview of common processes and
sub-domains within the ecommerce world, which is a key domain within online world.
At the end of the course, associates will be able to:

Define ecommerce and understand what constitutes Online businesses

Describe different kinds of end businesses involved in the ecommerce space

List the common modules and processes that constitute the ecommerce ecosystem such as
inventory management, buying and checkout

Understand various hosting solutions and architectural considerations

Note: This course is designed as a Learner level domain program and deep dives into specific areas in
the ecommerce world. However, capturing the entire gamut of the online domain and related
technical aspects mentioned below is beyond the scope of this course.

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2. 0 E C O M M E R C E & O N L I N E D O M A I N O V E R V I E W

The objectives of this chapter are:

Define ecommerce and Online businesses

List different ecommerce technologies and associated business value

Describe different kinds of end businesses domains involved in ecommerce space

The internet has spawned a number of innovations in business among individuals and
commercial organizations. However, a typically simple seeming online transaction has far
more intricacies than that actually meets the eye. For instance, a simplified view of an
ecommerce transaction starts with finding and selecting an item in the catalog, sending
orders to vendors to supply the items, invoices sent back by vendors, payment usually made
by debiting an organizations account and crediting the vendors bank accounts and tracking
items in the delivery until it is received. The key theme here is that all major transactions are
carried out electronically using a network of computers.
As a thumb rule throughout this document, all companies that make their revenue purely
from the online channel and does not have a physical brick and mortar store or presence is
considered an online company.

2.1. W HAT I S E C OM M ER C E ?
Electronic commerce is the application of communication and information sharing
technologies among trading partners to the pursuit of business objectives. Ecommerce is a
modern business methodology that addresses the needs of organizations, merchants, and
consumers to cut costs while improving the quality of goods and services and increasing the
speed of service delivery.
Ecommerce is associated with the buying and selling of information, products and services
via computer networks. Key element of ecommerce is information processing. The effects of
ecommerce are already appearing in all areas of business, from customer service to new
product design. It facilitates new types of information based business processes for reaching
and interacting with customers online advertising and marketing, online-order taking and
on-line customer service etc. It can also reduce costs in managing orders and interacting
with a wide range of suppliers and trading partners, areas that typically add significant
overhead to the cost of products and services. In addition, Ecommerce enables the
formation of new types of information-based products such as interactive games, electronic
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books, and information-on demand that can be very profitable for content providers and
useful for consumers.

2.2. E C O M M ER C E T E C HN O LOG I ES
While many technologies can fit within the definition of "Electronic commerce," the key
technologies are:

Electronic data interchange (EDI)


Bar codes
Electronic mail
World Wide Web*
Product data exchange
Electronic forms

The table below provides a quick insight of what functions each Ecommerce technology can
provide to improve business functioning:
Table 1 Ecommerce Technologies and its Business Value

Technology
EDI

Bar Code

Electronic mail

World Wide Web

Product Data Exchange

Electronic Forms

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Business Value
Integration of incoming and outgoing structured data into other
applications (e.g., use of customer orders to schedule production)
Lowers cost when transaction volume is high
Eases communication with many different trading partners (customers,
suppliers, vendors)
Locate and identify material
Integrate location and identification information with other applications
and databases (e.g., bar codes inserted at loading dock can be integrated
into an advance ship notice EDI transaction).
Free-text queries to individuals or groups
Share information via simple messages
Share complex information (via attachments)
Collaboration across distance (by making it easier to communicate and
share information)
Present information about company
Search for information from a large number of sources
Buy/sell products and services
Collaboration, information sharing among selected users within or
without a company
Accurate product details transmitted to trading partners
Oversight of trading partners design work
Collaborative engineering across distance
Managing processes when human oversight, approvals, or information
input needs to be combined with standard elements of information (e.g.,
catalogue data)
Tracking progress in a process where many people are involved doing
different activities

Online Domain Beginners Guide

Integrating human input data with automated data bases or applications


Electronic commerce (through integration with the WWW and internal
systems)

*Note: The key focus of this domain guide is ecommerce as against the wider World Wide
Web technology.

2.3. E C O M M ER C E : H IS TO R Y AND E VO LU T IO N
Existence of ecommerce goes back to early 1970s with the advent of electronic funds
transfer followed by emergence of one technology or the other such as EDI (Electronic data
interchange) in late 1970s to World Wide Web in the early 1990s. The real breakpoint
occurred during 1990s when Internet became commercial and users began flocking to
participate in the World Wide Web. Ecommerce applications rapidly expanded since then. In
fact, the term ecommerce itself was coined around the same timeframe. Since 1995, many
innovative applications, ranging from direct online sales to e-learning experiences had been
developed. Almost every organization in the world has a Web site.
Given below is snapshot of key events that led to many evolutions in the ecommerce space.
It is no doubt that Ecommerce will continue to shift and change in the future with the
advent of mobile and social media.

Figure 1 Ecommerce History & Key Events

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2.4. O VE R VI E W O F E N D B U S I N ES S D OM AIN S

2.4.1.

TRAVEL:

This includes online ticketing for flight, rail, and buses. A classic example for online ticketing
is irctc.co.in, the official website for booking tickets for travel with the Indian national
Railways. Typical players include Expedia, LiveNation, Yatra.com, Stub Hub etc.
2.4.2.

HOSPITALITY:

This comprises of online booking for Hotel accommodation, tour packages and site seeing
arrangements. The most commonly used websites include Expedia, Yatra.com, Club
Mahindra etc.
2.4.3.

ONLINE AUCTIONS :

This comprises of websites used to auction items online through a web portal. Ebay,
Bid2Win are some of the most preferred and commonly used websites for selling through
auction.
2.4.4.

INTERNET SEARCH:

These websites are special sites on the Web that help people find information stored on
other sites. The classic example of an Internet Search engine is Google, which gets nearly 1.5
billion searches every day. Most common players include Google, Yahoo, IAC Search &
Media and the GoodSearch.

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2.4.5.

DIGITAL MEDIA:

These websites refer to digital communities with a comprehensive platform and diversified
interfaces to aggregate, upload, compress, host and distribute images, text, applications,
videos, audio, games and new media. Some common examples are Shutterfly, Netflix, IAC
Search & Media, SAY Media, BSKYB, Yahoo
2.4.6.

CAR MARKETPLACE:

These websites make the process of buying and selling new and used vehicles as simple and
efficient as possible and consumers can purchase cars online through these
websites. AutoTrader.com is one such website.
2.4.7.

VIDEO RENTALS:

These include online DVD movie rental or online streaming service offering millions of titles
for rent that let users view at the convenience of their home. Netflix is the biggest player in
this market.
2.4.8.

ONLINE PAYMENT:

These include websites, which provides services that allows people to send money without
sharing financial information, with the added flexibility to pay using their account balances,
bank accounts, credit cards or promotional financing. The key player in this is PayPal.
2.4.9.

ONLINE MARKETPLACE:

In an online marketplace, intermediary processes consumer transactions and participating


retailers or wholesalers delivered and fulfilled the request. Marketplaces offer a variety of
products and provide consumers with the convenience of purchasing such products from
single store. Online marketplaces have become a driver of new business for online
merchants that leverage them as channels for increased sales. ASOS is the UK's largest
independent online fashion and beauty retailer.
2.4.10.

PRICE COMPARISON:

This allows individuals to see different lists of prices for specific products. These usually do
not sell products themselves, but source prices from retailers from whom users can buy.
Typical example for this is shopping.com.
2.4.11.

MOBILE ADVERTISING:

Mobile advertising is a form of advertising via mobile (wireless) phones or other mobile
devices. Websites providing such services to its customers come under this segment. Turn is
an important player in this area.
2.4.12.

BETTING:

This comprises of online betting websites, which allows users to place bets on sporting
events, horseracings etc. The most commonly used websites include Churchill Downs,
Twinspires.

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2.4.13.

10

ENTERTAINMENT :

This includes online ticketing for live entertainment shows across the world including live
concerts, shows, award ceremonies, etc. Typical players include LiveNation, Bookmyshow.
2.4.14.

INTERNET PUBLISHER :

These websites are of design and online publishing companies that design personal and
corporate Web sites for clients from many different business areas. One of the key players
in this is LiveNation.
2.4.15.

ONLINE GAMING:

This includes websites, which provides computer games that users can play over the
Internet using a web browser. Zapak is one such popular website in India with over 8.5
million registered users. Key players in this segment include Electra Games Ltd.
2.4.16.

SATELLITE BROADCASTING :

These websites provide complete broadcasting solution, including host broadcast and
outside broadcast facilities, broadcast systems integration services, wireless camera
solutions. Typical application of these websites is of Live streaming of events across the
world over the internet. British Sky Broadcasting (BSkyB) is the leading satellite broadcasting
service in the UK.
2.4.17.

NGO:

These websites provide information about the respective Non-Government Organizations


and provide interfaces for visitors to provide Donations, Charity & relief online through the
website. A few examples for such sites are ShriSaibabaSansthan Trust, World Vision.
2.4.18.

CLASSIFIEDS:

This includes websites, which provide classified advertisements where private sellers or
dealers list the item or service for sale or purchase. Items can range from services, to
electronics, to property for rent and sale. Key players in this segment include
AutoTrader.com, eBay.
2.4.19.

TELEPHONY SERVICES:

This includes websites, which offers digital telecommunications services based on Voice
over Internet Protocol (VoIP) provisioned via the Internet. The most commonly used such
service is Skype. Typical players include Nuance Communications.
2.4.20.

CLOUD:

These websites have a collection of remote computing services (also called web services)
that together make up a cloud-computing platform, offered over the Internet. Some popular
players include Amazon, Turn, and Google.

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2.4.21.

11

OFFERS & DISCOUNTS:

This includes deal-of-the-day type websites that feature discounted gift certificates and
offers usable at local or national companies. GroupOn is a typical example of such websites.
Some other players are Yatra.com, Club Mahindra, TheGoodSearch, ASOS, Expedia.
2.4.22.

LOYALTY MANAGEMENT

These websites provide expertise in building proprietary loyalty strategies, launching and
managing coalition loyalty programs, creating value through loyalty analytics and driving
innovation in the emerging digital and mobile spaces. Expedia also offers many Loyalty
management offers to loyal customers.
2.4.23.

DIGITAL DISTRIBUTION :

Digital distribution (also called content delivery, online distribution, or electronic software
distribution (ESD), among others) describes the delivery of media content such as audio,
video, software and video games, without the use of physical media usually over online
delivery mediums, such as the Internet. Digital distribution bypasses conventional physical
distribution methods, such as paper or DVDs. Netflix is one of the major players.
2.4.24.

ONLINE MAPPING :

Web mapping is the process of designing, implementing, generating and delivering maps on
the World Wide Web and its product. One of the key players is Yahoo!
2.4.25.

SPEECH ENGINE:

This system converts Speech to text and text to speech. Iphones Siri speech recognition
engine is provided by Nuance Communications.
2.4.26.

TICKET TRADING:

With the Internet and smart phones, it would be easy to trade last-minute tickets for
sporting events. StubHubself-described as Heaven for Sports Fans looking to trade
tickets.
2.4.27.

SUPPLY CHAIN:

A supply chain is a system of organizations, people, technology, activities, information and


resources involved in moving a product or service from supplier to customer Amazon.com
illustrates retail supply chain best practices.
2.4.28.

MOBILITY AND SOCIAL MEDIA:

This includes web-based and mobile-based technologies, which are used to turn
communication into interactive dialogue among organizations, communities, and individuals.
This allows sharing of multimedia content with families and friends. Shutterfly creates book,
card, and photo albums and allow sharing with friends. Mobility adds ability to use
computing capability on the go. Recently Google Inc. bought Motorola mobility and entered
the mobile space.
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2.4.29.

12

SHIPPING SERVICES DOMAIN :

Use of online shipping tools integrated with payment gateways have eased the life many
consumers. In this you can Create postage-paid shipping labels, pay for shipping and
insurance, create and print a pre filled packing slip, ship internationally and track your
shipments. PayPal has teamed up with the U.S. Postal Service, Canada Post, Royal Mail
Group and UPS to provide integrated shipping tools.
2.4.30.

ADVERTISING DOMAIN:

This is a form of communication used to encourage or persuade and to continue or take


some new action or buy a new product. Some of the players are SAY Media, Yahoo! and
Google.
2.4.31.

ADVERTISING TECHNOLOGIES:

These websites provide services like Search Engine Optimization (SEO), which helps, ensure
that the advertised product or services website is easily located by its target market via
search engines. Googles AdWorks is the most popular and the highest revenue generating
such product.
2.4.32.

HOSTING:

This includes websites that allow individuals and organizations to make their own websites
accessible via the World Wide Web as well as provide space on a server owned or leased for
use by clients, as well as providing Internet connectivity, typically in a data center. One such
player is Shutterfly.
With an overview of what is online industry, basics of ecommerce, different players and
their end business domains we will get into the environment analysis of this industry and
different business and revenue models spanning across it in the following chapter. However,
before we move on, let us take a simple quiz to check your understanding of this chapter.

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13

Quiz
1. Ecommerce is the process of selling goods or services over _________ systems such as computer networks
and internet.
Magnetic

Electronic

Physical

Spherical

2. ________ is the process of designing, implementing, generating and delivering maps on the World Wide
Web and its product.
Web Navigating

Global Mapping

Web directions

Web Mapping

3. ________ is the biggest player in the video rental online market space.
Google

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Yahoo

Netflix

Dailymotion

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3. 0 I N D U S T R Y F O R C E S

AND

14

BUSINESS MODELS

The objectives of this chapter are:

Describes different environmental forces that shape Online industry

List different business and revenue models used in Online industry and Illustrate with examples

3.1. O N LI N E I N D US T R Y F O R C ES AT P LAY
You would have often heard about the influence rapidly changing business environments
in business circles. Market forces, macroeconomic scenarios, societal changes, legal policy
changes and technology disruptions can all adversely impact brick and mortar businesses.
The same is true for online businesses. Perhaps, more so as businesses in todays times
constantly compete and restructure their business models to ensure that the customer is
forever at the focal point. In this section, we will discuss each of the significant factors that
influence and change the business landscape of the online industry.
3.1.1.

MARKET FORCES

Corporations are encouraged to use ecommerce in marketing and promotion to capture


international markets, both big and small. They use Internet as a medium for enhanced
customer service and support as well. It is a lot easier for companies to provide their target
consumers with more detailed product and service information using the Internet. Strong
competition between organizations, extremely low labor cost in some countries, frequent
and significant changes in market dynamics and increased power of consumers are the
reasons to create market forces.
3.1.2.

TECHNOLOGY FORCES

The development of information and communications technology (ICT) is a key factor in the
growth of ecommerce. For instance, technological advances in digitizing content,
compression and the promotion of open systems technology have paved the way for the
convergence of communication services into one single platform. This in turn has made
communication more efficient, faster, easier, and more economical as it eliminates the need
to setup separate networks for telephone services, television broadcast, cable television,
and Internet access.

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3.1.3.

15

ECONOMIC VALUE DRIVING FORCES

One of the most evident benefits of ecommerce is economic efficiency resulting from the
reduction in communications costs, advertising costs, technological infrastructure costs
facilitating faster and larger electronic transactions with suppliers and providing cheaper
customer service alternatives. The various forces driving better economic value are:

Lower marketing costs: Marketing on the Internet is relatively cheaper and has a wider
reach than marketing on other mediums
Source: http://techie-buzz.com/discussions/internet-marketing-vs-tv-radio.html
Lower sales costs: Increase in the customer volume does not need an increase in staff as
the sales function is housed in the computer and has virtually unlimited accessibility.
Lower order-processing cost: Automation of online ordering with checks to ensure that
orders are correct before accepting reduces errors and the cost of correcting them.
New sales opportunities: The website is accessible all the time and reaches a global
audience (something that is not possible with traditional storefront)

3.1.4.

SOCIETAL AND LEGAL FORCES

To understand the role of Ecommerce in todays organizations, it becomes necessary to


review the factors that create societal and environmental forces

Changing nature of workforce


Government deregulations
Shrinking government subsidies
Increased importance of ethical and legal issues
Increased social responsibility of organizations
Rapid political changes

3.2. E C O M M ER C E B U SIN E S S M OD ELS


The four basic ecommerce business models categorized based on the nature of buyer and
seller:

Business-to-business (B2B)
Business-to-consumer (B2C)
Consumer-to-consumer (C2C)
Peer-to-peer (P2P)

In addition to the four basic models mentioned above, there are five more ecommerce
models involving transactions between Government and other entities. Such transactions
are termed as e-governance. The five models are as follows:

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1. Government-to-Government (G2G): This model involves transaction between two


government entities. E.g., Indian government buying petroleum products from Arabian
government would involve such transactions.
2. Government-to-Consumer (G2C): This model involves Government and individual
consumers as two entities. Grants, loans, credit reports etc. form part of this model.
3. Consumer-to-Government (C2G): In this model, an individual consumer interacts with
the Government. Individuals paying taxes online form is an example of such transactions.
4. Government-to-Business (G2B): It involves transaction between Government and
business organizations. Government requesting tenders online from various contractors
is such a transaction.
5. Business-to-Government (B2G): In this model, Business houses transact with the
Government over internet. Example of such a transaction would be business houses
paying their corporate business taxes online using the tax portal.
In this section, we will discuss the four basic models in detail.
3.2.1.

B U S I N E S S - T O -B U S I N E S S (B2B) M O D E L

B2B is the largest shareholder in the ecommerce. Here transactions take places between
business users and not end consumers. It provides host of opportunities to the IT firms to
facilitate the firms that would like go online. In this model the buyer as well as the seller is a
business entity and is analogous to the wholesaler-retailer transaction or the manufacturerretailer transaction in the physical retail model.
3.2.2.

B U S I N E S S - T O -C O N S U M E R (B2C) M O D E L

B2C model involves transaction between business organization as seller and individual
consumer. Any organization, which sells its products and services to individual consumers
over the internet, adheres to this model. The selling organization maintains a database of
items available for sale and displays the catalog to the consumers who then purchases items
that he/she needs or wants.
The most basic design of this business model is as shown in fig. 1.

Figure 2 B2C Business Model Design

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B2C model has been rapidly growing in the modern times. Retail ecommerce spending for
the entire November December 2011 holiday season reached $37.2 billion, marking a 15percent increase versus last year and an all-time record for the season as per ComScore.
Approximately, 80% of US customers skipping retail stores on Black Friday. This is a
testimony to the fact that B2C model is on upswing and provides host of opportunities to
both the business firms to go online and the IT industry to help them build the requisite IT
infrastructure. A classic example of B2C model is the Brick and Mortar retailers like Shoppers
Stop going online. Amazon, Dell, Flip kart are some of the well-known websites using this
model. Net banking facilities, portals like IRCTC, Go Indigo and other such websites use this
model.
3.2.3.

C O N S U M E R - T O - C O N S UM E R (C2C) M O D E L

In a C2C model, the transaction is between two individual consumers and the online portal
provided by a third party as the platform. EBay is a classic example of such a platform where
individual consumers can transact. In this model, the party providing the platform charges
the seller certain fee for providing the service and both the seller and the buyer register
with the facilitating website.
The most basic design of the C2C business model is as shown in fig. 2

Figure 3 C2C Business Model Design

A great many websites dealing in real estate properties like makaan.com, 99acres.com,
sulekha.com etc. are classic examples of C2C where the seller and buyer both register and
transact with these sites acting as the intermediary.
3.2.4.

P E E R - T O -P E E R (P2P) M O D E L

In P2P model, people share data online. Here it is not required to use a common server;
instead, users share a common platform for transactions. RapidShare, Napster and the
torrents are examples using P2P model.
In addition, with increasing consumer demand models are getting increasingly complex with
additional layers in between such as B2B2C, C2B2C. Many businesses also offer a mix of the
above generic models to meet the needs of users and market.
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3.2.5.
REVENUE MODELS
In its initial avatar, ecommerce relied heavily on structured business selling over the internet as its
principle revenue source. However, with the evolution of the industry a number of new revenue
generating sources were added. Today, ecommerce companies generate their revenue from
multiple streams such as subscriptions, affiliate marketing, email blast, advertising and most
importantly sale of goods and services. Some of the revenue models are as discussed below:
3.2.6.
SALES REVENUE MODEL
The revenue generated from the sale and lease of goods and services online by the ecommerce
players constitute the Sales revenue Model. Though the sale of physical goods requires
infrastructure in the form of warehousing, shipping, heavy investments and customer service, the
current market trends show that these investments has the highest revenue potential. In this model,
the customers are benefitted in the sense of convenience, timesaving, low search cost, fast
information and competitive prices. The online marketplaces provide a common entry point for
various products from multiple vendors.
Different access points within the Sales Revenue Model are as follows:
1. Marketplaces: Common entry point for various products from multiple vendors such as
Buy.com, Etsy, Indiaplaza, Flipkart etc.
2. Shopping clubs: These are private members-only sales sites, which offer huge discounts on
products and services. E.g. One Kings Lane, Buy VIP, Brands for Friends, etc.
3. Live Shopping: one-day deal platforms. E.g. iBood, woot!, guut.de
4. Web-based e-tailers: Retailers based only on web and selling their products online. E.g.
Amazon, Flipkart
5. Single company online shop: e.g. dell, HP etc.
3.2.7.
TRANSACTION FEE REVENUE MODEL
In this model, the platform for transaction is provided and operated by a third party other than the
buyer and the seller. This party then receives commission from the sellers/buyers for enabling and
executing the transactions. This commission or transaction fees generate the revenue in this model.
The platform providing company is generally a market place operator. The buyers and the sellers
need to be registered with the ecommerce site (platform). Either the transaction fee can be a fixed
price on price range basis or it can be a percentage of the sales. With the increasing competition and
host of internet marketplaces coming into the being, the transaction fees have been pushed very
low and hence it requires the operators to play on volume and other revenue generating sources
and increase customer stickiness by providing other value added services. Some examples of
companies using this model are Amazon, eBay etc.

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3.2.8.
S U B S C R I P T I O N R E V E N UE M O D E L
In this model, customers subscribing to the website services and products for certain subscription
fees generate the revenue. These websites provide both free content to attract membership and
premium contents for members only. The subscription fees are periodic (monthly, quarterly, semiannually or yearly) and not based on the amount of content usage. The websites using this model
are most often the ones where valuable or proprietary information is offered e.g. databases on
products and suppliers. In this model, the customers are encouraged to use the website by the flat
fee architecture while the website operators have to be content with fixed subscription fees
regardless of the volume of transactions. Another problem with this model is stiff resistance by the
customers in case the operators want to switch to transaction fee model.
Some examples of websites using this model are as follows:

E-paper websites, online magazines, TV channels etc. provide text, video and audio contents
for subscribers
Many websites providing contents like research reports and other such documents with
periodic subscription use this model. E.g., consultancy website econsultancy selling their
research reports online.
Special services like secure payment gateways also work on this model.

3.2.9.
A D V E R T I S I N G R E V E N UE M O D E L
Advertising is another big revenue-generating source for the ecommerce players. In this model, the
websites earn their revenues in the form of fees for advertising for the customers i.e. advertisers in
this case. In year 2008, Google earned about $16.6 billion through advertising alone. This model has
been gaining in strength steadily.
The conventional advertising model was display marketing i.e. wallpapers, super banners, rectangles
skyscrapers etc. being displayed on the website. Major variations of the display marketing existing
today are the affiliate marketing, search engine marketing, email marketing and social media
marketing. Most of these revenue generation sources are based on PPC (Pay Per click) concept,
where the advertisers have to pay the publishers for each click on their advertisements. Examples of
websites generating bulk of their revenues from this model are Google, Facebook, and New York
Times etc.

Points to ponder
Here is a simple exercise. Think about the nature of business at your client
organization. And note down what is their business and revenue model?
Note down your inference and discuss with your teammates.

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3.2.10.
AFFILIATE REVENUE MODEL
This model is a variation of the Advertising Revenue Model. In this, model merchants advertise and
sell their products on affiliate websites. The affiliates generate their revenue in form of commissions
on actual revenue or other success parameters making this a pay-for-performance model. Here the
affiliates act as link between the merchant websites and the customers. Examples include Google,
Facebook, and New York Times
Please note many websites also provide one or more combination of the above models to cater to
different needs of users. For example: Newspaper and journal websites earn revenues both from
subscription and advertising.
This comes to end of this chapter and we will talk about different parts of Ecommerce Ecosystem in
the forthcoming sections. However, before we move on, let us take a simple quiz to check your

understanding of this chapter.

Quiz
1. Which of the following is NOT a standard ecommerce Model?
B2B

B2C

C2S

P2P

2. In _____ model, Government is requesting tenders online from various contractors.


Govt. to Consumer

Govt. to Govt.

Business to Govt.

Govt. to Business

3. Dell.com follows primarily ------------ revenue model.


Sales

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Affiliate

Subscription

Advertising

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4. 0 E C O M M E R C E E C O S Y S T E M

The objectives of this chapter are:

Describe the key players in the Ecommerce Ecosystem

List the common modules and processes that constitute the ecommerce platform

4.1. E C O M M ER C E E C OSY S T EM P LAY ER S


Many of us making online purchases, do so for the brevity and ease with which one can buy
anything and everything with a few clicks from the warm confines of our living room. No
hassle of visiting a dozen stores, no standing in long queues at the billing counter and no
worries about the store pulling its shutters down because its already late in the evening.
Add the product of your choice to the shopping cart, punch in your credit card details,
commit your transaction and it will be delivered at your doorstep before the weekend is
over. However, beneath this seemingly simple sequence of steps, there is an entire
ecosystem that makes your purchase cycle as seamlessly simple as it sounds. In this section,
we will take a look at some of the key ecosystem players and functions.

Figure 4 Ecommerce Business Architecture

The above diagram gives a holistic view of different subsystems or modules that typically
constitute an ecommerce or online system and various internal and external systems. The
key players (not exhaustive) are:
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1. Buyers / End Consumers


2. Sellers / Brokers / Intermediaries
3. Manufacturers / OEM
4. Retailers
5. Suppliers
6. Logistics Players
7. Distributors
8. Advertisers
9. Vendor Warehouses
10. Payment Aggregators / Gateways
11. Content providers
12. Gift card suppliers
The Ecommerce platform itself may need to integrate with several internal and external systems via
APIs or Services. For ex: Sellers on eBay use API to integrate with internal CRM systems and manage
leads generated for their classified ads. In addition, upload listings from their respective inventory
management system.

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4.2. E C O M M ER C E S Y S TE M O VER VI EW
We will provide an overview of key common modules shown in the Ecommerce platform
and delve into each topic in the following chapters.

4.2.1.
CUSTOMER MANAGEMENT
The customer management subsystem encompasses the systems and processes required into
building a long lasting relationship with the customers. In case of ecommerce where the user loyalty
to any particular site is as fickle as a stateless HTML page, customer management becomes all the
more an important subsystem. The customer management begins with attracting user footprints to
the website, to conversion of the visitor into a customer and then building a long lasting business
relationship with the customer (customer retention).
4.2.2.
INVENTORY MANAGEMENT
The inventory management/supply chain management subsystem handles the responsibility of real
time management of inventory in the catalog. The inventory subsystem takes care of updating
inventory status for all the items/product variants, monitoring stock depletions, ensuring
replenishments before the inventory reaches critical minimum level, synchronization of inventory
data between the management and production servers and other systems in the supply chain. With
the cost of losing customer associated with under-stocking and extra operational costs associated
with overstocking, a robust inventory management system is necessary. The inventory management
system serves the needs of shoppers, business users, and site administrators.
4.2.3.
CONTENT MANAGEMENT
Content Management is an important aspect of any website. In case of ecommerce portals where
the content is itself the item on sale (in case of subscription-based model) or prime facilitator of sale,
a robust content management system is a need. The content management subsystem is responsible
for the management of catalog and other contents like images, product and category metadata,
product and category definitions and product variant attributes.

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4.2.4.
T R A N S A C T I O N /T R A D I N G M A N A G E M E N T
In ecommerce enterprise, almost all the transactions take place online. The transactions
management subsystem includes all the operational and financial transactions that a customer
performs on the site. The transactions include the one between the customer and the ecommerce
enterprise and starts with the moment the customer searches any product with intention of
deciding to buy it. It starts with the search of the products and ends at the completion of checkout
followed by order fulfillment. In case of classifieds or services based ecommerce websites,
transaction could end with a simple lead creation. For information-based sites, dissemination of
content can itself be treated as transaction fulfillment.
4.2.5.
MONETIZATION
The monetization subsystem comprises of the processes involved with money transactions and
payment processing. It includes the payment mode, payment methods and the integration with
external or internal systems to facilitate payment processing.
4.2.6.
BUSINESS INTELLIGENCE / ANALYTICS
With the changing dynamics of competition in ecommerce domain, changing consumer behaviors,
ever-evolving multi-channel marketing, and the transformation of consumers to customers owing to
their larger bargaining powers, it becomes necessary for ecommerce enterprise to have a strong
business intelligence and analytics infrastructure. This helps them understand the market, the
customer, the changing and ever evolving operational paradigms, the changing trends better and
build a sound, healthy information base and knowledge enterprise. To enhance the capabilities,
evolve stronger and be up to the latest trends in ecommerce arena, business intelligence is
indispensable. This helps them optimize the operations and maximize the revenue while getting
clear picture of what sells and how it sells.
4.2.7.
CUSTOMER SERVICE
Customer Service is a crucial aspect of ecommerce and hence the customer commerce subsystem
must be highly structured and customer-centric. Customer service is essential at all stages of
customers interaction with the ecommerce enterprise. It starts at the customer visiting the portal,
through pre-transaction, transaction and post transaction stages. Customer service then continues
to replacements, post-sale warranty/guaranty services and beyond. In fact good customer service is
the lifeblood of any business. In ecommerce, the customer service is inbuilt in the website or it
provided through IVRs, call centers and other dedicated customer support systems. Customer
service is through providing assistance with the shopping process, profile management, increasing
awareness about the site, and help with order tracking, payment assistance and complaint
resolution. The online shopping experience for the customers should be a pleasant experience,
pleasant enough that it leaves the customer happy and satisfied and willing to come back for future
purchases. A good customer service facilitates that.
4.2.8.
MARKETING AND ADVERTISEMENT
Marketing comprises of the processes, which are used to bring customers to the site and create a
demand for the products the site sells. All the marketing efforts aimed at bringing customers to the
website and luring them into purchasing forms are accounted here.

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4.2.9.
TRUST AND SAFETY
Trust is a vital relationship concept between buyer and seller over internet. Trust is as important as
the product on offer. An essential element that leads to building that trust is the assurance that your
ecommerce operation meets the demanding security standards required of organizations handling
sensitive information. Hence, to provide security from cyber criminals, from data loss/theft, from
identity theft, phishing attacks, hacking, and intrusion into privacy and to provide a safe and secure
shopping experience building a healthy trust and safety subsystem is indispensable.
Now let us take a short quiz to test your understanding of this chapter.

Quiz
1. Integration with other systems such as CRM is an internal subsystem of ecommerce. State True or False
True

False

2. USPS (United States Postal Service) is one of the key players in eBay Ecosystem. State True or False.

True

False

3. Payment gateway integration is a subsystem within which of the following options.


Inventory Mgmt.

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Catalog Mgmt.

Content Mgmt.

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5. 0 C U S T O M E R M A N A G E M E N T
The objective of this chapter is to:

Describe different subsystems involved in Customer Management

If there is one marketing premise that has not changed despite the wide spread digitalization of
commerce, it is the fact that the customer is always king. Even as businesses adapt and embrace
new disruptive technologies, the emphasis continues to be on empowering the customer.
Businesses, online and otherwise continue to invest on improving user experience. With a millennial
generation that is spoiled by choice and characterized by short attention spans, managing customers
both new and existing is not as straightforward as before. In this section, we will have a look at the
customer management subsystem and its sub components:
1. Customer Acquisition
2. Customer Conversion
3. Customer Retention

5.1. C U S T O M ER A CQ U IS I TI ON
The internet users are a breed of impatient people who do not stick to any website until and unless
they see value. To acquire a customer an ecommerce portal must induce them to visit the website
by providing the products and services of their desire. Once on an ecommerce portal, a user can
register with the site where basic personal details and contact details of the user is captured. Once
registered, a web user becomes a potential customer. In addition, with social networking sites
gaining prominence and the internet usage pattern of users changing, many ecommerce portals
allow for logins through social sites (e.g. Facebook login) or email logins. These techniques help
ecommerce players to capture potential customers who can be converted as customer without
forcing the users to go through the lengthy registration process. Providing free subscription is
another technique that can drive traffic to the site. It gives customers a chance to have a trial and
then make an informed decision to convert into actual customer.

5.2. C U S T O M ER C O N VER S IO N
Once a potential customer has been acquired in form of making visit to the site and engaging the site,
conversion is a critical step. For that to happen the products/service of his desire should be available
at best price and his desire be fulfilled. A registered customer who has not yet made any purchase
can be attracted into purchase by providing new customer rewards and gifts or the benefits that a
premium customer gets over and above a free subscriber. Many a time a web user does not want to
go through the lengthy process of registration and want to have immediate checkout. For that guest
checkout facility has been a tool adopted by many major ecommerce portals. The guest checkout
facility not only quickens the checkout process for customer, it also allows the website to gather
basic contact details (email address/ship address/mobile number etc.) of the customer to target
them for future promotions and lure them into future purchases. A normal checkout process is the

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normal flow of customer conversion after registration. Once a customer realizes the value
proposition brought about by premium subscription initiates the subscription process.

5.3. C U S T O M ER R E T E NT I ON
The cost of new customer acquisition and conversion is very high as compared to retaining a
customer. The major source of revenue in any business is the repeat purchase by existing customers.
To retain customers, the ecommerce enterprise must build relationships with them by reconnecting
with them on regular intervals, providing them with repurchase benefits in terms of discounts or
priority purchase opportunities.
With this, we conclude customer management and let us take a short quiz to check your
understanding of this chapter.

Quiz
1. Which of the following is a user activity indicating customer conversion?
Sign-in

Sign-out

Sign-up

Checkout

2. Websites offer discounts to----------- users to retain or renew them.


New

Existing

Guest

Inactive

All of the above

3. Typically, cost of acquiring new users is typically higher than retaining an existing user. State True or False.
True
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False

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6. 0 I N V E N T O R Y M A N A G E M E N T
The objective of this chapter is to:

Describe different subsystems involved in Inventory Management

Illustrate with a case study why inventory management is critical

There is a very good possibility that you always buy groceries from one particular store. If
you analyze that a little bit in detail the reasons are all the usual suspects. It is optimally
located, the sales people are helpful and you always find whatever you are looking for. The
last mentioned reason is as critical an aspect as any other for brick and mortar and online
stores alike inventory management.
In any ecommerce website, users are ultimately buying a service or a good or information
and that forms the inventory of the site that it sells to its users. With under stocking
meaning lost sales opportunity and over stocking meaning extra inventory costs, managing
inventory management is often the art of finding the fine balance. In this section, we will
introduce you to the processes or subsystems that constitute the inventory management
system.
Inventory management is the process of maintaining the constant flow of units into and out
of the inventory. The business entities that make inventory management subsystem as
shown in fig. 11 are as follows:
1.
2.
3.
4.
5.
6.

Forecasting
Inventory Replenishment
Stock Update
Inventory On-boarding
Inventory Data Synchronization
Inventory Status Notifications

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Figure 5 Inventory Management

6.1. F O R E C AST IN G
Inventory management involves the science of forecasting the demand that may occur in the nearterm future. It involves calculating the demands for the future (based on past trends, future market
forecasts etc.), adjusting that demand for exceptional events like unexpected large one-time order,
and based on the forecast determining the optimal upper limit and lower-limit for the stock.

6.2. I N VE N T O R Y R E P LEN I S HM ENT


Inventory replenishment takes care of evaluating the inventory supply, and based on the
requirements and the demand forecasts, the order is placed. The EOQ (Economic Order Quantity)
model is used to optimize the inventory, calculating the optimum stock to order when the stock has
reached the reorder point. The replenishment can be internal or external.
In internal replenishment, the inventory needs of one warehouse are fulfilled by requisitioning from
another warehouse. An internal replenishment process may include of a hub and spoke model
where the central warehouse provides the inventory to the subsidiaries. For an internal
replenishment, order has to be created and it uses the EOQ model for inventory optimization. Once
a replenishment order is created, it is mailed to the central warehouse i.e. the warehouse providing
the inventory. The central warehouse then ships the items requisitioned to the subsidiary. The
financial transaction at the central warehouse is decrease in asset account and the corresponding
increase at the subsidiary company. In external replenishment, external vendor fulfill the inventory
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needs of the merchant. The external replenishment in any of the three situations: when there is no
central warehouse to order from, when the central warehouse itself needs to get replenished, or
when the things that the subsidiary needs is not stocked by the central warehouse. In this case, a
purchase order is generated by the requesting warehouse using the forecasts and EOQ model. The
purchase order is sent to the vendor who sends the goods with receipt. The receipt and goods are
verified. In case of returns, the adjustments are done before making the final payments. In case of
external replenishments, the merchant system needs to be integrated with the vendor(s) system.

6.3. I N VE N T O R Y O N - BO AR DI NG
In brick and click model of online retail where the merchant has physical outlet as well as online
shop, it becomes necessary that the inventory system is integrated with both the online system as
well as the physical retail POS systems. Again in multichannel, multi-brand systems the channel
integration becomes necessary and hence the inventory on boarding becomes a necessity to
maximize inventory optimization.

6.4. S T O C K U P D AT E
The inventory has to be updated with any sale, any return and any new replenishment received. The
system must support bulk inventory update on replenishments. Similarly, when the product is backordered and the inventory status has to be updated. The back order has to be captured to calculate
the replenishment limit. Similarly, the pre-order has to be captured for making the correct
calculations of the stock to order. Even when the customer makes a normal order, at the time of the
checkout the inventory of the variants bought need to be updated. On returns of items, the stock for
returned variants has to be updated to process the replacements or back payments.

6.5. I N VE N T O R Y D AT A S Y N C HR O NI Z ATI ON
The inventory status on the production server should be coordinated with the inventory status on
the management server. The process can be automated to keep the two systems in sync. Similarly,
any change in the inventory catalog should be reflected in the product catalog as well (in case of
Microsoft commerce server).

6.6. A U T O M AT ED N O TIF I C ATI ON S


With the ecommerce application being so complex and the inventory management being
undisputedly one of the key aspects, automated notifications in case of stocks reaching reorder
point. Similarly, if during the Purchase Order Generation for replenishment the product stock in
warehouse is lesser than the quantity mentioned in the quote, an email notification should be sent
to the warehouse manager. In case services are being sold, the customer can be compensated for
any extra time that he has to hold/wait. He can in that case be provided with information on
alternate services, offer him gift certificate or a promotion code to compensate for their waiting
time.

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Amazon.com
When Bezos started his venture, he aimed at hassle free operations. He wanted to offer his customers a
wide selection of books, but did not want to spend time and money on opening stores and warehouses and
in dealing with the inventory. He however realized that the only way to satisfy customers and at the same
time make sure that Amazon enjoyed the benefits of time and cost efficiency was to maintain its own
warehouse. Building warehouses and operating them was a very tough decision for Bezos. Each warehouse
cost him around $ 50 million and in order to get the money, Amazon issued 2 billion as bonds.
In 1999, Amazon added six warehouses in Fernley, Nevada, Coffeille, Kansas, Campbellsville/ Kentucky,
Lexington, Kentucky, McDonough, Georgia and Grand Forks, North Dakota. Overall Amazon had ten
warehouses. In the same year, Amazon increased its worldwide warehousing capacity from 300,000 square
feet to over five million square feet. Since Amazon ordered books and other products from warehouses only
after the customers had agreed to buy them the return rate was only 0.25 percent compared to the return
rate of 30 percent in many segments of the online retail industry.
Amazons warehouses were quarter-mile long yards wide stored millions of books, CDs, toys and hardware.
They were very well maintained and completely computerized. In fact, the number of lines of code used by
Amazons warehouses was the same as the number used by its website. Whenever a customer placed an
order, a series of automated events followed which made inventory management easier.
When a customer ordered a book from Amazon his invoice mentioned the title of the book followed by a
barcode. This was a code of numbers such as 6-5-4, which indicated the books location in the warehouse.
Computers sent signals to the workers wireless receivers telling those items had to be picked off the shelves.
The workers decided the order in which the items had to be picked and then verified the weight of each
product. These products were kept in a green crate that contained orders of different customers, when this
got filled they were placed on conveyor belt and sent to central point. Here the barcodes were matched
with the order numbers to find out who would receive each item. Then they were packed and parceled.
Most of the orders were shipped through either the United States postal service or United States parcel
service whichever is located nearer.
In the holiday season of 1999, Amazon was determined not to disappoint any customer who visited its site
for his holiday shopping. Accordingly, Bezos decided to stock the stores with every possible item that
customers were likely to buy. Although this strategy was appreciated but Bezos faced a lot of problems.
It was then Bezos realized the importance of Inventory Management and decided to reduce the size of
inventories, this was made possible by managing the warehouses efficiently. Amazon made careful
decisions about which products to buy from where. Then the company decided to manage distributing
channels. An important decision was taken was buying of books, CDs videos etc. directly from publishers
rather than from distributors. They upgraded the software and tried split shipments.
Amazon also tried to cut down its expenses. It decided to outsource some of its routine activities so that it
could concentrate better on its core activities. It collaborated with other companies for shipping the
inventory. So, while the partners shipped the items, Amazon leveraged on its e-commerce expertise. It
revamped the layout of its warehouses making it easier for the company to locate and sort customers. By
doing this it managed to save all the expenses related to filling and shipping orders. Improved inventory
management helped Amazon to get net profit of $5 million in the fourth quarter of2001 after accumulating
a deficit of $2.86 billion in seven years since its launch in 1995.

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This brings us to the end of inventory management. Let us take a short quiz before we move onto
content and catalog management.

Quiz
1. What is SKU?
Stock-keeping unit

Single keeping unit

Self Keeping Unit

Shelf-keeping unit

2. The purpose of having a robust inventory management system is to minimize stock out situations or excess
supply in the store. State True or False
True

False

3. What is EOQ?

Economic Order Quantity


Engine Output Quotient

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Easy Order Quantity

Emotional Order Quotient

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7. 0 C O N T E N T & C A T A L O G M A N A G E M E N T
The objective of this chapter is to:

Describe how content is created and managed in eCommerce sites

Illustrate the workflow involved in CMS (Content Management System)

List the benefits of using CMS

Describe different subsystems used for catalog management

With the lack of the touch, feel, smell paradigm that is fundamental to brick and mortar
commerce, ecommerce counterparts have to make sure that the content they display to
customers represent one and only one version of truth. Ecommerce players resort to
Content Management Systems to accomplish this. Content Management System can
encompass an organization's entire content creation and organization system. It provides a
content repository where information is available for independent editing, and, most
importantly, it can produce websites or any other publications from the stored content.

Figure 6 Content Management System (CMS) & Related Entities

7.1. W O R KF LO W
The workflow system includes the tools and the procedures that assure that the entire
process of collection, storage and publication runs effectively, efficiently, and according to
well-defined timelines and actions.

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A workflow system supports the creation and management of business processes. In the
context of a content management system, the workflow system sets and manages the chain
of events around collecting, storing in a repository, and publishing the content.
7.1.1.

CONTENT COLLECTION

A Content Management System can be broken down into four categories by function:
Content Collection, Workflow, Storage or Management, and Publishing. The collection
system includes the tools, procedures and people who collect content, and provide editorial
and metadata processing. The content collection process consists of adding new
components to the existing repository.
7.1.2.

PUBLISHING

Content publishing is the process that draws content out of the repository and formats it
into websites, web services and other publications. To be flexible enough to produce a wide
range of publications, the publishing system must include:

Publication templates;
A full programming language;
Runtime dependency resolution;
File and directory creation

7.1.3.

S T O R I N G I N A R E P O S I T O RY

The repository houses all the content and the metadata information, as well as the one
providing the processes and the tools needed to access and manage the collected content
and metadata information.
Repositories have the following functions:
Storing content;
Selecting content;
Managing content;
Connecting to other systems

7.2. B EN E F I T S
An enumeration of some of the benefits provided by a CMS would include:
Fresh, consistent, high quality information
Reuse of content
Enhanced productivity
Decentralized content creation
Centralized workflow, approval processes and rules
Competitive advantage

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7.3. C AT ALO G M AN AG EM E N T
Catalog management comes into picture when the content needs to created or sourced
from another vendor for multiple products and goes beyond simple content management
system. Catalog provides ability to add content at a much deeper and structured fashion for
example product description, features and reviews for each product in the product family
tree.
Online catalog is a very critical resource in ecommerce portal. The way the catalog is
organized, the product family tree and the cultural and linguistic aspects of the geography
where the ecommerce portal would be used is very critical. Hence, catalog management
becomes an important subsystem of content management subsystem in ecommerce. The
catalog management processes include creation, updating, deletion and retrieval of catalogs.
The catalogs may be the base catalog, a virtual catalog or an international catalog. In
addition, catalog management also includes creation, deletion, updating and retrieval of
catalog sets. With the need to use the same or similar catalog on multiple platforms, it
becomes highly important that the catalogs are highly extensible, dynamic and can be easily
imported and exported.
7.3.1.

CATALOG SCHEMA MANAGEMENT

Catalog schema maintains metadata or property based information for catalog. The
properties of a catalog are subject to changes with changing business needs, product
offerings and geographies. As a result, new properties need to be added and older ones
updated or deleted. The catalog schema management serves the purpose of creating,
updating, retrieving and deleting property metadata for catalog, category, products and
product variants.
7.3.2.

CATEGORY MANAGEMENT

The products in a catalog need to be organized into relevant categories and subcategories
so that the customers can conveniently browse through the catalogs in a seamless manner.
The category management includes creation, deletion, updating and retrieval of these
categories and subcategories.

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Figure 7 Catalog Management

7.3.3.
PRODUCT MANAGEMENT
Eventually what are sold are product variants, which belong to parent product in the catalog
hierarchy. The product management subsystem includes creation, updating, deletion, retrieval and
classification of products into one or more categories, eligible for up-sell or cross-sell. It also includes
creation, updating, deletion, retrieval of product variants and their properties.
7.3.4.
CATALOG HIERARCHY MANAGEMENT
The taxonomy of catalog has to be professionally designed and its structure has to be so that they
can access the minutest of information about the product as sought by the customer. Therefore, the
product family tree inclusive of the category and subcategory must be well defined. Catalog
hierarchy management subsystem takes care of catalog hierarchy by sequencing the categories and
products in the most efficient way.

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This concludes content and catalog management chapter. Let us take a simple quiz to test
your understanding of this chapter.

Quiz
1. A content management system helps organize and _____ the collection, management, and publishing
processes
Automate

Process

Understand

Produce

2. A changing website puts the impression of an unstable institution. State True or False
True

False

3. The benefits provided by a CMS would include which of the following options. Select the most appropriate
option(s)
Enhanced productivity
Reuse of content

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Centralized content creation

Decentralized workflow

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8. 0 T R A D I N G
The objective of this chapter is to:

Illustrate the business flow involved in buying

Describe each of the processes involved in pre-buying, buying and post-buying

List features used by portals to influence buying decisions

In the previous chapters, we discussed about the various systems that set up the electronic
commerce platform. In this chapter, we shift our focus to the actual trading process. From
consumer behavior nuances prior to making purchases online to processes that will
eventually fulfill the customer order, this chapter intends to step you through the entire
pre-buying buying post-buying cycle.
In ecommerce enterprise, majority of transactions take place online. The trading
management subsystem includes all the operational and financial transactions that a
customer performs on the site. Trading takes place between two entities, the customer and
the ecommerce enterprise and starts with the moment the customer searches any product
with intention of deciding to buy it. It starts with the search of the products and ends at the
completion of checkout followed by order fulfillment. This module will focus the trading
process which can be further classified into Pre-buying process, Buying and Post-buying as
shown in the below flowchart.

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Figure 8 Buying Flow

Description of various activities involved in each step is available in the forthcoming sections.

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Figure 9 Trading

8.1. P R E -B U Y I N G P R OC E S S ES
The pre Buying processes include the processes, which take place before the actual
transaction occurs and facilitate the actual transactions. Traditionally, these processes direct
towards creating interest for product among users and for aiding users to make right choice
of products.
8.1.1.

B R O W S I N G T H E P R O D UC T C A T A L O G U E

An ecommerce product catalog is a catalog that highlights the product or services provided
by the e commerce portal. Users who land on the ecommerce portal would browse through
the product catalog to find the product, which they wish to buy or to get information on.
The catalog may have multiple levels of classification based on the type and number of
product dealt with in the portal.
8.1.2.

S E A R C H I N G F O R P R O D UC T S

Search can be free text search or advanced and directed searches. Generally e commerce
portal have a search bar in their home page where users can search for product by typing in
the product keywords. Users can also search for products by selecting a particular category.
For example searches made by the customers for products need to be free text search with
the business logic taking care of adding the directed, intelligent search algorithms to present
a more directed search result. In addition to searching for product using the search bar most
portals allow users to narrow down their search using additional search criteria or advanced
search. Users can search products based on specifications, price range, brands and even
customer ratings/reviews. The ultimate aim of search in any e commerce portal is to make
users have a look at the product they like in the shortest span of time.

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P R O D U C T P R O M O T I O N S A N D O F F E RS

Similar to offline merchants who promote their products through sales and promotions,
online portal too do the same for increasing sales. These promotions could be across all
product lines or for specific product lines/products. Portals generally inform users about
these promotions and offers using merchandising, email alerts, information banners or by
other means. Some portals also have dedicated pages or categories to list products, which
currently have promotions or offers on them such as deal page.
8.1.4.

CAPTURING USER BEHAVIOR

To make the site more appealing, websites capture users interests and personalize home
page with the products/services of their interest. To make the system more appealing to the
customers and to reduce their search cost, some websites also narrow down the products
display on their home page based on their past purchases. In case the product graphics and
images matter a lot for the customers and they like to design their own customized product,
they also provide tools to design their own customized designs and their searches. Ex: For
laptops and other electronic gadgets, customers can build/upgrade the configuration
according to their own needs and desires.
8.1.5.

USER WISH LISTS

At certain times when the customer cannot make immediate purchase they make use of the
wish list or watch list to add the products for purchase in the near future. The wish list
process provides the facility for the users to email their wish list to family/friends who can
buy those items and gift to the customer wishing for them. Ecommerce sites provide facility
to add, update, delete and email wish lists.

Points to ponder
Visit any two online portals and critically evaluate the pre-buying user experience
offered by the two sites. Which one did you prefer and why? Relate to the topics
discussed and re-affirm your understanding.

8.2. B U Y I N G P R O C ES S ES
These processes are at the core of the ecommerce enterprise, which accounts for the sale of
goods/service in exchange of money to the customers. There are many processes, which
facilitate the core transaction of checkout. The customer profile retrieval and updating is
one such process, which helps capture the latest customer profile info, facilitating the
customer to self-manage the profile information.

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PRODUCT PAGE

Either after searches for the product through product catalog or through search, the users
end with the page, which has the complete information about the product/service that the
user is reaching for. This page will have information on the product such as:

Product Price
Product specifications
Product customization options
Product availability
Product gallery
Product reviews/ratings by other customers and industry experts
Shipping details/duration/price
Finance Options
Tax calculations
Product promotions/offers
Poplar accessories for the product

Users after carefully going through the information in this page make the ultimate decision
of either buying the product or not. When the user makes the decision to buy the product
he adds the product to his shopping cart. This does not necessarily mean that he has to buy
it immediately, but it certainly shows the interest to buy.
8.2.2.

SHOPPING CART

A shopping cart is a virtual cart that holds all the products selected by the user to buy. The
core transaction starts with the customer adding the product to their shopping cart. If the
customer has built his/her cart using the guest account and when he/she logs in, the guest
user shopping cart that was created for him/her must merge with the his/her registered
account cart. The website must provide user-interactive add to cart, update cart and delete
from cart processes to the customer. The cart page must also display the cross-sell, up-sell
items to facilitate cross sell and up-sell and record every cross sell, and up-sell item. When
the customer checks out the cart, a real-time inventory check must occur. In case particular
product in the cart is unavailable, the customer must be displayed a courteous message
regretting for the unavailability. If the product is back orderable, one can share an
information message with the customer along-with an email regarding the same to the
customer and concerned business order.
8.2.3.

CHECK OUT

Once the customer has populated the shopping cart, he/she clicks on checkout. Then the
customer provides or confirms the shipping and billing pages. Typically, the shipping options
are available based on the shipping address and on selection of one of the options,
additional taxes that apply and the billing charges are summed up to the total amount to be

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paid. The customer then makes the payment using the payment gateway. On payment
completion, a congratulations or confirmation message confirms the payment and triggers
an email to the customer with order details. Simultaneously, system sends a separate email
to the concerned supplier/warehouse/distributor for taking care of the shipment and
fulfillment. When the order is ready for shipment the consignment details mail are shared as
well.

8.3. P O S T -B U Y IN G P ROC E S S ES
Once the user places an order to buy a product a set of process make sure that the ordered
product reaches the user on time and even allows him the option to return the product back
if the user is not satisfied with the product.
8.3.1.

ORDER FULFILLMENT

Typically, the system or authority involved follows a set of activities mentioned below on
order/payment confirmation for fulfilling the order when the item is in stock

Purchase notification sent to warehouse


Selection of product and thorough inspection for defect checking
Packaging of the product (in gift wraps if so ordered by customer)
Packaging sent to delivery agents like DHL, UPS or even an in-house delivery arm
Portal updates product availability information with the latest stock details.
The consignment number from the delivery agent is then intimated to the user
Agents ship the product to the user as per the mode selected by the user during
purchase.
During shipment, user can use the consignment number to track the shipment and
enquire in case of any delays.
Some ecommerce websites do not take orders when the items are out of stock and allow
them to add it to their wish list so that they can receive a notification once the stock is
available. Others that continue to take orders even when out of stock, informs the possible
delays and places the order with the vendor / manufactures and ships it to the user once
received.

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MONETIZATION/ FINANCIAL SETTLEMENT

Payment Mode Selection


In case of transaction level processing, payment mode is select at the cart level. However, for
subscriptions the transaction is treated as a periodic recurring payment. The customer can select,
update, and view his subscription or package details. In case of ad-based revenue websites the
customer is displayed the rates for the PPC, PPR ad campaigns and the customer is can select and
update their options.
Online Checkout and Payment gateway integration
The online checkout process includes payment online. The payment can be made using vouchers,
coupons or e-wallet. In these cases, the payment gateway is not used. In case the payment is made,
using credit/debit card payment gateway is integrated with the system for card validation and
payment processing between the merchant account and the credit/debit card account. The e-wallet
recharge requires similar payment gateway integration.
Offline Checkout
In case of online checkout, the payment is not made online but instead a purchase order is created.
The customer takes the payment order to the physical store where they are provided the
goods/service on producing the purchase order. The invoice is generated for the same.

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PRODUCT RETURN

Most ecommerce portal provide users the option to return the product if they are not
happy with it. On product return, based on the set policies the user can get back the money
paid which can be up to full price of the product. The portal can themselves send a person
to collect the product or the user can themselves ship it back.
This brings us to an end of trading process. Here is a simple quiz to test your understanding
of this chapter.

Quiz
1. In case the customer has added something to his cart some time back and did not checkout for long, the
items are recommended to be released from the pipeline. State True or False
True

False

2. Friends and family can buy items for a user with the help of -------------.
Product list

Wish list

Sales List

Offer List

3. When the user makes the decision to buy the product he adds the product to his __________.

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9. 0 O N L I N E M A R K E T I N G & A D V E R T I S I N G
The objective of this chapter is to:

Define digital marketing and what constitutes it

Describe different types of online marketing techniques

List different forms of advertising in ecommerce space

Marketing is "the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large." Digital marketing is the use of internet-connected devices to accomplish
the above, ideally accomplished at a lower cost and creating a higher Impact.
Digital marketing in turn is classified into the following:
Online Marketing
Market Research
Brand Management

9.1. O N LI N E M AR KE T IN G T EC HN I QU ES
Online marketing processes include not only e-marketing and sales, but supply chain and
channel management, manufacturing and inventory control, financial operations and
employees workflow procedures across an entire organization. This mode of marketing has
lower cost and high impact.
Promotions Management and Loyalty Programs Management take care of onsite
marketing initiatives to retain customers (buyer and seller), special discounts, memberonly discounts and seasonal discount offers.
Affiliate marketing is a type of performance-based marketing in which a business
rewards one or more affiliates for each visitor or customer brought about by the
affiliate's own marketing efforts. Affiliate overlaps with other Internet marketing
methods to some degree, because affiliates often use regular advertising methods.
Those methods include organic search engine optimization (SEO), paid search engine
marketing (PPC - Pay per Click), e-mail marketing.
The social ecommerce management processes include creation, updating and deletion
of product pages ads, banners, promotions, discounts on social sites using plug-in such
as Facebook like, widgets etc.) within the website. In addition, creation and
management of user communities and maintenance of user reviews also form processes
of social ecommerce management.

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The updating of Stock keeping units or product keywords, meta description, URL
constitutes the processes in SEO.
Online lead/opportunity management can assist small or large businesses in achieving
their online or database goals

9.2. O N LI N E B R AN DI NG
With the rise in popularity of blogs, online social networks, podcasts, and video sharing,
anyone and everyone have a voice these days. In addition, that voice, however insignificant
it may have been a decade ago, now has the power to reach millions with just a few taps at
the keyboard and clicks on a mouse. Opinions about brands, products, even entire
organizations, can spread like wildfire, causing a wave of negativity, or on the contrary, a
flourish of positivity about a brand. Hence, online branding or word-of-mouth selling via
forums or social channels cannot be overlooked in ecommerce world.

9.3. M AR KE T R E S E AR C H
Market research is any organized effort to gather information about markets or customers.
It is a very important component of business strategy. Market research is a key factor to get
advantage over competitors. Market research provides important information to identify
and analyze the market need, market size and competition.
Through keyword-driven Internet research, secondary research using search engines like
Yahoo, Google, millions of people worldwide have easy, instant access to a vast and diverse
amount of online information. Companies are also indulging in online surveys, reaching out
to online focus groups, and harnessing social media in Online Research. Online focus groups
offer a fast way to conduct qualitative research online. Online Marketing Research methods
are typically faster, efficient and inexpensive as well.

9.4. A D VE R T I SI NG
With the intention of attracting advertising dollars, magazines and newspapers have also set
up sites on the Web. Many online periodicals include traditional advertisements as well as
icons, which display an advertisers logo and, when clicked with a mouse, send a user across
the Web to the advertisers Web site. Among periodicals that have gone from print to online
advertising with some degree of advertising success are Knight-Ridders San Jose Mercury
News newspaper, which reportedly charges Rs.100 per day for an advertisement, and
magazines such as Hot Wired, Playboy, and People, which reportedly charge Rs.30, 000-Rs.
45,000 per quarter for an advertiser to place an icon in the periodical.
Promotions are also common. In many cases, advertisers ask site visitors to provide their
names and addresses in exchange for a product discount.
9.4.1.

TRAFFIC MANAGEMENT

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As the amount of information online increases, it should be increasingly important for


advertisers to get users to their sites quickly, leading them to pay more for placement in
online periodicals.
One can enhance product descriptions through online advertising. With
more information available, the decision to purchase should be easier and
more purchases should occur (assuming the product is desirable). This
should boost the appeal of the Web and increase the rates that
advertisers charge for placing their icons in an online periodical. Pay per
click Model is one such model mobilized by advertisers.
9.4.2.

CAMPAIGN MANAGEMENT

Product advertising is far more effective if it leads to a purchase. If online


advertising encourages users to shift a portion of their purchases to the
Web, then companies may pay far more to advertise. Spending can be the
amount that advertisers pay other Web sites such as periodicals and
games to display their icons or product offerings. Campaign management
allows advertisers to run specific campaigns and measure the success
using embedded analytics into the campaign.
9.4.3.

BANNER EXCHANGE

Banner exchange is a common practice on the Web and involves at least


two websites that agree to post each other's banners. In other words, you
could make an agreement with another website to publish your banner in
exchange for you doing the same.

Figure 10
Advertising
Modules

Banner exchange can:


Send you targeted traffic
Help you acquire some inbound links (that will help with your Google search ranking)
Be virtually free

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Quiz
1. Online Branding requires you to concentrate your efforts around your biggest ___________.
Influencers

Competitors

Employers

Processes

2. __________ is a common practice on the Web and involves at least two websites that agree to post each
other's banners
Advertising

Listing

Banner Exchange

Searching

3. Typically, cost of acquiring new users is typically higher than retaining an existing user. State True or False.
True

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ANALYTICS / BUSINESS INTELLIGENCE

The objective of this chapter is to:

Describe different types and methods of building business intelligence (BI) and related
analytics methodologies

Illustrate how it helps organizations in every industry to use information for business
advantage

One of the latest trends to hit the marketplace has been Big Data. With the amount of data
that is being generated today, the big data revolution is about finding new value within and
outside conventional data sources. With a growing awareness in the marketplace that new
kinds of analysis are possible, e-commerce enterprises are constantly exploring
opportunities to take advantage of this new paradigm. This section introduces you to the
analytics/ business intelligence sub-systems that power most ecommerce systems and the
business value they bring about.
The four major level one entities of the Business Intelligence subsystem are as follows:
1.
2.
3.
4.

Web Analytics
Data Analytics
Data Mining
Dashboards and Reporting

We will discuss each of the above topics in the following sections.

10.1.

W E B A N ALY T I C S

Web Analytics is the process of collecting, measuring, analyzing and reporting the traffic on
any website and the visitors behavior. It also involves analysis of what drives traffic to
website with the goal to optimize the website for attracting more traffic and more business
making the site a success. In case of ecommerce portals, a visiting internet user is a
prospective source of revenue and hence web analytics becomes all the more important.
Web analytics involves tracking visitors, page views, when and how the traffic was
generated, which referring website generated how much traffic, page hits, bounce rate etc.
The analysis of traffic and visitors provide information on the target audience, what they like,
what they dislike and provide insights to change these dislikes into likes without alienating
the users. The information on page hits, exit pages and page views give information about

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the website as to where the optimization and what changes are required to increase traffic
given below is a snapshot from Google Analytics to provide of a view of what the above
reports looks like.

The information on referring sites measures the effectiveness of online ad-campaign. The
information on search keywords help achieves effective SEO. The A/B testing help gauge the
popularity of web pages with the users.

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Figure 11 Analytics

10.2.

D AT A A N ALY T I CS

Data analytics is the key to businesses with razor thin margins, extreme competitive
pressures and increased bargaining power of the customers. The level two analytical
modules of data analytics are as follows:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.

Customer Analytics
Merchandising Analytics
Loss Prevention Analytics
Marketing Analytics
Store Operations Analytics
Vendor Analytics
Online Purchase Funnel Assessment
Direct Inbound and outbound call funnel Assessment
Data Health and Risk Assessment

10.2.1.

CUSTOMER ANALYTICS

The objective of customer analytics is to understand the most valuable customers and
target them to increase loyalty and the profits. Customer analytics help understand the
customer touch points and leverage that to increase business. Customer analytics helps in

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gaining insights about customer behavior while modeling their preferences and tracking
their affinity points. It also gives insights into what are the attachment rates, the propensity
of the customer for switching brands, what are core items and the frequency of core item
purchases. It also helps gain insights on how the purchase basket changes with customer
demographics, the basket size, the revenue contribution, customer loyalty, average inbasket price etc.
These insights help discover the customer base, their unique characteristics, what they
purchase and why, by tracking their expectations and sentiments. It also helps in tracking
the impact of promotions on customer baskets, helping connect the dots between
customers, stores, products, and promotions. It helps in micro segmenting the customer
base to create a highly refined groups of customers based on user-defined characteristics.
10.2.2.

MERCHANDISING ANALYTICS

Merchandising analytics facilitates optimizing inventory-related decisions. The business


users can quickly accelerate replenishments for top-selling products, make seasonal sellthrough markdown decisions, cancel purchase orders for replenishment of bottom-selling
products, and communicate more effectively with vendors. This translates into eliminating
the risks of stock outs and overstocking.
Merchandising analytics helps gain insights into the contribution made by different
departments, the items that are selling hot, inventory turns, in-stock percentages,
markdown percentages, the pull through data, reallocations, seasonal purchases, sell
through information, weeks of supply, etc.
10.2.3.

LOSS PREVENTION ANALYTICS

Returns and loss prevention have strong positive correlation with customer satisfaction. The
loss prevention analytics help predict return trends by product and SKUs and optimize the
inventory to take care of that. The Key Performance Indicators to loss preventions analytics
are backorders, cancellations, return rates, vendor rationalization, natural losses etc.
10.2.4.

MARKETING ANALYTICS

Marketing practices, trends and needs are ever evolving. In addition, to staying ahead of the
time, to be change leaders instead of imitators in marketing efforts, marketing analytics
hold the key. With a growing number of people going online and the growing impact of
social sites as purchase decision influencers, new marketing techniques have evolved
around cross-selling, up-selling, geography-based marketing, in-store behavior analysis,
customer micro-segmentation, sentiment analysis and enhancing multichannel consumer
experience.
The key performance indicators derived from marketing analytics are attrition rates and
fading patters of user visits to websites and fading up of websites themselves, channel share,
coupon distribution, price points etc. It also gives insights on importance attributed to
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feature in comparison to display, how seasonal events affect sales and marketing, impacts
of different kinds of promotions and discounts and the impact of ad campaigns under
affiliate marketing, PPC marketing etc.
10.2.5.

STORE OPERATIONS ANALYTICS

The objective of store operations analytics is to give store operations the right information
at the right time so that the store managers or equivalent makes right decisions.
The key performance indicators (KPIs) of the store operations are asset turnover,
competitors performance, inventory turnover, Return on Asset (ROA), sales and sales
margin, etc. The store operations analytics help understand the store performance in terms
of units per transaction, average transactions in dollar terms and in units, etc.
10.2.6.

VENDOR ANALYTICS

The objective of the vendor analytics is to improve performance across the supply chain by
analyzing vendor performance, which helps in driving improvements, and strengthening
negotiations on price and quality of products. The vendor analytics provides information on
product/category performance, profitability on different categories, products and brands.
The vendor management scorecard also evaluates the vendor performance in terms of
quality of products/service, timeliness and price effectiveness.
The type of analytical insights provided by vendor analytics include optimization of product
assortment, contribution of different categories, category scorecards, market comparisons,
pricing of different products/services, smooth seasonal changeovers, optimization of shelfspace share, SKU rationalization and vendor performance.
10.2.7.

O N L I N E P U R C H A S E F UN N E L A S S E S S M E N T

This is a subset of the marketing analytics. The purchase funnel depicts and describes the
decision-making path of a typical consumer and consists of five stages: awareness, opinion,
consideration, preference and purchase.
Most often, the customers decide to walk away without making any purchase in the
subsequent phases of the purchase funnel. In fact the balking of the customers take place in
such a manner that the customer flow in the purchase funnel is analogous to the funnel
shape. The purchase funnel assessment facilitates in identifying the reasons for balking at
each phase and iteratively rectifying it. This can result in optimizing the purchase process
and reduce the angle of the funnel and increases the visitor to customer conversion ratio.
10.2.8.

D I R E C T I N B O U N D A N D O U T BO UN D C A L L F U N N E L A S S E S S M E N T

The call centers play very important role in customer service in case of ecommerce
enterprise. Hence, optimization of call center operations needs tactical handling. The call
funnel assessment is all about proper analysis of lead sources, offers, scripts and agent
performance both individually and as a whole. This assessment helps uncover issues relating
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to the management of call data, providing usable data insight to shape both direct campaign
performance and reporting processes alike.
10.2.9.

DATA HEALTH AND RISK ASSESSMENT

The health and accuracy of the data is of utmost priority. The analysis is effective only if
done on healthy and accurate data. Inaccurate data leads to faulty analysis and hence
misleading decisions. The accuracy and health of data adhered by following certain rules for
data health maintenance. There should be continuous assessments of the risks associated
with the health of the data. Verifying the data obtained through various sources improves
the quality of the data used for similar assessments.

10.3.

D AT A M I N I NG

Data mining is the research methodology over already available voluminous, real-time data
with the goal of generating the non-obvious and useful information, which helps decision
makers to make informed decisions. The various stages of data mining mechanism include
abstractions, aggregations, summarizations, and characterizations of data which in turn are
the result of sophisticated modeling techniques applied from statistics, artificial intelligence,
database management and computer graphics. The following areas of ecommerce are
suitable candidates for data mining detailed below:

DM in Customer Profiling
DM in Web Personalization
DM in Multimedia Ecommerce
DM in Recommendation/Notification System
DM in Buyer Behavior

10.3.1.

DM I N C U S T O M E R P R O F I L I N G

The customer profiling deals with recording/capturing customers past purchases and
interests. Data mining tools used for analysis of these data and then suggesting the products
that would complement their past purchases or what interests them. It is a very powerful
mechanism to assist customers into making spontaneous buying.
10.3.2.

DM I N W E B P E R S O N A L I Z A T I O N

The DM tools in web personalization use pattern discovery techniques such as clustering,
association rule-mining and sequential pattern discovery on customers web usage data to
find out what the customer is more likely willing to purchase and then display those items
for them on their homepages. In that case, each customer will have his own custom
homepage based on his/her past purchases, browsing behavior and interests.
10.3.3.

DM I N M U L T I - M E D I A E C O M M E R C E

In case of multi-media ecommerce, data mining tools identify which are the mediums that a
customer preferably uses for purchase and then target that particular medium for that user.
It also involves identifying the effectiveness of different mediums.
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DM I N R E C O M M E N D A T I O N S /N O T I F I C A T I O N S Y S T E M

Data mining tools may help predicting events that are more likely to occur or invoked by
customers. The event prediction system is based on association rule-mining and clustering
algorithms. Data mining can facilitate predict the demand of product categories, customer
response to specific promotions and then trigger notifications to those selected few who are
likely to be attracted by the promotions.
10.3.5.

DM I N B U Y E R B E H A V I O R

The data mining in buyer behavior involves extraction of knowledge from integrated data of
purchase of past user and their path traversal patterns data from web-server log files to
predict the purchase and path traversal behavior of future users.

10.4.

D AS HBO AR DS AND R EP O R T I NG

This involves creation of custom reports on sales, profit and other financial and operational
data and displaying that on dashboard in form of tables and graphs or extracts them as
documents (word/excel/pdf). Dashboard gives the pictorial representation of the data
analysis made under web analytics or data analytics.

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Quiz
1. The process of collecting, measuring, analyzing and reporting the traffic on any website and the visitors
behavior is known as ________.
Web Analytics

Data Mining

Reporting

Data Analytics Resolution

2. Inaccurate data does not have much impact on the final analysis. State True or False
True

False

3. What type of analytics aid in understanding the customer touch points, gain insights into customer
behavior and leverage them to increase business?
Data Analytics

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CUSTOMER SERVICE

The objective of this chapter is to:

Describe different business entities that constitute Customer Service subsystem

Illustrate some examples of good and bad customer service

Implementing a business model that focuses on customer service has become essential for
the success of businesses worldwide. The key business entities of customer service
subsystem are as follows:
1.
2.
3.
4.
5.

Shopping Assistance
Profile Management
Orders Inquiry
Complaint Resolution
Payment Assistance

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Figure 12 Customer Support / Service

The above diagram depicts the different parts of a Customer Service Subsystem.

11.1.

S HO P P I NG A SS I STAN C E

An ecommerce enterprise deals in online transactions. The online shoppers must provide
users help/FAQ pages for them to find assistance with any query that they may have
regarding the website, transactions and other processes. Creation, updating, deletion and
modification of these search pages form an important process. Ecommerce sites can provide
up-sell and cross-sell opportunities that are relevant based on past data. Home page
personalization is another process that assists the customers in making their shopping
decisions in which the products on the user home page are displayed based on customer
profiling and purchase behavior patterns. Ex: An online shopper can set his preferences for
the bit rate of the music he/she likes to download and whether he makes a direct download
or downloads using download manager. Certain websites also provide the online chat
assistance to make purchases. Another process supported by ecommerce sites is
recommendation to family/friend using the social networking sites or emails.

11.2.

P R O F I LE M AN AG EM EN T

Customer self-assistance in the form of updating, retrieval and deletion of profile


information, forgot password assistance and password change process with intelligent
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password strength assistance, and forgot username assistance is another type of customer
support service provided by the websites.

11.3.

O R D E R T R AC KI NG

Order tracking provides the customer the facility to track his/her order, consignment and
retrieve past orders history. They can track the orders online or can contact the customer
service representatives for the same.

11.4.

C O M P LAIN T M AN AG EM EN T

The process of lodging complaints and tracking the status is available in different sites in
different formats. The complaint can be lodged online on the portal that triggers mail to the
customer support team. Alternatively, the customer can directly email the customer support,
or call the call center representative or do an IVR. In each case, the complaint is lodged on
the customer support module and is tracked by the customer support representative.

11.5.

P AY M E N T A SS IS T AN C E

These processes deal with providing assistance during the payment process. Such processes
include prompt for payment by gift coupons or using the balance in e-wallet if the user has
balance in e-wallet.

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In our 24 hour world, it is simply unacceptable to


have no customer service at 8pm in New York City.

Following is a horrendous customer experience came from Rent-The-Runway. A fashion website touting the
ability to get very high-end dresses for your special event, we ordered a dress for a New York City party. This
seemed not too difficult since their warehouse is based in New Jersey. Despite ordering the dress on
Thursday morning and an indication that 24 hours delivery was available, no notification or package came
from the company Thursday evening. In an effort to find out what was happening, we called the customer
service line only to find out that they are no longer available after 8pm. In our 24 hour world, it is simply
unacceptable to have no customer service at 8pm in New York City. Following up on Friday for the dress,
repeated calls were made to secure the dress, being assured for afternoon delivery. Only at 1pm in the
afternoon did someone from customer service inform us that in fact the dress would not be delivered at all
with any option for anything that evening. A completely disastrous customer service and operations
experience for a well-publicized startup.

Not all e-commerce experiences are bad. There have been several promising stories of
evolutions in e-commerce. One example comes from Warby Parker, the try-at-home eyewear company
from New York City. Not only after ordering from their user-friendly website do you get a confirmation, but
you are having repeated interactions with a dedicated customer service representative. This person is
informing you of progress in production of the glasses and following up to ensure that you have a positive
experience. Often folks have referred to their Warby Parker customer service representative as a good
friend or someone who understands them. There is no doubt that some operational issues will amount for
this startup, but with such loyalty from their customers, the experiences will be positive despite any hiccups.

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Quiz
1. Which one of these functions is not part of profile management?
Change password

Create account

Retrieve password

Update profile info

2. Returns and loss prevention have strong positive correlation with customer satisfaction. State True or False
True

False

3. Facility to track order, retrieve order history forms part of which customer support sub-system?
Shopping Assistance

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Order Tracking

Payment Assistance

Compliant Resolution

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TRUST, SAFETY

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SECURITY

The objective of this chapter is to:

Understand the significance of Trust and Safety aspects in online portals

Describe the steps Businesses take to make their portal safe and secure for users

Describe services provided by portal for managing disputes and other user grievances

Trust is a vital relationship concept between buyer and seller over the internet. Trust is as
important as the product on offer. A user will only come to buy products from a portal if
that portal offers a safe and trusted environment for carrying out transactions. An
ecommerce portal involves providing confidential information such as personal details,
credit card, and bank account details. Hence, to provide security from cyber criminals, data
loss/theft, identity theft, phishing attacks, hacking, and intrusion into privacy, strong policies
and safeguards are imperative. Ecommerce sites should provide a safe and secure shopping
experience and building a healthy trust and safety subsystem is indispensable. Following
section provides significance of Trust & Safety in Ecommerce world.

12.1.

B U Y E R P R O T E CT ION

Buyer protection refers to protecting users who buy from the ecommerce portal. This is of
more importance in case of portal, which involves third party vendors who sell their
products. Ecommerce portal hosts the resolution process for resolving disputes between the
buyer and the seller. The resolution process is the primary avenue for settling disputed
transactions. It provides following benefits:
Help buyers and sellers resolve disputes in fewer steps, and provide buyers with a
more familiar ecommerce resolution experience.
Offer an option to contact the portal if buyers and sellers cannot reach resolution
themselves.
If a user notices any charge on their credit card or bank account, which they did not
authorize, most ecommerce portal have help lines where users can report such fraud.
Management of resolution of conflict and reimbursement for the affected parties
within the ecommerce portal

12.2.

E S C R O W S E R VI C ES

Internet escrow has been around since the beginning of Internet auctions and commerce. It
helps establishment of trust in the online world. These services are significant in case of
portals, which deals with third party vendors, second hand/used goods selling, and auction
sites.
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As with traditional escrow, Internet escrow works by placing money in the control of an
independent and licensed third party in order to protect both buyer and seller in a
transaction. When both parties verify the transaction completion as per the terms set,
payment is released to the seller. If at any point, there is a dispute between the parties in
the transaction, the process moves along to dispute resolution. The outcome of the dispute
resolution process will decide what happens to money in escrow. With the growth of both
business and individual commerce on the web, traditional escrow companies are supplanted
by new technologies.

12.3.

F R AU D P R OT E C TI ON AN D P R EVEN TI ON

Fraudulent activities in ecommerce portals mainly consist of the following:

Stealing personal information of users


Stealing credit card or bank account details of users
Third party vendors who have fake information on the portals
Phishing confidential information from portals
Virus attacks and hackers

Ecommerce portals provide safeguards so that it detects such activities and prevent fraud
wherever possible. They also provide guidelines for users to help in preventing them from
directly or indirectly involving in such activities.
The trust and safety security subsystem is composed of the following level one entity:

Authentication
Authorization
Data Security
Payment Security
Protection from Cyber Crime
Trust Management

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Figure 13 Trust and Security Management

12.4.

A U T HE N T IC AT IO N

The authentication process provides information to the right user and ensures the
information is not available in the wrong hands. With captcha service used during
registration to ensure that, the response generated is human and not by any automated
malicious piece of code. The registration often uses SSL layer to protect the user profile
information. Similarly, the sign-in/login page use SSL encryption using HTTPS protocol to
secure data transaction.

12.5.

A U T HO R IZ AT IO N

The logins are usually role based and provides access to different resources, sites, pages and
modules based on the role to which the user belongs. Authorization ensures access control.
Some websites provides users access to limited features as a guest and requires user to
register to consume additional benefits/offers. Ex: In ebay.com, users cannot buy an item or

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save an item unless they register with some exception flows such as guest checkout. They
can have access to wish/watch list, personalized recommendation post sign-in.

12.6.

D AT A S E C U R I T Y

The data theft and replication can lead to disastrous consequences. With ecommerce, data
security is the key to success. So whenever data is to be transferred over network, over
external networks or any information exchange between different parties involved, it has to
be done using the SSL and TCP/IP protocol wherever possible. In addition, system encrypts
critical data like password, credit card information using Cryptography techniques and
stores the same using hashing techniques.

12.7.

P AY M E N T S E C U RI TY

Online payment requires adherence to standards such as PCI DSS (Payment Card Industry
Data Security Standard) as it deals with financial instruments. Verified and secure payment
gateway integration for payment processing is a minimal requirement for an ecommerce
site to thrive. Companies such as PayPal offer multiple solutions for merchants to integrate
on their site to improve trust and safety of payment methods used. The payment gateway
takes care of credit card validation. Validation of billing address and shipping address before
processing the payment request reduces the possibility of bad orders as well.

12.8.

P R O T E C TI ON F RO M C Y BER C R IM E

Cybercrime activities like identity theft, infusion of malicious content, phishing, hacking,
credit card thefts etc. are biggest deterrents to customers making online purchases. To
provide security against them the process of integration with Cybercrime Security Software
(e.g. McAfee Secure), Intrusion Prevention Systems is also a mandate in the ecommerce
world. The firewalls must be set up at different levels to increase protection.

12.9.

T R U S T M AN AG E M EN T

The above-mentioned security-related initiatives do help instill trust among customers. In


addition, users need to be aware of the security policies adopted by the ecommerce player
by mailing them security awareness mails and other forms of notifications on transactions.
Providing prompt fulfillment, seamless web experience with no outages with proper load
balancing mechanism can also further enhance trust on the site. Other management
techniques include regular security audits and displaying the ratings on the website and
audit reports signed by third party authorizers infuses trust among the customers.
Since the majority of the business deals with online financial transactions, trust and safety
features are imperative and all ecommerce businesses need tools or frameworks to perform
accurate risk assessment and to carry out regular audits to identify possible issues with the
systems and to take timely remedial measures.

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B E N E F I T S O F T R U ST & S AFET Y M AN A G EM EN T

Ecommerce portals have several benefits of following proper Trust & safety measures. It not
only gives it a good brand value but also helps it mitigate many operational issues faced by
online businesses. The benefits include:
Brand value protection
Reduce revenue leakage and increase trust (by reducing - Fraud, Charge backs,
Irrelevant / Malicious content)
Lower legal exposure
Optimized security spend

Quiz
1. The authentication process ensures that the access is provided to:
Correct user

Any user

Admin user

Seller

2. Which of the following options ensures access control?


Authorization

Authentication

Data Security

Payment Security

3. Trust and safety features indirectly increase the popularity of an ecommerce portal. State True or False
True

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False

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INFRASTRUCTURE

The learning objectives of this chapter are:

Provide brief overview of hosting solutions

List key parameters to be considered while evaluating a hosting provider

Describe key architecture considerations for an eCommerce website

Provide an overview of multi-tier and logical layered design

Note: Deep technology focus on hosting and architecture are beyond the scope of this course.

To wrap up foundational understanding of the ecommerce landscape, we will not move into
a brief overview of ecommerce infrastructure concepts.

13.1.

H O S TI NG S O LU T ION S

An unreliable website can be fatal to ecommerce business. A product with a great user
interface and well thought out marketing strategy bundled with unique value proposition
can be disastrous if one ignores the primary requirements behind successful ecommerce
business - a reliable hosting solution. The key parameters considered in evaluating hosting
providers are:
1. Server Hardware We host ecommerce websites on a server. Technical hardware
and software specifications of the service determine a sites performance. Any new
feature additions require thorough hardware planning and adequate resources to be
accounted and budgeted to scale up over time.
2. Reliability and Uptime A single second downtime can cause sales loss of thousands
or even millions dollars if you are running a website of the scale of eBay or Amazon.
For a website to be reliable, one needs to plan for both right hardware and proper
maintenance. Improper maintenance may deteriorate the performance of servers.
Real time log status tracking can help determining the quality of maintenance. Also,
ensure there are no chronic hardware issues.
3. Security - Maintaining the highest levels of security is critical for ecommerce
websites. The hosting provider should adhere to proper security measures.
4. Scalability - Many ecommerce websites face seasonal traffic peaking during holiday
season. The hosting solution should cater the seasonal or promotional demand and
scale to deal with sudden spikes in traffic.

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5. Pricing Pricing is critical in determining the choice of hosting solution (in house vs.
external hosting service provider). Pricing must be planned for base traffic as well as
expected growth to keep it competitive.
6. Support and Maintenance Define expected quality of customer service and
response time SLAs while signing up with an external hosting contractor. The criteria
will also apply for an internal hosting solution for an internal binding contract.
13.1.1.

TYPES OF HOSTING

Having looked at the different parameters that can help in finalizing a hosting solution
provider (external or internal) to bring the optimum performance and cater to the need of
users, there are multiple types of hosting that one can choose from as shown below*
Shared hosting

A shared web hosting service or virtual hosting service or derive host refers to a web hosting
service where many websites reside on one web server connected to the Internet. Each site
"sits" on its own partition, or section/place on the server, to keep it separate from other
sites. This is generally the most economical option for hosting, as many people share the
overall cost of server maintenance
Reseller hosting

Reseller hosting is a form of web hosting wherein the account owner has the ability to use
his/her allotted hard drive space and bandwidth to host websites on behalf of third parties.
The reseller purchases the host's services wholesale and then sells them to customers,
possibly for a profit. A certain portion of hard drive and bandwidth is allocated to the
reseller account. The reseller may rent a dedicated server from a hosting company, or resell
shared hosting services. In the latter case, the reseller is simply given the permission to sell a
certain amount of disk space and bandwidth to his own customers without renting a server
from a web hosting company he signed for a reseller account with.
The typical web hosting reseller might be a web design firm, web developer or systems
integrator who offers web hosting as an add-on service. Reseller hosting is also an
inexpensive way for web hosting entrepreneurs to start a company. Most reseller hosting
plans allow resellers to create their own service plans and choose their own pricing
structure. In many cases, resellers are able to establish their own branding via customized
control panels and servers.
Virtual Private server

Virtual private server (VPS) is a term used by Internet hosting services to refer to a virtual
machine. The term is used for emphasizing that the virtual machine, although running in
software on the same physical computer as other customers' virtual machines, is in many
respects functionally equivalent to a separate physical computer, is dedicated to the
individual customer's needs, has the privacy of a separate physical computer, and can be
configured to run server software.
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The terms virtual root server (VRS) and virtual dedicated server (VDS) are also used as
synonyms of VPS. However, the latter also occasionally indicates that the server does not
use burst/shared RAM through multiple machines and may use individual CPU cores. The
term cloud server is also used to describe the same concept, normally where such systems
can be setup and re-configured on the fly.
Dedicated Server

A dedicated hosting service, dedicated server, or managed hosting service is a type of


Internet hosting in which the client leases an entire server not shared with anyone else. This
is more flexible than shared hosting, as organizations have full control over the server(s),
including choice of operating system, hardware, etc. The hosting company as an add-on
service can usually provide server administration. In some cases, a dedicated server can
offer less overhead and a larger return on investment. Dedicated servers are most often
housed in data centers, similar to colocation facilities, providing redundant power sources
and HVAC systems. In contrast to colocation, the provider owns the server hardware and in
some cases, they will provide support for your operating system or applications.
Using a dedicated hosting service offers the benefits of high performance, security, email
stability, and control. Due to the relatively high price of dedicated hosting, it is mostly used
by websites that receive a large volume of traffic.
Colocation Centre

A colocation center or colocation center (also spelled co-location, colo, or coloc), is a type of
data center where equipment space and bandwidth are available for rental to retail
customers. Colocation facilities provide space, power, cooling, and physical security for the
server, storage, and networking equipment of other firmsand connect them to a variety of
telecommunications and network service providerswith a minimum of cost and
complexity.
Cloud hosting

Cloud computing is the delivery of computing and storage capacity as a service to a


community of end-recipients. The name comes from the use of a cloud-shaped symbol as an
abstraction for the complex infrastructure it contains in system diagrams. Cloud computing
entrusts services with a user's data, software and computation over a network.
There are three types of cloud computing:
Infrastructure as a Service (IaaS),
Platform as a Service (PaaS), and
Software as a Service (SaaS)
Using Infrastructure as a Service, users rent use of servers (as many as needed during the
rental period) provided by one or more cloud providers. Using Platform as a Service, users
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rent use of servers and the system software to use in them. Using Software as a Service,
users also rent application software and databases. The cloud providers manage the
infrastructure and platforms on which the applications run.
Cloud computing relies on sharing of resources to achieve coherence and economies of
scale similar to a utility (like the electricity grid) over a network (typically the Internet). At
the foundation, cloud computing is a broader concept of converged infrastructure and
shared services.
Example: Salesforce.com - The Sales Cloud
This application runs in the cloud, so the user can access it anywhere through an Internetenabled mobile device or a connected computer. The Sales Cloud includes a real-time sales
collaborative tool called Chatter, provides sales representatives with a complete customer
profile and account history, allows the user to manage marketing campaign spending and
performance across a variety of channels from a single application, tracks all opportunityrelated data including milestones, decision makers, customer communications, and any
other information unique to the company's sales process. Automatic email reminders can be
scheduled to keep teams up to date on the latest information.
Other activities can be done on the Salesforce cloud. These include using the Jigsaw
business data to access over 20 million complete and current business contacts from right
inside Salesforce CRM, and designing and automating any process in Salesforce CRM
Self-service

The ultimate hosting plan where the firm takes care of end-to-end hosting needs. One buys
the servers, installs and configures the software, ensures there is sufficient cooling and
power in machine room(s), and double up everything for redundancy. It includes managing
data center space,
cooling, power (with backup), bandwidth, server hardware, systems
administrator, data integrity, data backup etc.
*Reference: Wikipedia.org & about.com

13.2.

A R C HI T EC T U R E

Software application architecture is the process of defining a structured solution that meets
all of the technical and operational requirements, while optimizing common quality
attributes such as performance, security, and manageability. It involves a series of decisions
based on a wide range of factors, and each of these decisions can have considerable impact
on the quality, performance, maintainability, and overall success of the application.

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72

W H Y I S A R C H I T E C T U RE I M P O RT A N T ?

Like any other complex structure, software must be built on a solid foundation. Failing to
consider key scenarios, failing to design for common problems, or failing to appreciate the
long term consequences of key decisions can put any site or application at risk. This applies
to ecommerce websites as well. The risks exposed by poor architecture include software
that is unstable, is unable to support existing or future business requirements, or is difficult
to deploy or manage in a production environment.
Systems should be designed with consideration for the user, the system (the IT
infrastructure), and the business goals. We will cover only an overview of Multi-tier
architecture and Logical Layered Design in detail given its relevance in ecommerce without
getting into design details since this is outside the scope of this course. Please refer links
below for additional details.
13.2.2.

MULTI-TIER ARCHITECTURE

In software engineering, multi-tier architecture (often referred to as n-tier architecture) is a


clientserver architecture in which the presentation, the application processing, and the
data management are logically separate processes. For example, an application that uses
middleware to service data requests between a user and a database employs multi-tier
architecture. The most widespread use of multi-tier architecture is the three-tier
architecture. Ecommerce is based on client/ server architecture where:
a.
Client processes requesting service from server processes - First used in 1980s, the
model improves to be ecommerce usability, flexibility, interoperability and scalability.
b.
Client is defined as the requestor of a service and a server is the provider of the
service. Browser is the client and the customer, the computer that sends the HTML files is
the server. The server can also be a computer program that provides services to other
computer programs.
c.
A web server is the computer program that serves requested HTML pages or files. It
uses client/server model and http (hypertext transfer protocol). Every computer on the
internet that contains a web site must have a web server program.
13.2.3.

LOGICAL LAYERED DESIGN

Layers are concerned with the logical division of components and functionality, and do not
take into account the physical location of components. Layers can be located on different
tiers, or they may reside on the same tier. Layers help to differentiate between the different
kinds of tasks performed by the components, making it easier to create a design that
supports reusability of components. Each logical layer contains a number of discrete
component types grouped into sub layers, with each sub layer performing a specific type of
task.

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At the highest and most abstract level, the logical architecture view of any system is a set of
cooperating components grouped into layers. Figure 18 shows a simplified, high level
representation of these layers and their relationships with users, other applications that call
services implemented within the applications business layer, data sources such as relational
databases or Web services that provide access to data, and external or remote services that
are consumed by the application.

Figure 14 Logical Layered Design

Source: MSDN

Presentation layer
This layer contains the user-oriented functionality responsible for managing user interaction
with the system, and generally consists of components that provide a common bridge into
the core business logic encapsulated in the business layer.
Business layer
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This layer implements the core functionality of the system, and encapsulates the relevant
business logic. It generally consists of components, some of which may expose service
interfaces that other callers can use.
Data layer
This layer provides access to data hosted within the boundaries of the system, and data
exposed by other networked systems; perhaps accessed through services. The data layer
exposes generic interfaces that the components in the business layer can consume.
Services Layer
When an application must provide services to other applications, as well as implementing
features to support clients directly, a common approach is to use a services layer that
exposes the business functionality of the application. For examples, eBay provides listing
services for sellers to list item on eBay from third party tools that can integrate with sellers
other systems such as CRM, Accounting etc.
For more information on architecture or design level topics, refer
http://msdn.microsoft.com/en-us/library/ee658098 and http://msdn.microsoft.com/enus/library/ee658109 from MSDN Resource Library

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Quiz
1. Client side validations such as date entry format, email id validation can best be achieved at which layer in
multi-tier architecture
Presentation Layer

Business Layer

Data Layer

Service Layer

2. Client processes requesting service from server processes were first used in their ----1960s

1970s

1980s

1990s

3. An application that uses middleware to service data requests between user and database employs single
tier architecture. State True or False
True

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False

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NEXT STEPS

This course caters to anyone seeking an introduction to the online world. Following this
course, do sign up with Cognizant Academy to add the Level 0 Online CCP course into your
learning program and complete the certification to get L0 Online Certified. This is just the
beginning in laying the foundation for your online domain knowledge and we intend to
bring additional specialized courses on each of the specific topics mentioned above for
richer domain experience along with self-paced eLearning modules in the coming year.
For feedback or corrections on the above course, please write to OnlineCCP@cognizant.com

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