E-commerce

UNIT-I
Subject Code-CMA-209
Class-B.COM III(Specilisation)

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 OBJECTIVE
• This unit provides an in-depth discussion on e-
commerce .
• It includes discussion on activities,
components ,advantages and disadvantages of
e-commerce.
• It includes a detailed discussion on different
applications of e-commerce and e-business .

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 UNIT-1
Introduction to Electronic Commerce: What is
E-Commerce (Introduction and Definition),
Main activities Ecommerce, Goals of E-
Commerce, Technical Components of
Ecommerce, Functions of E-commerce, Adv /
Disadvantages of Ecommerce, Scope of E-
commerce, Electronic commerce Applications
Electronic commerce and Electronic Business

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 OUTCOMES:

1.students will understand the basic concepts of E

Commerce and their application in modern day.
2. It will enhance their understanding on how to
manage the online business smoothly and
efficiently

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E-commerce
About e-commerce
• It is commonly known as electronic marketing.
• It consist of buying and selling goods and
services over an electronic system such as the
internet.
• E-commerce is the
 purchasing ,
 selling &
 exchanging goods and services over computer
network or internet through which transactions
or terms of sale are performed electronically.
E-commerce payment systems?
Some of the modes of electronic payments are
following.
Credit Card.
Debit Card.
Smart Card.
E-Money:
Electronic Fund Transfer (EFT).
E-commerce security systems?
Security is an essential part of any transaction that
takes place over the internet. Customer will loose
his/her faith in e-business if its security is
compromised. Following are the essential
requirements for safe e-payments/transactions −
 Confidential − Information should not be accessible to
unauthorized person. It should not be intercepted
during transmission.
 Integrity − Information should not be altered during its
transmission over the network.
 Availability − Information should be available wherever
and whenever requirement within time limit specified.
Contd....
Authenticity − There should be a mechanism
to authenticate user before giving him/her
access to required information.
Encryption − Information should be encrypted
and decrypted only by authorized user.
Audit ability − Data should be recorded in
such a way that it can be audited for integrity
requirements.
Measures to ensure security?
Major security measures are following −
 Encryption − It is a very effective and practical way to
safeguard the data being transmitted over the network.
Sender of the information encrypt the data using a secret
code and specified receiver only can decrypt the data using
the same or different secret code.
 Digital Signature − Digital signature ensures the
authenticity of the information. A digital signature is a e-
signature authentic authenticated through encryption and
password.
 Security Certificates − Security certificate is unique digital
id used to verify identity of an individual website or user.
Models of e-commerce?
I. Business-to-Business (B2B)
II. Business-to-Consumer (B2C)
III. Consumer-to-Consumer (C2C)
IV. Consumer-to-Business (C2B)
 Process of e-commerce
STEP-1: A consumer uses Web browser to connect
to the home page of a merchant's Web site on
the Internet.
STEP-2: The consumer browses the catalogue of
products featured on the site and selects items to
purchase. The selected items are placed in the
electronic equivalent of a shopping cart.
STEP-3: When the consumer is ready to complete
the purchase of selected items, she provides a
bill-to and ship-to address for purchase and
delivery.
Contd....
STEP-4: When the credit card number is
validated and the order is completed at the
Commerce Server site, the merchant's site
displays a receipt confirming the customer's
purchase.
STEP-5: The Commerce Server site then
forwards the order to a Processing Network
for payment processing and fulfilment.
B2B e-commerce?
• B2B e-commerce is simply defined as ecommerce
between companies. About 80% of e-commerce is of
this type.
• Example:
Intel selling microprocessor to Dell.
B2C e-commerce?
• Business-to-consumer e-commerce, or commerce
between companies and consumers, involves
customers gathering information; purchasing
physical goods or receiving products over an
electronic network.
• Example:
Dell selling me a laptop.
C2C e-commerce?
• Consumer-to-consumer e-commerce or C2C is simply
commerce between private individuals or
consumers.
• Example:
Me selling a car to my neighbor.
C2B e-commerce?
• In this model, a consumer approaches website
showing multiple business organizations for a
particular service.
• Consumer places an estimate of amount he/she
wants to spend for a particular service.
• For example,
Comparison of interest rates of personal loan/ car
loan provided by various banks via website.
Business organization who fulfils the consumer's
requirement within specified budget approaches
the customer and provides its services.
Advantages of e-commerce
• Faster buying/selling procedure, as well as easy to find
products.
• Buying/selling 24/7.
• More reach to customers, there is no theoretical
geographic limitations.
• Low operational costs and better quality of services.
• Easy to start and manage a business.
• Customers can easily select products from different
providers without moving around physically.
Disadvantages of e-commerce
• Unable to examine products personally.
• Not everyone is connected to the Internet.
• There is the possibility of credit card number
theft.
• Mechanical failures can cause unpredictable
effects on the total processes.
Value Chains in e-commerce?
• Value chain is the process involved in
converting a product from raw material to its
finished, saleable and its consumable stage.
• Sum total of the supply and distribution chain.
• Covers all the areas directly and indirectly
involved in doing the business of value
creation from the stage of procuring the basic
raw material all the way to delivery of the
finished product to the customer.
 Processing

Supply Chain/ Distribution

Input/ Raw Chain/
data Output/ Final
product
General components of Value Chain
I. Primary Activities.
II. Secondary Activities.

I. Primary activities: Operations in the business

organisation where most of the value creation efforts are
made or done. Example: Operations, Service, Inbound
and outbound logistics etc.
II. Secondary activities: Support activities that are
undertaken to support the value creation activities both
at the level of supply and distribution chain or the entire
value chain system. Example: Human Resource
Management, Infrastructure, Equipment etc.
Functions of e-commerce
 These are the typical functions of an e-commerce
system available both on back office and front
office::
• Registration
• Basket
• Payment
• Product management
• Orders management
• VAT and shipping costs
• Registration
In order to make a purchase, users must
register with the site, providing all the
information needed for shipping and billing.
The data will be stored on a database and will
be available from the back office.
• Basket:
The basket is a tool that, like a shopping basket, allows
users to select the products they want and then go to
the checkout for payment.
Managing the basket means:
 summarising user requests within the possibilities
offered by the catalogue.
 checking the basket and possibly cancel/modify the
items placed in it.
 starting the payment process for the selected products.
• Payment:
The payment system is a mechanism that facilitates
dialogue between the parties involved in financial
transactions: the bank, the store and you with your credit
card.
After filling in the order, the customer enters his/her credit
card number that travels along a channel solely accessible
to the bank. The bank checks the customer’s account and
decides whether or not to authorise the payment.
The operation takes a few moments. If approved, the bank
performs the transaction and transfers the payment to the
account. If denied the user is notified that the transaction
cannot be completed and his order is cancelled.
• Product Management:
This is the main part of the e-commerce
system and provides all the features required
for product placement, order fulfilment, etc..,
key to the management of online sales.
This makes it possible to define a product via a set of standard fields:
– product code
– category
– subcategory
– product name
– description
– image, zoom
– sizes available
– price in euros
– 'pieces' in stock
The products can be searched by category and subcategory.
The back-office feature that allows you to associate related products to
further stimulate online sales is very useful.
• Order Management:
The order is the card that summarises all the delivery and order
information to enable correct delivery. It includes:
– list of products purchased
– user information
– details of place of delivery
– delivery time information
– payment information
Managing the order means crossing the information on the
registration database, the data in the basket, the delivery
information and verification data relating to the payment credit
rating.
All this information is summarised in a form identified by a number
or reference code (order number).
 Listing orders and customer details: From the
back office of the site you can search and sort
orders by:
 Customer
 order status
 Date
 Payment
 Orders may be printed for attachment to the
shipment (packing list).
• VAT and shipping costs:
In addition to the cost of products purchased, the system
manages the VAT and the shipping charges.
The e-commerce module is able to manage VAT rates in
countries within and outside the EU.
Shipping costs both fixed and variable based on the weight
and volume of the shipment.
• Discounts
Discounts and promotions are managed for a single product
or product category.
This second phase of the site requires a detailed analysis of
your current storage and order management systems with
which it will be necessary to integrate.
Opportunities
E-commerce is suitable to apply in following types of
commercial transactions:
• Property transaction
• Sale, purchase of goods
• Delivery of goods
• Electronic payments
• Banking and money transfer
• Import and export
• Transportation
• International finance
• Tourism and hotel industry
• Payments of taxes
• Payments of services
• Social services
• Entertainment
• National security
• Property transaction: Dealers, builders,
housing finance companies make use of E-
commerce facilities and internet sites to offer
their products.
• Sale, purchase of goods- consumers can buy
products, industries can procure raw
materials, and manufacturer and sellers can
sell their products by using E-commerce.
• Delivery of goods- Direct E-commerce permits
the delivery of products. For example, the
computer software is directly downloaded by
the software manufacturer on computer of
the customer.
• Electronic payments- Payments can be made
by utilizing E-commerce devices like credit
card, debit card and electronic transfer etc.
• Banking and money transfer- Banking services
are also carried out by E-commerce.
• Import and export- electronic payments have
played significant role in export import
business. The internet has further simplified
the export import business.
• Transportation- Transportation is crucial for
handling and delivery of raw materials and
other products. It can be arranged and
monitored through internet facilities.
• International finance- financial transactions
involves both the persons offering financial
services as well as those requiring it. loans, bills,
discounting, lease transaction can be easily
carried out by E-commerce devices.
• Tourism and hotel industry- it is possible to know
about different tourist places and
accommodations throughout the world by surfing
on the net. Customer can book their tickets,
accommodation in hotels.
• Payments of taxes- it is possible to make
payments for taxes electronically.
• Payments of services- payment for different
services like telephone, electricity, water,
insurance, fee of children can be paid using E-
commerce facilities.
• Social services- E-commerce can be utilized for
following services-
 Online education and distant learning training
 Online diagnosis and treatment
 Sharing research
• Entertainment- entertainment has its use in
following areas-
 Ticketing for theatres, cinema halls, concerts
 Online games and refresher courses.
• National security- E-commerce is also utilized
by defence forces for secret information and
coded message.
E-TRANSACTION
• Electronic commerce means commercial
transactions with anyone, anywhere, anytime
i.e., seven days a week 24 hours a day.
• Sale & purchase of goods or services, whether
between businesses, households, individuals,
government etc.
• It emphasizes new business opportunities that
result in greater efficiency and more effective
transactions.
 Drivers of E-commerce- there are several
drivers of E-commerce. And these are:
• Increase in access and connectivity of IT- the
exponential increase in the number of PC and
laptops, Smartphone etc. has led the growth
of E-commerce.
• Anywhere, anytime, anyone- today’s E-
commerce is available to anyone, anytime
anywhere in the world. 24*7.
• Organizational change- modern organizations are
changed structures their working differs. These
changes have played a major role in growth of E-
commerce.
• Increasing demand for customized products and
services- todays customers are collectively
demanding higher quality and better
performance, including a customized way of
producing, delivering and paying for goods and
services. It has put lot of pressure on firms to use
e-commerce.
• Increasing emphasis on reducing operating
costs and increasing profits margins- global
competition and the proliferation of products
and services worldwide have added unusual
pressure to keep a close watch on operating
cost and maximize profit margins. E-
commerce addresses these concerns quickly,
effectively and at low costs.
Technical components of e-
commerce
• The hardware and software must be selected
in such a way that they can fulfil the needs of
the E-commerce application.
I. Hardware:
• A Web server hardware platform is one of the
major components of the Ecommerce
infrastructure on which the performance of
the whole E-commerce application depends.
• While selecting Web server hardware, the
software that will run on the server of the E-
commerce transactions to be processed must
be considered.
• The amount of the storage capacity and the
computing power required depend on the
volume of the E-commerce transaction to be
processed.
• If the exact requirements are not known in
advance, then the hardware configuration
should be highly scalable so that they can be
upgraded to meet the requirements.
II. Software:
Software is the main component that
implements the E-commerce services and
functionality. Software for E-commerce can be
categorized in the following two types:
a) Web server software.
b) E-commerce software.
a) Web server software:
• Web server software is required in addition to the Web
server operating system software.
• It is used to implement some extra functionality such as
security and identification and retrieval and sending of
Web pages.
• Web server software creates a Web log file that identifies
things such as the URL of the visitor, the length of the visit
and the search engine and the key words used to find the
site.
• Web server software includes website development tools
such as HTML editor and Web page upload support.
b)
E-commerce software:
With the growth of E-commerce, many applications have
emerged— for example, the electronic shopping cart that tracks
the items selected for purchase and their costs. A typical E-
commerce software must support the following processes:
 Catalog management.
 Product configuration.
 Shopping cart.
 Transaction processing.
 Web traffic data analysis.
Catalog management:
It is required to deliver the customized
content to the screen or the GUI used by the
customer.
The software used for catalog management
combines the different product data formats
into a standard format for viewing,
aggregating and interacting catalog data into a
central store.
Product configuration:
The Web-based product configuration
software allows the user to build the product
to their specifications without the
intervention of the salespeople.
For example, Dell Computers and CISCO
systems use configuration software to sell
build-to-order and network processes to their
customers over the Internet.
Shopping cart
A model known as shopping cart is used by
Ecommerce sites to track the items that are
selected for purchase; the shopping cart
allows customers to view all the items
selected by them.
The customers can add new items and remove
the previously selected items from the
shopping cart.
Transaction processing:
E-commerce transaction processing is used to
process the data received from the shopping
cart and to calculate the total cost of the
purchase.
Web traffic data analysis:
It is required to analyze all the data captured
in the Web log file. The analysis is essential to
improve the Website performance.
Other key components are:
 Product Information.
 Search.
 User Details/ Profile management.
 Order management.
 Payment.
 Guarantee/ Warranty management.
 Offers.
 Privacy Policy.
 Security.
 Product Information:
Product is the sellable unit in ecommerce system
(we can sell services as well, but then they will be
considered as product for that particular system).
We need to have as much information as possible
about product so that it can be shown to
customer, who can then make an informed
decision on purchase.
Information should be provided in industry
accepted standards, so that it can be compared
easily by customer.
Search:
This is most used feature of any ecommerce
website.
Rather then looking for a product in catalogs,
customer will prefer searching for it by
keywords.
A good search functionality will make sure he
gets what he is looking for (or better).
User Details/ Profile management: An e-
commerce site might allow a user to shop
without login to system.
But at times it is desirable to let user create a
profile, so that he does not need to enter his
details (address, name, phone number etc)
everytime he makes a purchase.
Order management: How can customer order
for a product or a service? Can he order
online, send emails, call up customer care or
go to nearby store.
Payment: What are different modes of
payment customer can use- Credit card, debit
card, net banking, cash on delivery etc.
Usually a third party payment gateway can be
used to keep focus on business requirements.
 Guarantee/ Warranty management: A product
might have guarantee or warranty associated,
which needs to be honored by the business to
make sure customer is coming back to it.
 Offers: Businesses need to come up with
frequent offers/ discounts/ loyalty programs to
boost up sales. Business also uses techniques like
cross sell or up sell to increase profit and help
customer make good choices.
 Privacy Policy: A business might need to collect
some information from customer like name,
address, age (sometimes more private info) etc.
What will happen to info collected from customer
(kept private)? Also will cookies be used by the
site?
 Security: Customer might be sharing sensitive
information online, so system needs to use https/
SSL for data collection. Additional requirement
will be to secure data already collected by use of
authorization and firewalls.
 FAQ
• Define e-commerce and its types ?
• What are the technical components of e-
commerce?
• What are the advantages and disadvantages
of e-commerce?
• Explain the role of basket in e-commerce.
• Describe the various myths about e-
commerce.
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 References
• Schneider, E-Commerce, Cengage Learning,
New Delhi.
• Pee Losuin & A Murphy, Electronic Commerce
Jaico Pub

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