E-Commerce Assignment

By Rachna Sahni, 1002631

1. What is the long tail and what implications does it have for ecommerce?
The concept of the long tail has been around for many years, but it was truly brought to our attention by Chris Anderson in 2004 through his article in Wired magazine. In his book, Ebusiness, Jonathan Reynolds defines the long tail as the ability of firms to obtain significant profits from the sale of small amounts of previously hard-to-find items to many customers, rather than selling only large amounts of a small number of popular items. Essentially, this means that by locating in a niche market (tail), and supplying a rare/scarce product to customers businesses can benefit more than if they focus on selling a popular item to many customers (head) in a saturated market amongst many competing suppliers. In the Change This manifesto, The Long Tail , Chris Anderson talks about the future of Ebusiness and how companies can exploit the long tail. He suggests that online companies have the ability to store a lot more inventory than retail stores, and hence can focus on selling more niche goods, which are less readily available in stores, at lower costs. He gives the examples of Amazon, Rhapsody and Netflix, where 20-25% of the products they sell can t be found in retail stores. In the case of Google, most of their profits are made from the smaller advertisers., and eBay from the smaller sellers. The long tail gives consumers choice and variety. Advertising can now be more targeted because of a focus on long tail keywords on websites like Facebook and Google, so businesses gain access to a larger customer base within their niche. Consumers no longer have to settle for a close substitute, they can find exactly what they may be looking for. The Internet has given consumers a platform to understand each one of their options too (e.g. through recommendations and reviews). This means businesses operating online need to stay on top of their game and give excellent service to their niches to stay competitive. When using the Long Tail approach, sourcing niche products can be difficult for online businesses. The products are scarce, and may be difficult for retailers to come by locally or easily. Costs of transporting products over large distances, and borders can therefore be high. In addition, if businesses choose to sell large goods, costs of storage increase. Niche products aren t always fast moving and accurately predicting how much to store/order can be difficult for businesses in ecommerce. As wonderful as the long tail sounds, there are always two sides to a story. Alan Mitchell believes that the long tail only applies to digital products and services and is most powerful in sectors where customers seek a large variety. He also suggests that customers don t always appreciate a variety of goods. The example he uses is of baked beans, suggesting that there s no need or desire for a large variety of baked beans. Personally I feel that the long tail is a great principle, but can t be applied to every sector in the same manner as Amazon and Google. It encourages companies and online businesses to focus on differentiating themselves. Furthermore, it allows consumers the freedom to choose from all options available, as opposed to just what marketers and retailers make available to them. The application will vary across each industry, but if implemented correctly in the right market, the rewards can be endless. 1

2. What different kinds of online payment systems are available and what security issues do they have in common?
For E-commerce to function, reliable payment systems must exist. To take payments using the online payment system an Internet Merchant Service and a Payment Service Provider are needed to collect card details over the Internet. An Acquiring bank usually provides the merchant service e.g. Maestro. Financial institutions are becoming increasingly popular as Payment Service Providers, e.g. PayPal and World Pay. Some other examples of online payment systems are; App55, card, e-pay and eWAY. sQuid is a new type of contact less prepaid online card, and Oyster is another well known example. Security is a major concern when it comes to online payments. Hacking, the compromise of confidential data, fraud and phishing are the main ones . Many websites and online retailers store card details. Hackers can get access to passwords and purchase items for themselves using these details. Even large companies don t seem to be safe. Sony s PS3 hacking scandal was a clear example where customer s details were compromised twice. In 2010 the Open Security Foundation reported 555 incidents of data loss. Over 26million users were affected. Another concern is fraud. It is much easier to use another person s details to make online payments. Phishing, where consumers are misled into giving details to a fraudster is another problem. A final security problem occurs when online payments are made and credit card details are intercepted when moving between the consumer and merchants. SSL, SET and PKI are just three of many security measures to keep customers details safe. Some companies also check the level of security for websites e.g. VeriSign and TRUSTe, which reassure consumers of a websites safety via a quality seal. If customers are weary of their actions, and what they do with their details, instances of fraud and phishing can be prevented.

3. What are the economic benefits of email in businesses?

The economic benefits of email have increased significantly with time and the popularization of the Internet. In 2008 it was discovered that more than 80% of recent Internet users used it to send or receive emails. The economic benefits of this exchange are as follows. Email allows accessibility of information: Email now accessible from anywhere in the world, hence information can be accessed globally. Email is a great marketing tool: It s cheap, fast and proactive. Marketers can push information to potential customers as opposed to passively wait for them to come across their product elsewhere. Marketers can also target niches and calculate their performance using specific data (e.g. number of increased subscriptions). However in the world of increasing spam, email users have less patience and time to pay attention to these messages. Email increases efficiency: In the past communication was done via telephones or post. Post takes time to write/type, print, and package, send, deliver and then be read. Telephones require more time. Callers may be put on hold, line may be engaged or conversations are longer. Email takes a lot less time to type and sends/delivers almost immediately. Alternatively, email has also had a negative impact. It is said that interruptions from email costs the US economy $650bn a year (Reynolds, BASEX, 2007). This is mainly through the disruption to productivity. Email lowers costs: As opposed to the cost of posting letters, once granted access to the Internet, email is free. Email improves communication: Email allows both formal and informal communication. It also allows users to deliver short, to the point messages that are clear and eliminates the difficulty of understanding foreign accents. Furthermore, email allows communication between several people at once. These exchanges can be saved and referred to in the future as needed. However, if messages are irrelevant this can cause frustration and loss of productivity. People are also beginning to substitute email (and now social media) for face to face (F2F) communication. This can negatively affect emotional states and is also, debatably, creating a generation of social introverts that prefer to type than talk . Email helps bridge the gap between businesses and customers/suppliers: Everyone uses email, and usually often. Today email is even accessible on the go via mobile phones. Suppliers an d consumers all over the world are just an email away. Emails can be sent to confirm orders and shipments, to up sell or cross sell products and even to share accounts and bills.

4. What is a service oriented architecture and how might it be used in ecommerce?

The IBM website describes Service Oriented Architecture (SOA) as a business-centric IT architectural approach that supports integrating your business as linked, repeatable business tasks, or services. Essentially a SOA is built of a reusable set of components that can communicate with each other. One reason that SOA is so useful in ecommerce is that services don t need to be fixed to a specific application or network. E-businesses can therefore use SOA to flexibly plan, position and integrate services regardless of location or technology. This means employees can operate the business from anywhere and customers can access services from anywhere (enabling organizations to operate globally). SOA also functions using a one to one communication system that is initiated by consumers (Reynolds, 2010). Only one consumer may use a service at a given time and they summon the service provider. Service providers and consumers are connected via an Enterprise Service Bus (ESB), which is a channel between the providers and users of a service. Replies are sent back to consumers in a uniform manner. 6 main areas where SOA can be used within ecommerce are: payroll, monitoring, supply, order checking and tracking, receiving and stoking and counter sale services. Due to the flexibility of SOA, e-businesses can modify their processes according to evolving customer needs without changing their infrastructure. Opportunities and threats can be quickly responded to, keeping businesses strategically placed, competitive and profitable. An example of the use of SOA is with Monster, the online job site. It operat es around the globe and SOA enables employers to advertise vacancies in more than one country automatically. Job hunters can access these all over the world in real time.

References
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