The previous chapter discussed the research methods used to address the research questions. It included a detailed discussion of research strategies. This chapter employed a qualitative method to show e-commerce potential risks and how they can be avoided. The research used one of the leading companies in e-commerce (Alibaba) as a case study. The research will conduct extensive research on past literature from journals, websites and news articles to analyze the possible risks customers face when using the platform. Mainly, the section will be guided by research questions developed in chapter 1 above.
1. What are the potential risks that the technology company faces?
4.2. Security Risk
E-commerce is opened to numerous security issues that open the firm to risks that can thwart its operations. Distributed Denial of Service (DDoS) attacks can render the website of a company offline following flooding by requests from untraceable IP addresses (Balasubramanian, 2016; Abdelkader & Ahmed, 2019). Malware can infect and disrupt the normal functioning of a website or even making it to go offline. It is imperative to be aware of such possibilities to adopt appropriate measures to safeguard a company’s site. E-commerce encourages the designing of websites to enhance customer interaction and sell products and services, making it critical to ensure it remains online and safe from potential hackers.
There is a high risk of a business running a website that cannot be seen or accessed by targeted viewers who can be leads to sales in the future. E-skimming is also a common security issue that makes it dangerous to trade in the e-commerce industry. It entails stealing vital personal information from payment processes using the online platforms that can result in money laundering, as observed by Alasri and Sulaiman (2018). Malware has also disrupted networks in e-commerce, an aspect that has made it difficult for companies to do business with customers safely. It is critical to be conversant with these security threats when investing in e-commerce to adopt appropriate measures to shield the firm and customers from its adverse effects.
According to Mamtaz, Sheth, & Yang, (2014), even with the introduction Fair Play Fund, AlisourcePro, and Gold Supply services, the company has not managed to have a 100% efficient payment system. The company continues to face fraud problems. Still, with the platform, scammers can make payment frauds and delivery of defective or damaged goods.
Payment fraud happens when scammers can hack the buyer’s email accounts and change invoice details. The scammers then redirect the money to their bank accounts instead of being sent to the supplier. In most cases, the scammer is not traceable even if detected. Secondly, the delivery of substandard products is a common method of fraud. Due to the low-profit margins of the manufacturer, they are often not able to countercheck all the details. Additionally, some customers do not indicate the quality they need. They are therefore delivered products that do not meet the paid quality.
With an increase in the company’s transaction volume, the company developed an optimized approach to handle the bulk transactions. The company started with the RAC in 2009 that used the Green Plum (GP) using the ODPS. The system was developed to improve and analyses the system in real-time. Through this technique, the system can reduce payment fraud prevention of fraud. Different algorithms were used to analyses aggregated risk of an intermediary; user, account, or the device. Big data methods have been developed to identify verify fraud activities and separate good ones and bad ones. The algorithm was used to use different scenarios to produce thousands and thousands of attributes to build and deal with various fraud activities.
4.4. Logistics Problems
Logistics management is an important requirement for e-commerce companies. In 2013, the company sent 18% of its GDP on logistics. The geographic and economic requirement of logistics is the main challenge. The company serves customers in many parts of the globe, some of which with poor road networks. Some roads are not passable making the uneven roads, especially in the rural areas. Additionally, cheap transport such as railway transport mainly focuses on passenger transport rather than on freight. This problem mainly increases delivery time, while the business depends on swift deliveries to reduce time and cost.
With the company’s main target being China, more than half of the population resides in the rural areas. Additionally, small enterprises forming the larger business network are unable to locate urban cities due to high property costs. This means that the enterprises are not able to meet full economic potential by trading in rural areas. Alibaba has problems accessing businesses in rural areas due to is topology. Thus, the company had to solve the logistics problems to be able to improve its efficiency.
4.5. Customer Data and Cyber Threat
2. What are the countermeasures that can be implemented to manage potential risks?
Alibaba has dominated the e-commerce industry both locally and internationally. The company has emerged the leading e-commerce website due to improvements in its platform compared to its competitors. According to Banda, (2019), Alibaba is diversifying its selling services to the industry. The company has had a local challenge due to the existence of different regulations. Despite the company managing to reach international markets, the spread is being limited by the global challenge. Meanwhile, the company has diversified its services by introducing the computing service. This service is meant to help merchants to track their shopping habits in the bid to increase sales.
Additionally, Alibaba is facing similar challenges of any e-commerce company, however, the company has been able to outsmart most of its competitors by increasing its dominance in the Business to business platform. Mamtaz, Sheth, & Yang, (2014), provided suggestions that would improve Alibaba’s challenges. They included reducing fraud cases, improving logistics, and improving efficiency. The company would be able to break even by reducing the cost of logistics.
4.6. Reducing Fraud Cases
The company has identified ways in which it can reduce the number of scammers by using Alibaba’s protection services. The company introduced the product to educate users on how the system works when it should be used and how the users can identify scammers early before they are conned. The website protects its customers from being scammed by using two main payment platforms; Alipay and Fair Play Fund. Alipay was designed to have a secure transaction between the customer and the supplier. The platform prevents payment fraud arising from hacking.
Customers are thus able to pay from the websites escrow page, where the money is held safely until the transaction is completed and the customer has confirmed that the purchase is correct. However, the system requires people to use the system effectively by knowing the exact procedures of how the system works. Buyers are required to be aware that the order must be complete before they ‘Release Payments.’ Additionally, they need to be aware that the ‘Confirm Order’ does not mean that the money has been sent to the supplier, the money is held safely by escrow and will be sent to the supplier two weeks without clicking on the release payment button.
On the other hand, the Fair Play Fund reduces fraud by the customer receiving defect goods. It ensures that the supplier is liable to compensation of a certain amount of money if they deliver defective goods thus decreasing the risk of the buyer ending up with the wrong products. Concerning this service, certain information should be clarified. First, all the transactions are only between gold suppliers and the buyers, this means that losses from defective goods for normal suppliers cannot be compensated. Secondly, there is no limit on how much loss can be covered. Thirdly, the customer must have tried several times to complain directly to the supplier before they can be compensated for the losses. This makes it not Alibaba’s liability rather than to the supplier.
Currently, it is rather difficult to access essential information from the website. The website provides basic information about the services being offered and would require the customer to conduct further research about the supplier. The company also provides a comprehensive tutorial about how to use specific services, limitations, procedures, and limitations. Through this, investors, customers, and suppliers will be aware of faulty transactions. Updates about change in contract information are sent to the supplier and the user via email and SMS to ensure that they are aware of the changes.
Alibaba has established logistics as a major problem. The possible solution will be to have a centralized point in which products can be distributed. Jack Ma has recognized warehouse logistics as a priority. Since establishing a warehouse in the urban center will be expensive, the warehouses can be established near rural areas where many small-medium businesses are located. For instance, an area such as Northwest China would be a good location for companies working in the cement industry. Many cement companies may be interested in supplying cement to larger companies such as Shenzhen, however, it would be costly to transport it all the way. By installing, a warehouse at a location between Urumqi and Shenzhen for example will be appropriate as a drop off point at these warehouses.
However, the main problem with the introduction or warehouses is its cost. It is estimated that it would cost $2.5 trillion for the company to build the needed warehouses for the next 15 years. Additionally, despite the high cost of maintaining the financing of workers and maintaining the warehouse, the company would save a lot of time and improve delivery efficiency.
4.8. Security Risk
There has been a history of an online security breach, hackers have been costed companies and customers a lot of money. According to, Alibaba managed to intercept 2.2 billion cyber-attacks in November 2019. This made the Singles Day in China the biggest online shopping event, followed by Cyber Monday or Black Friday. The company managed to deal with the problem by employing 3,000 security specialists that deployed 1,258 algorithmic models that worked for 24 hours. The company identified 2.2 billion cyber threats such as abnormal transactions, counterfeits goods, and malicious complaints. The attacks identified that day included hacker attacks, brute force hacks, traffic attacks, and unfair scrapping by buyers. The company’s threat matrices, therefore, was much more complex than just denial of service attacks or normal cyber threats. This explains the reason for the company to employ humans and machines to deal with the unpredictable threats.
The company thereafter introduce Artificial intelligence to be able to deal with the daily cyber-attacks. The AI algorithms were implemented to detect any abnormal or irregular transactions in the system. The company introduced the algorithm known as Alibaba Intelligence, an algorithm that is superior to humans used to thwart malicious online behavior. Even though the algorithm is not 100% perfect in spotting all malicious activities, it can recognize more than 1 million cheating methods. The algorithms have been the best investment to reduce cyber threats because they have been trained to only respond to facts and not emotions, thus not biased or contextual in supposition take over.
4.9. Cyber Threat and Customer Data Matrix
The ability of the company to successfully feed off more than 300 million cyber hacks every day is based on the willingness of the company to use customer data to help the AI algorithm. The availability of data allows the system to learn more and able to solve the cyber threat. Over time, the system will be able to anticipate new threats even when the threats have not happened. This action raises an interesting question of how much the company uses personal data to hand over to the e-commerce of a secure shopping experience.
The system requires personal information such as transaction history, physical location, IP address, and shopping profile to be used by the system. An example of an e-commerce website in the United States is probably Amazon, people using the platform have a justifiable concern about the use of their data. In many aspects, the data requirement of these e-commerce websites to require personal data is oils down the question of privacy vs security. However, Alibaba views security as a much more priority than privacy especially in the wake of the use of Artificial Intelligence.
The Alibaba case study of the Single Day hacking spree involved 2.2 billion attacks also showed an important cyber security trend of big companies embracing transparency when handling cyber security initiatives. Alibaba handled the proof of transparency in demanding for better methods of handling cyber risk. Alibaba has been a good example of a company that handled the issue of cyber threats while handling privacy data accordingly. Despite how cyber attackers are, the company will be able to safeguard and defend customer data.