Module 4: E – Commerce

4.1 E-Commerce-Concept
E-commerce - E-commerce or electronic commerce just like traditional commerce involves
buying and selling of goods and services but over internet.
The World Trade Organization defines e-commerce as, “E-commerce is the production,
distribution, marketing, sales or delivery of goods and services by electronic means”.
Electronic commerce or e-commerce refers to a wide range of online business activities for
products and services. It also pertains to "any form of business transaction in which the parties
interact electronically rather than by physical exchanges or direct physical contact. E-commerce
is usually associated with buying and selling over the Internet, or conducting any transaction
involving the transfer of ownership or rights to use goods or services through a computer-
mediated network. Though popular, this definition is not comprehensive enough to capture
recent developments in this new and revolutionary business phenomenon. A more complete
definition is E-commerce is the use of electronic communications and digital information
processing technology in business transactions to create, transform, and redefine relationships for
value creation between or among organizations, and between organizations and individuals
Functions:
The four functions of e-commerce are:
1) Communication Function: It is related with exchange of information or documents for
carrying out business transactions. E.g.E-mail Communication
2) Process management function: It includes computerization and improvement of business
processes. e.g. Connecting two computers in networking to share and transfer data instead of
manually copying information from one computer to another.
3) Service management function: This is related with applying technology to improve the
quality of service .E.g. Federal Express website. It allows customers to follow shipment and
schedule picks up 24 hours a day with a worldwide network automatically without taking the
help of service representative. Customer service is improved because of sites Transaction
Capabilities.
4) Transaction capabilities: it is a process effective and cheap for suppliers and customers. It
allows buying and selling on the internet or allows to carry out any online service E.g. Retail
website of Amazon.com and REI

4.2 Benefits of E-Commerce

E-Commerce is gaining popularity because it offers the following benefits.
1. Global Market: E-Commerce enables business firms to reach out to customers all over the
world who have an access to internet. Thus, the whole world becomes a potential market for
business enterprises.
2. Lower Transaction Cost: E-Commerce reduces the cost of business transactions substantially.
For instance, the number and cost of customer service representatives in a bank can be reduced
by using net banking.
3. Higher Margins: An e-commerce firm can earn higher margins as the transaction costs are
reduced to a great extent.
4. 24X7 working: A website is open all 24 hours, 7 days in a week it can, thus, take orders, keep
an eye on delivery of goods and receive payments at any time. A business firm can provide
information about its products and services to customers around the clock.
5. Wide Choice: For the consumers, the whole world becomes a shop. They can look at and
evaluate the same product at different websites before making a purchase decision.
6. Customer Convenience: Customers can shop from home or office. They don’t need to stand in
long queues to talk to a salesman. They can read details regarding model numbers, prices,
features etc. of the product from the website and purchase at their own convenience. Payments
can also be made online.
7. Direct Contact between Business and Consumer: E-Commerce enables business firms to
establish a direct contact with their customers by eliminating middlemen.
8. Customer Satisfaction: E-Commerce allows quick response and redressal to consumer
complaints. This helps in increasing customer satisfaction.

4.3 Challenges of E-Commerce

E-Commerce suffers from the following drawbacks.
1. Security: Security continues to be a problem for online businesses. Customers might be
reluctant to give their credit card number at the website due to a number of credit card fraud
cases.
2. System and Data Integrity: Data protection and integrity of the system that handles the data
are serious concerns. Computer viruses may cause data corruption, file backups, storage
problems etc. there is also a danger of hackers accessing the files and corrupting accounts.
3. Costs: Even though the company may initially save money by cutting intermediaries, other
costs may be incurred as start-up costs in terms of hardware and software as well as training of
employees and costs to maintain the website.
4. Products People won’t buy Online: There are certain products like home furnishings which
people might not like to buy online. They might want to, for instance, sit on a sofa to see how
comfortable it is, feel the texture of the fabric etc.
5. Corporate vulnerability Web farming: The availability of product details, catalogs, and other
information about a business through its website makes it vulnerable to access by the
competitors. The competitors might then indulge in web farming i.e. extracting business
intelligence from your competitor’s web pages.
6. Problem of customer loyalty: No business can survive for long without loyal customers. The
new breed of net savvy customers buys from a website where they are getting the best deal. They
are not loyal to a particular seller.
7. Shortage of Talent: There is a great shortage of skilled people who can handle e-commerce
successfully. Traditional organizational structures and poor work cultures also inhibit the growth
of e- commerce.
8. Fulfillment Problems: There could be problems related to shipping delays and merchandise
mix-ups.
9. Returning goods: Returning goods online can be difficult. There are uncertainties regarding
whether the goods will get back to their source, who will pay for the return postage, will the
refund be paid etc.

4.4 Internet Payment systems

With the growth of E-commerce industry where buyers and sellers do not come in physical
contact with one another there was an increasing need of innovative payment modes. Technology
based payment modes are gaining importance over paper based payment systems.
The various Technology based payment modes can be categorised as below:
Credit cards

Debit cards

Mediating services

Account Based Systems Mobile / App payments

Online Banking

Escrow Account
Online payment Instruments

Reward points

Smart card system

Electronic based sysytems
Online cash system

Account based: Payment modes connected with the bank account of the user:
 Credit card- Credit cards are the most widely used technology based payment mode. It is
a plastic card with high security features as 3D secure/verified by VISA etc. The provider
allows customer to purchase goods and services on credit.
 Debit card- The amount paid through this card is directly debited from the customer’s
account as soon as transaction is made.
 Mediating services- Mediating service providers provide additional layer of security to
the customer. Debit/ credit card of the customer is registered with the service provider.
Payment made through this system provides additional security as account information is
not transmitted to the seller and payment is made through mediators. Example: Paypal.
 Mobile/ App based- Account no. of the user is registered with the service provider and
payments are made using mobile phones. IMPS( Immediate payment service) is a service
 launched in 2010 for quick transfer of money using mobile phones as payment device.
Other innovation in this line is mobile wallets like Paytm.
 Online Banking- Online banking refers to banking operations, which is done over World
Wide Web.
 Escrow Account- This is a relatively new concept where payment is withheld by the
intermediary before delivery of goods and afterwards released to the seller.
 Reward points- The reward points are awarded on the loyalty of the buyer which can be
further redeemed to buy goods and services.
Electronic currency system:
 Smart card- A card or similar instrument is used to purchase at POS (Point of sale). There
is no need to link such card with accounts and cards are generally prepaid, work on the
chip embedded in the card.
 Cash on delivery and credit cards are the most popular payment methods in this sector.

4.5 E-Commerce Business Strategies

E-commerce business strategies are similar to the strategies used in any type of business, but the
big benefit is the ability to specifically measure the effectiveness of ecommerce activities. Those
choosing to market their products or service online can take advantage of a variety of tools and
techniques that are cost effective and relatively easy to

4.6 Business Models of E-Commerce

E-commerce models- E-commerce operates on various models. These models are defined by the
participants involved in the transaction.
Business - to - Business (B2B)
Business - to - Consumer (B2C)
Consumer - to - Consumer (C2C)
Consumer - to - Business (C2B)
Business - to - Government (B2G)
Government - to - Business (G2B)
Government - to - Citizen (G2C)
 B2B (Business-To-Business concept) - Business-To-Business e-commerce model refers
to online transactions between the various participants of a value chain. It happens both
in upward and backward direction. In the case of upward transaction, manufacturer buys
raw material from the supplier and in the case of forward transaction manufacturer sells
goods and services to the distributer. They are called value chain transactions as some
value is added at every stage. So, B2B transactions involve-
 Wholesalers
  Distribution relationships with large or chain retailers.
 Selling to organisations (school, business, non profits).
 Supplier selling to resellers.
 B2C (Business-To-Consumer concept) - This type of e-commerce transactions are
becoming very popular in the recent past. Reasons for the same includes increase in
number of devices like smartphones, high internet speed and internet penetration. There
are a lot of advantages for customers using online stores over brick and mortar business.
They can choose among products available by comparing quantity, quality, features and
price. These days everything is available for online purchase ranging from groceries to
diamonds to furniture.
 C2C (Consumer-To-Consumer concept) - C2C business model provides a virtual market
place for customers to interact and transact. They are like information exchanges that
connect people who want to buy and sell. These transactions are done through bidding or
auction or connections. Example- Job portals, Matrimonial sites etc.
 C2B (Consumer-To-Business concept) - In this business model consumer gives referrals
or services to the company. This is not a very popular model in India. Business connects
with customers to build a network of service providers.
 Other Business Models of e-commerce
Business-to-Peer Networks (B-to-P): This would be the requirement of hardware,
software or other services to the peer networks. An example of this is Napster which
provides software and facilities to do peer networking.
Consumer-to-Government (C-to-G): This type of category does not exist as no consumer
has provided service to government yet.
Consumer-to-Peer Networks (C-to-P): This is like a peer-to-peer networking is and so is
not needed as consumers use their computing facilities while using the peer network.
Government-to-Business (G-to-B): This is related with exchange of information, services
and products between government agencies and business organizations. There are many
government sites now which allow the exchange between government and businesses
such as -  International Business Information, guidance and advice for international
business facilities (e.g. www.dti.org.uk) and sources of money and support (ukishelp),
 A database of industry laws, regulations and government policies.
 Official forms of on-line application and submission (for e.g. company tax, value added
tax).
 On-line payment services. Application of G-to-B improves accuracy, increases speed
and reduces costs. Financial incentives are provided for electronic form submission and
payment services.
Government-to-Consumer (G-to-C): (Also known as e-government). This are the
government sites which provide people with information, forms and facilities to conduct
transactions using which user can pay bills and submit official forms like tax returns
online.
Government-to-Consumer (G2C) model: In this model, the government contacts with the
consumers. By using G2C model tax payments laws can be applied on the consumers by
the government over the internet.
Consumer-to-Government (C2G) model: In this model, an individual consumer interacts
with the government. For example, income tax or house tax payment online by the
individual. As the consumer contacts with government, this type of transaction falls under
C2G model. Government-to-Government (G-to-G): (Also known as e-government).
These are the type of transactions between two governments within countries connecting
local governments as well as international governments, within European Union, which is
the development at the beginning to join different national systems. For example,
transactions like buying of oil from Arabian government by American government where
there is a transaction between two governments.
Government-to-Peer Network (G-to-P): No example of this type is in existence till now.
Peer–to-Peer Network (P-to-P): This type of networking exists with parties having same
capabilities; any party can start a communication session. Internet is used to exchange
files and computer resources directly or through a mediating service in recent peer to peer
application. Peer to peer technology does not need central web server and any other type
of intermediaries to exchange files and computer resources over internet. However P2P
technology uses super servers as intermediaries to speed up the process. Since 1999,
Business enterprise capitalists and entrepreneurs are using various aspects of peer to peer
technology into Peer to peer (P2P) e-commerce. There are many successful applications
of P2P only the exception is of illegal downloading of copyrighted music. In the year
2001, a website named Napster.com was created which offered to share online music
files was the well known example of peer-to-peer e-commerce but it was put out of
business because of series of negative court decisions. Two more websites with the
names Kazaa and Grokster were having a similar website but they were also subjected to
legal challenge. In the year 2002 Recording Industry of America a trade organization of
the largest recording companies filed a case against Kazaa and Grokster for violating
copyright law. The company was blamed for enabling and encouraging member to
exchange copyrighted music tracks without paying to the owner. In June 2005, in one
case, the Supreme Court issued a decision against the file sharing networks.
Peer Network-to-Consumer (P-to-C): These are nothing but the peer to peer networking
services offered to different consumers who are the basic part of peer network. Peer
Network-to-Government (P-to-G): This type is not used till now but if it is used in future
it would be like P-to-B but instead of business, the transaction is with government.
Peer Network-to-Business (P-to-B): This type of networking provides resources to
business. For example, the tasks requiring high capacity processing power such as the
spare processing capacity of individual machines on the network to solve mathematical
problems or intensive and repetitive DNA analyses are done using peer network
 resources. This model was used to divide the customers into different categories and to
find the needs, requirements, business processes and services of different customer.
Mobile commerce or m-commerce: This model is concerned with the wireless digital
devices to carry out transactions using web. M-commerce uses wireless networks to
connect cell phones and handheld devices such as blackberries. These 28 networks also
connect personal computers. Mobile consumers after connection can conduct transactions
including stock trades, in-store price comparisons, banking, travel reservations, etc. M-
commerce is mostly used in Japan and Europe (especially in Scandinavia), than in United
States where cell phones are used more. Thus far, m-commerce is used most widely in
Japan and Europe, especially in Scandinavia, where cell phones are more common than
in the United States. But it is expected that m-commerce will grow rapidly in United
States within next five years

4.7 Principles of Website Design

A Website is a collection of related web pages on a web server maintained by any individual or
organization . A website is hosted on web server, accessible via internet or private LAN through
an internet address called URL(Uniform Resource Locator). All publicly accessible websites
collectively constitute the WWW(world wide web)
As a marketer one of the most important things is the company’s website. a company website is
the first time new visitors get introduced to the company and the brand. It’s used to educate
potential clients, to capture new visitors, and it’s used in sales. The ultimate goal of any website
is to convert visitors to marketing-qualified leads and ultimately into clients or customers.

Website designing has direct link to visual aspect of a website. Effective website design is
necessary to communicate ideas effectively.
 Usability

Messaging Functionality

Principles
Simplicity of Website Accessibility
Design

Engaging Branding

Professional

4.8 E-Marketing- Techniques

e-Marketing is also known as Internet marketing, web-marketing or even online
marketing. It is actually a subset of digital marketing.
eMarketing is the process of marketing a brand using the Internet. It Internet. It includes both
direct includes both direct response marketing and indirect marketing elements and uses a range
of technologies to help connect businesses to their customers.
e-Marketing involves the use of the Internet for the promotion of a business’s products and
services on a digital platform. The various channels that e-marketing uses for these promotional
activities include social media, email marketing, affiliate marketing, websites, etc.
However big or small the business is, e-marketing can help it grow and make more profits with a
rather less investment as compared to the traditional concepts of marketing.
 Direct Marketing
 Loyalty programs
 Events
 Public relations
 Advertising
 Tradeshow promotions

E-marketing or online marketing can be executed and promoted by the following techniques and
methods. These are as follows:

 Search Engine Marketing (SEM)

This is a type of marketing that seeks to promote websites by increasing their visibility in
Search Engine Result Pages. This is done through the use of paid inclusion, contextual
advertising, and paid placement, and search engine optimization.
 Blog Marketing
Blog marketing is internet marketing by way of web logs (blogs). Blogs are different than
corporate websites because they contain daily or weekly postings, many times around a
single subject. Many corporations use blogs to foster a dialog with customers so that they
can explain the features of their products and services.
 Email Marketing
This is a type of direct marketing that uses Email to communicate commercial or
fundraising messages to an audience. Emails are sent with the purpose of:
• Strengthening the relationship of the business person with his/her previous and current
clients to create customer loyalty
• Acquiring new clients or convincing existing clients to purchase something
• Adding advertisements sent by other businesses to their clients.
 Viral Marketing
Viral marketing is a marketing technique that creates brand awareness by using social
networks that already exist. Viral marketing increases brand awareness and achieves
other marketing objectives (such as product sales) through self-replicating viral
processes, analogous to the spread of pathologic and computer viruses. Information can
be spread by word-of-mouth or it can be enhanced by the network effects of the internet.
Viral promotions might be in the form of video clips, Ebooks, images, text messages, or
brandable software.
 Social Media Marketing
Social media marketing is a term that describes the act of using social networks, online
communities, blogs, wikis, and other collaborative internet forms of media for marketing,
sales, public relations, and customer service. Common social media marketing tools
include Twitter, blogs, LinkedIn, Facebook, Flickr, and YouTube.
 Article Marketing
Article marketing is advertising in which businesses write short articles related to their
industry. These articles are made available for publication and distribution in the
marketplace. Each article contains a bio box and byline that include references and
contact information for the author’s business. Well-written content articles released for
free distribution have the potential of increasing the business’ credibility within its
market as well as attracting new customers.
 Affiliate Marketing
Affiliate marketing is an internet-based marketing practice in which a business rewards
one or more affiliates for each visitor or customer brought about by the affiliate’s
marketing efforts.
 Geo Marketing
Geo targeting (in internet marketing) and geo marketing are the methods of determining
the geolocation (the physical location) of a website visitor with geolocation software and
delivering customized content to that visitor based on his or her location, such as country,
region/state, city, metro code/zip code, organization, Internet Protocol (IP) address, ISP,
or other criteria.
 Corporate Video
This method comprises the usage of online interactive video and thus more successful to
convey the desired message to the target audience and have the feature of easy sharing
and cost effective in terms of creation and can be accessed across the globe.
Major E-commerce mergers are listed below-
 Flipkart’s owed Myntra fashion acquired Jabong and became a strong retail fashion e-
commerce market.
 Flipkart acquired Phonepe as a partner for mobile payments.
 Flipkart acquired E-bay
 Voonik acquired Dekkoh, Zohrra, Pick Silk, Styl, Getsy
 Paytm acquires Shopsity ad Shifu (consumer behavior prediction)
 Future group acquires Fabfurnish

4.9 Cyber Security

Definition
Internet security is the branch of computer security specially related to internet. Cyber security
refers to the body of technologies, processes, and practices designed to protect networks,
devices, programs, and data from attack, damage, or unauthorized access. Cyber security may
also be referred to as information technology security. Its objective is to establish rules and
measures to use against attack over the internet,
Cyber security or information technology security are the techniques of protecting computers,
networks, programs and data from unauthorized access or attacks that are aimed for exploitation.

Importance
Cyber security is important because government, military, corporate, financial, and medical
organizations collect, process, and store unprecedented amounts of data on computers and other
devices.
1. Sensitive data: A significant portion of that data can be sensitive information, whether that be
intellectual property, financial data, personal information, or other types of data for which
unauthorized access or exposure could have negative consequences.
2. Transportation and storage of data: Organizations transmit sensitive data across networks and
to other devices in the course of doing businesses, and cyber security describes the discipline
dedicated to protecting that information and the systems used to process or store it.
3. Volume of data: As the volume and sophistication of cyber attacks grow, companies and
organizations, especially those that are tasked with safeguarding information relating to national
security, health, or financial records, need to take steps to protect their sensitive business and
personnel information.
As early as March 2013, the nation’s top intelligence officials cautioned that cyber attacks and
digital spying are the top threat to national security, eclipsing even terrorism.

Challenges
For an effective cyber security, an organization needs to coordinate its efforts throughout its
entire information system.
Elements of cyber encompass all of the following:
 Network security
 Application security
 Endpoint security
 Data security
  Identity management
 Database and infrastructure security
 Cloud security
 Mobile security
 Disaster recovery/business continuity planning
 End-user education

1. Constantly- growing nature of security risks: The most difficult challenge in cyber security is
the ever-evolving nature of security risks themselves. Traditionally, organizations and the
government have focused most of their cyber security resources on perimeter security to protect
only their most crucial system components and defend against known treats.
2. New approaches to handle risks: Today the approach to handle risks are insufficient, as the
threats advance and change more quickly than organizations can keep up with. Advisory
organizations promote more proactive and adaptive approaches to cyber security. Similarly, the
National Institute of Standards and Technology (NIST) issued guidelines in its risk
assessment framework that recommend a shift toward continuous monitoring and real-time
assessments, a data-focused approach to security as opposed to the traditional perimeter-based
model.
3. A proactive management: A Top-down approach to cyber security in which corporate
management leads the charge in prioritizing cyber security management across all business
practices and ensures that company assets and the company’s reputation are protected.