CHAPTER 1
INTRODUCTION TO E-COMMERCE
THEORIES & PRACTICES
Hamisa Jim
Faculty of information and communication technology
(Ext 8403)
[email protected]
OVERVIEW OF ELECTRONIC COMMERCE
• E-Commerce or Electronics Commerce is a methodology of modern business,
which addresses the need of business organizations, vendors and customers
to reduce cost and improve the quality of goods and services while
increasing the speed of delivery.
• E-commerce is abbreviated for Electronic Commerce. Its function is the
transference of financial and other commerce related information using
Information Technology and Telecommunications
MORE ON E-COMMERCE?
• E-commerce refers to the paperless exchange of business information
using the following ways:
• Electronic Data Exchange (EDI)
• Electronic Mail (e-mail)
• Electronic Bulletin Boards
• Electronic Fund Transfer (EFT)
• Other Network-based technologies
MORE TECHNOLOGY USED IN E-COMMERCE
• Mobile commerce
• Electronic funds transfer
• Supply chain management
• Internet marketing
• Online transaction processing,
• Electronic data interchange (EDI)
• Inventory management systems
• Automated data collection systems
THE INTERNET AND THE WEB
The Internet
• Worldwide network of computer networks built on common standards
• Created in late 1960s
• Services include the Web, e-mail, file transfers, and so on
• Can measure growth by number of Internet hosts with domain names
The Web
• Most popular Internet service
• Developed in early 1990s
• Provides access to Web pages
• HTML documents that may include text, graphics, animations, music, videos
• Web content has grown exponentially
• Google reports 60 trillion unique URLs
E-COMMERCE Vs E-BUSINESS
E-COMMERCE
• The process of buying, selling, or exchanging products, services, or information via computer networks
• In e-commerce, information and communications technology (ICT) is used in inter-business or inter-
organizational transactions (transactions between and among firms/organizations) and in business-to-
consumer transactions (transactions between firms/organizations and individuals).
E-BUSINESS
• A broader definition of EC that includes not just the buying and selling of goods and services, but also
servicing customers, collaborating with business partners, and conducting electronic transactions within an
organization
• In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process that a
business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-
mediated network. A more comprehensive definition of e-business is: “The transformation of an
organization’s processes to deliver additional customer value through the application of technologies,
philosophies and computing paradigm of the new economy.”
HOW CAN COMPANIES BENEFIT FROM E-COMMERCE?
The key drivers for businesses to establish E-commerce are
• Access new markets and extend service offerings to customers
• Broaden current geographical parameters to operate globally
• Reduce the cost of marketing and promotion
• Improve customer service
• Strengthen relationships with customers and suppliers
• Streamline business processes and administrative functions
MAJOR ASPECTS OF E-COMMERCE
• Customers
• Services
• Security:
Responsible credit card transactions happen under secure socket layer (SSL) that
provides an encrypted channel between the website and the payment gateway. It
is important to note Shopping cart and order forms need to operate under SSL
Ask your provider to set this up for you. Most Internet credit card fraud has been
caused by use of card numbers stored on machines accessible on the public
Internet
HOW E-COMMERCE WORKS
• The consumer moves through the internet to the merchant’s web site. From
there, he decides that he wants to purchase something, so he is moved to the
online transaction server, where all of the information he gives is encrypted.
Once he has placed his order, the information moves through a private gateway
to a Processing Network, where the issuing and acquiring banks complete or
deny the transaction. This generally takes place in no more than 5-7 seconds.
• There are many different payment systems available to accommodate the
varied processing needs of merchants, from those who have a few orders a day
to those who process thousands of transactions daily. With the addition of
Secure Socket Layer technology, E-Commerce is also a very safe way to
complete transactions.
HISTORY OF E-COMMERCE
• The history of e commerce is a history of how Information Technology has transformed
business processes. Some authors will track back the history of e commerce to 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. EDI has never reached the level of popularity of
the web-based ecommerce for several reasons:
• High cost of EDI prohibited small businesses and medium- sized companies from participating in the
electronic commerce;
• Slow development of standards hindered the growth of EDI; and
• The complexity of developing EDI applications limited its adaptation to a narrow user base.
FEATURES OF E-COMMERCE
E-Commerce provides the following features:
• Non-Cash Payment
• 24x7 Service availability
• Improved Sales
• Support
• Inventory Management
• Communication improvement
TRADITIONAL COMMERCE Vs E-COMMERCE
• Heavy dependency on information exchange • Information sharing is made easy via electronic
from person to person. communication channels making a little
• Communication/transactions are done in dependency on person to person information
synchronous way. Manual intervention is exchange.
required for each communication or transaction. • Communication or transactions can be done in
• It is difficult to establish and maintain standard asynchronous way. The whole process is completely
practices in traditional commerce. automated.
• Communications of business depends upon • A uniform strategy can be easily established and
individual skills. maintained in e-commerce.
• Unavailability of a uniform platform, as • In e-commerce, there is no human intervention.
traditional commerce depends heavily on • E-commerce websites provide the user a platform
personal communication. where all the information is available at one place.
• No uniform platform for information sharing, as • E-commerce provides a universal platform to
it depends heavily on personal communication. support commercial/business activities across the
globe.
ADVANTAGES OF E-COMMERCE
The advantages of e-commerce can
be broadly classified into three
major categories:
Advantages to Organizations
Advantages to Consumers
Advantages to Society
ADVANTAGES TO ORGANIZATIONS
• Using e-commerce, organizations can expand their market to national and international
markets with minimum capital investment. An organization can easily locate more
customers, best suppliers, and suitable business partners across the globe.
• E-commerce helps organizations to reduce the cost to create process, distribute, retrieve
and manage the paper based information by digitizing the information.
• E-commerce improves the brand image of the company.
• E-commerce helps organizations to provide better customer service.
• E-commerce helps to simplify the business processes and makes them faster and efficient.
• E-commerce reduces the paper work.
• E-commerce increases the productivity of organizations. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request
comes from a customer and it uses just-in-time manufacturing way.
ADVANTAGES TO CUSTOMERS
• It provides 24x7 support. Customers can enquire about a product or service and place orders
anytime, anywhere from any location.
• E-commerce application provides users with more options and quicker delivery of products.
• E-commerce application provides users with more options to compare and select the
cheaper and better options.
• A customer can put review comments about a product and can see what others are buying,
or see the review comments of other customers before making a final purchase.
• E-commerce provides options of virtual auctions.
• It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
• E-Commerce increases the competition among organizations and as a result, organizations
provides substantial discounts to customers.
ADVANTAGES TO SOCIETY
• Customers need not travel to shop a product, thus less traffic on road and low
air pollution.
• E-commerce helps in reducing the cost of products, so less affluent people can
also afford the products.
• E-commerce has enabled rural areas to access services and products, which are
otherwise not available to them.
DISADVANTAGES OF E-COMMERCE
The disadvantages of e-commerce can be broadly classified
into two major categories:
• Technical disadvantages
• Non-technical disadvantages
TECHNICAL DISADVANTAGES
• There can be lack of system security, reliability or standards owing to poor implementation
of e-commerce.
• The software development industry is still evolving and keeps changing rapidly.
• In many countries, network bandwidth might cause an issue.
• Special types of web servers or other software might be required by the vendor, setting
the e-commerce environment apart from network servers.
• Sometimes, it becomes difficult to integrate an e-commerce software or website with
existing applications or databases.
• There could be software/hardware compatibility issues, as some e-commerce software
may be incompatible with some operating system or any other component.
NON-TECHNICAL DISADVANTAGES
• Initial cost: The cost of creating/building an e-commerce application in-house may be very
high. There could be delays in launching an e-Commerce application due to mistakes, and
lack of experience.
• User resistance: Users may not trust the site being an unknown faceless seller. Such
mistrust makes it difficult to convince traditional users to switch from physical stores to
online/virtual stores.
• Security/ Privacy: It is difficult to ensure the security or privacy on online transactions.
• Lack of touch or feel of products during online shopping is a drawback.
• E-commerce applications are still evolving and changing rapidly.
• Internet access is still not cheaper and is inconvenient to use for many potential
customers, for example, those living in remote villages.
E-COMMERCE─BUSINESS MODELS
E-commerce business models can generally be categorized into the
following categories.
• Business - to - Business (B2B)
• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
BUSINESS - TO – BUSINESS
• A website following the B2B business
model sells its products to an intermediate
buyer who then sells the product to the
final customer. As an example, a wholesaler
places an order from a company's website
and after receiving the consignment, sells
the end-product to the final customer who
comes to buy the product at one of its
retail outlets.
THE GROWTH OF B2B E-COMMERCE IN THE U.S.
SOURCE: Based on data from U.S. Census Bureau, 2014; authors’ estimates.
BUSINESS - TO – CONSUMER
• A website following the B2C business model sells its products directly to a
customer. A customer can view the products shown on the website. The
customer can choose a product and order the same. The website will then
send a notification to the business organization via email and the organization
will dispatch the product/goods to the customer.
THE GROWTH OF B2C E-COMMERCE IN THE U.S.
SOURCE: Based on data from U.S. Census Bureau, 2014; authors’ estimates.
CONSUMER - TO – CONSUMER
• A website following the C2C business model helps consumers to sell their assets like
residential property, cars, motorcycles, etc., or rent a room by publishing their
information on the website. Website may or may not charge the consumer for its
services. Another consumer may opt to buy the product of the first customer by
viewing the post/advertisement on the website.
