Introduction to E-Commerce Meaning of commerce

Introduction to E-Commerce
Meaning of commerce
Commerce is a branch of business. It is concerned with the exchange of goods and services & includes
all those activities which directly of indirectly facilitate that exchange.
Commerce looks after the distribution aspect of the business. Whatever is produced must be consumed.
To facilitate this consumption there must be a proper distribution channel. Here comes the need of
commerce which is concerned with the smooth buying and selling of goods and services.
Importance of commerce
 Commerce tries to satisfy increasing human needs.
 Commerce helps to increase our standard of living.
 Commerce links producers & consumers.
 Commerce generates employment opportunities.
 Commerce increase national income and wealth.
 Commerce helps in expansions of aids to trade such as banking, advertisement, insurance,
communication, transport, etc.
Electronic Network system
Electronic network or simply Internet is a network of computers (or other communication
devices). The sole purpose of the existence of electronic network is to facilitate the communication or
exchange of information or data with speed, accuracy, around larger domain and among exact addresses
guided by various communication protocols.
Most of the benefits of networking can be divided into two generic categories: connectivity and
sharing. Networks allow computers, and hence their users, to be connected together. They also allow for
the easy sharing of information and resources, and cooperation between the devices in other ways.
Advantages of Electronic Network system
 Connectivity and Communication: Networks connect computers and the users of those
computers. Individuals within a building or work group can be connected into local area
networks (LANs); LANs in distant locations can be interconnected into larger wide area networks
(WANs). Once connected, it is possible for network users to communicate with each other using
technologies such as electronic mail. This makes the transmission of business (or non-business)
information easier, more efficient and less expensive than it would be without the network.
 Data Sharing: One of the most important uses of networking is to allow the sharing of data.
Before networking was common, an accounting employee who wanted to prepare a report for her
manager would have to produce it on his PC, put it on a floppy disk, and then walk it over to the
manager, who would transfer the data to her PC's hard disk. True networking allows thousands
of employees to share data much more easily and quickly than this.
 Hardware Sharing: Networks facilitate the sharing of hardware devices. For example, instead
of giving each of 10 employees in a department an expensive color printer, one printer can be
placed on the network for everyone to share.
 Internet Access: The Internet is itself an enormous network, so whenever you access the
Internet, you are using a network. The significance of the Internet on modern society is hard to
exaggerate, especially for those of us in technical fields.
 Internet Access Sharing: Small computer networks allow multiple users to share a single
Internet connection.
 Data Security and Management: In a business environment, a network allows the
administrators to much better manage the company's critical data. Instead of having this data
spread over dozens or even hundreds of small computers in a haphazard fashion as their users
1

create it, data can be centralized on shared servers. This makes it easy for everyone to find the
data, makes it possible for the administrators to ensure that the data is regularly backed up, and
also allows for the implementation of security measures to control who can read or change
various pieces of critical information.
 Performance Enhancement and Balancing: Under some circumstances, a network can be used
to enhance the overall performance of some applications by distributing the computation tasks to
various computers on the network.
Information & communication technology (ICT)
Electronic network system merely provides the pathway via which information or data transfer
occurs among various source and destinations. To facilitate these exchanges of information or
conduct communication via networks various software, applications and electronic devices are
required. The encapsulation or use of software, applications and electronic devices with the
electronic network system that fulfills the specific requirements of the users or systems gives rise to
Information & communication technology.
E-Commerce
E-Commerce may be defined as the application of information and communication technologies
(ICT) in support of all the activities for conducting commerce. Commerce constitutes the exchange of
products and services between businesses, groups and individuals and can be seen as one of the essential
activities of any business. Electronic commerce focuses on the use of ICT to enable the external
activities and relationships of the business with individuals, groups and other businesses.
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 refers to the paperless exchange of
business information using the following ways:
 Electronic data exchange.
 Electronic mail (E-mail).
 Electronic fund transfer (EFT).
 Other network based technologies.
Features of E-Commerce
 Non-Cash Payment: E-Commerce enables the use of credit cards, debit cards, smart cards,
electronic fund transfer via bank's website, and other modes of electronics payment.
 24x7 Service availability: E-commerce automates the business of enterprises and the way they
provide services to their customers. It is available anytime, anywhere.
 Advertising/Marketing: E-commerce increases the reach of advertising of products and services
of businesses. It helps in better marketing management of products/services.
 Improved Sales: Using e-commerce, orders for the products can be generated anytime,
anywhere without any human intervention. It gives a big boost to existing sales volumes.
 Support: E-commerce provides various ways to provide pre-sales and post-sales assistance to
provide better services to customers.
 Inventory Management: E-commerce automates inventory management. Reports get generated
instantly when required. Product inventory management becomes very efficient and easy to
maintain.
 Communication improvement: E-commerce provides ways for faster, efficient, reliable
communication with customers and partners.
2

Traditional Commerce v/s E-Commerce
Advantages of E-Commerce
The advantages of e-commerce can be broadly classified into three major categories:
 Advantages to Organizations
o 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.
o E-commerce helps organizations to reduce the cost to create process, distribute, retrieve
and manage the paper based information by digitizing the information.
o E-commerce improves the brand image of the company.
o E-commerce helps organizations to provide better customer service.
o E-commerce helps to simplify the business processes and makes them faster and
efficient.
o E-commerce reduces the paper work.
o 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 Consumers
o It provides 24x7 supports. Customers can enquire about a product or service and place
orders anytime, anywhere from any location.
Traditional Commerce E-Commerce
Heavy dependency on information exchange
from person to person.
Information sharing is made easy via
electronic communication channels making a
little dependency on person to person
information exchange.
Communication/transactions are done in
synchronous way. Manual intervention is
required for each communication or
transaction.
Communication or transactions can be done in
asynchronous way. The whole process is
completely automated.
It is difficult to establish and maintain
standard practices in traditional commerce.
A uniform strategy can be easily established
and maintained in e-commerce.
Communications of business depends upon
individual skills.
In e-commerce, there is no human
intervention.
Unavailability of a uniform platform, as
traditional commerce depends heavily on
personal communication.
E-commerce websites provide the user a
platform where all the information is available
at one place.
No uniform platform for information sharing,
as it depends heavily on personal
communication.
E-commerce provides a universal platform to
support commercial/business activities across
the globe.
3

o E-commerce application provides users with more options and quicker delivery of
products.
o E-commerce application provides users with more options to compare and select the
cheaper and better options.
o 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.
o E-commerce provides options of virtual auctions.
o It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
o E-Commerce increases the competition among organizations and as a result,
organizations provide substantial discounts to customers.
 Advantages to Society
o Customers need not travel to shop a product, thus less traffic on road and low air
pollution.
o E-commerce helps in reducing the cost of products, so less affluent people can also afford
the products.
o E-commerce has enabled rural areas to access services and products, which are otherwise
not available to them.
o E-commerce helps the government to deliver public services such as healthcare,
education, social services at a reduced cost and in an improved manner.
Disadvantages of E-Commerce
The disadvantages of e-commerce can be broadly classified into two major categories:
 Technical disadvantages
o There can be lack of system security, reliability or standards owing to poor
implementation of e-commerce.
o The software development industry is still evolving and keeps changing rapidly.
o In many countries, network bandwidth might cause an issue.
o Special types of web servers or other software might be required by the vendor, setting
the e-commerce environment apart from network servers.
o Sometimes, it becomes difficult to integrate an e-commerce software or website with
existing applications or databases.
o 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
4

o 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.
o 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.
o Security/ Privacy: It is difficult to ensure the security or privacy on online transactions.
o Lack of touch or feel of products during online shopping is a drawback.
o E-commerce applications are still evolving and changing rapidly.
o Internet access is still not cheaper and is inconvenient to use for many potential
customers, for example, those living in remote villages.
Electronic commerce applications
 Direct Marketing: Direct marketing is a form of advertising which allows businesses to
communicate directly to customers through a variety of media including cell phone text
messaging, email, websites, online adverts, fliers, catalog distribution, promotional letters, etc.
Direct marketing seeks to drive a specific "call to action". For example, an advertisement may
ask the prospect to call a free phone number, mail in a response or order, or click on a link to a
website. Direct marketing removes the "middle man" from the promotion process, as a company
provides a message directly to a potential customer. Companies with smaller advertising
budgets typically use this type of marketing since they cannot afford to pay for advertisements
on television and often do not have the brand recognition of larger firms.
 Electronic malls (E-malls): Collection of individual shops under one Internet address. E.g.
shopping.yahoo.com, eshop.msn.com, etc.
 Electronic Trading (E-Trading): Method of trading securities (stocks and bonds) , foreign
exchange or financial derivatives electronically. Information technology is used to bring together
buyers and sellers through an electronic trading platform and network to create virtual market
places. Electronic trading is rapidly replacing human trading in global securities markets.
 Jobs hunting: Includes collection of job vacancies available in the market, information and
reviews of the company, etc. Jobs seekers can log-on to these sites and find the best matching
job. E.g. JobsNepal.com.
 Online Banking (virtual banking or home banking): Includes various banking activities
conducted from home, a business, or on the road instead of at a physical bank location.
Electronic banking has capabilities ranging from paying bills to securing a loan. It saves time and
is convenient for customers. E.g. HSBC internet banking service.
 Procurement and purchasing (E-Procurement): It is the activity of purchase and sale
of supplies, work, and services through the Internet as well as other information and networking
systems, such as electronic data interchange and enterprise resource planning. The e-
procurement value chain consists of indent management, e-Informing, e-Tendering, e-
Auctioning, vendor management, catalogue management, Purchase Order Integration, Order
Status, Ship Notice, e-invoicing, e-payment, and contract management.
5

 Online Auctions: Auctioning has been a way to buy and sell goods or services for thousands of
years. In an auction the seller sets a low starting price and a group of buyers bid incrementally
higher prices until a winner emerges. Today a large part of e-commerce is comprised of online
auctions, selling practically anything to a worldwide pool of buyers, 24 hours a day, 7 days a
week. There are a number of online auction sites but the largest marketplace by far is eBay,
followed distantly by Yahoo!Auctions.
 Travel: The traditional method of marketing and acquiring information about the customers in
the tourism and travel industry involved the use of travel agents. The agents would direct the
customers to the companies offering travel and tourism services for a fee. The modern
technology in the industry has phased out the role of the agents and the use of internet has
become popular. To increase profitability in the travel and tourism industry more customers have
been captured through the use of internet. E.g. Expedia.com, goibibo.com, etc.
 Electronic Publishing: Electronic publishing (also referred to as e-publishing or digital
publishing or online publishing) includes the digital publication of e-books, digital magazines,
and the development of digital libraries and catalogues. It is becoming common to distribute
books, magazines, and newspapers to consumers through tablet reading devices generated by
online vendors such as Apple's iTunes bookstore, Amazon's bookstore for Kindle, and books in
the Google Play Bookstore, ekantipur.com, etc.
 Customer Services: e-support is the electronic (usually Web-based) version of customer service
that would otherwise have required either a visit to a company or a telephone call. At its best, e-
support offers a customer efficient 24-hour-a-day service, and offers an enterprise a cost-
effective means of improving customer relations. Support options could be offered through FAQ
lists, Online documents, web forums, e-forms, e-mails, online chat, instant messaging, VoIP
software, audio / video conferencing, remote computer accessing software like teamviewer &
remote desktop, etc.
Generic framework for E-Commerce:
A framework can be defined as a structure for supporting or attaching something else,
particularly a support that is used as the foundation for something being created. Hence, an e-commerce
framework comprises the set of legal & regulatory support system and infrastructures required for
carrying out the e-commerce business. This set of infrastructure typically includes the network
requirements and the different software applications that are for e-commerce.
Building an E-Commerce application requires a framework of infrastructures and legal & regulatory
support system which sets up the stage upon which the E-commerce can be conducted. Following
infrastructures are generally required.
 Network (information super-highway) infrastructure (Telecom, Cable TV, wireless,
internet, LAN, WAN, Intranet, Extranet, etc) : The very foundation for providing the
highway system along which all ecommerce must travel.
 Multimedia content and network publishing infrastructure (HTML, JAVA, WWW, etc):
For creating content and means to communicate about it, for examples, Movies, Digital Games,
Electronic books, graphics. Concerned with basically on which format the content must made
available.
 Messaging and information distribution infrastructure (Email, Http, EDI, Chat-rooms): As
a means of sending and retrieving information. Concerned with how the (multimedia) contents
are transported on the information super-highway. I.e. via E-mail, EDI, etc.
6

 Common business services infrastructure (Security/authentication, Electronic payment,
directories, catalogs .....): For facilitating buying and selling process. It involves addressing
supporting issues such as security of information/content during its delivery, Secured electronic
payment system. For example by applying encryption and authentication methods.
 Public policy (Taxes, legal issues, privacy issues, etc): Deals with the cost for accessing
information, regulations to protect consumers from fraud, protect the right to privacy, protect
from information piracy.
 Technical standards for electronic documents, multimedia and network protocols:
Concerned with the issues of differences in standards which limit global use of the contents.
Standards are crucial in the world of e-commerce to ensure seamless and harmonious integration
across the transportation networks, access information on any type of device and operating
systems the consumer chooses. For example video conferencing would be inefficient if
manufacturers develop devices without adoption of video standards. If each manufacturer
develops their proprietary standards, there would not be interoperability among devices from
different manufacturers. Therefore video conferencing would not have been so popular.
Media convergence:
Media convergence is the blending of multiple unconnected media forms which traditionally
existed in diversified and isolated forms, into one platform for purposes of delivering a dynamic
experience. It is the merging of mass communication outlets – print, television, radio, the Internet along
with portable and interactive technologies through various digital media platforms. Media convergence
allows mass media professionals to tell stories and present information and entertainment using a variety
of media. Converged communication provides multiple tools for storytelling, allowing consumers
to select level of interactivity while self-directing content delivery.
Media convergence can be broadly categorized into multimedia convergence and cross-media
convergence.
multimedia convergence: It applies to the conversion of text, voice, data, image, graphic & video into
digital content.
cross-media convergence: It refers to the integration of various industries based on multimedia content,
i.e. entertainment, publication, communication media.
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)
Business to Business(B2B): In this form of business model a business organization 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. A company buys raw
materials or subcomponents from other companies to produce its own product.
Examples:
7

 MYOB.com – is a provider of business management solution. It helps companies manage their
finances and connect with bookkeepers and financial services professionals.
 firerock.us : manufactures pre-engineered masonry products for contractors and home builders.
 partsnow.com : Deals with printer parts.
 Medline.com : Deals with medical supplies.
 staples.com : Deals with office supplies.
 Alibaba.com : Deals with supplies of all sort of items(health, edecucational, gifts, mechineries,
electrical equipments, construction, etc.).
B2B business model
Business to Consumer(B2C): In this form of business model a business organization 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.
Examples:
 Amazon.com : Sells book to the consumers.
 Mcdonalds.com : Sells eatery items.
 Walmart.com : Sells consumer merchandise goods.
 OfficeDepot.com : deals with office supplies and furnitures.
 OverStock.com: Trades household items.
8