E-Commerce Unit-1: Introduction to E-Commerce

What is Commerce?
Before we get into a complete discussion of e-commerce, it is helpful to have a good
mental image of plain old commerce first. If you understand commerce, then e-commerce
is an easy extension.
Commerce is defined as “the exchange or buying and selling of commodities on a large
scale involving transportation from place to place”. So, commerce is, quite simply, the
exchange of goods and services, usually for money.
We see commerce all around us in millions of different forms. When you buy something at
a grocery store, you are participating in commerce. In the same way, if you deposit money
in your bank account, you are participating in commerce in different angle. If you go to
work each day for a company, that is yet another link in the chain of commerce.
Elements of Commerce
When you think about commerce, you recognize no more than these three elements or
roles: buyers, sellers and producers.
Buyers are the people with money who want to purchase a good or service.
Sellers are the people who offer goods or services to buyers. They are generally
recognized in two different forms: retailers who sell directly to consumers and
wholesalers or distributors who sell to retailers and other businesses.
Producers are the people who create products and services that sellers offer to
buyers. A producer is always, by necessity, a seller as well.

Meaning of E-Commerce
E-commerce, also known as electronic commerce or internet commerce, refers to the
buying and selling of goods or services using the internet, and the transfer of money and
data to execute these transactions. E-commerce is often used to refer to the sale of physical
products online, but it can also describe any kind of commercial transaction that is
facilitated through the internet. It is, simply, any method of using electronic
communications and computer technology to conduct business. It is about buying and
selling products and services on the World Wide Web. In broader sense, 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 services and increasing
the speed of service delivery.
E-commerce is exactly analogous to a marketplace on the Internet. E-commerce consists
primarily of the distributing, buying, selling, marketing and servicing of products or
services over electronic systems such as the Internet and other computer networks.
E-commerce typically uses electronic communications technology of the World Wide
Web, at some point in the transaction's life-cycle, although of course e-commerce
frequently depends on computer technologies other than the World Wide Web, such as
databases and e-mail, and on other non-computer technologies, such as transportation for
physical goods sold via e-commerce.
E-commerce, according to Pearson Hall’s book "E-Commerce", started in 1994 with the
first banner ad being placed on a website. Since then, e-commerce has evolved to make
products easier to discover and purchase through online retailers and marketplaces.
Independent freelancers, small businesses, and large corporations have all benefited from
e-commerce, which enables them to sell their goods and services at a scale that was not
possible with traditional offline business.

Compiled By: Ajay Shah 1

Associate Professor, PU
E-Commerce Unit-1: Introduction to E-Commerce

In this type of online commercial transaction, the seller can communicate with the buyer
without having a face to face interaction.

Some examples of real world application of e-commerce are online banking, online
shopping, online ticket booking, social networking, etc.
The basic requirement of e-commerce is a website. The marketing, advertising, selling and
conducting transactions are done with the help of internet. Any monetary transaction,
which is done with the help of electronic media, is e-commerce.
The effect of e-commerce has already appeared in all areas of business, from customer
service to a new product design. It facilitates new types of information-based business
processes for reaching and interacting with customers ― online advertising and marketing,
online ordering and order-taking, online payment, online customer service, and so on.

Differences between E-Commerce and Traditional Commerce

E-Commerce Traditional Commerce
1. Definition It is a form of online shopping It is a traditional approach to buy
where users can buy goods and goods and services which involves
services using electronic devices face to face dealing.
such as laptop, mobile, tablet.
2. Usage It is used to save valuable time and It is ancient and still in use where
money. digital network is not reachable.
3. Process It is easier to use and operate if It can be followed by any person
customer has basic digital gadget irrespective of education or
knowledge. knowledge.
4. Mode It is in electronic or digital mode It can be in any form which is manual
only. or non-electronic form.
5. Time It is available round the clock. It is available only during limited
time.
6. Inspection Inspecting a product before Inspecting a product before
purchasing is not possible. purchasing is possible.
7. Involvement Buyer and seller may never meet. It always involves face to face
involvement of both buyer and seller.
8. Business More business can be done easily Very difficult to perform more
without any hassles. business.

Compiled By: Ajay Shah 2

Associate Professor, PU
E-Commerce Unit-1: Introduction to E-Commerce

E-Commerce Advantages and Disadvantages

E-commerce provides many new ways for businesses and consumers to communicate and
conduct business. There are a number of advantages and disadvantages of conducting
business in this manner.

Advantages: (Benefit to Business – B / Benefit to Customer – C)

• Being able to conduct business 24×7×365. E-commerce systems can operate all day-
everyday. Your physical storefront does not need to be open in order to do business.
Both customers and suppliers can communicate with you electronically. (B, C)
• Access the global marketplace. The Internet spans the world, and it is possible to do
business with any business or person who is connected to the Internet. Simple local
businesses such as specialist record stores are able to market and sell their offerings
internationally using e-commerce. This global opportunity is assisted by the fact that,
unlike traditional communications methods, users are not charged according to the
distance over which they are communicating. (B, C)
• Speed and convenience of transaction. Electronic communications allow messages to
traverse the world almost instantaneously. There is no need to wait weeks for a
catalogue to arrive by post; that communications delay is not a part of the Internet / e-
commerce world. (C)
• Opportunity to reduce costs. The Internet makes it very easy to 'shop around' for
products and services that may be cheaper or more effective than we might otherwise
settle for. It is sometimes possible to, through some online research, identify original
manufacturers for some goods ― thereby bypassing wholesalers and achieving a
cheaper price. (C)
• No need of physical store. Since there is no need for a physical store, ecommerce
businesses save on one of the biggest cost overheads that retailers have to bear. (B)
• Lots of choices. Since there are no shelf size or store size limitations, e-commerce
businesses are able to list many different items at one place. (B)
• Greater sales, improved customer service and higher customer satisfaction. (B, C)
• Customer control. More power has shifted to customer's hands, i.e., the customer
controls the search process, the time spent on the website, the degree of comparison,
the people with whom he/she comes in contact, and the decision to buy or not. (C)
• Knowledge of customer behavior. Knowledge is power and wealth. The firm has to
observe and track individual customer behavior to maintain the knowledge-base (or
database) within the organization. (B)
• Disintermediation. Business organization can directly contact or approach the
customers and suppliers, cutting down the number of levels and cutting down the
costs. (B)

Disadvantages and Constraints:

• Time for delivery of physical products. It is possible to visit a local music store
and walk out with a compact disc or a bookstore and leave with a book. E-
commerce is often used to buy goods that are not available locally from
businesses all over the world, meaning that physical goods need to be delivered,
which takes time and costs money. In some cases there are ways around this, for
example, with electronic files of the music or books being accessed across the
Internet, but then these are not physical goods.

Compiled By: Ajay Shah 3

Associate Professor, PU
E-Commerce Unit-1: Introduction to E-Commerce

• Physical product, supplier & delivery uncertainty. When you walk out of a
shop with an item, it's yours. You have it; you know what it is, where it is and
how it looks. In some respects e-commerce purchases are made on trust. This is
because, firstly, not having had physical access to the product, a purchase is made
on an expectation of what that product is and its condition. Secondly, because
supplying businesses can be conducted across the world, it can be uncertain
whether or not they are legitimate businesses and are not just going to take your
money. It's pretty hard to knock on their door to complain or seek legal recourse!
Thirdly, even if the item is sent, it is easy to start wondering whether or not it will
ever arrive.
• Returning goods. Returning goods online can be an area of difficulty. The
uncertainties surrounding the initial payment and delivery of goods can be
exacerbated in this process. Will the goods get back to their source? Who pays for
the return postage? Will the refund be paid? Will I be left with nothing? How long
will it take? Contrast this with the offline experience of returning goods to a shop.
• Consumers feel less confident with their credit card numbers. Most of the
consumers are still not confident in providing their credit card numbers for
making payments on the website while shopping on the Internet.
• Issues related to size and number of transactions. E-commerce is most often
conducted using credit card facilities for payments, and as a result very small and
very large transactions tend not to be conducted online. The size of transactions is
also impacted by the economics of transporting physical goods. For example, any
benefits or conveniences of buying a box of pens online from a US-based business
tend to be eclipsed by the cost of having to pay for them to be delivered to you in
Australia. The delivery costs also mean that buying individual items from a range
of different overseas businesses is significantly more expensive than buying all of
the goods from one overseas business because the goods can be packaged and
shipped together.
• Not suitable for many businesses like perishable food and high cost items
such as jewellery, antiques and the like.
• Lack of personal touch. Although some human interaction can be facilitated via
the web, e-commerce can not provide the richness of interaction provided by
personal service. One may miss the personal touch and relationship that develops
with a retail store. In comparison, e-commerce is far more sterile.
• Lack of physical touch. There are many products that consumers want to touch,
smell, feel, hear, or taste before they buy. E-commerce takes away that luxury.
• Need for an Internet connection and an Internet access device. One always
needs Internet connectivity to participate in e-commerce which can only be
transacted with the help of an Internet access device such as a computer or a
smartphone.
• Out of reach of computer illiterate and untrained people.

Important Elements of a Successful E-commerce Applications

If your company offers a tangible product(s), and you have a website, then it’s likely you’ve
already entered the exciting, lucrative world of E-Commerce. Perhaps your sales are sufficient
enough that you think you might not need to make any improvements. Maybe you think it isn’t
worth the time or the effort. But what if even just one simple improvement can increase
monthly sales by $1,000? Maybe $10,000? Perhaps even $100,000. Is it worth it then?

Compiled By: Ajay Shah 4

Associate Professor, PU
E-Commerce Unit-1: Introduction to E-Commerce

With an E-Commerce site, potential and loyal customers can reach you from anywhere, at
anytime. But if your E-Commerce site isn’t set up properly, it won’t attract visitors, or, more
importantly, engage those visitors enough to increase brand recognition and keep them coming
back. Consider these important factors that are fundamental for any E-Commerce site to be
successful and continually profitable.
1. Detailed and Concise Product Information: Visitors need to know the facts about what they
are buying from you. If the product information is lacking or confusing, they won’t buy it.
Examine the product pages on your site. Are all the important features listed? Imagine that you
are a visitor to the site who knows nothing about the product. Is enough information there for
you to make an informed decision on whether to buy or not?
You’ll want to make sure all the necessary product information is available to users, but don’t
make them too busy through paragraphs of information to find. Put the most important features
first, and follow that with any additional information that relates to the specifics of the product.
Include a good, decent sized picture of the product, and a description of the product if
applicable, but try not to overdo it. If a potential customer clicks away, chances are they won’t
be coming back.
2. Adequate On-site Search Engine: Nothing is more frustrating than using the search feature
on an E-Commerce site and receiving dozens of results that don’t match what you were
looking for. Make sure your E-Commerce site uses competent, reliable search engine, and
allow filtering for more refined search options if you maintain a large inventory of products.
3. Easy Checkout Process: Consider your shopping experience in a brick and mortar store.
You select a product, wait on line at the cashier, pay, and leave. Simple, right? So why
shouldn’t it be just as simple on an E-Commerce site?
Of course, there may be a few more necessary steps to take when shopping online, such as
selecting a shipping method, but the overall process can still be relatively quick and painless if
done correctly.
Customers don’t want to have to cycle through more than a couple pages in order to purchase a
product. Ideally, it would be beneficial to both you and the customer if the checkout process
could be contained to one page, but that isn’t always possible. But if it is feasible, allow your
customers to enter all their information (mailing & billing address, credit card number,
shipping option, etc.) on a single page, and then have them confirm their order on the following
page. Anything else in between gives customers a chance to be frustrated, and they’ll either
leave your site, or make their purchase but choose not to return.
4. User-Friendly Navigation: Your entire E-Commerce site should be relatively easy to
navigate. A rewarding user experience keeps visitors on your site, and also keeps them coming
back. Put menus or links to product categories in a prominent place, and make sure categories
and the products that are in each category are properly named.
Additionally, make sure each page provides users with an easy way to get back to the home
page, find contact information, select another category, or go directly to the shopping cart.
5. Shopping Cart Design and Features: Your shopping cart design is just as important as the
remainder of your E-Commerce site. Aside from displaying information clearly, a shopping
cart layout should be simple, effectively display company branding (colors, company logo),
and include prominent checkout buttons.
A shopping cart page should also include all the important elements your customers need, such
as the ability to change quantities, select shipping options (shipping prices should be
displayed), enter promo codes, select a payment option, or continue shopping and/or adding
more products to the cart. Also, don’t limit customers to only one or two payment options, such
as PayPal only, or only Visa and MasterCard but not American Express. You are only hurting
yourself by not making as many payment options as possible available to your customers.

Compiled By: Ajay Shah 5

Associate Professor, PU