UNIT 5

E-Commerce

• Give a short introduction on E commerce

E-commerce means using the Internet and the web for business transactions and/or commercial transactions, which typically involve the exchange of value (e.g., money) across organizational or individual boundaries in return for products and services. Here we focus on digitally enabled commercial transactions among organizations and individuals.

E-business applications turn into e-commerce precisely, when an exchange of value occurs. Digitally enabled transactions include all transactions mediated by digital technology and platform; that is, transactions that occur over the Internet and the web.

Hence, e-tailing is a subset of e-commerce, which encapsulates all “commerce” conducted via the Internet. It refers to that part of e-commerce that entails the sale of product merchandise and does not include sale of services, namely railway tickets, airlines tickets and job portals.

There are three types of destinations that cater to retail sales:

i. Traditional retail- brick-and-mortar

Ii. Corporatized retail- brick-and-mortar

Iii. Corporatized retail- e-tailing

1. Give a short history of E commerce

Early Development:

The history of E-commerce begins with the invention of the telephone at the end of last century. EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce if we consider ecommerce as the networking of business communities and digitalization of business information. Large organizations have been investing in development of EDI since sixties. It has not gained reasonable acceptance until eighties. The meaning of electronic commerce has changed over the last 30 years.

Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of E-commerce was the airline and railway reservation system.

Online shopping, an important component of electronic commerce was invented by Michael Aldrich in the UK in 1979. The world’s first recorded business to business was Thomson Holidays in 1981. The first recorded Business to consumer was Gateshead SIS/Tesco in 1984. During the 1980s, online shopping was also used extensively in the UK by auto manufacturers such as Ford, General Motors and Nissan. The systems used the switched public telephone network in dial-up and leased line modes.

From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. An early online information marketplace, including online consulting, was the American Information Exchange, another pre Internet online system introduced-in 1991. In 1990 Tim Berners-Lee invented the World Wide Web and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www(dot)Commercial enterprise on the Internet was strictly prohibited until 1991.

Although the Internet became popular worldwide around 1994 when the first internet online shopping started, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to associate a word “E-commerce” with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

2.     What is the meaning of E-Commerce?

The term electronic commerce or e-commerce refers to any sort of business transaction that involves the transfer of information through the internet. By definition it covers a variety of business activities which use internet as a platform for either information exchange or monetary transaction or both at times.

For example, the numbers of consumer brand retail sites like Amazon(dot)com and Flipkart(dot)com which normally provides information about products and also allows monetary transactions to happen over the internet.

On the contrary there are the auctions sites like Quickr(dot)com and Ebay(dot)com where the information about certain listed products and services are provided but the monetary transactions normally happen physically.

Apart from these two categories of e-commerce sites, there are some sites which enable businesses to exchange trading goods and also service between two or more companies. All of these forms of internet based business platforms are known as e-commerce.

Over the last decade the advent of e-commerce has actually transformed the manner in which people used internet. People now are not only just using internet for gathering information, leisure or socializing online but also at the same time they are seeking measures to conduct business.

Even popular social networking sites like Facebook(dot)com are allowing people to promote and sell products and services online and the introduction of computer and mobile based e-commerce application software like Shopify provides evidence of how e-commerce have boomed over the past 5 years.

3.     What are the various objectives of E commerce?

The various objectives of the e-commerce can be laid down as follows:

1. Development of Business-Relationship:

The business development can be done through the e-commerce being the primary and the basic object. As their direct contact in between the company and the consumer, their business relationship will be enhanced. Hence the area of the market can be increased.

2. Better-Customer Service:

As it is done round the clock, the customer will always have online help regarding the products. As all the information is furnished to the customer, it becomes easy to him to choose the best product among all other alternatives. As even the service can also be done through the net immediately, the customer service will be ballooned. By highlighting the customer service, the companies are trying to subjugate a lion-share in the market.

3. Getting more Customers:

In these days it becomes the mandate of the companies to double its customers, and this can be done by rendering the value add service and maintaining the quality. Hence, it is also one of the primary objectives of the companies which supply impetus for the robust growth in sales and overall profit.

4.     Explain E-Commerce has pertained key features which are explained as follows:

Feature # 1. E-Commerce is Technology-Enabled:

Traditional commerce is taking place since times immemorial but E-commerce is result of integration of digital technology with business processes and commercial transactions. The technological foundations of E-commerce are internet, WWW and various protocols.

Feature # 2. Technology Mediated:

In E-commerce buyers and sellers meet in cyber space rather than physical place. Hence E-commerce does not involve face to face contact.

Feature # 3. Universality:

Buying and selling take place through websites in E-Commerce. The websites can be accessed from anywhere around the globe at any time therefore it possess the feature of universality.

Feature # 4. Intercommunication:

E-commerce technology ensures two way communications between buyer and seller. On one hand by using E- commerce firms can communicate with customers through E-commerce enabled websites. On the other end, customers can also fill order forms, feedback forms and can communicate with business operating firms.

Feature # 5. Delivery of Information:

E-commerce serves as the best channel of communication. E-commerce technologies ensure speedy delivery of information at very low cost and considerably increase information density as well.

Feature # 6. Electronic Completion of Business Processes:

By using E- commerce we can perform business transactions like accounting and inventory through computers at global level.

Feature # 7. Virtual Communities:

Virtual Communities are online communities created by means such as chat rooms and specifically designed sites like, where people can interact with each other having common interest using the internet.

Feature # 8. Inter-Disciplinary in Nature:

Implementation of E-Commerce needs a lot of knowledge of managerial, technological, social and legal issues. Besides this, understanding of consumer behaviour, marketing tools and financial aspects is as crucial as designing interactive E- Commerce websites.

Feature # 9. Customization:

With the use of E-commerce technology, the world is moving from mass-production to mass-customization. Product customization ensures that goods are tailor made as per the requirements and preferences of customers.

Like Dell Computers Website www(dot)dell(dot)com enables the consumers to mention configuration of a Computer and then the product is made available and delivered as per the configuration ordered by the customer.

5.     What is the type of E commerce?

The major different types of E-Commerce are:

I. Business-to-Business (B2B);

II. Business-to-Consumer (B2C);

III. Business-to-Government (B2G);

IV. Consumer-to-Consumer (C2C);

V. Mobile Commerce (M-Commerce).

Type # I. Business to Business (B2B):

1. Business to Business or B2B refers to E-Commerce activities between businesses.

2. In E-Commerce B2B, transactions are usually carried out through Electronic Data Interchange or EDI. EDI is an automated format of exchanging information between businesses over private networks.

3. EDI is composed of standards that enable businesses’ computers to conduct transactions with each other, without human intervention.

4. For Example- Manufacturers and wholesalers are B2B companies.

Type # II. Business to Customer (B2C):

1. Business to Customer or B2C refers to E-Commerce activities that are focused on consumers rather than on businesses.

2. For instance, a book retailer would be a B2C company such as Amazon.com.

Type # III. Customer to Business (C2B):

1. Customer to Business or C2B refers to E-Commerce activities, which use reverse pricing models where the customer determines the price of the product or services.

2. For example – tele workers and online auctions are C2B processes.

Type # IV. Customer to Customer (C2C):

1. Customer to Customer or C2C refers to E-Commerce activities, which uses an auction style model.

2. Customers are also the business and C2C enables customers to directly deal with each other. An example of this is peer auction giant, E Bay.

Type # V. M-Commerce (Mobile Commerce):

1. M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology i.e., handheld devices such as cellular telephones and personal digital assistants. Japan is seen as a global leader in m-commerce.

2. As content delivery over wireless devices becomes faster, more secure and scalable, some believe that m-commerce will surpass wire line e-commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users.

6.     What are the factors of E commerce?

The study of following factors shows the need for E-Commerce in modern business era:

1. Wider Audience- The internet provides businesses, access to millions and millions of people. A 2010 survey by Internet World Stats showed there are 266,244,500 internet users in North America. On the World Wide Web, companies move beyond geographic limits to reach wider audience.

2. Cost Efficiency- At the beginning of the internet age in the 1990s, creating websites was a costly undertaking. As the years passed, building websites became less and less expensive. In fact, small businesses can now build their own sites.

3. Faster Information- The information superhighway permits speedy exchange of data across the world, which also means new information, is available faster.

4. Enhanced Service- Development of E-Commerce equipped domestic providers to offer more services to clients.

8. What are the major business application areas?

Following are the major business application areas where E-Commerce is used widely:

1. Sale, Purchase of Goods:

By using E-Commerce, consumers can buy the various products and services from the different manufacturers. Industries can purchase raw materials, components etc. using E- Commerce. Sellers can sell their products by using E-commerce.

2. Real Estate Market:

Online real estate services are provided by websites that show listing of houses, shops and flats put up for sale and rent. Online real estate sites play supporting role for property dealers.

Now builders can use virtual reality technology on their website to demonstrate three dimensional floor plans to buyers. This helps real estate companies to attract buyers. So transactions normally can be initiated online but materialize offline in a face to face contact of parties. Many websites are providing online real estate services.

3. Online Banking:

Online Banking is also known as electronic banking, Net banking, virtual banking and internet banking online banking is defined as automated delivery of new and traditional banking products and services through electronic and interactive communication channels. Customers can access online banking services by using electronic devices like personal computer, laptop, palmtop, ATM, kiosks etc.

4. Delivery of Goods:

E-Commerce allows the delivery of products. For example, the computer software is directly downloaded by the software manufacturer on computer of the customer.

5. Import and Export:

Electronic payments are playing a great role in import and export business. The internet has simplified the import and export business. By using E-commerce importers can make enquiries about the products, their manufacturers, price, quality, other terms and conditions etc.

Exporters can also make enquiries about suitable customers. Payments can be made by electronic modes including digital means like internet payment or internet money transfer.

6. Supply Chain Management:

A supply chain is a set of relationships between a number of companies who have a symbiotic relationship with each other in that one company supplies commodities or services to other companies which, in turn, supply commodities or services to other companies, and so on.

An important point about an application such as this one is that information should be kept confidential as it flows across the internet.

7. E-Tailing:

E-tailing refers to retailing over the internet. Thus an e-tailer is a B2C business that executes a transaction with the final consumer. E-tailers can be pure play businesses like amazon(dot)com or businesses that have evolved from a legacy business, Tesco(dot)com. E-tailing is a subset of e-commerce.

9.     E-Commerce – Channels: Commercial Channels and The Internet

These are of following two types:

(i) Commercial Channels:

Various companies have set up on-line information and marketing services that can be accessed by those who have signed up for the service and pay a monthly fee. These channels provide information, news, libraries, education, travel, sports and reference, entertainment, shopping services, dialogues opportunities and e-mail etc.

(ii) The Internet:

The Internet is a global web of computer networks that has made instantaneous and decentralised global communication possible. Internet usage has spread with recent development of the user-friendly World Wide Web (www) browser software such as Netscape Navigator and Microsoft Internet Explorer.

Users can surf the Internet and experience fully integrated text, graphics, images and sound. Users can send e-mail, exchange views, shop for products, and access news and business information. The users need to pay an Internet provider-to be hooked up to it through their computers.

Internet Strategies for Business and Key Success Factors in E-Commerce:

Internet users are better educated, better informed. As more and more people find their way onto the internet, the cyberspace population is becoming more mainstream and diverse.

Younger users of Internet in general place a greater value in information, entertainment, socialising etc.

Old users are more likely to use Internet for investment and more serious matters. In general, Internet users respond to messages aimed at selling, and receive information about products and services. In on-line marketing through internet, the consumers, and not the marketer, gives permission and controls the interaction.

Internet ‘search engines’ such as “Yahoo” and “Google” give consumers access to varied information sources, making them better informed and more discerning shoppers.

Consumers gain the following capabilities in the E-commerce providing information-rich regime:

1. They can get objective information for multiple brands, including costs, prices, features and quality without relying on the manufacturer or retailers.

2 They can initiate requests for advertising and information from manufacturers.

3. They can use software agents to search for and invite offers from multiple sellers. These new buyer capabilities mean that the exchange process in the age of information has become customer initiated and customer controlled.

Marketers and their representatives are held at bay till customers invite them to participate in the exchange process, customers define the rules of engagement, and insulate themselves with the help of agents and intermediaries.

Customers define what information they need, what products or services they are interested in and what prices they are willing to pay.

10. E-Commerce – 4 Major Market Segments: E-Tailing, E-Advertising and E- Marketing (With Advantages and Disadvantages)

E-commerce is a means of conducting business, where the buying or selling of goods and services or the transmitting of funds or data, occur via electronic medium. There are no physical market places and the entire process of marketing and selling of goods, takes place on-line or electronically. This means, the buyer and the seller do not often meet face to face. It is a replica of a physical market place in the virtual world.

E-commerce, also called e-trading, operates in all four major market segments – Business to Business, Business to Consumer, Consumer to Consumer and Consumer to Business. Examples of E-commerce include on-line shopping, electronic payments, on- line auctions, internet banking, on-line ticketing etc.

1. E-Tailing:

E-Tailing is the abbreviation of electronic retailing. It is the sale of goods and services through the internet. E-tailing involves business-to-business or business-to-customers transactions. It can be regarded as the internet front of any traditional retailer.

E-tailing shops believe in building strong brands. The web sites they create are easily understood by the visitors. They also provide discounts and offers to engage the customers. The pricing, in E-tailing shops, is generally lower than that of a traditional shop.

In this way the e-tailing shops lure the customers to make purchases on-line. The customers also get benefited from the fact that he/she does not need to physically visit the shop for making the purchase. The customers are free to make their own decisions regarding the purchase, at their own leisure time.

However, e-tailing shops need to have a strong distribution network in order to secure the delivery of the products. Otherwise, the purpose of the e-tailing site will be defeated. Big e-tailing sites like Ebay(dot)com and Amazon(dot)com are making great business in this country.

Advantages of E-Tailing:

1. No requirement of physical infrastructure.

2. Order completion is smoother than that of physical shops.

3. Customers might get addicted to on-line shopping, which in turn boost sales and increase revenue.

4. It is easy to review the product before, actually, purchasing it.

5. Most items available on-line are cheaper with quick and easy shipping and returns.

Disadvantages of E-Tailing:

1. Creating and maintaining an e-tailing web site is an expensive process.

2. Customers do not often get to check the actual dimensions of the products and the quality displayed there.

3. Customers may have trust issues before providing their personal details and credit card details.

2. E-Advertising:

E-Advertising is the mechanism of promoting products or services on-line. It is the process of gaining attention of the customers, through the digital media.

The main purpose of e-advertising is to reach out to a wider range of customers. It is more cost effective when compared to the traditional forms of advertising. E-advertising also enables you to target the specific customers.

On safeguard to be taken regarding E-advertising is that advertisement had to be consistently monitored and controlled because if it is done poorly, it can severely damage the image of the company.

Features:

1. E-advertising will only be published on the internet.

2. Sometimes e-advertising will provide hyperlinks to the company’s web site.

3. Can include image, texts, and even animations within the advertisements.

Types of E-Advertising:

There are various types of e-advertising:

(a) Wallpaper Advertising – It changes the background of the web site to the chosen promotion.

(b) Pop Up Advertising – It pops up a new screen upon clicking on a certain link on the web site, that it advertises the product.

(c) Floating Advertising – The floating e-advertising is a kind of a floating banner on the web site, which tempts the visitor to click on it.

(d) Ad Sense Advertising – This refers to companies’ paying major search engines (such as Google) to promote their business within the first three links that appear when a search is entered.

3. E-Marketing:

Electronic marketing (e-marketing) is also known as internet marketing, web marketing and digital marketing on on-line marketing. It is the process of marketing a product or service using the internet, e-mail and wireless media. Unlike e-advertising, e- marketing is very subtle. It is not always a direct message of persuasion but rather it is something which will educate the customers and convince them to buy the product or service.

Digital marketing techniques include Search Engine Optimization (SEO), Search Engine Marketing (SEM), content marketing, e-commerce marketing, social media marketing, display advertisement, marketing through SMS and on-hold mobile ring tones, etc.

When compared to the means of traditional marketing, e-marketing offers several advantages.

Advantages of E-Marketing:

1. E-marketing provides much better return on the investment made by the marketer.

2. It reduces the cost of marketing campaign.

3. The marketer can easily monitor and track the results of the campaign.

4. The results are often easily measurable and quickly obtained.

5. E-marketing allows marketers to create viral content, allowing viral marketing.

Disadvantages of E-Marketing:

1. Devising a strong online marketing campaign involves spending money, the cost of which is ultimately borne by the customer. The cost of website design, software, hardware, maintenance of website, online distribution cost and invested time, are also factored in, while deciding the cost of providing a service or a product online.

2. Website of the company has to be constantly updated, which required research and skills and thus timing of updates are also critical.

3. Digital marketing is not suitable for marketing of industrial goods and pharmaceutical products making it useful for only specific categories of products, namely consumer goods.

Types of E-Marketing:

There are several options through which the e-marketers can promote their product and services:

1. Article Marketing – Writing articles about products and services often helps in the process of educating the customers.

2. Affiliate Marketing – It is a kind of referral marketing where reference of any product will be provided on the other websites and when the customer buy’s the product based on the recommendation this website owner with gets commission.

3. Video Marketing – In this kind of e-marketing, a video will be shared describing the usage and benefits of the product or a service. It is often similar to television commercials.

4. Email Marketing – Direct emails are being sent to potential customers describing benefits of the product or service.

5. Blogging – Publishing blogs about similar products is also a very subtle way of marketing some business.

6. Social Media Marketing – This form of marketing means promoting company’s products and service on social media handles like Facebook, Twitter and Instagram – It is cost-effective because these platforms allow business to create profiles for free.