E-COMMERCE IN DEVELOPING COUNTRIES

: BRAZIL A CASE STUDY

Submitted by:
Jeannot Poisson
130958
BMAN13(M)PT

Table of Contents
Ecommerce .....................................................................................3
History of E-Commerce....................................................................3
Why e-Commerce for Brazil.4
Traditional and Electronics Business Transaction ............................5
Traditional Commerce vs e-Commerce............................................3
Dimensions of E-Commerce .............................................................6
Business to consumer(B2C) ..................................................7
Business to Business (B2B) ...................................................7
Business to Government(B2G) ..............................................7
Benefits of E-Commerce ...................................................................7
e-Commerce in Brazil .......................................................................8
Overview of implementation stage of e-Commerce in Brazil8
Some e-Commerce shop in Brazil ....................................................9
The impact of e-Commerce ...............................................................9
Bottlenecks of E-Commerce in Brazil................................................10
Challenges of E-Commerce in Brazil................................................10
Recommendations11
Conclusion........................................................................................12
References.13

Ecommerce refers to the buying and selling of products or services over

electronic systems through Internet and other computer networks. The most

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popular medium in which e-Commerce is conducted is the internet. It

combines a range of process such as:

Electronic Data Interchange (EDI)

Electronic mail (E-mail)

World Wide Web (WWW)

Internet Applications

Network Applications

It does not include transactions over telephone, fax or any payments made
online for transactions whose terms were negotiated offline or by physical
means.
Some common applications related to electronic commerce are the following:

Email
Enterprise content management
Instant messaging
Newsgroups
Online shopping and order tracking
Online banking
Online office suites
Domestic and international payment systems
Shopping cart software
Teleconferencing
Electronic tickets

History of E-Commerce
In 1950s companies began to use computers to store and process
internal transaction records.
By 1960s businesses that engaged large volume of transaction had
began exchanging transaction information on punched card.
In 1968 Transportation Data Co-ordination Committee (TDCC ) was
formed by some companies.
In 1979 ANSI (American National Standards Institute) chattered a new
committee to develop uniform EDI (Electron Data Interchange).
In 1979: Online shopping was invented in the UK by Michael Aldrich.
In 1982: Minitel was introduced nationwide in France by France
Telecom and used for online ordering.

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 In 1984: World's first recorded B2C online home shopper. Mrs Jane
Snowball uses the Gateshead SIS/Tesco system to buy groceries.
In 1987: Swreg begins to provide software and shareware authors
means to sell their products online through an electronic Merchant
account.
In 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb,
using a NeXT computer.
In 1992: J.H. Snider and Terra Ziporyn publish Future Shop: How New
Technologies Will Change the Way We Shop and What We Buy. St.
Martin's Press. ISBN 0312063598.
In 1994: Netscape releases the Navigator browser in October under the
code name Mozilla. Pizza Hut offers pizza ordering on its Web page.
The first online bank opens. Attempts to offer flower delivery and
magazine

subscriptions

online.

Adult

materials

also

become

commercially available, as do cars and bikes. Netscape 1.0 is

introduced in late 1994 SSL encryption that made transactions secure.
In 1995: Jeff Bezos launches Amazon.com and the first commercial-free
24 hour, internet-only radio stations, Radio HK and NetRadio start
broadcasting. Dell and Cisco begin to aggressively use Internet for
commercial transactions. eBay is founded by computer programmer
Pierre Omidyar as AuctionWeb.

Why e-Commerce for Brazil ?

With the increasing diffusion of ICTs, more specifically the Internet, the global
business community is rapidly moving towards Business-to-Business (B2B) eCommerce. The buyers/ importers gain a clear advantage when the Internet
gives them access to the global market, by which they can compare prices
across regions, find out whether prices vary by order fragmentation, get
awareness about substitute/ alternative products. Consequently, the sellers/
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14

exporters make sure that they are well portrayed in the cyber world through
websites and portals. Like buyers, sellers also benefit from increased and
more efficient access to the global market through the Internet. Brazil is
pursuing an economic policy of export-led growth. With the rising forces of
globalization, it is becoming increasingly important that the private sector,
particularly the export sectors are well prepared to meet the requirements
and expectations of the importers and also stand out in the competition
against exporters in other countries. In such a scenario, two issues are
becoming particularly important for Brazilian export sectors one, whether
businesses are automating their internal processes with the use of ICTs to
become increasingly efficient and competitive in a global context, and two,
whether businesses have effective presence and participation in the cyber
world. International organizations such as UNCTAD (United Nations Center for
Trade and Development) and WTO (World Trade Organization) have, over the
last several years, put much emphasis on the importance of e-Commerce for
developing countries. UNCTAD has special programs to facilitate developing
countries to transition into e-Commerce. The WTO has also developed rules
and guidelines for global e-Commerce transactions.

Traditional and Electronics Business Transaction

The business processes are broadly divided into five main categories namely:
Market product and services
Sell and deliver products and services
Process payments
Manage relationship
Manage the enterprise

Traditional

e-Commerce

Traditional Commerce

Commerce vs. eCommerce Items

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Sales Channel

Enterprise Internet

Consumer

Wholesaler

Manufacturer

RetailerConsumer

Sales

Hour

/Region

Entire world

Restricted area

24x7

Restricted

sales

Sales

Market space (Network)

hour
Market space (store)

place/method

Sale based on

Sale

display
Market survey and

Customer

information
acquisition

Any

time

acquisition

through internet

Digital Data without no

activity

1:1

Marketing

on

salesman

re-entry
Marketing

based

Require information
re-entry

via

bi-

directional

One way marketing

to consumer

communication
Customer

support

Real time support for

Delayed support for

customer Dissatisfaction

customer

Real time acquisition of

Dissatisfaction

customer needs

Time

different

catching

for

customer

needs

Capital

small

large

Dimensions of E-Commerce
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The three dimensions of e-commerce are:

Business-to-Consumers (B2C)
Business-to-Business (B2B)
Business-to-Government (B2G)
B2C e-commerce is unlikely to be of much use in the near future in Brazil
because of low per capita income, a weak infrastructural and legal
environment, lack of trust between business and consumers. B2C for cross
border trade is also limited by the factors suggested for the domestic front.
In addition, non-availability of international credit cards, foreign currency
remittance restrictions, delays and informal payments at customs clearance
even for small value and quantity items will discourage B2C.

Business to Consumer (B2C)

Where enterprises sell directly to the customer, often cutting out wholesalers
or retail outlets. B2C is the most commonly understood form of internet
business www.mercadolivre.com.br most successful trading has been with
standard products such as Electronics, Phones, Cameras, Motor Parts, Books,
Digital Software and Music etc.
Business to Business (B2B)
It is larger, growing faster. This includes procurements of raw materials and
supplies, liaison with contractors, sales channels, servicing customers,
collaborating with partners, integrated management with data and
knowledge.
Business to Government (B2G)
Here business trade directly with government offices and agencies for public
procurement (e.g. supplies for hospitals, school and other government
contracts.
Consumer to consumer (C2C)
Online transaction between private individuals. There are many sites offering
free classifieds, auctions, and forums where individuals can buy and sell
thanks to online payment systems like PayPal where people can send and
receive money online with ease. eBay's auction service is a great example of
where person-to-person transactions take place everyday since 1995.

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Benefits of E-Commerce
The benefits of e-Commerce are many and many. Some of them include:
24X7 operation: Round the clock operation is an expensive proposition
in the brick and mortar world while it is natural in the click and conquer
world
Global reach: The net being inherently global, reaching global
customers is relatively easy on the net compared to the world of bricks
Cost of acquiring serving and retaining customers: It is relatively
cheaper to acquire new customers over the net. Thanks to 24 X 7
operation and its goal reach. Through innovative tools of push
technology to retain customers, loyalty with minimal investments.
An extended enterprise is easy to build: In todays world every
enterprise is a part of the connected economy; as such you need to
extend your enterprise all the way to your suppliers and business
partners like distributers, retailers and ultimately you end customers.
Internet provides an effective (often less expensive) way to extend
your enterprise beyond the narrow confines of your own organization.
Tools like enterprize resource planning (ERP) ,supply chain
management (SCM) and customer relationship management (CRM),
can easily be deployed over the net permitting amazing efficiency in
time needed to market, customer loyalty, on time delivery and
eventually profitability.
Dis-intermediation: Using the net one can directly approach the
customers and suppliers, cutting down the number of level sand in the
process, cutting down the costs.
Improved customer service to your clients: It results in higher
satisfaction and more sales
Power to provide the best of both the worlds: It enhances traditional
along with internet tools.

E-Commerce in Brazil
The e-commerce transactions are one of the most potentially profitable
operations in the Internet. Brazil is, nowadays, the main Internet market in
Latin America, accounting for US$ 300 millions of a total turnover of US$ 580
millions. Despite the fact that Brazil has been responsible for more than half
the value of online retail transactions in Latin America, online retailing
represents less than 0,01% of the Brazilian global retail sales. According to a
1999 Ibopes research, 79% of those accessing the Internet have already
made use of some product or service in the net; and others 18% affirm that

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they would use. However, as shown in table 3, Brazilian Internet users do not
demonstrate much interest for buying through the Internet.
According to a 1999 Ibopes research, 79% of those accessing the Internet
have already made use of some product or service in the net; and others
18% affirm that they would use. However, as shown in table 3, Brazilian
Internet users do not demonstrate much interest for buying through the
Internet

Overview of implementation of e-Commerce in Brazil

In Brazil, implementation process is observed in small scale, but it is rapidly
evolving.
Commercial operations in the Internet were launched in the country in
1995
Approximately 6 million Brazilians have access to the Internet and,
according to an Ibope4 research, 1 million use the Internet to buy
goods and services.
The high level of automation of the Brazilian banking services, which
have improved significantly since the beginning of the 90s, facilitated
the entrance of the banks in Internet.
Approximately 4 million account owners access banks though the
Internet to perform different kind of operations, including bill payments
or money transfers.
In the private sector, online services have been diversified since 1995.
Sites about everything one can imagine, can be found.
In 2000, more than 10 million taxpayers (around 80 per cent of total)
used the Internet to present their income tax returns
The Brazilian government is making efforts to promote the information
technology industry and to stimulate the use of the Internet. In
parallel, implementation of the e-government is a priority for the
federal government 8 and, on March 14th, 2001, a committee (the Ecommerce Technical Committee) to discuss e-commerce issues was
created

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Some e-Commerce shop in Brazil

MercadoLivre.com.br
PeixeUrbano.com.br
Groupon.com.br
Americanas.com.br
Submarino.com.br
Buscape.com.br
Netshoes.com.br

The impact of e-Commerce

E-commerce can transform the way products and services are created,
sold and delivered to the customers. It can also change the way in
which the company works with its partners. The followings are well
established benefits of e-commerce:
Improved productivity: Using e-commerce, the time required to create,
transfer and process a business transaction between trading partners
is significantly reduced. Furthermore human errors like duplication of
records are largely eliminated with the reduction of data entry and reentry in the process. This improvement in speed and accuracy plus the
access to document and information will result in increase in
productivity.
Cost savings: The cost savings stem from efficient communication,
quicker turnaround and closer access to market.
Streamlined business process: Use of internet and with automation of
business process can make business more efficient
Better Customer service: Customer can enjoy the convenience of
shopping at any hour and anywhere in the world.
Opportunities for new business: Business over the internet have global
customer reach. There are endless possibilities for business to exploit
and expand their customer base.

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Bottlenecks of E-Commerce in Brazil

E-commerce in Brazil has increased very fast in the recent years, but its
participation in retailing sales is very low yet. The performance of the electronic
commerce in 1999 and 2000 has created an expectation of accelerated growth for
the next years. The change in the economy due to the Information Technology
Revolution, however, generated new questions and updated old problems. In this
section, the focus is set on the telecommunication problems. Telecommunication
services supply in Brazil can be considered a bottleneck to the expansion of the new
economy. In the nineties, the telecommunication sector was privatised by the
Brazilian government. In the privatisation process, the Brazilian market was
fragmented and each part sold to a different company. One of the motivations was
to assure the necessary investment for competition in the New Economy. Phone
lines offered, even in the richer areas, are still insufficient to satisfy the demand
and, sometimes, present a low quality, slowing down speed of access to the
Internet. High tariffs and pricing (based on the duration of the call) are also
obstacles to the expansion of the Internet in Brazil. Alternatives to telephone lines,
as cable internal, only recently became available. These are expensive services,
which are supplied only in a few areas of the country. E-commerce in Brazil: an
overview 03.29.2001 Mnica Mora 10 Despite of the fact that Brazilian Market has
been become strategic in this process in reason of its effective performance and its
potential, some problems, as these present in telecommunication, have been
slowing down the growth of Internet in Brazil.

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Challenges of E-commerce for Brazil

Network Infrastructure
o Intra-bank and Inter-bank Connectivity
Local and Global
o Bank-Client Connectivity
o Security of transaction
Banking mechanism
o Automation
o Convertibility of the Brazilian currency
o Retention quota
o International credit cards
Capacity Building: Human, Technical and Regulatory
o Quick Settlement, Online credit Information, Skilled e-Manpower,
Regulatory Framework
Investment
Legal Infrastructure
Currency Convertibility: Access to Global Finance
E- Culture

Recommendations
The assessment of the e-commerce environmental forces of Brazil leave us
some room to recommend some steps and measures, that should be
undertaken by the policy makers and business stake holders for the fullfledged implementation and development of e-commerce in Brazil. The
recommendations are:
There should be an EFT (Electronic Fund Transfer) Gateway, which will
connect all finance and banking institutions, ATMs, POS and related
websites. Such Gateway will speed up the transactions among banks,
commercial institutions. This sort of infrastructure needs to be
implemented on priority basis.
A CCG (Credit Card Gateway) should be established. A credit card
gateway is a server that makes online credit card transactions safe
(Skinner, 2005). The software protocols in the CCG use the information
provided to check for availability of funds and to make sure the credit
card is not expired, lost or stolen. This takes only seconds. When the

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transaction is approved a receipt is generated for the customer, and

the funds are transferred to the vendor's bank account through EFT.
Unlicensed radio frequencies should be made available on demand and
VSAT operating licenses should not limit the bandwidth.
To improve banking mechanism, Brazil government should compel the
banking sectors to automate their operation and going online by a
specific period. The control of foreign exchange should be liberalized
gradually, and easier issuance of International Credit Cards should be
allowed, banks should take effective steps here.
Business associations and organizations should be made aware of the
benefits of e-commerce.
Political commitment to improve governance and institutional strength
is essential for successful application of e-commerce.
Last but not least, National ICT policy, 2002 and enactment of the ICT
Act, 2005 is required to enhance the implementation of e-commerce.

CONCLUSION
A key reason why e-commerce, especially the business-to-business segment,
is growing so quickly is its significant impact on costs associated with
inventories, sales execution, procurement, intangibles like banking, and
distribution costs. If these reductions become pervasive, e-commerce has
the potential to be the application that ushers in the large productivity gains.
Achieving these gains is therefore contingent on a number of factors,
including access to e-commerce systems and the needed skills. However,
what is unique about ecommerce over the Internet and the efficiency gains is
that it promises the premium placed on openness. To reap the potential cost
savings fully, firms must be willing to open up their internal systems to
suppliers and customers. This raises policy issues concerning security and
potential anti competitive effects as firms integrate their operations more
closely.

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REFERENCES
http://www.manufacturingnews.com/news/editorials/cohen.html
http://www.med.govt.nz/templates/MultipageDocumentPage____16344.aspx
http://www.cid.harvard.edu/cidtrade/issues/ecommerce.html
http://en.wikipedia.org/wiki/Ecommerce
http://www.forbes.com/sites/ricardogeromel/2013/10/28/internet-in-brazil-key-hardfacts-you-must-know/#1622a3f2563f
http://www.mondaq.com/brazil/x/461820/Contract+Law/The+ECommerce+And+The
+Brazilian+Experience

http://unpan1.un.org/intradoc/groups/public/documents/un/unpan001191.pdf

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