INTRODUCTION TO E-COMMERCE

E-commerce deals with buying and selling of information, products and services through a
computer network without actually visiting an actual physical store. It can also be considered as
a business activity that uses an electronic medium for the delivery of information, products,
services and payment through the electronic medium.
E-commerce involves the paperless exchange of information in a business with the use of
Electronic Data Interchange (EDI), electronic bulletin boards, e-mail and other technologies. It
helps to automate processes and transactions that are usually done on paper. E-commerce
technologies have assisted companies to change the way they operate and become more
technologically savvy.

Electronic commerce and electronic business.

E-commerce is buying and selling using an electronic medium. It is accepting credit and
payments over the net, doing banking transactions using the Internet, selling commodities or
information using the World Wide Web and so on.
E-business involves not merely setting up the company website and being able to accept credit
card payments or being able to sell products or services on time. It involves fundamental re-
structuring and streamlining of the business using technology by implementing enterprise
resource planning (ERP) systems, supply chain management, customer relationship management,
data ware housing, data marts, data mining, etc.

E-Commerce Opportunities for Businesses

Many businesses need e-commerce software packages to help take advantage of various business
opportunities:
1. Tourism and travel sector: Consumers can make online reservations in hotels and
restaurants; can purchase air and railway tickets and so on.
2. Banking sector: Most banks have made their services available online through their
respective Websites. These services include making payments, paying bills, purchasing and
selling shares, checking account balance and transferring funds and so on.
3. Health care sector: Most health care companies provide their services online, such as
payment of premiums, issue of policies, providing reimbursements and soon.
4. Stock sector: De-mat account facilities are provided to customers who can do overall analyses
of the stock markets and their related transactions.
5. Financial sector: The financial sector provides e-commerce services, which are made
optimum use of by users for paying insurance, loans, mortgages and so on.

Working of E-Business Models

To understand the operating procedure of an e-business model, consider a customer who wants to
make an online purchase. He is transferred to the online transaction server where all the
information is converted into an encrypted form. Once he has placed his order, the information
moves through a private gateway to a processing network where the issuing and acquiring banks
complete or deny the transaction. This process takes only few seconds. A typical online
transaction is shown in Figure 1.1.
Online customer Merchant

Internet

Online transaction

Processing network

Acquiring Merchant Bank Issuing Consumer Bank

TYPES OF E-COMMERCE
A transaction in an electronic market describes a number of interactions between parties. This
includes, for example, ordering products, making payments, supporting delivery and marketing
and promotion activities. One must therefore have a marketing strategy for transacting commerce
through which a corporation maintains itself and generates revenue.
Business models are defined as, ‘A set of shared common characteristics, behaviour and methods
of doing business that enables a firm to generate profits through increasing revenues and
reducing cost.’ Business models are created for the purpose of trying to answer the following
questions:
(i) How can you get competitive advantage?
(ii) Which product-market strategy is to be followed?
(iii) What should be the marketing mix?

Business-to-consumer (B2C) model:

E-commerce model in which businesses sell to individual shoppers
This is the most commonly prevalent e-commerce segment, in which online retailers and
marketers sell their products to consumers by using data made available through online
marketing tools. This model concentrates on individual buyers and offers consumers the
capability to browse, select and merchandise online from a wider variety of sellers and at better
prices. The B2C e-business interaction is most appropriate for the following types of
transactions:
Easily transformable goods, i.e., products that are easily transformable into digital format, such
as videos, software packages, music books, and so on
Highly rated branded items or items with return security
Items sold in packets that are not possible to open in physical stores
Items that follow standard specification
The working of B2C has the following steps:
i. The customer identifies his/her need.
ii. The customer looks for the product or services that suit his/her needs.
iii. The customer selects a vendor and negotiates a price.
iv. The customer then receives the product or service.
v. The customer makes the payment for the received product.
vi. The customer gets the services and warranty claims that are associated with the product.

Business-to-business (B2B) model:

E-commerce model in which all of the participants are businesses or other organizations
In this form, both buyers and sellers are business set-ups and there are no individual customers.
In this model, manufacturers supply goods to retailers or wholesalers. This type of model needs
two or more business organizations that do business with each other. It entails commercial
activity among companies through the Internet as a medium. At present, there are many types of
e-businesses. The B2B ebusiness is of the following types:
Supplier oriented: In this type of e-business, a supplier establishes the electronic market where a
number of customers or buyers transact with suppliers. Generally, it is done by a supplier which
has monopoly over products that it supplies.
Buyer oriented: In this type of e-commerce, big business organization with high volume
purchase capacity creates an e-business marketplace for purchases and gains by starting a site of
their own. The online e-business marketplace is used by buyers for placing requests for
quotations and carrying out the entire purchase process.
Intermediary oriented: In this type of B2B e-business, a third party establishes the e-business
marketplace and attracts both buyers and sellers to interact with each other.

Application of B2B model: Some of the applications of the B2B model are, inventory
management, channel management, distribution management, order fulfillment and delivery
payment and payment management.

Consumer-to-consumer (C2C) model: This model facilitates the online selling and purchasing
of goods and services between two parties. There is no middleman involved and the parties carry
out transactions with other consumers directly via online classified advertisements and auctions
or by selling personal services or expertise online. This model involves the growing popularity of
peer-to-peer (P2P) software that facilities the exchange of data directly between individuals over
the Internet.

Business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or service to a client business
that maintains its own customers

Consumer-to-Business E-Commerce Model

In a consumer-to-business (C2B) e-commerce model, a consumer posts online information
regarding the goods for sale (project) with a budget. Depending on the popularity of the site and
the requirement, interested parties will review and bid on the project. The consumer will review
the bids and select the company that will complete the project. In addition to the various types of
e-commerce, such as business-to-business

The following instance would explain the concept of C2B ecommerce well:
Neha, a student, wants to fly from New Delhi to London and back, but has only Rs 35,000 to pay
for this trip. She puts up an online advertisement on a C2B site for airline companies that provide
such a package to budget travellers. If any airline company can match the offer, it will respond to
Neha’s advertisement. Thus, this way airline companies can operate, albeit at no profit margin,
which is better than flying with empty seats.

Peer-to-peer (P2P) model: In this model, people share computer files and computer resources
directly without being routed through a Web server. Here, both parties must install software that
enables them to communicate on the common platform.

M-Commerce: Short for mobile commerce, this model facilitates the use of smart phones,
personal digital assistants and other mobile devices to conduct business transactions.
Other e-commerce business models are listed as follows:

Business-to-employee (B2E) model

Government-to-business (G2B) model
Government-to-citizen (G2C) model
Evolution of E-Business Models
The Internet has become integral to daily activities ranging from banking to shopping and
entertainment. For instance, in modern times, people are using automated teller machines
(ATMs), as opposed to human tellers. This has made banking very easy.
There are two phases in establishing an e-business—Phase 1 and Phase 2.

The trend of companies setting up e-business establishments in the first phase was as follows:
Business organizations rushed to get an e-commerce Website up. Little or no regard was given to
check how scalable or reliable the site was supposed to be. It was mostly a matter of overtaking
competition.
A drawback of these first-to-market consumer sites was little or no integration with the
production side of the business. The production part of the business tried to establish its own
online-based relationship with suppliers. Thus, the lack of integration proved to be a major
obstacle for many business organizations. This was due to the
Following factors:
Growth of customer base
Request for real-time order status
Return of products

In the second phase of establishing an e-business, the expectations of customers and suppliers
have arisen. This has forced organizations to start planning about integrating the back end
business operations and real-time transaction processing. Business organizations should maintain
one complete customer–supplier relationship with the help of Internet-based technologies and
join those systems to the interpersonal aspects of the business transaction when needed. Many
businesses have realized the prospect of ebusiness and are addressing the whole business cycle
and controlling Internet
Technologies. It can be concluded that these days, e-businesses have the power to change the
business scene. Nowadays, the value of a company is based on its strategy, business model and
its ability to sell. Businesses are using Internet technologies and integrating their systems and
processes more efficiently. They are able to greatly reduce the obstacle to entry while
significantly increasing their own market reach.

C2B systems represent the future of e-commerce and can be defined as the Comparison of
shopping activities performed online by a user before purchasing a product.

Example C2B scenarios

The following scenarios help clarify the intended role of C2B systems.
Shopping assistance: A pedestrian is walking through the streets of Connaught Place, New
Delhi. She passes by the shops and peers through the windows to examine the various offerings.
A fashion apparel outlet recently got a new C2B system that requests for this pedestrian’s details
and identity information. Based on that, the software determines her preferences for various
items of clothing. On the basis of the inventory, the software determines that the shop has certain
items that might fit her profile. The store sends a message to the pedestrian on her PDA
containing information about the items available in the store and the directions to the store.
Emergency room: A businessman falls ill after having dinner with potential clients in Taj Mahal
Hotel, Mumbai. His family is away on holiday in Paris and his family physician is attending a
conference. The ambulance picks the patient from the hotel and rushes him to the emergency
room at the nearest hospital. The hospital where he usually gets himself examined has sent his
personal details to this hospital. Since the hospital has his details, he is not asked to fill out forms
or answer questions regarding history or allergies. The local doctors provide the treatment and
the patient recovers soon without complications.
C2B models must have the following requirements:
Mobile device
Real-time, highly relevant information and personalized attention
Maintenance and access of personal data for various real-life situations
Creation of forms for automated information extraction
Matchmaking between personal requirements and corporate offerings
Automated update of personal information on the completion of specified
transactions
Automated system evolution to support new custom data

FACTORS THAT FUEL THE GROWTH AND DEVELOPMENT OF ELECTRONIC

COMMERCE.

Economic Forces
One of the most evident benefits of e-commerce is economic efficiency resulting from the
reduction in communications costs, low-cost technological infrastructure, speedier and more
economic electronic transactions with suppliers, lower global information sharing and
advertising costs, and cheaper customer service alternatives.
Economic integration is either external or internal. External integration refers to the electronic
networking of corporations, suppliers, customers/clients, and independent contractors into one
community communicating in a virtual environment (with the Internet as medium). Internal
integration, on the other hand, is the networking of the various departments within a corporation,
and of business operations and processes. This allows critical business information to be stored
in a digital form that can be retrieved instantly and transmitted electronically.

Market Forces
Corporations are encouraged to use e-commerce in marketing and promotion to capture
international markets, both big and small. The Internet is likewise used as a medium for
enhanced customer service and support. It is a lot easier for companies to provide their target
consumers with more detailed product and service information using the Internet.

Technology Forces
The development of ICT is a key factor in the growth of e-commerce. For instance, technological
advances in digitizing content, compression and the promotion of open systems technology have
paved the way for the convergence of communication services into one single platform. This in
turn has made communication more efficient, faster, easier, and more economical as the need to
set up separate networks for telephone services, television broadcast, cable television, and
Internet access is eliminated. From the standpoint of firms/ businesses and consumers, having
only one information provider means lower communications costs.

Global customers
Availability of global infrastructure has ensured that people can do business anywhere around the
world. The internet platform additionally provides a fast and convenient service mode to
traveling customers.

Global Products
Since most products in use throughout the world are similar or are assembled by subsidiaries
based on economic and other conditions, global technology provides the geographical flexibility
needed to ensure that products have a global access.

Global Operations.
Most firms have spread out their operations on a global scale to diversify the risk or to increase
the scope of economies of scale. Electronic based strategies support operational flexibility.

Global resources.
The use of common equipment, facilities and people by firms has encouraged electronic based
trading since it enables businesses to keep track of shared resources.

Global Collaboration.
Knowledge and expertise of workers across the globe can be efficiently accessed, shared and
organized to support individual or group efforts. This enhances enterprise collaboration.

ELECTRONIC COMMERCE: DEFINITIONS AND CONCEPTS

Electronic market (e-marketplace) An online marketplace where buyers and sellers meet to
exchange goods, services, money, or information
Intranet
An internal corporate or government network that uses Internet tools, such as Web browsers, and
Internet protocols An intranet is a private computer network that uses Internet Protocol
technologies to securely share any part of an organization's information or operational systems
within that organization. The term is used in contrast to internet, a network between
organizations, and instead refers to a network within an organization. Sometimes the term refers
only to the organization's internal website, but may be a more extensive part of the organization's
information technology infrastructure. It may host multiple private websites and constitute an
important component and focal point of internal communication and collaboration.

Extranet
A network that uses the Internet to link multiple intranets
The Internet is a global system of interconnected computer networks that use the standard
Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network of networks
that consists of millions of private and public, academic, business, and government networks of
local to global scope that are linked by a broad array of electronic and optical networking
technologies. The Internet carries a vast array of information resources and services, most
notably the inter-linked hypertext documents of the World Wide Web (WWW) and the
infrastructure to support electronic mail.
AN EC FRAMEWORK
EC applications are supported by infrastructure and by the following five support areas:
People
Public policy
Marketing and advertising
Support services
Business partnerships

F-commerce
E-commerce activities conducted on Facebook or influenced by the site
EC Failures
EC Successes

THE FUTURE OF EC
Social computing
An approach aimed at making the human–computer interface more natural
Web 2.0The second generation of Internet-based services that lets people collaborate and share
information online in new ways, such as social networking sites, wikis, communication tools,
and folksonomies
social network A category of Internet applications that help connect friends, business partners,
or individuals with specific interests by providing free services such as photo presentation, e-
mail, blogging, and so on using a variety of tools
Social networking service (SNS) A service that builds online communities by providing an
online space for people to build free homepages and that provides basic communication and
support tools for conducting different activities in the social network
Social networking The creation or sponsoring of a social network service and any activity, such
as blogging, done in a social network (external or internal)
Social commerce The e-commerce activities conducted in social networks and/or by using social
software (i.e., Web 2.0 tools)
Virtual world A user-defined world in which people can interact, play, and do business; the
most publicized virtual world is Second Life
How Students Make Money in a Virtual World

digital economy An economy that is based on digital technologies, including digital

communication networks, computers, software, and other related information technologies; also
called the Internet economy, the new economy, or the Web economy

Digital enterprise A new business model that uses IT in a fundamental way to accomplish one
or more of three basic objectives: reach and engage customers more effectively, boost employee
productivity, and improve operating efficiency; uses converged communication and computing
technology in a way that improves business processes
Corporate portal A major gateway through which employees, business partners, and the public
can enter a corporate website.

Business model
A method of doing business by which a company can generate revenue to sustain itself
1. Revenue Models
2. value proposition
TYPICAL EC BUSINESS MODELS
1. Online direct marketing
2. tendering (bidding) system
a. Model in which a buyer requests would-be sellers to submit bids; the lowest
bidder wins.
3. Electronic marketplaces and exchanges
4. Viral marketing
5. Group purchasing
THE BENEFITS AND IMPACTS OF EC
EC as a Provider of Competitive Advantage
THE LIMITATIONS AND BARRIERS OF EC
Ethics The branch of philosophy that deals with what is considered to be right and wrong
WHY STUDY E-COMMERCE?