INTRODUCTION TO E-COMMERCE

Definition of ecommerce
Ecommerce, also known as electronic commerce or internet commerce,
refers to the buying and selling of goods or services using the internet,
and the transfer of money and data to execute these transactions.
Ecommerce is often used to refer to the sale of physical products online,
but it can also describe any kind of commercial transaction that is
facilitated through the internet. Whereas e-business refers to all aspects
of operating an online business, ecommerce refers specifically to the
transaction of goods and services.
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Types of ecommerce Merchants
On the whole, there are two types of ecommerce merchants:
1. Those Selling physical products: This is pretty self-explanatory. It's just the
buying and selling of physical products via some kind of electronic medium. For
example, you could be selling merchandise from any of the following niches:
fashion, accessories, home ware, toys, etc.
2. Stores selling digital products (AKA downloadable products): If you've ever
purchased an online course, this falls under the category of ‘digital products.' As a
general rule, if you have to access the product via an online members’ area or if you
have to download it, it's probably a ‘digital product.'
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Advantages of ecommerce
Advantages to Organizations
1. 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.
2. E-commerce helps organizations to reduce the cost to create process, distribute,
retrieve and manage the paper based information by digitizing the information.
3. E-commerce improves the brand image of the company.
4. E-commerce helps organization to provide better customer services.
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5. E-commerce helps to simplify the business processes and makes them faster and
efficient.
6. E-commerce reduces the paper work.
7. 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
1. It provides 24x7 support. Customers can enquire about a product or service and
place orders anytime, anywhere from any location.
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2. E-commerce application provides users with more options and quicker delivery of
products.
3. E-commerce application provides users with more options to compare and select the
cheaper and better options.
4. 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.
5. E-commerce provides options of virtual auctions.
6. It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
7. E-Commerce increases the competition among organizations and as a result,
organizations provide substantial discounts to customers.
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Advantages to Society
1. Customers need not travel to shop a product, thus less traffic on road and low air
pollution.
2. E-commerce helps in reducing the cost of products, so less affluent people can
also afford the products.
3. E-commerce has enabled rural areas to access services and products, which are
otherwise not available to them.
4. E-commerce helps the government to deliver public services such as healthcare,
education, social services at a reduced cost and in an improved manner.
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E-commerce disadvantages
Technical Disadvantages
1. There can be lack of system security, reliability or standards owing to poor implementation
of e-commerce.
2. The software development industry is still evolving and keeps changing rapidly.
3. In many countries, network bandwidth might cause an issue.
4. Special types of web servers or other software might be required by the vendor, setting the
e-commerce environment apart from network servers.
5. Sometimes, it becomes difficult to integrate an e-commerce software or website with
existing applications or databases.
6. There could be software/hardware compatibility issues, as some e-commerce software may
be incompatible with some operating system or any other component.
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Non-Technical Disadvantages
1. 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.
2. 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.
3. Security/ Privacy − It is difficult to ensure the security or privacy on online transactions.
4. Lack of touch or feel of products during online shopping is a drawback.
5. E-commerce applications are still evolving and changing rapidly.
6. Internet access is still not cheaper and is inconvenient to use for many potential
customers, for example, those living in remote villages.
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Ecommerce models
E-commerce business models can generally be categorized into the following
categories.
1. Business - to - Business (B2B)
2. Business - to - Consumer (B2C)
3. Consumer - to - Consumer (C2C)
4. Consumer - to - Business (C2B)
5. Business - to - Government (B2G)
6. Government - to - Business (G2B)
7. Government - to - Citizen (G2C)
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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.
B2B identifies both the seller as well as the buyer as business entities. B2B covers a
large number of applications, which enables business to form relationships with
their distributors, re-sellers, suppliers, etc. Following are the leading items in B2B
ecommerce.
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• Electronics
• Shipping and Warehousing
• Motor Vehicles
• Petrochemicals
• Paper
• Office products
• Food
• Agriculture
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Key Technologies
Following are the key technologies used in B2B e-commerce −
1. Electronic Data Interchange (EDI) − EDI is an inter-organizational exchange of
business documents in a structured and machine process able format.
2. Internet − Internet represents the World Wide Web or the network of networks
connecting computers across the world.
3. Intranet − Intranet represents a dedicated network of computers within a single
organization.
4. Extranet − Extranet represents a network where the outside business partners, suppliers,
or customers can have a limited access to a portion of enterprise intranet/network.
5. Back-End Information System Integration − Back-end information systems are
database management systems used to manage the business data.
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Architectural Models
Following are the architectural models in B2B e-commerce −
1. Supplier Oriented marketplace − In this type of model, a common
marketplace provided by supplier is used by both individual customers as
well as business users. A supplier offers e-stores for sales promotion.
2. Buyer Oriented marketplace − In this type of model, buyer has his/her own
market place or e-market. He invites suppliers to bid on product's catalog. A
Buyer company opens a bidding site.
3. Intermediary Oriented marketplace − In this type of model, an
intermediary company runs a market place where business buyers and sellers
can transact with each other.
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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.
• In B2C model, a business website is a place where all the transactions take place directly
between a business organization and a consumer.
• In the B2C model, a consumer goes to the website, selects a catalog, orders the catalog,
and an email is sent to the business organization. After receiving the order, goods are
dispatched to the customer. Following are the key features of the B2C model −
• Heavy advertising required to attract customers.
• High investments in terms of hardware/software.
• Support or good customer care service.
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Consumer Shopping Procedure
The following are the steps used in B2C e-commerce
• A consumer: determines the requirement, Searches available items on the website
meeting the requirement, Compares similar items for price, delivery date or any
other terms, and Places the order, Pays the bill, Receives the delivered item and
review/inspect them, Consults the vendor to get after service support or returns the
product if not satisfied with the delivered product.
• Disintermediation and re-intermediation
• In traditional commerce, there are intermediating agents like wholesalers,
distributors, and retailers between the manufacturer and the consumer. In B2C
websites, a manufacturer can sell its products directly to potential consumers. This
process of removal of business layers responsible for intermediary functions is
called disintermediation.
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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. 
Consumer - to - Business
• In this model, a consumer approaches a website showing multiple business organizations
for a particular service. The consumer places an estimate of amount he/she wants to spend
for a particular service. For example, the comparison of interest rates of personal loan/car
loan provided by various banks via websites. A business organization that fulfills the
consumer's requirement within the specified budget approaches the customer and provides
its services.
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Business to government
• B2G model is a variant of B2B model. Such websites are used by governments to trade
and exchange information with various business organizations. Such websites are
accredited by the government and provide a medium to businesses to submit application
forms to the government.
Government to business
• Governments use B2G model websites to approach business organizations. Such websites
support auctions, tenders, and application submission functionalities.
Government to citizen
• Governments use G2C model websites to approach citizen in general. Such websites
support auctions of vehicles, machinery, or any other material. Such website also provides
services like registration for birth, marriage or death certificates. The main objective of
G2C websites is to reduce the average time for fulfilling citizen’s requests for various
government services.
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Electronic data interchange (EDI)
• EDI stands for Electronic Data Interchange. EDI is an electronic way of transferring
business documents in an organization internally, between its various departments or
externally with suppliers, customers, or any subsidiaries. In EDI, paper documents are
replaced with electronic documents such as word documents, spreadsheets, etc.
EDI Documents
Following are the few important documents used in EDI −
• Invoices
• Purchase orders
• Shipping Requests
• Acknowledgement
• Business Correspondence letters
• Financial information letters
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Steps in an EDI System
Following are the steps in an EDI System.
• A program generates a file that contains the processed document.
• The document is converted into an agreed standard format.
• The file containing the document is sent electronically on the network.
• The trading partner receives the file.
• An acknowledgement document is generated and sent to the originating
organization
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Advantages of an EDI System
Following are the advantages of having an EDI system.
• Reduction in data entry errors. − Chances of errors are much less while using a computer
for data entry.
• Shorter processing life cycle − Orders can be processed as soon as they are entered into the
system. It reduces the processing time of the transfer documents.
• Electronic form of data − It is quite easy to transfer or share the data, as it is present in
electronic format.
• Reduction in paperwork − As a lot of paper documents are replaced with electronic
documents, there is a huge reduction in paperwork.
• Cost Effective − As time is saved and orders are processed very effectively, EDI proves to be
highly cost effective.
• Standard Means of communication − EDI enforces standards on the content of data and its
format which leads to clearer communication.
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Ecommerce payment system
E-commerce sites use electronic payment, where electronic payment refers to
paperless monetary transactions. Electronic payment has revolutionized the business
processing by reducing the paperwork, transaction costs, and labor cost. Being user
friendly and less time-consuming than manual processing, it helps business
organization to expand its market reach/expansion. Listed below are some of the
modes of electronic payments −
• Credit Card
• Debit Card
• Smart Card
• E-Money
• Electronic Fund Transfer (EFT)
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Credit Card
Payment using credit card is one of most common mode of electronic payment. Credit
card is small plastic card with a unique number attached with an account. It has also a
magnetic strip embedded in it which is used to read credit card via card readers. When
a customer purchases a product via credit card, credit card issuer bank pays on behalf
of the customer and customer has a certain time period after which he/she can pay the
credit card bill. It is usually credit card monthly payment cycle. Following are the
actors in the credit card system.
• The card holder − Customer
• The merchant − seller of product who can accept credit card payments.
• The card issuer bank − card holder's bank
• The acquirer bank − the merchant's bank
• The card brand − for example, visa or MasterCard.