E-Commerce Practicum

Session-1
Overview of E-commerce

Jagdish Bhatta
 What is Commerce?
Traditional commerce may be defined as:

Dictionary Meaning
Commerce : \Com"merce\, noun.

The exchange or buying and selling of commodities;

esp. the exchange of merchandise, on a large scale,
between different places or communities; extended
trade or traffic.

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 What is E-Commerce?

In its broadest definition, eCommerce is digitally

enabled commercial transactions between and
among organizations and individuals.
• Digitally enabled means, for the most part,
transactions that occur over the Internet and
World Wide Web(“Web”)
• Commercial transactions involve the exchange of
value (e.g. money) across organizational or
individual boundaries in return for products and
services.

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What is E-Commerce? (Contd.)
• E-Commerce is a modern business methodology that
addresses the needs of organizations, merchants,
and consumers to cut costs while improving the
quality of goods and service and increasing the speed
of service delivery.

• More commonly, e-commerce is associated with the

buying and selling of information, products and
services via computer networks today and in the
future via any one of the myriad of networks that
make up the Information Superhighway.

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 Definition of E-Commerce
• From a communications perspective, EC is the
delivery of information, product/services, or
payments over telephone lines, computer networks,
or any other electronic means.
• From a business process perspective, EC is the
application of technology toward the automation of
business transactions and work flow.
• From a service perspective, EC is a tool that
addresses the desire of firms, consumers, and
management to cut service costs while improving
the quality of goods and increasing the speed of
service delivery.
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Definition of E-Commerce (Contd..)
• From an online perspective, EC provides the
capability of buying and selling products and
information on the Internet and other online services.
• From a collaboration perspective, EC is the facilitator
for inter- and intra-organizational collaboration.
• From a community perspective, EC provides place for
community members, to learn, transact and
collaborate.

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 Electronic Business:
• Commonly referred to as "eBusiness" or "e-business", may be
defined as the application of information and communication
technologies in support of all the activities of business.
Commerce constitutes the exchange of products and services
between businesses, groups and individuals and can be seen
as one of the essential activities of any business.
• Electronic business methods enable 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.
• In practice, e-business is more than just e-commerce. While
e-business refers to more strategic focus with an emphasis on
the functions that occur using electronic capabilities, e-
commerce is a subset of an overall e-business strategy. E-
commerce seeks to add revenue streams using the World
Wide Web or the Internet to build and enhance relationships
with clients and partners and to improve efficiency. 7
 eCommerce differs from eBusiness

• eBusiness is digitally enabled transactions

and processes for the distribution of
information, providing customer support,
and intrabusiness tasks. It is frequently
used interchangeably with EC.
• For example, a company’s online inventory
control mechanisms are a component of e-
business and online selling of company
product is e-commerce.

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eCommerce differs from eBusiness
(Contd.)
Some people use the term e-business to refer to
all the categories of e-commerce. E.g. IBM
defines e-business as: The transformation of key
business processes through the use of Internet
technologies

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 Electronic Market:

• is a place where shoppers and sellers meet

electronically. In electronic markets, sellers and
buyers negotiate, submit bids, agree on an order,
and finish the execution on- or off- line.

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E-Commerce is Interdisciplinary

• Accounting and • Finance

Auditing • Economics
• Business Law and • Management
Ethics • Management
• Computer Sciences Information Systems
• Consumer Behavior • Marketing
and Psychology • Others

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 Brief History of EC

• EC applications first • Limited to:

developed in the early – Large corporations
1970s – Financial institutions
• Electronic funds – A few other daring
transfer (EFT) businesses

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 Brief History of EC (cont.)

• Electronic data • Enlarged pool of

interchange (EDI)— participants to include:
electronic transfer of – Manufacturers
documents: – Retailers
– Purchase orders – Service providers
– Invoices
– E-payments between
firms doing business

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 Brief History of EC (cont.)

• Interorganizational systems (IOS)

– Stock trading
– Travel reservation systems
• Internet became more commercialized in
the early 1990s
– Almost all medium-and large-sized
organization in the world now has a Web site
– Most large corporations have comprehensive
portals
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 Brief History of EC (cont.)

• EC Successes • EC Failures
– Pure online – E-tailors began to fail in
• eBay 1999
• VeriSign
• AOL
– This does not mean
• Checkpoint that EC’s days are
– Click-and-mortar numbered
• GE – Large EC companies like
• IBM Amazon.com are
• Intel expanding but success
• Schwab or failure is not certain

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 Pure Vs. Partial E-Commerce

• Traditional Commerce also known as Brick-and-

mortar where selling physical products by means
of physical agents
• Partial E-Commerce also known as Click-and-
mortar where organizations conduct e-commerce
activities, but do their primary business in the
physical world.
• Pure E-Commerce where organizations sell
products or services only online
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E-Commerce Framework

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 E-commerce Categories

Following are general e-commerce categories:

• Business to Consumer (or B2C) e-commerce
• Business to Business (or B2B) e-commerce (sometimes
called e-procurement)
• Business processes that support buying and selling
activities
• Consumer-to-consumer (or C2C) e-commerce
• Business-to-government (or B2G) e-commerce

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 B2C e-commerce
• Description
– Businesses sell products or services to individual
customers (consumers)
• Example
– Walmart.com sells merchandise to consumers
through its Web site
• Web site
– www.walmart.com

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 B2B E-commerce
• Description
– Businesses sell products or services to other businesses
– Types include inter-business exchanges, e-distributors,
B2B service providers, matchmakers and infomediaries
• Example
– Grainger.com sells industrial supplies to large and small
businesses through its Web site
• Web site
– www.grainger.com

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 Business Processes that Support
Buy/Sell Activities
• Description
– Businesses and other organisations maintain and use
information to identify and evaluate customers, suppliers
and employees (and to support buying, selling hiring,
planning and other activities). More and more this
information is being shared
• Example
– Dell Computer uses secure internet connections to share
current sales and forecasts with suppliers who use it to
plan their production, therefore they deliver the right
quantities of components at the right time

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 C2C e-commerce
• Description
– Participants in an online marketplace can buy and sell
goods with each other
• Example
– Consumers and businesses trade with each other on
eBay.com
• Web site
– www.ebay.com

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 B2G e-commerce
• Description
– Business sell goods or services to governments
and government agencies
• Example
– Cal-Buy portal for businesses that want to sell
online to the State of California
• Web site
– www.pd.dgs.ca.gov/calbuy/default.htm

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 E-commerce Categories: Example
• You are a computer manufacturing company who
performs the following activities on the Internet:
– Sells computers to individuals (B2C)
– Purchases parts (e.g. hard drives, power supplies etc.)
from a supplier (B2B)
– Hires staff, manage customer accounts, advertise, etc.
(Business processes)
– Sells computers to the Government to be used in schools
(B2G)
– On eBay.com individuals buy and sell this brand of
computers (C2C)

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Electronic Commerce Not New

Banks have used electronic funds transfers (EFTs), also

called wire transfers, for decades.
Businesses have been engaging in electronic data
interchange (EDI) since the 1960’s. EDI occurs when
one business transmits computer readable data in a
standard format to another business.
Drawbacks to mass adoption by business was high cost
of implementation; expensive, proprietary software,
hardware, leased telephone lines.
EDI now adapting to the Internet at a much lower cost.

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Technology and Business (Commerce)

“Business drives Technology

Technology Enables Business”
To understand how Technology enables Business, or
Commerce, we must review traditional commerce.
Once activities, or business processes in traditional
commerce are identified, we can consider how they can be
improved through technology
Technology is not a panacea/solution! Knowing when and
when not to apply technology to business problems is the
key.

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 Origins of commerce
Origins of commerce predate recorded history.

Commerce is based on the specialization of skills.

Instead of performing all services and producing all

goods independently, people rely on each other for the
goods and services they need.

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 Traditional commerce

Money has replaced bartering, but the basic mechanics

of commerce remain the same: one member of society
creates something of value that another member of
society desires.

Commerce is a negotiated exchange of valuable objects

or services between at least two parties and includes all
activities that each of the parties undertakes the complete
the transaction.

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 From Traditional Commerce to E-
commerce Cont’d
Electronic Funds Transfer (EFTs)
Electronic Data Interchange (EDI)
Internet
Wire transfers - used
by banks
Businesses transfer
electronic data
- data not re-keyed
- high implementation
cost, thus excluded
small businesses
On-line shopping
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 Views of commerce

Commerce can be viewed from at least two different

perspectives:
1. The buyer’s viewpoint
2. The seller’s viewpoint

Both perspectives illustrate that commerce involves

a number of distinct activities, called Business
Processes.

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 Business Processes

Business processes are the activities that firms

engage in as they accomplish a specific element
of commerce

Examples include:
 Transferring funds
 Placing orders
 Sending invoices
 Shipping goods to customers

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 The Buyer’s perspective

From the buyer’s perspective, commerce involves

the following activities:
1. Identify a specific need
2. Search for products or services that will satisfy
the specific need
3. Select a vendor
4. Negotiate a purchase transaction including
delivery logistics, inspection, testing, and
acceptance
5. Make payment
6. Perform/obtain maintenance if necessary

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 The Seller’s perspective

From the sellers’ perspective, commerce involves

the following activities:
1. Conduct market research to identify customer
needs
2. Create a product or service to meet those needs
3. Advertise and promote the product or service
4. Negotiate a sales transaction including delivery
logistics, inspection, testing, and acceptance
5. Ship goods and invoice the customer
6. Receive and process customer payments
7. Provide after sales support and maintenance

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 Why eCommerce?

The Internet and eCommerce are new technologies to help

businesses increase profits.
So why are there no special textbooks or courses on “TV
Commerce”, “Radio Commerce”, “Railroad Commerce” or
“Highway Commerce”? These are also technologies that
have had profound impact on business in the 20th century
and account for more commerce than eCommerce.
Simply put, eCommerce technologies are more powerful
than any of the other technologies we have seen in the 20th
century.

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Unique Features of eCommerce
Technology

The features the set eCommerce Technology apart from

others used in traditional commerce are:
1. Ubiquity – internet/web technology is available
everywhere: at work, home and elsewhere via mobile
devices.
 Marketplace extended beyond traditional boundaries
 “Marketspace” is created, available 24/7/365
 Customer convenience increased, costs reduced.

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 Unique Features of eCommerce Technology
(continued)

2. Global Reach – the technology reaches across national

boundaries, around the earth.
Commerce enabled across cultural and national boundaries
seamlessly.
 Potential customer reach extended.
 Reduces barriers to markets.

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 Unique Features of eCommerce Technology
(continued)

3. Universal standards – there is one set of technology

standards, namely internet standards.
 Promotes technology adoption
 Reduces costs of adoption

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 Unique Features of eCommerce Technology
(continued)

4. Richness – Video, Audio, graphical and text messages

are possible.
 Integration to a more powerful marketing message
and customer experience

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 Unique Features of eCommerce Technology
(continued)

5. Interactivity – the technology allows active user

involvement.
 Consumers engage in dynamic dialog
 Experience adjusted to the individual based on
responses / reviews.
 Customer becomes co-participant in the process of
delivering goods to the market.

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 Unique Features of eCommerce Technology
(continued)

6. Information Density - the technology reduces

information costs and increase quantity and quality.
 Information processing, storage and communication
costs drop dramatically.
 Accuracy and timeliness improve greatly.
 Information becomes plentiful, cheap and accurate.

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 Unique Features of eCommerce Technology
(continued)

7. Personalization/Customization – the technology reaches

allows personalized messages to be delivered to
individuals as well as groups.
Commerce enabled across cultural and national
boundaries seamlessly.
 Potential customer reach extended.
 Reduces barriers to markets.

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 Seven Cs of Ecommerce
•Cost
•Convenience
•Communication
•Community
•Coordination
•Customization
•Collaboration

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 Fundamental Business Goals

The fundamental goal of a business is to earn a profit.

Performing business processes in the most efficient way
possible furthers this goal.

Firms are increasingly interested in eCommerce because

it can help increase profits.

All the advantages of eCommerce can be summarized in

one statement:
eCommerce can Increase Sales and Decrease Costs.

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 Examples of eCommerce
Enabling Business Goals

Increase Revenues
A company is able, through publishing its catalogs
online, to reach more customers for the same costs as
printing and mailing its catalogs.
Decrease Costs
The same company can provide more timely product
information by updating its catalog online, than by
mailing its catalog four times a year.

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 Appropriateness

It is important to identify which business processes

can be streamlined using eCommerce technologies.

It is equally important to realize that some processes

make effective use of traditional commerce and can’t
be improved upon using technology.

Technology is not a panacea/solution. Using it when it is

not necessary or helpful can be a costly mistake.

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 Well-suited for eCommerce

Business processes that are well-suited for electronic

commerce:
• Sale/purchase of new books and CDs
• Online delivery of software
• Advertising and promotion of travel services
• Online tracking of shipments
The business processes that are especially well-
suited
to eCommerce include Commodity items.
A Commodity is a product or service that has
become so standardized and well-known that buyers
cannot detect a difference in the offerings of various
sellers and decide to buy based on price. 47
 Best for Traditional Commerce

Business processes that are well-suited to traditional

commerce:

 Sale/purchase of high fashion clothing

 Sale/purchase of perishable food products
 Sale of expensive jewelry and antiques
Exceptions?

In general, products that buyers prefer to touch, smell,

or otherwise closely examine are difficult to sell using
eCommerce.

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 Questionable cases

Would eCommerce or traditional commerce work

best for the following activities?

• Browsing through new books

• Sale/purchase of shoes
• Sale/purchase of collectibles (trading cards,
plates, etc.)

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 Combinations of both

Some business processes can be handled well using

a combination of electronic and traditional methods:

 Sale/purchase of automobiles
 Online banking
 Sale/purchase of investment/insurance products
Consumers can research products online and make final
transactions in person.
In any business problem it is good practice to weigh the
advantages and disadvantages of a particular approach.
Evaluating the application of eCommerce technology is no
Different.
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 Advantages of eCommerce

For the seller:

 Increases sales/decreases cost.
 Makes promotion easier for smaller firms.
 Can be used to reach narrow market segments.

For the buyer:

 Makes it easier to obtain competitive bids
 Provides a wider range of choices
 Provides an easy way to customize the level of
detail in the information obtained
 Allows anonymity and less pressure to buy.

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 Advantages of eCommerce

In general:

 Increases the speed and accuracy with which

businesses can exchange information.

 Electronic payments (tax refunds, paychecks, etc.)

cost less to issue and are more secure.

 Can make products and services available in

remote areas.

 Enables people to work from home, providing

scheduling flexibility.
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 Disadvantages of eCommerce
 Some business processes are not suited to
eCommerce, even with improvements in
technology.

 Costs and returns on eCommerce can be

difficult to quantify and estimate.

 Cultural impediments: People are reluctant to

change in order to integrate new technology.

 The legal environment is unclear and full of

conflicting laws; regulation has not kept up.

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