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Basics of E-commerce ________________________________________________________ Enterprises across the globe have experienced significant changes in their business information system. system. The emergence emergence of the Internet Internet through through out the world has contributed a variety variety medium in doing business as well as as people lifestyle. lifestyle. In fact, Internet is the essential prerequisite for the existence of E-commerce. E-commerce is a revolution in business practices, it is changing the way of doing business.
Meaning of E-commerce Electronic Commerce or e-commerce has been defined as the ability to perform transactions involving the exchange of goods or services between two or more parties using electronic tools and techniques. E-commerce is using the power of computers, the Internet and shared software to send and receive product specifications and drawings; bids, purchase orders and invoices; and any other type of data that needs to be communicated to customers, suppliers, employees or the public. E-commerce is made possible through the expanded technologies of the Internet, the World Wide Web (www) and Value Added Networks (VAN). E-commerce is paperless paperless exchange of business information using key standards and technologies through a) b) c) d) e)
Electronic Data Exchange (EDI), Electronic Mail ( e-mail) Electronic Bulletin Boards Electronic Fund Transfers (EFT), and Other Network-based technologies.
Thus, e-commerce is a methodology of modern business which addresses the need of business organisations, vendors and customers to reduce cost and improve the quality of goods and services with increasing the speed of delivery.
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E-business vs. E-commerce Commerce Commerce refers refers to purchase and sale of goods or services and includes the activities of transport, transport, banking, insurance, advertisement, advertisement, packaging and warehousing which facilitates the the exchange (buying and and selling ) of goods and services. Business is an economic activity activity which includes includes production or procurement procurement of goods and services, sale or exchange of goods and services and other activities such as sales, marketing, delivery, branding and research. E-commerce involves E-commerce involves buying and selling of goods or services over the Internet through World Wide Web (www), (www), while E-business include E-business include e-commerce and other functions like production, product development, accounting and finance, inventory management, marketing, branding, delivery, etc. The following are the major distinctions between e-business and e-commerce : No.
Feature
1.
Meaning
e-Business E-business refers to the processes or areas involved in the running and operation of an organisation electronically.
e-Commerce E-commerce is the exchange of merchandise on a large scale between different persons using Internet.
e-Business is the application of e-Commerce focuses on the information and communication use of information and technologies in support of all the communication technologies activities of business. It includes to facilitate the exchange of not only information exchanges products and services related to buying and selling but between businesses, groups also servicing customers and and individuals and is one of collaborating with business the essential activities of any partners, distributors and business. suppliers. 2.
Activities
E-business includes direct business activities such as marketing, sales and human resource management and indirect activities such as business process re-engineering and change management, which affects the efficiency and
E-commerce incorporates a whole socio-economic, information technology and commercial infrastructure at the macro-environmental level. All these elements interact together to provide
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E-business vs. E-commerce Commerce Commerce refers refers to purchase and sale of goods or services and includes the activities of transport, transport, banking, insurance, advertisement, advertisement, packaging and warehousing which facilitates the the exchange (buying and and selling ) of goods and services. Business is an economic activity activity which includes includes production or procurement procurement of goods and services, sale or exchange of goods and services and other activities such as sales, marketing, delivery, branding and research. E-commerce involves E-commerce involves buying and selling of goods or services over the Internet through World Wide Web (www), (www), while E-business include E-business include e-commerce and other functions like production, product development, accounting and finance, inventory management, marketing, branding, delivery, etc. The following are the major distinctions between e-business and e-commerce : No.
Feature
1.
Meaning
e-Business E-business refers to the processes or areas involved in the running and operation of an organisation electronically.
e-Commerce E-commerce is the exchange of merchandise on a large scale between different persons using Internet.
e-Business is the application of e-Commerce focuses on the information and communication use of information and technologies in support of all the communication technologies activities of business. It includes to facilitate the exchange of not only information exchanges products and services related to buying and selling but between businesses, groups also servicing customers and and individuals and is one of collaborating with business the essential activities of any partners, distributors and business. suppliers. 2.
Activities
E-business includes direct business activities such as marketing, sales and human resource management and indirect activities such as business process re-engineering and change management, which affects the efficiency and
E-commerce incorporates a whole socio-economic, information technology and commercial infrastructure at the macro-environmental level. All these elements interact together to provide
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integration of business processes and activities.
the fundamentals commerce.
of
e-
3.
Internal vs. E-business includes e-commerce E-commerce covers external External as well as internal processes of processes that touch production, inventory control, customers, suppliers and product development, finance, external partners including human resources, branding and purchase of raw materials, research. sales, marketing, order taking, delivery, customer e-Business methods enable services, etc. companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers.
4.
Scope
E-business is a more generic term and it is more than just ecommerce. e-Business refers to more strategic focus with an emphasis on entire value-chain – electronic purchasing and supply chain management, processing orders electronically, handling customer services and cooperating with business partners.
E-commerce is a subset of an overall e-business strategy. e-Commerce adds to revenue streams and enhance relationships with clients and partners and to improve efficiency.
5.
Medium of Information
E-business can be conducted using the Web, the Internet, Intranets, Extranets or some combination of these.
E-commerce is conducted via computer networks including the Internet.
Features of e-commerce
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Electronic Commerce means better business communication and data interchange information is essential for every and any business. E-commerce is fast, cost efficient, time saving and easy to use, i.e. economic tangibility and good business generation. E-commerce provides the following features : No.
Features of e-commerce
1.
Online Facility
E-commerce provides the capability of buying and selling products and information on the internet and other on-line services.
2.
Communication
E-commerce is the delivery of information through computer networks or any other electronic mode of communication.
3.
4.
Automation
of
E-commerce is the application of technology towards the
Business Process
automation of business transactions and work flow.
Service Perspective
E-commerce addresses the desire of firms, consumers and management to cut service cost while improving the quality of goods or services and increasing the speed of service delivery.
5.
Ubiquity
Internet or Web technology is available every where: at work, at home and elsewhere via mobile devices, anytime.
Ubiquity means appearance
The market place is created beyond traditional boundaries of local
everywhere
area to national geographic locations. Shopping can take place anywhere. Customer convenience is enhanced and shopping costs are reduced.
6.
Global Reach
The technology reaches across national boundaries around the earth. The market space
has widened across international
boundaries thereby accessing potentially billions of consumers and businesses worldwide. 7.
Universal
There is one set of technology standards, namely internet
Standards
standards. There is one set of technical media standards across the globe.
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8.
Richness
Video, audio and text marketing messages are integrated into a single marketing message and consuming experience.
9.
Interactivity
The technology works through interaction with the users. Consumers are engaged in a dialog that makes the consumer a coparticipant in the process of delivering goods to the market.
10.
Information
The technology reduces information costs and raises quality.
Density
Information processing, storage and communication costs drop dramatically, which accuracy and timeliness improve greatly. Information becomes plentiful, cheap and accurate.
11.
Personalization
/
Customization
The technology allows personalized messages to be delivered to individuals as well as groups.
Personalisation of marketing
messages and customization of products and services are based on individual characteristics. 12.
Non-Cash Payment
E-Commerce enables use of credit cards, debit cards, smart cards, electronic fund transfer (EFT)
via bank’s
website and other
modes of electronics payment.
IMPORTANCE (Benefits / Advantages) of E-Commerce or E-business E-commerce is the new, profitable way to conduct business which goes beyond the simple movement of information and expands electronic transactions from point-of-sale requirements, determination and production scheduling, right through to invoicing, payment and receipt. E-commerce has created new phenomena in our lifestyle especially in shopping activities. The global nature of the technology, low cost, opportunity to reach hundreds of millions of people, interactive nature, variety of possibilities, and resourcefulness and growth of the supporting infrastructure (especially the
Web ) result in many potential benefits to
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organisations, individuals and the society. Thus, E-commerce provides a lot of benefits to the Organisations, Customers and the Society, discussed as follows :
Advantages of E-commerce
No. A.
Benefits to Organisations
1.
Expanded
Using e-commerce, organisations can expand their market to
Market
national
and
international
markets
with
minimum
capital
investment. An organisation can easily locate more customers, best suppliers and suitable business partners across the globe. 2.
Reduced Cost
E-commerce helps organisation to reduce the cost to create process, distribute, retrieve and manage the paper based information by digitizing the information.
3.
Reduced
E-commerce allows reduced inventories and overheads by
Inventory
facilitating “pull” type supply-chain-management – which means collecting the customer order and then delivering through just-intime (JIT) manufacturing which reduces storage costs.
4.
Time Saving
E-commerce reduces the time between the outlay of capital and the receipt of revenue through sale of products and services.
5.
Low Cost of
The internet is much cheaper than value added networks, and it is
Communication
also cheaper to send a fax or e-mail via the Internet than direct dialling.
6.
Better Marketing
E-commerce increases the reach of advertising of products and services of businesses. It helps in better marketing management of products or services.
7.
Improved Sales
Using e-commerce, orders for the products can be generated any time, anywhere without any human intervention.
By this way,
dependencies to buy a product reduce at large and sales increase.
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8.
Improved
Electronic business results in better transactions, wide market
Transactions
coverage by offering the benefits of speed, convenience, being cost effective, timeliness, high profit margins, instant customer relations, no loss of customers, impact and control.
9.
Better Decisions
Application of electronic operations to commercial activities means better business solutions.
It greatly facilitates a firm to make
better decisions, sales forecasts, prices and other valuable information can be sent and received instantaneously. 10.
Competitive
E-commerce enables firms to have an edge over competitors by
Advantage
informing, following up and requesting information faster and easier to customers.
11.
Greater Control
E-commerce helps to maintain greater control at work, home or while travelling, communicating with any business partner or firm, anywhere instantly.
12.
Co-ordinates
The sales people spend a lot of their time on the roads, relying
Sales Efforts
heavily on telephone calls for contact with their head officers and customers.
The electronic business eliminates telephone tag,
sends and receives messages at convenience, links sales team members to gather and effecting sales without delays. 13.
Effectiveness and
E-commerce increases the efficiency and effectiveness of public
Efficiency
relation programmes, broadcast press releases, financial updates and other corporate communications. Copy reviews and approvals are expedited by circulating instant messages to key internal and external contacts.
14.
Improved
E-commerce increases responsiveness of the company about price
Responsiveness
change and marketing strategies as and when required, and ensures customer satisfaction. The requests for information and follow-up-reports can be effected with greater efficiency using instant messages.
15.
Planning and
Executive management meetings, seminars, workshops, symposia
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Execution of
and conventions take a great deal of time and effort to manage. In
Meetings
an electronic business environment, video-conferences, document conference, computer-based conference, which offer companies the flexibility of both electronic and paper distribution, can make these jobs easier and more effective.
16.
Digitisation
of
Products
E-commerce has facilitated the digitisation in case of software and music or video products, which can be downloaded or e-mailed directly to customers via the internet in digital or electronic format.
B.
Benefits to CONSUMERS
1.
Easy Accessibility
E-commerce enables customers to shop or do other transactions 24 hours a day, all year around, from almost any location.
2.
Wide Choice
E-commerce provides customer with more choices, they can select from many vendors and from many more products.
3.
Cost Saving
E-commerce provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.
4.
Fast Delivery
E-commerce allows quick delivery of digitised products.
5.
Fast Information
Customers can receive relevant and detailed information in seconds, rather than days or weeks.
6.
Wide Interaction
E-commerce allows customers to interact with other customers in electronic communities and exchange ideas as well as share experiences.
7.
More Discounts
E-commerce facilitates competition, which results in substantial discounts.
C.
Benefits to SOCIETY
1.
Less Congestion
E-commerce enables more individuals to work at home and to do
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less travelling for shopping, resulting in less traffic on roads and lower air pollution. 2.
3.
Increased
E-commerce allows some merchandise to be sold at lowest prices,
Standard of
so less affluent people can buy more and increase their standard of
Living
living.
Access to Rural
E-commerce has enabled people in developing countries and rural
Areas
areas to enjoy products, services and information that otherwise are not available to them.
4.
Better Utility
E-commerce facilitates delivery of public services such as health
Services
care, education and distribution of government social services at a reduced cost and improved quality. Health-care services can reach patients in rural areas.
Thus, e-commerce is a new way of doing business or an additional method of doing business with new generation technology. The customers can get the right product at the right time and for the right price, companies can set new standards in efficiency and profitability.
LIMITATIONS / Disadvantages of E-Commerce The limitations of e-commerce can be grouped into two categories – Technical and Nontechnical, discussed as follows : No.
LIMITATIONS of e-commerce
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A.
TECHNICAL
Limitations to the Organisation
1.
Uncertain
There is lack of sufficient system security, reliability, standards and
System
communication protocols. There are numerous reports of websites and databases being hacked into, and security holes in software. Protocols
are set of rules and regulations for communication and
transfer of data between two computers in a network. 2.
Rapid Change
The technology is changing rapidly, so there is always a feeling of trying to ‘catch up’ and not be left behind.
3.
4.
Specialised
Vendors may need special Web servers and other infrastructures in
Servers
addition to the network servers.
Incompatible
It is difficult to integrate the Internet and E-commerce software
Software
with some existing applications and databases. Further, some e-commerce software might not fit with some hardware or may be incompatible with some operating systems or other components.
5.
Pressure
to
Innovate
The firms innovate and develop business models to exploit the new opportunities that can be copied over the Internet which is detrimental
to
the
organisation
and
curtails
longer-term
competitive advantage. 6.
Price wars
E-commerce has increased competition from both national and international competitors which leads to price wars and subsequent unsustainable losses for the organisation.
7.
Internet Outrage
The network may not be reliable because of failures in networks and the Net itself. Reliability is a major issue in net business that needs to be attended.
8.
Absence of Cyber
Advertising on the Net tends to focus on e-commerce rather than
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Brand Image
on brands found in the real world which proves to be a deterrent in ensuring consumer loyalty.
9.
Preference
to
Foreign Sites
On-line shoppers in India do not prefer Indian websites to a large extent and prefer US and other foreign websites. Because they provide better selection, prices, stock, quality products, shipping payment process security, customer service and wide variety of sites among other things.
B.
Limitations to Consumers
1.
Initial
Capital
Cost
Computing equipment is needed for individuals to participate in the new ‘digital’ economy, which means an initial capital cost to customers.
2.
Updation Cost
The technology is updated regularly to be compatible with the changing requirement of the Internet, websites and applications, which requires further costs.
3.
4.
Absence of
Customers are unable to touch and feel goods being sold on-line or
Personal Feeling
gauge voices and reactions of human beings.
Lack of
The lack of awareness of the technology and its potential benefits
Awareness
as well as lack of interest and willingness to make a paradigm shift are responsible for the poor growth of e -commerce. Most of the business people are unsure of the quality and delivery schedule, physical delivery of goods and mode of payment. It is difficult to change the minds and attitudes of the merchants in tune with the emerging Information Technology ( IT ). A
new
awareness is needed as well as optimism and strategic business projections are required. 5.
Lack of
The consumers still are hesitant in buying through the Net. Lack of
Confidence
quality products, timely delivery of products, lack of security are the potential reasons for not developing e-commerce.
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6.
User Resistance
User may not trust the site being unknown faceless seller. Such mistrust makes it difficult to make user switch from physical stores to online stores.
7.
Security
or
Privacy
The shoppers are still sceptical about safety and have not been quick to trust sending personal information such as credit card numbers or address over the Net. It is difficult to ensure security or privacy on on-line transactions.
8.
Dissatisfaction
A key source of dissatisfaction is that the advertised products or services are not available.
The options of feedback and not
receiving suggestions are also reasons for annoyance. Many online consumers want more detailed information on their purchases but are not available.
C.
Limitations to SOCIETY
1.
Breakdown
2.
in
As people become more used to interacting electronically there
Human
could be an erosion of personal, cultural and social skills which is
Interaction
possible only through face to face interaction.
Social Division
There is an increase in the social divide between technical haves and have-nots, so people who do not have technical skills become unable to secure better-paid jobs which is dangerous for social stability.
3.
Lack of Skills and
The use of the Net for trade requires a complex introduction of
Expertise
servers, browser software and knowledge of web design, hosting, promotion and many more skills. There is lack of skilled and trained personnel which impedes the growth of e-commerce.
4.
Wasted
As new technology dates quickly, it becomes difficult to dispose of
Resources
all the old computers, keyboards, monitors, speakers and other hardware or software.
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5.
Absence of Tax
There is no fixed location for the Internet, no emphasis on national
Laws
boundaries, and messages travel across the boundaries of several countries globally. But a person’s location and identity is necessary for tax purposes. Since these two are difficult, the Net transactions pose a big problem for taxation.
6.
Infant Stage
The IT function has not grown beyond the marketing department and credit cards, merchant accounts, digital signatures and prompt payment and one has to realize that the e-commerce role is more about harnessing technological resources to deliver profits to the Net users. Only a few big house have gone on-line to explore the potentials of e-commerce.
E-Commerce Framework __________________________________________ E-commerce Framework refers to the structure and pillars required to implement the ecommerce transactions and models. The structure and pillars are the important components of the e-commerce framework which are required to carry on e-commerce transactions efficiently, effectively and smoothly.
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Thus, the e-commerce framework identifies the different Components of business and technology that interact together to make up e-commerce. The Components of E-commerce Framework are discussed as below : E-commerce Framework Components ______________________________________________ Core Components
Supporting Pillars
*
Network Infrastructure
*
Public Policy
*
Contents Development and
*
Technical Standards
Network Publishing
*
Legal Framework
*
Distribution Infrastructure
*
Financial Framework
*
Business Services Infrastructure
1.
Network Infrastructure
Network Infrastructure is called as “Information Superhighway”. It is the path through which actual information flows and moves between sender and receiver. Information Superhighway consists of telecommunication networks, cables and direct broadcast satellite networks, and computer networks like Internet, intranets and local area networks. All these modes of communication are interconnected. They are connected with routers, switches, bridges, gateways, etc. which are devices to connect similar and different network. All the information flow on these lines and through these devices and reach the desired destinations.
2.
Multimedia Contents Development and Network Publishing
The Network Information enables the transmission and publishing of Information (content) through the World Wide Web (www). multimedia content
Web
stores and transports electronic data and
to create product information (content) in the form of Hyper Text
Markup Language (HTML) and a means to publish it in a distribution center (network or web server). This infrastructure consists of following three components :
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i)
Multimedia Publishing Infrastructure to create multimedia contents for business applications
ii)
Multimedia Storage Infrastructure to provide for efficient and organised storage facilities for efficient and quick retrieval and deployment of multimedia contents
iii)
Content Deployment Infrastructure which helps to search and retrieve multimedia contents from their storage locations.
3.
Messaging and Information Distribution Infrastructure
The information content transferred over the network consists of text, numbers, pictures, audio and video. Once Information contents have been created and stored on a server, translators interpret and transform data formats and
messages are carried across via
satellite networks. Messaging and information distribution infrastructure are like engines and fuel, which transport the data around the network by EDI, e-mail, Hyper Text Transfer Protocol.
4.
Business Services Infrastructure
Business services infrastructure includes all vendors and other parties engaged in the business activities which facilitate e-commerce transactions in any fashion. Such business activities include : i)
Providing hardware and software solutions to counter security threats. This includes development of encryption technology and standards.
ii)
Development of secure Electronic Payments Funds Transfer systems.
iii)
Developing standards and formats for content creation, distribution and deployment and development of protocols for data transmission, and other such in frastructure
iv)
Convergence of content, transmission technologies and information access devices.
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The business services are necessary for facilitating the buying, selling and other transactions safely and reliably through Smart cards, Authentication, Electronic payment, Directories or catalogues.
5.
Public Policy
Public Policy related to e-commerce includes such issues as universal access, privacy, information pricing, electronic contracts and the terms and conditions that govern ecommerce. Public Policy is ensured through Standards and Legal systems which govern the way in which personal information is acquired, disclosed and used on-line.
6.
Technical Standards and Network Protocols
Technical standards dictate the format of information publishing tools, user interfaces and transport.
They include transmission protocols, multimedia formats, interoperability,
integration of hardware and software, documentation specifications and acceptability of standards. These standards are essential to ensure compatibility across the entire network of world.
7.
Legal Framework
A Legal Framework includes Regulations for e-commerce transactions and ensuring legal systems compatible to e-commerce. A legal framework for e-commerce in India has been provided by the Information Technology Act, 2000, whose main objectives are : i)
To make possible e-commerce transactions – both B2B (business to business) and
B2C ii)
(business to consumer) To make possible e-governance transactions – both G2C (government to citizen) and C2G (citizen to government)
iii)
To curb cyber crime and regulate the Internet
iv)
To provide Security and Authentication of Electronic Funds Transfers through digital signatures.
A
proper legal framework ensures privacy, security, protection and confidentiality in e-
commerce transactions.
8.
Financial Framework
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E-commerce requires financial and banking framework that allows for electronic payments and transfers quickly, effectively and safely. This would include requirements for certification of documents, electronic signatures, confidentiality and privacy. Thus, the interaction of people and organisations to manage and coordinate the applications, infrastructures and businesses are all necessary to make e-commerce work.
This is
particularly useful framework for managers to understand the importance of technology and business, both with the organisation and external to it, in the planning and development of any e-commerce or e-business solution.
Pre-requisites of E-commerce Framework The e-commerce framework consists of the basic and supportive infrastructure and business applications as well as the basic issues that are needed to develop the e-commerce business model. There are certain basic considerations (essentials) required while developing a generic framework for e-commerce, discussed as below :
No. 1.
Essentials for E-commerce Framework Interoperability
E-commerce must be based on a common set of services and standards that
ensure
interoperability.
Preferably, service
providers and application designers will be able to use these services and standards as building blocks that can be combined, enhanced and customized.
2.
Flexibility
In fast changing technological environment, the e-commerce framework should be able to acknowledge and accept such advancements e.g. in the field of electronic payment systems. It should have ability to publish, reuse and update information to meet changing business conditions.
3.
Integration
New services and business application areas are emerging, so ecommerce framework should be able to accommodate future enhancements and trends in the infrastructure, industry and applications.
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4.
Media
E-commerce transactions will involve all kinds of legacy and newly
Convergence
developed devices and media, and networks over which these are delivered.
The e-commerce framework must be able to
accommodate these technologies, devices and their convergence, needed to reach and sustain the mass market.
5.
Personalization
E-commerce should permit the ability to target, format, and automatically adapt content for specific users to meet their preferences, interests and business requirements.
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Customization
Customization means changing the delivered product or service based on a user’s preferences or prior behaviour. Many of the products are designed or tailored by customers according to their own tastes, preferences and fashions. For example, customers can customize their own clothing designs.
This capability adds a
customer-driven activity – a design phase – to the purchase cycle.
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Adaption
to
Legacy Systems
Many ‘legacy systems’ as paper checks, settlement and payment systems and EDI VANs exist in the e-commerce. A successful infrastructure must let the user transfer easily and transparently between these older systems and newer, all electronic systems, applications and processes.
A framework developed with all these considerations will form the strongest basis for a powerful and useful e-Commerce Infrastructure.
E-Commerce Process e-Commerce process consists of the following activities or stages (steps) :
Steps 1.
E-commerce Activity or Stage Advertising
The first step in e-commerce includes searching and browsing
and Shopping
electronic directories and catalogues on a network by both sellers
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and buyers. The buyers send electronic requests for proposal and sellers respond with various offers by advertising their products and services. However, the advertising and shopping activity is costly and time consuming
in
developing,
maintaining
and
finding
relevant
information, products and services, given the plenty of available information. 2.
Negotiating
Buyers and sellers negotiate the terms of a transaction, i.e. the terms of exchange and payment. These terms may cover delivery, refund policies, arranging for credit, instalment payments, copyright or license agreements, usage rights, distribution rights, etc.
These
terms can be standardized for routine commodity use, or customized to suit specific customers. 3.
Ordering
The buyers and sellers enter into a contractual agreement (order) that sets forth the quantity, price and other terms of the transaction. The order may be verbal, in writing, or electronic.
4.
Billing
Once seller has delivered goods or services, a bill is sent to the buyer which includes remittance information that should accompany the payment.
5.
Payment and
The buyers sends some form of electronic payment usually along
Settlement
with remittance information to the seller. Settlement occurs when the payment and remittance information are analysed by the seller or the seller’s agent and accepted as valid.
6.
Distribution
The seller arranges for delivery of the goods and services to the
and Receipt
buyer, and the buyer provides the seller with proof of receipt of delivery. Policies regarding customer satisfaction and return should be negotiated prior to this activity and made part of the contract between buyer and seller.
7.
Accounting
Both buyer and seller must reconcile all electronic transactions in the accounts receivable and accounts payable, inventory information and
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accounting systems. Account and Management Information System (MIS) records must also be updated. 8.
Customer
Customer service and feedback consists of :
Service and Feedback
a)
providing the buyer with timely information as to the progress of the transaction;
b)
handling any mistakes, disputes or complaints regarding product quality, delivery or payment, returns and refunds, etc.; and
c)
providing expert advice and assistance in the use of the products and services.
Web based business ( e-Commerce / e-Business ) vs. Land based business (Traditional Commerce ) Web-based-business, called as e-Commerce, is the ability to perform transactions involving the exchange of goods or services between two or more parties using electronic tools and techniques. Land-based-business is the traditional business of buying and selling of goods or services, where sellers open retail stores at different locations to offer their products and services and buyers visit these places to buy goods or avail services to satisfy their needs, also called as ‘Bricks and Mortar’ business. The following are the major differences between Traditional Commerce and E-commerce :
No.
Basis of
Traditional Commerce
e-Commerce
It requires more space, proper
It requires less space and can be
location and is formed as an
started from any location (even
Enterprise requiring high initial
from
Distinction 1.
Formation
home)
by
any
person
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2.
3.
Operating Cost
set-up cost.
requiring less set-up cost.
It involves high operating costs
It involves low operating costs of
of rent, staff, transport, etc.
internet connection, etc.
Organisational
It
Structure
organisational
has
vertical
or
tall
structure
because of chain of command.
It
has
horizontal
or
flat
organisational structure because command and communication are direct.
4.
Physical
It requires physical presence.
It does not require physical
presence 5.
presence.
Nature of
It involves hierarchical flow of
It involves non-hierarchical flow
Communication
communication i.e. from Top-
of communication.
to-Middle-to-Lower
level
management to Operatives. 6.
Means of
Manual intervention is required
Electronic systems automatically
Communication
for
handle
each
communication
or
transaction.
when
communication
to to
pass required
person or do the transactions. 7.
8.
Business Cycle
Location
The business process cycle is
The business process cycle is
Long.
Short.
It is located locally at the places
It is located Globally world-wide
where sources of raw material
through Internet Networks.
are easily available or near the markets for the products. 9.
Nature of
It involves indirect contact with
It involves direct contact with the
Contacts
the suppliers and the customers
suppliers and the customers.
through intermediaries. 10.
Personal Touch
It facilitates more opportunity
It lacks opportunity for inter-
for inter-personal touch which
personal touch.
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gives personal feeling. 11.
Pre-sampling of
It provides many opportunities
It
Products
for physical pre-sampling of the
physical
products.
products only in case of books,
provides
opportunities
pre-sampling
of
for the
journals, videos, etc. 12.
Human Capital
It
requires
semi-skilled
and
unskilled workers.
It
requires
technically
professionally
and
qualified
personnel. 13.
14.
15.
Transaction Risk
Standards
It involves low transaction risk
It involves high transaction risk
because parties have direct
because parties don’t have direct
personal interaction.
personal interaction.
It is difficult to establish and
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HISTORY and GROWTH of e-Commerce ________________________________________________________ E-commerce, a new means to carrying out business transactions through Internet environment has been contributing to the effective socio-economic growth. E-commerce as an essential part of the “digital economy” plays a key role to open out door to the 21 st Century, the new era a knowledge-based economy.
HISTORY of e-Commerce
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E-commerce means the process of execution of commercial transactions electronically with the help of the leading technologies such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange business information and to electronic transactions. The ability to use these technologies appeared in the late 1970s and allowed business companies and organisations to send commercial documentation electronically. This included ATM (automated teller machines) and Credit Card transactions as well as the ability to do billing and invoicing through electronic methods. During the periods of late 1970s to 1980s the people started to use credit cards on a regular basis and that set the foundation for e-commerce. In 1984, EDI was standardized through formulating standards ASC x12. This guaranteed that companies would be able to complete transactions with one another reliably. In 1990, Tim Berners-Lee wrote the first web browser, World Wide Web (www), using a NeXT Computer. This was the time when average person started using Internet. E-commerce became possible in 1991 when the Internet was opened to commercial use. Since that date thousands of businesses have taken up residence at web-sites. In 1992, Compu-serve offered on-line retail products to its customers. This gave people the first chance to buy things on their computer. In 1994, Netscape arrived and providing users a simple browser to surf the Internet and a safe on-line transaction technology called Secure Sockets Layer (SSL). In 1995, two biggest names in e-commerce were launched which are Amazon.com and eBay.com. Amazon.com, Inc. is one of the most famous e-commerce companies and is located in Seattle, Washington (USA). It was founded in 1995 by Jeff Bezos and is one of the first American e-commerce companies to sell products over the Internet. Although the Internet began to advance in popularity among the general public in 1994, it took approximately four years to develop the security protocols ( for example, HTTP and DSL ) which allowed rapid access and a persistent connection to the Internet. In 1998, the Digital Subscriber Line (DSL) provided faster, always-on-internet service to subscriber across California (USA). This prompted people to spent more time and money online. In 1999, retail spending over the Internet reached $ 20 billion ( $ 2000 crores), according to Business.com.
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In 2000, a great number of business companies in the United States and Western Europe represented their services in the WWW. At this time the meaning of the word ecommerce was changed. People began to define the term e-commerce as the process of purchasing of available goods and services over the Internet using secure connections and electronic payment services. However, the dot.com business collapsed in 2000 and led to unfortunate results and many of e-commerce companies disappeared, the “brick and mortar” retailers recognised the advantages of e-commerce and began to add such capabilities to their web sites, for example, after the on-line grocery store Webvan came to ruin, two supermarket chains, Albertsons and Safeway, began to use e-commerce to enable their customers to buy groceries on-line. By the end of 2001, the largest form of e-commerce, Business-To-Business (B2B) model, had around $ 700 billion in transactions. After the dot.com collapse, Amazon had lost its position as a successful business model, however, in 2003, the company made its first annual profit which was the first step to the further development. At the outset, Amazon.com was considered as an on-line bookstore, but in time it extended a variety of goods by adding electronics, software, DVDs, video games, music CDs, apparel, footwear, health products, etc. The original name of the company was Cadabra.com, but shortly after it became popular in the Internet, it was renamed as “Amazon” after the world’s most voluminous river. Although the Amazon’s main headquarters is located in the USA, it has set up websites in other countries such as the United Kingdom (UK), Canada, France, Germany, Japan and China. The company supports and operates retail web-sites for many famous businesses, including Marks & Spencer, Lacoste, the NBA, Bebe Stores, Target, etc. In 2008, Amazon entered into the cinema and sponsored the film “The Stolen Child” with 20 th Century Fox. The Amazon.com attracted about 615 million customers every year. Amazon.com is also well-known for its clear and user-friendly advanced search facility which enables visitors to search for keywords in the full text of many books in the database. One more company which has contributed much to the process of e-commerce development is Dell Inc., an American company located in Texas, which stands third in computer sales within the Industry behind Apple and Hewlett-Packard. History of e-commerce is unthinkable without Amazon and eBay which are among the first Internet companies to allow electronic transactions. Currently the most popular
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categories of products sold in the World Wide Web are Music, Books, Computers, Office supplies and other Consumer electronics. History of e-commerce is a history of a new, virtual world which is evolving according to the customer advantage. It is a world which we are all building together brick by brick, laying a secure foundation for the future generations.
GROWTH Story of E-commerce in India The growth of e-commerce started in India in the year with the introduction of Business-to-Business (B2B) portals in 1996, now e-commerce is all set to become one of the successful medium for business transactions. The growth story of e-commerce in India, over the years, is discussed as follows : No. 1.
E-commerce wave over the years First Wave – 1996 to 2005
The first wave of e-commerce in India was characterised by a small on-line shopping user base, low consumer acceptance and inadequate logistics infrastructure. The IT downturn in 2000 led to the collapse of more than 1000 e-commerce businesses in India, and there was thin activity in India in between 2000 and 2005.
2.
Second wave – 2005 to 2010
During the second wave, two major transitions took place that aided in the build-up of e-commerce story in India. They were :
a) On-line Travel
The entry of Low Cost Carriers (LCCs) in the Indian aviation sector in 2005 marked the beginning of the second wave of e-Commerce in India. The decision of LCCs to sell their tickets on-line and through third parties enabled the development of On-line Travel Agents. The LCCs developed their own websites and partnered with Agents to distribute their tickets
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on-line. The Indian Railways had already implemented the e-ticket booking initiative by the time LCCs started their on-line ticket booking schemes. b) On-line Retail
3.
Third wave – 2010 onwards
The growth of on-line retail was partly driven by changing urban consumer life-style and the need for convenience of shopping at home. This segment developed in the second wave in 2007 with the launch of multiple online retail websites.
Third wave started in 2010 which consists of following two major activities : a) Group Buying
Group-buying sites have seen a significant rise in the number of unique visitors and membership.
b) Social Commerce
It is a key avenue for e-Commerce players to reach out to target customers. Companies have started establishing their presence in the social media space for branding activities, connecting with customers for feedback and advertising new product launches.
E-commerce Today Today’s world is not an ordinary world or common world; we are living in on-line world or Internet world for each and everything we are depending on Internet and Internet has become part and parcel of human life. We are using internet not only for browsing information but for everything like for booking tickets of train, bus and flight, for booking cinema tickets, for payments, for banking transactions, for social networking, and also for shopping of day to day needed goods.
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E-commerce today is a remarkable experience. It has transformed traditional shopping beyond recognition. People seem to shop literally everywhere – at their workplaces during lunch times, in rush hour when there is nothing else to do but switch on their laptops and start surfing. E-commerce today gained so much popularity because we are even offered to “fee l” the product with a 3D mouse to better understand its shape, size and texture. Why go somewhere out when all you have to do is make an order on-line, choose the shipping method, put up your feet and wait till the order is delivered right to your door-step, so easy. E-commerce today offers so much luxury that even conventional stores have already signalled the alarm. Although, every one agrees that it is a long way for an e-commerce to replace “brick -and-mortar” stores, it has every chance to happen in the future. Ecommerce which we are witnessing todays brings in so much adventure into our lives that it is enjoyed by the whole on-line community. Today people are not only having personal computers but also laptops, notebooks, tablets, palmtops and smart phones and they are having 3G, 3G+ and 4G networks from where they can easily access the internet. Day-to-day internet users are tremendously increasing in India due to large availability of smart phones, faster networks, and cheaper broadband services and the internet transactions are also increasing and customers are attracted by the different benefits provided by on-line shopping and the number of online service websites are also increasing. Today human life has become on-line, everything is purchased through internet only and they don’t want only products and services but also they need the different benefits along with the shopping like discounts, offers, big deals, different brands, variety of choices, convenience payments and delivery, and time saving. Due to all these reasons, ecommerce transactions are increasing and the e-commerce industry in India is also growing day-by-day.
Present Status of E-commerce in India The e-commerce market in India has been growing by leaps and bounds for the last few years. The trend is expected to continue as the e-commerce market in India was worth # 16 billion in 2013 and is expected to touch $ 56 billion by 2023, according to the latest ASSOCHAM report. Consumer behaviour and shopping-trends have helped the Indian ecommerce industry to record a staggering 85% growth in 2013 as compared to last year. The e-commerce market in India will control 6.5% of total retail market by 2023.
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The ASSOCHAM report on e-commerce market in India 2013-2023 claims that Mumbai leads the other cities in number of on- line shoppers, followed by Delhi and Kolkata. It’s surprising to know that the silicon IT hub of India – Bangalore, fails to make it to the top 3 places despite of a superior technology infrastructure and a large number of technology professionals who are quite used to internet usage. Young generation on the internet has emerged as the driving force behind the growth of the e-commerce industry in India. Nearly 90% of on-line shoppers in India belong to the 18-45 year age group. While classifying the on-line shoppers based upon gender, nearly 65% of on-line shoppers in India are Male as against 35%, who are Female. More than 76 lakhs people are found vising deals and discounts based websites, which is a proof itself of their growing fad for on-line shopping. The following are TOP 10 Indian E-commerce companies on Facebook : No.
e-Companies
1. Flipkart 2. Amazon India 3. eBay 4. Olx.in 5. Junglee 6. Snapdeal 7. Bewakoof.com 8. BookmyShow 9. Jabong 10. Hungama.com 11. Lootore.com 12. Quiker.com As per a study by ASSOCHAM, Indian e-commerce is emerging as the biggest B2C market place of Asia after recording an increase of 35% and by 2020 it is likely to appear as the central point for start-ups, investors and entrepreneurial activities. This tremendous growth and trending shopping habits have brought a surge of new online companies that have created a competitive atmosphere. The attention grabbing ads, tempting offers and discounts, free gifts, endless deals sites, easy return & exchange and many such feats are the result of this brewing competition.
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The products that are sold, mostly are in the tech and fashion category, which include mobile phones, iPad and accessories, MP3 players, digital cameras and jewellery, etc. The following is the percentage of products bought and sold by on-line shoppers as per ASSOCHAM Report, Dec. 2013 : Products Gift Articles Books Electronic Gadgets Railway tickets Accessories Apparel Apparel Computers & Peripherals Airline tickets Movie tickets Music Hotel rooms Magazines Home tools, products and appliances Toys Jewellery Beauty Products Health & Fitness Products Apparel Gift Certificates Sporting goods
% of Products’ transaction by on-line
58 42 41 39 36 36 33 29 26 24 20 19 16 16 15 12 12 10 7
The year 2014 saw the biggest deals in Indian e-commerce arena. Flipkart acquired fashion e-tailor Myntra in May 2014 for $ 370 million. In July 2014, the Flipkart had raised $ 1 billion at a valuation of around $ 5 to 7 billion. This was followed by Flipkart’s biggest competitor Amazon infusing $ 2 billion into its Indian arm. Its close competitor Snapdeal had raised $ 100 million in May 2014 from group of investors, including Azim Premji (Wipro Chairman). Then its valuation had touched $ 1 billion ( $ 1000 million).
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In September 2014, the Chinese e-commerce giant Alibaba broke all records with is $ 25 billion IPO (Initial Public Offer – new issue of shares ) on US stock exchange (NASDAQ). The year 2014 will also be remembered in Indian e-commerce as the year when Mobilecommerce took to its wings. The e-tailers got 40% to 50% traffic from Mobiles and this will grow further in 2015. Flipkart this year launched the Big Apple products sale in December 2014 to promote sale on its mobile-platform. Today, nearly 10% of the total population in India is on the Internet now. According to a Report from Comstore, three out of every five internet users in India are shopping online. This has made India, one of the most lucrative markets for global e-commerce giants, especially the likes of Amazon, Alibaba and Flipkart. As per retail consultancy Technpak, the total size of the e-tailing industry in India stood at $ 2300 million in 2014 and this is expected to grow up to $ 32 billion by 2020.
FUTURE of E-commerce Experts predict a promising and glorious future of e-commerce in the 21 st Century. In the foreseeable future, e-commerce will further confirm itself a major tool of sales. Successful e-commerce will become a notion absolutely inseparable from the web, because eshopping is becoming more and more popular and natural. Each year the number of e-commerce deals grows enormously. Sales volumes of on-line stores are more than comparable with those of “brick -and-mortar” ones. And the tendency will continue, because a lot of people are “imprisoned” by work and household duties, while Internet saves a lot of time and gives opportunity to choose goods at the best prices. Present-day Internet sales boom is the foundation for magnificent e-commerce future. The “ quantity – to – quality” tendency of e -commerce is also becoming more and more obvious, as the Internet has excluded geographical factor from the sale. So it doesn’t matter any more whether your store is situated in New York or London or i n a small town. To attract more customers, e-store owners will have not only to increase the number of available services, but to pay more attention to such elements like attractive design, userfriendliness, appealing goods presentation, they will have to employ modern technologies for their businesses to become parts of e-commerce future.
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E-commerce industry still has to reach to the minds of the people not only in Metropolitan cities but also in other big cities, especially in small cities. It has to create awareness in the Rural sector about the benefits of on-line shopping. Because in recent days mobile phones have become basic need of human beings especially smart phones and these are internet enabled, and they play an important role in increasing the business of on-line shoppers. The future looks very bright for e-commerce in India with even the stock exchanges coming on-line providing a on-line stock portfolio and status with a 15 minutes delay in stock price. In the next 3 to 5 years, India will have 100 million Internet users which will equal to many of the developed countries.
TYPES of E-commerce ________________________________________________________
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E-commerce is the process of conducting commercial transactions electronically over the Internet, and the main aspect of e-commerce is a merchant selling products or service to the consumers. The following are some popular e-commerce models used by companies engaged in e-commerce.
1.
B2B Business-to-Business e-commerce
B2B commerce i.e. business-to-business involves e-commerce transactions between business firms. It involves transactions relating to placing orders, monitoring production, money transfer, creation of utilities, sending and receiving orders or invoices. B2B includes internet-enabled initiatives of an enterprise to form commercial linkages with another enterprise, dealer or manufacturer thereby reducing e-paperwork and timeto-market.
Business Organisation
Order Processing
Supplies
Distributor or
WEBSITE
Orders
Wholesaler
A wholesaler may sell products to the retailers with multi-tier pricing, by setting up online stores to offer preferred pricing to some vendors and shared price to others. B2B e-commerce is smart growing business which facilitates access to the ordering process to only those with whom a concern has a commercial relationship.
Benefits B2B e-commerce provides Small and Medium Enterprises (SMEs) with an excellent opportunity to access new markets, improve customer service and reduce costs. As a
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medium of information storage, the internet has emerged as a clear winner as compared to other popular media such as newspaper, radio and television. Disadvantages B2B transactions are however relatively high value in nature and organisations are slow to change their traditional systems for the Supply Chain Management (SCM).
2.
B2C Business-to-Consumer e-commerce
B2C commerce i.e. business-to-customers involves transactions which take place between business firms and customers. It is also referred to as on-line shopping. B2C e-commerce involves selling of goods and services to consumers or end-users through Internet. It allows them to browse the product catalogue, select products or services and complete the order on-line.
Business Organisation
Order Processing
Supplies
Customer
WEBSITE
Orders
Some of the first examples of B2C e-commerce are Amazon.com and Dell.com in the USA. The Amazon.com, which is the first on-line bookseller has proved a potential competitor to the traditional ‘bricks and mortar’ booksellers such as Barrens and Noble in the USA.
Benefits
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E-business in this mode significantly reduces the costs associated with intermediaries, service centres and mass marketing campaigns. Since e-commerce makes Just-In-Time (JIT) delivery possible, the supplier does not have to store the goods. B2C is the most popular form of e-commerce, wherein the businesses use the internet for offering their products or services 24 hours a day through global access to the ultimate consumers.
3.
C2B Consumer-to-Business e-commerce
C2B is the exchange of products, information or services from individuals to business. A classic example of this would be individuals selling their services to businesses. 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.
Business Organisation
Supplies Product
Customer
Receives Money
Order Processing WEBSITE
Places money for Particular service
An example of C2B model of e-commerce is the site Priceline.com, which allows prospective airline travellers, tourists in need of hotel reservations, etc. to visit its websites and indicate their preferred price for travel between any two cities. If an airline is willing to issue a ticket on the customers offered price, the consumer can then travel to the mentioned destination at his terms. Benefits
