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Indira Gandhi tional Open University E-Commerce
School of Computer and Information Sciences

E-Commerce Concepts and Models 1

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"Education is a liberating force, and in

our age it is also a democratising force,
cutting across the barriers of caste and
class, smoothing out inequalities imposed
by birth and other circumstances,"

-Indira Gandhi
 ignou BCS-062
THE PEOPLE'S E-COMMERCE
UNIVERSITY

Indira Gandhi National Open University

School of Computer and Information Sciences

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Block

1
E-COMMERCE CONCEPTS AND MODELS
UNITl
Introduction to E-Commerce 5
UNIT 2
Elements o('.E-Commerce 15
UNIT 3
Electronic Data Interchange and Electronic Payment
Systems 25
UNIT 4
Introduction to E-Commerce Models 33

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 PROGRAMME DESIGN COMMITTEE
Prof. Manohar Lal
SOCIS, IGNOU, New Delhi
Prof. H. M. Gupta
Dept. of Elect. Engg.
1fT, Delhi
Prof. M. N. Doja, Dept. of CE
Jamia Millia, New Delhi
Prof. C. Pandurangan
Dept. ofCSE, lIT, Ch.ennai
Prof. I. Ramesh Babu
," Dept. ofCSE
Acharya Nagarjuna University
Nagarjuna Nagar (AP)
Prof. N. S. Gill
Dept. of CS, MDU, Rohtak
Prof. Arvind Kalia, Dept. of CS
HP University, Shim la
Prof. Anju Sahgal Gupta
SOH, IGNOU;New Delhi
Prof. Sujatha Verma
SOS, IGNOU, New Delhi
Prof. V. Sundarapandian
IlTMK, Trivandrum
Prof. Dharamendra Kumar
Dept. of CS, GJU, Hissar
Prof. Vikram Singh
Dept. of CS, CDLU, Sirsa
Sh. Shashi Bhushan
Associate. Prof.
SOCIS, IGNOU, New Delhi
Sh. Akshay Kumar
Associate Prof.
SOCIS, IGNOU, New Delhi
Dr. P. K. Mishra, Associate Prof.
Dept. of CS, BHU, Varanasi
Dr. P. V. Suresh, Associate Prof.
SOCIS, IGNOU, New Delhi
Sh. V. V. Subrahmanyam
Associate Prof.
SOCIS, IGNOU, New Delhi
Sh. M. P. Mishra, Asst. Prof.
SOCIS, IGNOU, New Delhi
Dr. Naveen Kumar, Reader
SOCIS, IGNOU, New Delhi
Dr. Subodh Kesharwani, Asst. Prof.
SOMS, IGNOU, New Delhi

COURSE CURRICULUM DESIGN COMMITTEE

Sh. Shashi Bhushan Prof. A. K. Tripathi Sh. Akshay Kumar
SOCIS, IGNOU, New Delhi SOCIS, IGNOU, New Delhi
Dept. of CSE, IIT(BHU),
Dr. P. V. Suresh Varanasi Prof. Manu Sood,
SOCIS, IGNOU, New Delhi Dept. of CS
Dr. S. R. N. Reddy
HP~'yniversity
Sh. V. V. Subrahmanyam Dep!. ofCSE
Shim la
SOCIS, IGNOU, New Delhi IGDTUW
New Delhi Sh. M. P. Mishra
Dr. Naveen Kumar
SOCIS, IGNOU, New Delhi
SOCIS, IGNOU, New Delhi

SOCIS FACULTY

- Sh. Shashi Bhushan,

Sh. Akshay Kumar
Associate Professor
Sh. M. P. Mishra
Director Prof. Manohar Lal
Sh. V. V. Subrahmanyam
Associate Professor
Dr. Sudhansh Sharma
Dr. P. V. Suresh
Associate Professor
Dr. Naveen
Reader
Kumar

Asst. Professor Asst. Professor

PREPARATION TEAlVl
Content Editor: Block Writcrs: Unit 3
Dr. P. V. Suresh
Unit 1 Sh. Shailesh Kumar Shiva
School of Computer and Sh. T. Lakshmana Kumar Kumar, Research Scholar
Information Sciences Project Manager, Sri Parimala (SOCIS, IGNOU) and
IGNOU, New Delhi Software Services Senior Technology Architect
(Infosys Technologies)
Language Editor: Unit 2
Sh. P. Lakshmi Kantham Ms. Suman Madan,
Unit 4
(Retd.), Tenali Faculty, JIMS, GGSIPU Ms. Neelam Kumari,
New Delhi Consultant, NCERT
New Delhi

Course Coordinator: Dr. P. V. Suresh, sons. IGNOU, New Delhi

PRlNT PRODUCTION
Mr. Rajeev Girder Mr. Tilak Raj
Asst. Registrar (Pub.) Section Officer (Pub.)
MPOO-TGNOU MPDD-IGNOU
October, 20 l.t. (Reprint)
© lndira Gandhi National Open University, 2014
ISBN -97S-~ 1-266-6669-0
All rights reserved. No part ofthis work may be reproduced in any form. by mirneograph or any
ether means, without permission in writing from the Indira Gandhi National Open University.
Further information on the Indira Gandhi National Open University courses may be obtained
from the University's office at Maidanl Garhi, New Delhi-Il 0068.
Printed and published on behalf of 'the Indira Gandhi National Open University,
New Delhi by the Registrar, MPDD.
Printed at: Public Printing (Delhi) Service, C-80 Okhla Industrial Area, Phase I. N.D-20

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 COURSE INTRODlJCTION
Thi~ course introduces the learner to the subject ofE-commerce.
With the increase in usage ofInternet, there was a shift from the way business is done in
traditional manner. People who have access to Internet are performing transactions using
it, wherever possible. Due to the shift to usage of Internet, e-commerce has gained
prominence. Companies started deploying their business activities through Internet to
expand the reach globally. Due to e-commerce, it has become possible to reduce the
involvement 'of number of entities when compared to traditional way of doing business
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thus leading to reduction in the cost. People started saving their time and money due to
e-cornmerce, Moreover, it also provides large number of options as well as more outlook
due to presence of online reviews, price comparisons, etc. Advent of e-commerce had
lead to better quality of life as it also leads to more green environment. There are e..shops
which deliver goods physically' and accept payment on delivery. Also, there are e-shops
which accept payment online. Due to the advent of e-commerce, Internet security has
come into focus as any threats due to Internet are to be immediately viewed Iro-n the
perspective of e-comrnerce also. Sensitive information is transmitted across networks
during e-oommerce transactions. Information related to credit/debit cards, ban! :;"lhll::.
<1'

passports, user names, passwords are some of the examples. There is need to c ,;

security in transmission during e-cornmerce transactions. Hence, different :;\;., ','

related technologies such as SSL are deployed. Sti11,there were several inst.m, vs of
breaches of security coming to fore due to e-commerce transactions. Due to advent of
e-commerce, B2B, etc. has become reality.
Several practices had emerged due to e-commerce. Shops like Amazon have become
leading companies in Globe due to their e-commerce practices. Globally, Countries
started developing Information Technology Acts as the existing acts do not have
provisions todeal with issues that arise due to deployment ofInfonnation Technology.
Increase in the number ofcyber crimes has been reported. At the same juncture, there
was a revolution in mobility related technologies and consequently, number of persons
using mobile devices had increased rapidly. Due to advent of m-commerce, businesses
started expanding to mobile devices and increasing number of persons are using mobile
devices such as mobile phones, tablets etc. to perform transactions.
This course consistslof'two blocks:
Block 1 deals with the concepts related to e-commerce and associated models, It covers
various elements of e-commerce, EDI and EPS.
Block 2 showcases practices in e-commerce. It introduces e-businesses such as Internet
based bookshops. It also covers security issues. It concludes with an introduction to
m-commerce and a case study,

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 BLOCK INTRODUCTION
This block introduces learner to e-commerce, its elements, models and EDI (Electronic
Data Interchange) and EPS (Electronic Payment Systems). .
E-commerce stands for Electronic Commerce and caters to trading in goods and
services through the electronic medium such as desktop computer, Laptop, mobile with
the help of Internet. It involves the use ofInformation and Communication Technology
(lCT) and Electronic Funds Transfer (EFT) in making commerce between consumers and
" organizations, organization and organization or consumer and consumer. With the
growing use of Internet worldwide, Electronic Data Interchange (EDI) has also increased
in larger amounts and so has flourished e-commerce with the prolific virtual Internet
bazaar inside the digital world which is termed as e-maIl.
E-commerce is growing at a record pace and many businesses are trying to setup store
fronts in cyberspace and are targeting at selling stuff on the web. The term E-commerce
means using Internet for sale and purchase of goods, pre and after sale services and
maintain long term relationships with customers. The basic elements required in
e-commerce are: e-commerce website, a server, users and proper Internet connection.
Basically an EDI is a structured, machine readable document used in business exchanges.
EmployingEDIs in business functions would reduce the overall transaction time and
automates the process. Some of the examples ofEDI include purchase orders, sales
orders, invoices, bills, etc. EDls are pre-dominantly used in B2B scenario.
Any exchange of commodity made through electronic medium is called e-commerce.
E-commerce is available to the user through EFT, supply chain management, Internet
marketing, online transaction processing, EDI, inventory management systems, and
automated data collection systems. Modem e-commerce typically uses the World Wide
Web. E-commerce and e-business are interrelated. Through e-commerce, technology
enabled and technology mediated transactions happen.
This block consists of four units and is organized as follows:
Unit 1 introduces e-commerce. It defines e-commerce and m-commerce along with their
scope. It also covers e-commerce trade cycle, electronic markets, internet commerce, and
benefits and impact of e-commerce.
Unit 2 deals with elements of e-commerce. It covers e-visibility, e-shops, elements
involved in delivery of goods and services, online payment, as well as e-commerce
security.
Unit 3 deals with EDI and EPS. Apart from introducing EDI and EPS, it covers EDI's
layered architecture, EDI technology and standards, EDIcommunications and
transactions as well as benefits and applications ofEDI. With respect to EPS, it explains
e-credit accounts and e-money.
Unit 4 introduces models of e-commerce apart from explaining inter-organization and
intra-organization e-commerce.

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 UNIT 1 INTRODUCTION TO E-COMMERCE
Structure
1.0 Introduction
1.1 Objectives
1.2 Definition of E-commerce
1.3 Scope of E-commerce

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" 1.4 Definition of M-commerce
1.5 Scope of M-commerce
1.6 E-commerce Trade Cycle
1.7 Electronic Markets
1.8 Internet Commerce
1.9 Benefits and Impact of E-commerce
1.10 Summary
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1.11 Ans~ers to Check Your Progress
1.12 Further Readings

1.0 INTRODUCTION
E-commerce stands for Electronic Commerce and caters to trading in goods and
services through the electronic medium such as desktop computer, Laptop, mobile with
the help oflnternet. It involves the use ofInformation and Communication Technology
(ICT) and Electronic Funds Transfer (EFT) in making commerce between consumers and
organizations, organization and organization or consumer and consumer. With the
growing use of Internet worldwide, Electronic Data Interchange (EDI) has also increased
in larger amounts and so has flourished e-commerce with the prolific virtual Internet
bazaar inside the digital world which is termed as e-mail.
We now have access to almost every need of our daily lives at competitive prices on the
Internet. No matter one is educated or illiterate, an urban or a countryman, in India or in
U.K; all you need is an Internet connection and Net Banking/Credit CardlDebit Card. In
fact, some companies also do Cash On Delivery (COD). With e-commerce then, you can
buy almost anything you wish for without actually touching the product physically and
inquiring the salesman. From pizza to pair of shoes, we have everything on sale on the
Internet available with tempting offers. The most popular websites are Snapdeal.com,
Amazon, eBay, Naaptol, Myntra, etc.

1.1 OBJECTIVES
After going through this unit, you should be able to know the

• terminology of e-commerce,

• advantages and limitation of e-commerce,

• terminology of m-commerce, and

• impact of electronic markets on the society.

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 E-Commerce Concepts
and Models 1.2 DEFINITION OF E-COMMERCE
Vladimir Zwass defined E-commerce' as sharing of business information, maintaining
!-'usiness relationships, and conducting business transactions by means of
, .iecommunications networks, .

He pointed out that e-commerce includes not only buying and selling goods over Internet,
but also various business' processes within individual organizations that support the goai.
Four different types of information technology are converging to create the discipline of
e-commerce:

• E-mail and fax

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• Sharing a corporate digital library
• EDI and EFT
• Electronic publishing to promote marketing, advertising, sales, and customer
support

DanielMinoli and Emma Minoli gave their view of e-commerce as follows:

E-commerce is the symbiotic integration of communications, data management, and
security capabilities to allow business applications within different organizations to
automatically exchange information related to the sale of goods and services.
Another Definition for E-commerce is given below:
"A type of business model, or segment ofa larger business-model, that enables a firm or
individual to conduct business over an electronic network, typically the Internet."

Electronic commerce operates in all four of the major market segments: business to
business (B2B), business to consumer (B2C), consumer to consumer (C2C) and
consumer to business (C2B). It can be thought of as a more advanced form of mail-order
purchasing through a catalog. Almost any product or service can be offered via
e-commerce, from books and music to financial services and flight tickets.

1.3 SCOPE OF E-COMMERCE

E-commerce encompasses one or more of the following:

• EDI
• E-mail
• Shopping on World Wide Web

• Product sales and services on the Web

• EFT
• Outsourced Customer and Employee care operations
The advantage of e-commerce is to transact online. Transaction through online can be
either on products or services. Most ofus are aware of buying products online through
some sites like e-bay or amazon.com. Almost everything from gym equipment to laptops,
from apparels to jewelries, is purchased online in this age 'Ofe-commerce. While these
arc products, people are also buying services online. Consultants to business lawyers are
offering their services online to their potential clients.
" -tomers are also eager to transact on line, as it is much hassle-free. Moreover, there is
»gh freedom offered to them to go online, look tor a product, and 'Compare a few
'le ef different models, along with their prices. The bonus is that the customer can also
- ~ to other online product review sites, and discussion forums. Once the customer likes a
product after all research, s/he can order for it online. E-commerce has also made it easy
to pay. A number of methods have evolved to pay your dealers such as Credit Cards,
Debit Cards, PayPal account, Direct Online Money Transfer etc. Once the payment is
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made, the dealers dispatch the product, which reaches the doorstep of the customers Introduction to
within few days. E-Commcrcc

As business means keeping your customers happy and doing things the way they like,
businessmen are choosing e-commerce to traditional business. In fact, companies which
already exist in traditional forms are also going for the extra option of on line business for
the ease of the customers. To cite a good example here would be Wal-rnart, Although
they have huge stores, they have gone online with their business. So, even if the
customers cannot make it to their store, they can still log on and order things of their
need. Factors that encourage the businessmen include the fact they do not have to set up
a real store and spend a bulk of money for its maintenance. A real store also means
employing large number of employers, salary of which also needs to be borne by the
entrepreneur. And, of course, similar to customers, businessmen also love the idea of
receiving their payments online which is fast, hassle-free, and reliable. Figure 1.1 depicts
E-commerce work flow. .

--
Order r-e- ...,
....------, Placed Credit Card!
Shopping Debit Card!
Customer --
Cart Net Banking!COD

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c •..
Q) Q)
Vl E
!I
Payment Processed
-c_0
Q) Vl E-mail Confiiming Placement of Order
E :::l
0.<..)
:E
Cl)

E-mail for Fulfillment

Courier Picks up
Shipment ----I Warehouse I
.

Figure 1.1: E-commerce Work-Flow

The field of Eccommerce is very broad. There are many applications ofE-commerce such
as home banking, shopping in electronic malls, buying stocks, finding a job, conducting
an auction, collaborating electronically with business partners around the globe, and
providing customer service. The implementation of various E-commerce applications
depend on four major support categories such as people, public policy, and
marketingladverti ing and supply chain logistics. In addition, there has to be
infrastructure support.

1.4 DEFINITION OF M-COMMERCE

M-commerce stands for Mobile Commerce. Sometimes, it is also referred to as Mobile
E-commerce as its transactions are basically electronic transactions conducted using a
mobile terminal and a wireless network. Mobile terminals include all portable devices
such as mobile phones, PDAs, as well as devices mounted on the vehicles that are
capable of accessing wireless networks and perform m-commerce transactions. One
definition of m-commerce describes it as any transaction with a monetary value that is
conducted via a mobile telecommunications network. Some other definitions tend to
ignore Telematics, an important feature of m-commerce. For instance, m-commerce is
the buying and selling of goods and services, using wireless hand-held devices such as
mobile telephones or persona/data assistants (PDAs).
M-commerce is also defined as use of information technologies and communication
technologies for the purpose of mobile integration Of different value chains and business
processes, and for the purpose of management of business relationships.
Another definition of m-commerce is the delivery of trusted transaction services over
mobiledevices for the exchange of goods and services between consumers, merchants
and financial institutions.

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 E-Commerce Concepts
and Models 1.5 StOPE OF M-COMMERCE
Mobile Banking: This application makes it possible to perform bank-related transactions
such as checking account status, transferring money and selling stocks, via mobile
devices, independent of the current user location,
Mobile Entertainment: This application offers services that provide entertainment
through mobile devices such as ring tones, music and videos, gaming and chatting etc.
Mobile Information Services: This term refers to mobile services that provide
subscribers with content that provides information. Examples of such services are news
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updates of any nature (finance, politics, sport, etc.), travel information, access to search
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engines and Mobile Office (e-mails, appointments, etc.).
Mobile Marketing: This term refers to services based on mobile communication
'tephnologies that provide firms with new and innovative instruments to increase sales,
. win and retain customers, improve after-sales service, build and sustain a positive and
modem image/brand and carry market research.
Mobile Shopping: This application bundles services that allow for of transactions
.. involving purchase of goods using mobile devices. The user can purchase products by
choosing them from a catalogue accessible from a mobile device .
MObile Ticketlng: All services that must be paid for, before a lawful utilization can take
place, are suitable for Mobile ticketing such as travelling in public transport, entry to a
cultural event or cinema. This application ensures that the user can purchase a right to
utilization/ticket with a mobile device, replacing the conventional paper ticket. The ticket
is sent in digital form to the mobile device.
Telematics Services: Telematics is an artificial term that refers to innovative
technologies that link telecommunication technologies with informatics. The transport
segment has been the primary area of this application, which is also known as Intelligent
Transport System (ITS). The main services are for navigation systems, remote diagnosis
as well as access to other mobile applications such as mobile entertainment, mobile
content/office, mobile banking and mobile shopping.
cr· Check Your Progress 1

(1) Buying and selling goods over the Internet is called -,-_
(2) The use of E-commerce is growing rapidly (True/False).
(3) Any transaction with a monetary value that is conducted via a mobile
telecommunications network is known as _

1.6 E~COMMERCE TRADE CYCLE

A trade cycle is a series of exchanges that take place between a customer and supplier
when a commercial deal is executed. A general trade cycle consists of the following
phases:
Pre-sales (finding a supplier and agreeing the terms), Execution (selecting goods and
taking delivery), Settlement (Invoice, if any and payment) and After-sales (following up
complaints or providing maintenance). .
For business-to-business transactions, the trade cycle typically involves the provision of
r credit with execution preceding settlement whereas in C2B transactions, these two steps
are typically coincident. The nature of the trade cycle can indicate the e-commerce
technology most suited to the exchange.
EDI (Electronic Data Interchange) is the e-commerce technology appropriate to these
exchanges. The trade cycle includes the following operations: search, negotiate, order,
deliver, invoice, payment and after-sales.
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Consumer transactions tend to be once-off (or at least vary each time) and payment is I" •• «ductiun to
E-Commerce
made at the time of the order. The trade cycle in the case of retail exchanges is different
and includes the following operations: search, order, payment, deliver and after-sales.

1.7 ELECTRONIC MARKETS

The use of the Internet and Electronic Commerce in the late '90s caused the
disappearance of intermediaries between the buyer and seller. A seller could sell his
products and services directly to a buyer without an intermediary in between. With the
advances in the development ofE-commerce technologies, new types of intermediaries
were established. These new intermediaries were offering new value added services. New
intermediaries attract a lot of new buyers and sellers with new services that support the
trading process between them. This new way of doing business describes the
e-marketplace or simply electronic markets, which represent one of the new business
models developed in the late '90s. The e-marketplace is the result of using innovative
technology in business processes.

Doing business on the e-marketplace enables sellers to enter new markets, to find new
buyers, and to increase sales. On the other side, the e-marketplace gives access to a
broader range of products and services offered by sellers to buyers. A buyer has the
option to quickly compare various offers by price and quality measures. The
e-marketplace services support the exchange of large amounts of data about the supply
and demand between the buyer and seller, and the implementation of business •
transacti ons.

There are many different business models of e-marketplaces, In practice, we can find a
lot of evidence that the e-marketplace is supporting many different processes between a
buyer and a seller. Some e-marketplaces support only the aggregation of supply and
demand, and the searching and matching of buyers or sellers. In addition, many
e-marketplaces support different types of auctions and negotiations. On the other hand,
not many e-marketplaces support the entire trading process where business services such
as contracting, finances, logistics, insurance, legal, payments and other services are
needed.

The e-marketplace is a virtual marketplace where buyers and suppliers meet to exchange
information abo t product and service offers, and to negotiate and carry out business
transactions. Furthermore, in the age of Internet, and with the emergence of new
communication technologies, the e-marketplace is a web based information system,
where multiple suppliers and multiple buyers can undertake business transactions through
Internet. The e-marketplace uses Internet technologies and standards to distribute product
data and to facilitate online transactions.

An intermediary can provide the following four important mechanisms that cause
marketplaces to add value:

• Matching buyers and sellers to negotiate prices on a dynamic and real-time

basis,

• Ensuring trust among participants by maintaining a neutral position,

• Facilitating market operations by supporting certain transaction phases, and

• Aggregating a large number of buyers and sellers together.

Intermediary functions may support a multiplicity of activities, including auctions,

payments, logistics, legal, consulting, or may support inter-company communications
through third party inter-organizational systems- and related systems.

The success of the e-marketplace depends on the net benefit to buyers and suppliers.
From the viewpoint of transaction cost economics, helps to reduce transaction costs,
risks, and coordination costs by the utilization of e-marketplaces.
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E-Commerce Concepts In order to understand strategic implications of the e-marketplace, we must focus on the
and Models following characteristics:

• An e-marketplace system can reduce customers costs for obtaining

information about the prices and product offers of alternative suppliers as
well as suppliers costs for communicating information about their prices and
product characteristics to customers,

• The benefits toindividual participants in an e-marketplace increase as 1L.0i'e

organizations join the system ."

• The e-marketplace can impose significant switching costs on its participants.

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• The re-marketplace itypi,caUyrequires large capital investments and offers
sabsraetialeconomies of scale and scope,

• Potential participants on the e-marketplace face substantial uncertainty with

regard to the actual benefits of joining such a system. Occasionally, this
uncertainty remains even after an organization joins the system,
We may divide e-marketplaees into horizontal and vertical marketplaces. A horizontal
marketplace addresses a 'specific function (e.g. human resources, office 'Supplies) and
serves a wide range of industries, while a vertical marketplace focuses on a wide range of
functions 1na specific industry, such as c-iemicals, steel or automotives,
We may also classify marketplaces into four categories:

• MRO (Maintenance, Repair, Operations) hubs are horizontal markets that

enable systematic sourcing of operating inputs,

• Yield managers are horizontal markets that enable spot sourcing of

operating inputs,

• Exchanges are vertical markets that enable spot SOUTCingof manufacturing

:inputs, "and

• Catalogue hubs are vertical markets-that enable systematic sourcing of

manufacturing inputs.
As previously mentioned, an intermediary provides different services to buyers .and
suppliers on the e-rnarketplace. The most commonly used services on today's
-e-marketplaces are related to maintaining a product e-catalogue, negotiating support and
performing onlineaacuons. The aim of e-marketplace service providers 1:-- to provide a
wide range of services to all the participants on the e-marketplace, Among others. these
services indude product developmeet, qogasties and insurance services, payments and
other similar services, There are not many marketplaces operating today that oifer such a
wide range of services, Most of them are oriented in providing services of matching
buyers and sellers. negotiation and auction services,
The e-marketpJaces are new business models that are developing and changing vel)'
rapidly. Thereforc.jr is important that the business environment encourages organizations
'to use 'such models to gain a competitive advantage iu the global market, Governments
need to play a key role in such activities,

1.8 INTERNET COMMERCE

t1.-.• Interne. commerce, we mean the use oHr;terl.'iet f.'r pur.cl'F S' al;;;I ",!. vf~o",ls,
, ·~--vioes,il1cJndi"1gservice and support after sdJe",.t~·:\·i!letCOP,JJlle>,ce ht'~nt:,';;:,Gm,' new
" ·~.nolo:gyaud new capabilities to business, In shOlt, it IS nothing h;!~,commercial
'tF'--1tj,!S assc iated with the Internet. These are divided into two main categories as
.;-r.en below.
Transplanted Real-World Business Models: Business activities which occur naturally
in real-world and have been transplanted onto the Internet.
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 Introduction to )
The following are some of the business models that fall into the above mentioned
I
E-Commerce
category. !

• Mail-Order Model: A web site shop front is employed to sell physical

goods which are then posted or delivered (Amazon.corn).

• Advertising Based Model: Where advertising revenues support the

operation of a free service (Yahoo.com).
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• Subscription Model: Users subscribe for access to a database of digital
products; well suited for combination with digital delivery
(mtormationweek.corn).
"

• Free Trial Model: Software is available for free download or distribu .ed on
CD-ROM but will only work for a limited period or will not be fully
, functional until a fee is paid.

• Direct Marketing Model: The use of e-mail based direct marketing (often
ends up as spam).

• Real Estate Model: Sell web space, domain names and e-mail addresses.

• Incentive Scheme Models: Opportunities to win prizes or to secure "free"

or inexpensive goods or services are used to entice people to accept
advertising or to provide personal information.

• B2B: Businesses transact between corporate entities via the Internet,

including financial, research, legal and employ~nent services.
Apart from above mentioned models, the combination of abo,ve mentioned models also
exist.

Native Internet Business Models: Business activities that have evolved in the Internet
environment and are native to it.
The following are some of the business models that fall into above mentioned category:

• Library Model: The web site that offers free information.

• Freeware Model: It provides free software (basic versions may be free) or

. open worce software.

• Information Barter Model: Some SOli of exchange of information over the

Internet between individuals and organizations.

• Digital Products Model: Images, movies, animation, audio, text,

certificates and software will be available as products.

• Digital Delivery Model: Takes place when digital products are purchased.

• Access Provision Model: Provides access to Internet from enterprises

called Internet Service Providers (ISPs).

• Web site Hosting and Other Internet Services: Hosting web servers,
e-mail as well as URL and e-mail re-direction services.

1.9 BENEFITS AND IMPACT OF E-COMMERCE

The following are the benefits of E-commerce to organizations:

• Expands a company's marketplace to national and international markets.

With minimal capital outlay, a company can quickly locate more customers,
the best suppliers, and the most suitable business partners worldwide,

• Enables companies to procure material and services front 01.1.'r companies,

rapidly and at less cost.

11

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 E-Commerce Concepts
and Models
• Shortens or eliminates marketing distribution channels, making products
cheaper and vendor's profits higher.

• Decreases (by as much as 90 percent) the cost of creating, processing,

distributing, storing, and retrieving information by digitizing the process.

• Allows lower inventories by facilitating pull-type supply chain management.

This allows product customization and reduces inventory costs.

• Reduces telecommunication costs as Internet tools are used.

• Helps small businesses compete against large businesses.

"

• Enables a very specialized niche market.

The following are the benefits ofE-commerce to customers:

• Provides products at reduced cost as well as services by allowing consumers

to conduct quick online comparisons.

• Gives more choices to consumers than they could locate otherwise.

• Enables customers to shop or make transactions 24X7 from any location.

.. • Delivers relevant and detailed information .

• Enables consumers to get customized products from PCs to Cars at

competitive prices. "- .

• Makes it possible for people to work and study at home.

• Makes electronic auctions possible.

• Allows consumers to interact with electronic communities and to exchange
ideas and compare experiences.
The following are the benefits of E-commerce to society at large:

• Enables individuals to work from home and to do less travelling, resulting in

increased productivity.

• Allows merchandise to be sold at lower prices, thereby increasing people's

standard of living.

• Enables people in developing countries and rural areas to enjoy products and
services that are otherwise difficult to buy. This includes opportunities to
learn and earn college degrees, or to receive better medical care.

• Facilitates delivery of public services, such as government entitlements,

reducing the cost of distribution and chance of fraud, and increasing the
quality of social services, health care, and education.

1.9.1 Impact of E-commerce

E-commerce and E-business are not solely the Internet, websites or dot com companies.
It is about a new business concept that incorporates all previous business management
and economic concepts. As such, e-business and e-commerce impact many areas of
business and disciplines of business management studies.
The following are some of the areas which have an impact ofE-conunerce:

,. • Marketing: Issues of online advertising, marketing strategies, consumer

behaviour and cultures. One of the areas in which it impacts particularly is
direct marketing. In the past, this was mainly door-to door, home parties and
mail order using catalogues or leaflets. This moved to telemarketing and TV
selling with the advances in telephone and television technology and finally
developed into e-marketing spawning 'e-CRM' (Electronic Customer
Relationship Management), data mining etc. by creating new channels for
direct sales and promotion.
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 • Computer Sciences: Development of different technologies and languages Introduction to
E-Commerce
to support e-commerce and e-business. Linking front and back office legacy
systems with web based technologies is an example.

.• Finance and Accounting: Online banking has become popular with

complex transactions becoming possible without physically going to bank.

• Economics: There was a positive impact of e-commerce on local and global

economies leading to understanding the concepts of a digital and knowledge
based economy.

.
" • Production and Operations Management: The impact of on-line
processing has led to reduced cycle times. It takes seconds to deliver
digitized products and services electronically; similarly the time for
processing orders can be reduced by more than 90 per cent from days to
minutes. Production systems are integrated with finance marketing and other·
functional systems as well as with business partners and customers.

• Production and Operations Management (Manufacturing): Moving

from mass production to demand-driven, customer pull rather than the

, . manufacturer push of the past has become possible. Web based Enterprise
Resource Planning (ERP) systems can also be used to forward orders
directly to designers and/or production floor within seconds, thus cutting
production cycle times by up to 50 per cent, especially when manufacturing
plants, engineers and designers are located in different countries. In sub-
-assembler companies, where a product is assembled from a number of
different components sourced from a number' of manufacturers,
communication, collaboration and coordination are critical. So, electronic
bidding can yield cheaper components and having flexible and adaptable
procurement systems allow for rapid changes at a minimum cost leading to
minimized inventories and savings.

• Management Information Systems: There has been an impact on analysis,

design and implementation of e-business systems within an organization as
wen as issues of integration of front end and back end systems.

• Huma Resource Management: There has been an impact leading to

, OlllJ.,nefecruitment and working from home.

• Business Law and Ethics: There has been an impact on different legal and
ethical issues that have arisen as a result of a global virtual market and on
issues such as copyright laws, privacy of customer information, legality of
electronic contracts, etc.

rJr Check Your Progress 2

(l) EDI stands for -----

(2) is a virtual marketplace where buyers and suppliers meet to

exchange information about product and service.

(3) Traditional commerce helps small businesses compete against large

businesses (TruelFalse).

1.10 SUMMA~Y
In this unit, we discussed E-commerce starting from the definition to scope, its benefits
and impact on the society as a whole. M-commerce is also discussed very briefly. The
trade cycle of E-commerce is explained. The virtual market place, also known as
E-markets, and their characteristics are discussed. Commercial activities associated with
Internet such as Internet Commerce are discussed.
13

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 E-Commerce Concepts
and Models 1.11 ANSWERS TO CHECK YOUR PROGRESS
Check Your Progress 1
(I) E-commerce
(2) True

(3) M-commerce
Check Your Progress 2

"
(J) Electronic Data Interchange
(2) E-Market
(3) False

1.12 FURTHER READINGS

References
1.
E-commerce 2013 Laudon, Kenneth, Traver, Carol Guercio, Pearson Edition.
2. Introduction to Electronic Commerce (3rd Edition) Turban, Efraim, King, David,
Lang, Judy, Prentice Hall.
3. Electronic Commerce: Structures and Issues by Vladimir Zwass; Published in
International Journal ofE-commerce (Special section: Diversity in electronic
commerce); Volume 1, Issue 1, September 1996.
4. Web Commerce Technology Hand Book by Daniel Minoli and Emma Minoli;
Computing McGraw Hill; 1997.
5. http://seacorn.cs.ucy.ac.cy/par ;;rs/files/m-commerce- final revised.pdf
6. http://wiki.answers.com
7. http://en.wikipedia.org/wiki/E-commerce

14

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 UNIT 2 ELEl\lENTS OF E-COMMERCE
Structure
2.0 Introduction
2.1 Objectives
2.2 E-Visibility
2.3 E-Shops
"
2.4 Delivery of Goods and Services
2.5 Online Payments
,
2.5.1 Credit Cards
2.5.2 Debit Cards
2.5.3 Smart Cards
2.5.4 EFT (Electronic Fund Transfer)
2.5.5 PayPal

2.6 After Sales Service

2.7 E-commerce Security
2.7.1 Digital Certificate
2.7.2 SSL

2.8 Summary
2.9 Answers to Check Your Progress
2.10 Further Readings

2.0 INTRODUCTION
E-commerce is growing at a record pace and many businesses are trying to setup store
fronts in cyberspace arid.are targeting at selling stuff on the web. This unit introduces the
ways of making your presence felt in cyberspace. The term E-commerce means using
Internet for sale and purchase of goods, pre and after sale services and maintain long term
relationships with customers. The basic elements required in e-commerce are:
e-commercc website, a server, users and proper Internet connection. To sustain in online
business, any organization should concentrate on following primary features:
• Allow buyers to inquire about products, review products and service
information, place orders, authorize payment, receive both goods and
services online.
• Allow sellers to advertise products, receive orders, collect payments, deliver
goods electronically, and provide ongoing customer support.
• Allow financial organizations to make and accept secured payment online.
• Allow sellers to notify logistics organization.
There are more features which are secondary in nature. They are given below.
• With the increase in wireless Internet technology, many online customers
prefer to shop using their mobile devices than their desktops. To adapt to
this change, experts have had to develop a more mobile responsive approach
to brand website design.

• The longer the time web page takes to download, the higher the chances that
the customers will leave the site. Thus a minimalist layout solves
the problem of page load time. IS

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 E-Commerce Concepts Concentrate on trust building features like: Brand and merchants reputation, experience
and Models in the offline world, interface design and ease of navigation, use of native languages by
the website, customer service contact numbers, links to trusted companies (for small or
web based merchants), contractual terms and conditions, clear pricing (including delivery
costs, taxes, etc.), clearly stated return policy (procedure, cost, reimbursement), ability to
back-out ofa transaction, variety of payment methods with different risk levels for
consumers (cash on delivery, credit card, etc.), etc.

2.1 OBJECTIVES
"
After going through this unit, you should be able to

• learn the ways to increase visibility of your online business,

• know different ways to pay online,

• know the needs of e-shops,

• learn the delivery and after-sales issues related to e-commerce, and

.. • know the issues related to secure transactions.

2.2 E-VISIBILITY
Being able to stand out and getting customers is very challenging task in the ever
growing global market when too many e-commerce sites are competing for the same
target customers. The following are some of the strategies to increase e-visibility of your
e-commerce website:

• Increasing traffic: It is essential for your site to regularly post on social .

networking sites. It is paramount to create and maintain your brand
positioning in order to survive. It is essential to remember that anything out
of sight of customer will be out ofhislher mind. This can be improved by
taking the following measures:
(i) Uploading contents like special offers, news, pictures, phrases, any
eye catering information for the regular followers.
(ii) Knowledge about competitions, doing research and checking what the
competitors are uploading, their offers and number of posts are they
doing.

• Easy URL: The website URL must be simple and catchy so that can be
easily remembered. At the same time, name should be sensible that it can be
guessed and easily remembered by users.

• Adding icons of social networks: It helps user/followers and other potential

customers to know about your site and business.

• Advertising: Word of mouth marketing is more powerful than ever but even
the conventional way of advertising using media such as TV, newspapers,
etc. In fact, they play significant role in increasing visibility. The consumers
have always trusted recommendations and advice from friends and peers
more than they do on brand advertisement. So taking advantage of the
,. power of supporters of your brand can also be useful.

• Social empire optimization: It is a process of imposing the visibility of

website in the search engine's search results. The higher appearance of your
website in the search engine, the higher the probability of increase of
number of custornei .

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The following are some of the techniques that need to be followed to improve visibility: Elements of
E-Commerce
• Optirnizing the contents of website.

• Including list of key words related to your work on all your pages.

• . Using buttons of social networks on your website.

Search engines are classified into two categories.

• Crawler based search engine: These search engines called robot or bat,
generally index sites based on the content and links to your website. Google
and Alta vista are examples. The exact method of ranking the website by
crawler based search engine is kept confidential as rules keep on changing
., with time .

• Human powered directories: These are actually compiled by human

reviewers who examine and evaluate description of website and then they
rate the contents using their own criteria. Normally, this type of combination
is done for listing by paid search engines.

• Link popularity: Link popularity is a key factor for increasing ranking of

web pages. It refers to the number and quality oflinks that point to website.

2.3 E-SHOP
E-shop is also referred to as e-website or virtual store. It allows the customers to purchase
goods from various sellers using Internet. E-shop can be of any type (B2B, B2C, C2C)
and size. The aim of e-shop is to provide a global, reliable, 24 x 7 web based effective
sales management system. The e-shop interface has following features:

• Product tree: It helps users in finding necessary product(s).

• Tables: User can easily manage the table data such as sorting, filtering and
viewing table data.

E-shop has several features to ensure that customer's e-commerce experience is

comfortable and easy, efficient, dependable and secure. The following are some of the
features a e-shop:

• Ease of navi ation: Effective navigation is very important and critical for
e-shops because lost visitors will result in lost sales. Large sites have huge
range of products and have to be more careful as finding a product of choice
is a big task. Sufficient user testing will be extremely useful for identifying
potential navigational issues.

• Shopping cart, login and search options: An e-shop without these features
is of no use. Many e-shops provide private accounts to customers so that
they can check their order history. Also, such customers get special discount
offers or can participate in different promotions or sale. Search options are
essential for finding suitable products for customers by customers,
specifically in large websites.

• Deals, freebies and free shipping: people generally tend to buy more
during sales and discounted periods. Some are also attracted by free
shipping. So making eye-catching banners with discount offers on the upper
part of home page of e-shop website will lead to increase in sales.

• Payment system Icons: E-shops have many customers from round the
globe and each have their own preferred payment system ranging from
credit & debit card, gift vouchers and cash on delivery, etc. These options
always display the delivery and after sales terms and conditions.

• Links from social media: Almost 30% of online purchases are

accomplished after surfing through social media sites such as Twitter and 17

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E-Commerce Concepts Face book. They are good options as customers are inclined by public
and Models opinion also,

• Phone numbers and online chats: The customer help line numbers and
online chat with customers to clear queries are highly appreciated forms of
value added customer service since E-shops are working 24 x 7 and
customer service can solve majority of pre-sales and after sales questions.

• Store finder: This feature is useful and must for E-shops that have wide
dealer network. Many international customers prefer to visit website to find
nearest branch as well as for information but prefer to visit nearest store
physically,
"

• Trust marks: Trust marks are small images or a logo that shows a security
guarantee .by an external party indicating that it is safe to shop onsite. Some
of these trust marks come from Verisign, TRUSTe, McAfee, etc.
Apart from trust marks, a clear design, easy menu and submenus, detailed product
descriptions and clear images of products along with user review are also very important
to build reputation of Esshops.

2.4 DELIVERY OF GOODS AND SERVICES

Delivery of products bought online is very crucial a~.::!complex as multiple layers of
contracts are involved. The delivery value chain may have (he involvement of the
. following groups of stakeholders:

• E-shoppers: buy products and delivery services from e-retailers.

• E-Retailers: buy delivery services from delivery operators and logistics

intermediaries.

• Delivery operators: operate in.the intersections that exist between

e-shoppers, e-retailers and delivery operators.
The most important aspects of delivery for e-shopper are:

• Low cost delivery.

• Delivery at home address.

• Access to electronic delivery notifications such as SMS, e-mail etc.

• Convenient return options.

The deliveries of goods or services depend on the size of products, its nature, urgency
and the distance between the customers and retailer's warehouse. The following are some
ofthe ways:

• Home delivery: The product is shipped to the address given by customer.

The home delivery of products can be in the form of parcels or delivery by

.. hand.

Content delivery as electronic delivery: Also referred as online

distributors, they deliver media content like audio, video, games,
downloadable add-ons of other products. A lot of software is also sold
online. It can be downloaded or may be streamed. Download enables storing
the content on any storage media for faster access in future.
,.
• Drop shipping: It is the way in which the retailers transfer the customer
.order and shipment details to either the manufacturer, distributers or whole
sellers who then deliver the products directly to customers. This means that
retailer does not have to keep goods in stock and saves time, money and
space.

18

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 Elements of
• Collect your own: Sometimes, traditional customers can't trust for timely
E-Commerce
delivery of products so they pay for the product online and select a local
store using locator software and pick up the products from selected
locations. This will save time as queues are avoided at checkout time.

• Printing out: Products like insurance policies, gift vouchers, tickets etc. can
be e-mailed to customer and the print outs of products can be easily
redeemed at appropriate online or physical stores. .
er Check Your Progress 1

(1) Consumer service is usually not a problem for most electronic commerce
sites. (T IF)
"

(2) One of the best ways to accommodate a broad range of visitors needs is to
build into the website interface.

2.5 ONLINE PAYMENTS

'. The online.electronic payment is the core of e-commerceand has revolutionized the
business processing by reducing paper work, transaction costs, etc.

.
,
Debit Cards

Pay Pai

Credit Cards

Smart Cards

Figure 2.1: Types of Electronic Payment Systems

The following are some of the types of Electronic Payment Systems (EPS) (refer to
Figure 2.1):

2.5.1 Credit Cards

This is one of the frequently used modes of payment used for purchases by Internet as it
is the most convenient mode. But, it has spending limit based on users credit history.

Advantages

• Ease of use,
• Increased sales as credit card order'S MC generally bigger in nature,

• Secured than carrying cash, and

• Authentication is online. Thus, retailers are sure of payment.

Disadvantages

• Cost of credit card processing is more than cash payment in some cases,

• Phishing or Internet frauds pose a major security issue, and

• Peer to peer transaction is not possible.

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 . E-Commerce Concepts 2.5.2 Debit Cards
and ModeJs
Debit cards are quite similar to credit cards which are issued to customers by banks. The
major difference in debit card and credit card is that in case of debit card amount is
immediately deducted from account as soon as transaction is done. Like credit cards,
there is no restriction of spending limit in debit card.

Advantages
• Since amount is debited immediately from the corresponding account,
chances of becoming bankrupt are less.

Disadvantages
.
"
• Debit card security is major task, theft of user pin is much easier,

• Debit cards are pay now option i.e. no grace period of paying your amount,
and

••
,- r Sometime the extra processing charges are added when paying through debit
cards.

2.5.3 Smart Cards or Stored Value Cards

.. Smart cards are aiso similar to credit and debit cards but they have additional
microprocessor chip added to the plastic cards. This chip stores the customer details and
digital cash value in it in encrypted form and can be accessed using customer PIN only.
Smart cards are more secur- and =rovide
. faster processing.Visa
•..... Cash cardIMondex cards
are examples.

Advantages
• Atomic transactions,

• Good f;)1 very small transactions,

• , "••onymous in nature,

• Security of physical storage, and

• It is currency neutral.

"
Disadvantages
• Due to lesser transaction limit, it is not suitable for B2B or B2C, and

• Due to high interface cost, it is not suitable for C2C.

2.5.4 EFT
EFT is the computer based system that transfers the money electronically from one
account to another. Sometimes, it is also known as e-cheque. Interbank transfers are
examples of EFT.

Advantages
• Scheduled electronic payment helps in managing delayed disbursements
easily,

• The manual cheque involves the cost of ordering cheques, stamps,

envelopes, visit to bank, etc. But, EFT reduces all such administrative costs.
It requires less labor and simplifies reconciliation of bills,

• Money transfer is faster as transfer is normally done within 24 hours,

• It provides greater control to approve payment by using built in feature of

segregation of duties. Only a password is required to issue payments, and

• Process is secure when compared to cheques as no issue oflost or stolen

cheques arises.
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Disadvantages Elements of
E-Commerce
• It is limited to large companies;

• Risk is involved as the account number added may be incorrect sometimes,

and

• The transactions are irreversible.

2.5.5 . PayPal
This is also electronic payment system in which money is transferred between the
accounts. It is analogous to net banking. To use PayPal, you have to open a PayPal
account associated to your credit card or your bank account. However, a user can pay
without giving, the credit card number during the transaction. The following is the process
of validating the account particulars:

• Customer gives PayPal account number,

• PayPal transfers small amount to the account,

• Customer confirms the payment amount,

• If correct, authentication is treated as successful, and

• PayPal sends email to both the payment sender and receiver of the
transactions.

Advantages
"
• Easy to use, and

• No Credit card is required.

2.6 AFTER SALES SERVICE

Customer service is service given during and after sales. Poor or lack of service yields
negative word of mouth advertising which in turn keeps people away from your business.
The following steps can be taken to improve after sales service:

• Make delivery procedure easy: Flexible and convenient delivery methods

or returning/exchange method always makes customer happy.

• Send delivery notifications: Sending e-mails and SMS about delivery gives
a feel of personal touch to customers. Text in e-mail and SMS should be
simple and easily manageable.

• Loyalty counts: Give increased benefits to customers who are regular for
their loyalty.

• Feedback: Customer feedback AND service helps to analyze your own

business loopholes and problems. This is useful to increase customer base.

2.7 E-COMMERCE SECURITY

(

The security in e-commerce is becoming more topical part.in the ongoing success and
growth. However, Internet is an open communications network and anyone can exploit
its vulnerabilities for fraudulent gain. If the Internet is to succeed as a business and
communications tool, then the security is the most fundamental issue that needs to be
taken care of. The following are some of the security features that can be implemented
for success of e-commerce:

• Identification or Authenticatior The persons/entities with whom we are

21
communicating are really w" " . 'ly they arc.

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 E-Commerce Concepts
and Models
• Confidentiality: The content of the message or transaction is kept
confidential. It should only be read and understood by the intended sender
and receiver.

• Integrity: The content of the message or transaction is not tampered

accidentally or deliberately.

• Non-Repudiation: The sender and receiver cannot deny sending and

receiving of the message or transaction respectively.

• Access Control: Access to the protected information is only realized by the

" intended person or entity.
There are two levels for securing information over the Internet:
• The first level is issue of a Digital certificate. Digital certificates provide a
means of proving your identity in electronic transactions; much like a
driving license or a passport. With a Digital certificate, you can assure
friends, business associates, and online services that the electronic
information they receive from you is authentic.

• The second level is SSL (Secure Sockets Layer). SSL is a standard security
technology that helps in establishing an encrypted link between the server
and the client - typically a web server (e-commerce website) and a browser
(consumer side). SSL allows client/server apil1ications
..•.... to exchange sensitive
information such as credit card numbers and login credentials securely
preventing others from eavesdropping, tampering or forging the information.

2.7.1 Digital Certificates

Digital certificates are electronic files that are used to uniquely identify people and
resources over the Internet. They enable secure, confidential communications between
two parties. Digital certificates are issued by CA (Certifying Authorities), such as
VeriSign or Entrust Technologies. A CA is a trusted entity whose main responsibility is
certifying the authenticity of users. There are four types of certificates available:

• Server Certificates: These types of certificates are used by web servers to

identify the company running the server and to allow encrypted SSL
sessions and SET (Secure Electronic Transaction) processing.

• Personal Certificates: These certificates are for individuals who want to

send SIMIME messages and access web servers using SSL and SET.

• Publisher Certificates: These are used by software authors to sign and

identify their release codes so that users will know of tampering, if it
happens.

• Certificate Information: All digital certificates include information about

its owner and the CA who issued it. A digital certificate includes the
following information: Name of the certificate holder and other identifying
information unique to the holder such as URL or e-mail address, holder's
public key, name of the CA who issued the certificate, serial number of
certificate and validity period of the certificate (start and end date).
Public Key Cryptography
Digital certificates are based on public key cryptography, which uses a pair of keys
for both encryption and decryption. With public key cryptography, keys work in
pairs of matched "public" and "private" keys. The public key can be freely
distributed without compromising the private key, which must be kept by its
owner. Since these keys only work as a pair, an transaction done with confidential
public key can only be undone with the corresponding private key, and vice-versa.
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 2.7.2 SSL Elements of
E-Commerce
SSL allows the client and server to communicate with each other in' a way that prevents
the tampering of data that is being transmitted. SSL requires all information sent between
a client and-a server be encrypted (by the server) when sent and decrypted' (by the client)
when received ..SSL also has the ability to detect any tampering of data. SSL certificates
are available in two strengths: 40-bit encryption and 128-bit encryption. The higher the:
bit number, the more difficult it is to break the encryption code.

Figure 2.2 depicts the working of SSL.

."
"Request to connect

r ,
SSL certificate and Server public key

CA is validated and Session key established

Web Browser Web Server

Acknowledgement for starting session

.. Both communicate with encrypted data

!
L -----
Figure 2.2: Working ofSSL

<:r Check Your Progress 2

(I) A digital signature is _

(:!) The concept of electronic cash is to execute payment

(3) What is public key encryptionsystem?

---------.---,--------
2.8 SUMMARY
-----------------------------------------------
This unit discussed the facilities which any e-shop should have and the strategies it
should follow to increase customer-base and sustain the e-business round the globe. To
increase and sustain in e-business, the organizations are required to focus on issues like
payment methods, customer care, ease of navigation, etc. This unit also discussed about
the security of transactions in e-commerce.
-----------------------
2.9 AN~WERS TO CHECK YOUR PROGRESS
Check Your Progress 1
(1) False

(2) Flexibility

Check Your Progress 2

(I) Encrypted information.

(2) Over networks.

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 E-Commerce Concepts
and Models
2.10 FURTHER READINGS
References
1. E-commerce: Strategy, Technologies and Applications; David Whiteley; Tata
McGraw Hill.
2. Electronic Commerce: from vision to Fulfillment, E1ias M. Awad; PHI; 2006.
3. http://www.wikipedia.org

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 UNIT 3 ELECTRONIC DATA INTERCHANGE
AND ELECTRONIC PAYMENT
SYSTEMS
Structure
3.0 Introduction
.
"

3.1 Objectives
3.2 Architecture of EDI

3.3 EDI Technology a,nd Standards '.

3.3.1 ANSIX12
3.3.2 EDIFACT
3.4
If• Benefits and Applications ofEDI
3.5 Electronic Payment Systems
3.5.1 CreditlDebitJSmart Cards
3.5.2 E-credit Accounts
3.5.3 E-money

3.6 Summary

3.7 Answers to Check Your Progress

3.8 .Further Readings

3.0 INTR DUCTION

This unit provides insights into Electronic Data Interchange (EDI) and Electronic
Payment Systems (EPS).

Basically an EDI is a structured, machine readable document used in business exchanges.

Employing EDIs in business functions would reduce the overall transaction time and
automates the process. Some of the examples ofEDI include purchase orders, sales
orders, invoices, bills etc. EDIs are pre-dominantly used in B2B scenario.

EDI based Business Function

Consider the following conventional B2B scenario.

A manufacturing company generates a purchase order (PO) of materials it wants to

purchase from a business partner. The PO is typically generated using internal
systems including the inventory control systems, pricing systems and others. The
manufacturing company then transfers PO to the partner via fax or mail. The
business partner then would use its own internal systems to translate the items in
PO complying with its internal standards. After this translation and processing, the
PO transaction is finalized. Sequence of steps is depicted below in Figure 3.1.

A sample business flow for generating and receiving PO without EDI is shown in
Figure 3.1.

Bringing EDI into picture eliminates five steps in the above process right away.
Modified business function with EDI is shown in Figure 3.2.
25

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 E-Commerce Concepts
and Models Buyer initiates Buyer's Internal
PO Process ERP System

PO fed into Seller's executive

" Seller's System Processes PO

Figure 3.1 : Conventional Processing of PO

Buyer initiates Buyer's Internal PO fed into

PO Process ERP System Seller's System

Figure 3.2: Processing of PO in the era of EDI

As we can see from the process flow in Figure 3.l, there are certain manual steps
such as company synchronizing with internal systems, partner
translating/processing PO which is potentially causing delays in the overall
process. When EDI is used, the complete process can be automated and the
structured information can be exchanged between systems belonging to
manufacturing company and its business partner.

Characteristics of EDI
The main characteristics ofEDI include the following:

• Provides structured and standardized format for business transactions

such as purchase orders, sales orders, bills etc.,

6' Provides electronic exchanges of data automatically,

• Automates most of the business transactions, and

• Drastic reduction of manual errors in overall transactions and business

process.

3.1 OBJECTIVES
After going through this unit, you should be able to know

• key concepts ofEDI,

• various standards and format ofEDI,

.- .'" layered architecture ofEDI,

• electronic payment systems, and

• concepts related to credit card, debit card, e-money and e-credit,

3.2 ARCHITECTURE OF EDI

This section elaborates the concepts ofEDI with few scenarios and examples. According
to National Institute of Standards and Technology (NIST) EDT may be defined as a
computer ..to-computer interchange of strictly formatted messages that represent
documents other than monetary instruments.
26

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 It is important to note that EDI is between computers without manual intervention and Electronic Data
Interchange and
hence the term computer-to-computer is used in the definition. Similarly, strictly
Electronic Payment
formatted message indicates conformance to industry-wide standards. Svstl'nlS

EDI layered architecture essentially consists offour main layers as shown in Figure 3.3:

Application Layer

Format Layer

.
"
Data Transport Layer

t-'-------I
I. Data Connection Layer

Figure 3.3: EDI Layered Architecture

The four layers form the basic building blocks ofEDI. They are introduced below:

• Application Layer: This layer consists of business applications which use

the EDI. The applications can be internal enterprise systems and other B2B
systems. The main responsibility of these applications is to convert the.
internal documents of company in electronic format to the standard format
supported by EDI system. So, these applications act as converters in
application Layer.

• Format Layer: This layer processes the documents in EDI formats. Two
popular industry wide ED! standard formats are ANSI X12 and EDIFACT
(Electronics Data Interchange for Administration, Commerce and
Transport). More about these si, l":. ,·.dIormats 'tit; discussed els.: '\ h~Y in
this unit.

• Data Transport Layer: This layer is responsible for automatically

transferring the EDt Though e-mail is a popular format of data exche .pg::;.
there are other transportation mechanisms such as FTP, HTTP, HTTPS Dad
X.435,

• Data Connection Layer: This layer consists of enterprise network

infrastructure which is used to transport data. This includes dial-up/modem
based connections, Internet, point-to-point communication etc. Other
popular format for network infrastructure includes employing of a Value
Added N etwork (VAN) which provides an EDI account and
store-and-forward mailbox for subscribers.

3.3 EDI TECIINOLOGY A.~ STANDARDS

Though there are multiple EDI standards, we will look into two popular standards in this
section. In addition, there are other standards such as TRADACOMS (Trading Data
Communications), ODE1TE (Organization for Data Exchange by Tele Transmission in
Europe), VDA (Verband Der Automobilindustrie), SWIFT (Society for Worldwide
Interbank Financial Tctccommunicatiou) which are used in particular geographies and
industries.

3.3.1 ANSI X12

ANSI X12 is most popular in North American region. It defines standards for various
business transactions such as order processing, material handling, warehousing services,
manufacturing services, etc. X12 standard uses transaction set to identify each business
transaction and each transaction set is denoted by a numeric code.
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 E-Commerce Concepts Figure 3.4 depicts a sample Xl2 compliant EDI document for PO transaction:
and Models

"

J -TO E

PURGfAS£ORD€ '11

'I • 7 0925 ']

Figure 3.4: A Sample X12 Compliant EDI Document

3.3.2 EDIFACT
EDIFACT is an EDI standard format developed under UN (United Nations), Hence,
EDIFACT is also denoted as UNIEDIFACT.
This is the international standard which consists of the following four key elements:

• Syntax which defines the message structure

• Data elements within the document

• Segments which groups the date elements

• Messages which are an ordered group of segments and symbolize a business

transaction

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 Figure 3.5 depicts a sample EDIFACT compliant EDI document. Electronic Data
Interchange and
Electronic Payment
Svstems

..

> Figure 3.5: EDIFACT Compliant EDI Document

3.4 BENEFITS AND APPLICATIONS OF EDI

The following are the key benefits of using EDI:

• Minimizes the manual work and redundancy in exchange of business

documents, '

• Automates the business exchange transactions,

• Optimizes the lead times for inventory,

• Contributes directly to increased sales and revenue due to increased

cooperation,

• Reduced time in all business transactions such as PO generation, and

• Better customer service due to improved turnaround times.

EDI is applied in wide variety of business domains such as e-commerce, logistics, retail,
healthcare etc.
Some of the industry specific applications ofEDI are given below:

• EDI is used by educational institutions to exchange student information,

• HIP AA (Health Insurance Portability and Accountability Act) standard in

health care requires EDI, 29

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 E-Commerce Concepts
and Models
• Automotive industry uses EDI for streamlining operations with suppliers
and vendors,

• Retail players use EDJ to streamline their procurement processes, and

• Manufacturing firms use EDI for product purchases and interaction with
resellers.
r:r Check Your Progress'}
(1) The layer which converts application specific format into EDI standard is

"
(2) ANSI X 12 standard uses to identify business transaction.

(3) ____ group data elements in EDIF ACT compliant EDI document.

3.5 ELECTRONIC PAYMENT SYSTEMS

Electronic payment systems (EPS) are an application of EDI which provides a system for
electronic payment and transactions. EPS facilitate a commerce transaction electronically
by allowing the buyer to pay online. EPS are hugely popular among (B2C) transactions.
They enjoy unique benefits such as wider reach to customers, support to numerous modes
of electronic payments, and decreased transaction costs. Due to its ease-of-use, vast
majority of E-commerce platforms employ EPS to facilitaje the sale of their products.
EPS are employed in numerous online financial transactions such as online shopping,
utility bill payments done online etc. Numerous digital financial instruments are used in
EPS such as credit/debit cards, smart cards, e-cash etc. We will look into them in next
section.

3.5.1 CreditlDebit/Smart Cards

• . Credit card is the most popular way of performing online transactions. The cards
are identified by 16 digit number and have a maximum limit on spending. Buyers
need to enter card information such as number, CVV (Card Verification Value)
code, and expiry date etc. to authenticate the transaction. Most popular credit card
networks employ additional layer of security such as OTP (One-time password) or
security code to verify the authenticity of the card holder. Major players in credit
"ani business are Visa, Master card and American Express.

• Unlike credit cards, debit cards are linked to user's bank accounts and they can use
their debit cards as one of the channels to use their account. Often online banking
or net banking rules apply while using debit cards.

• Smart cards have built-in integrated circuits and act as electronic wallet for the
users. They can be pre-loaded with tokens or funds and they can be used to make
electronic and physical payments similar to debit cards.
The following is a typical flow of transaction when credit/debit/smart cards are used:

i) . Buyer selects the product he/she wants to purchase.

ii) E-commerce system redirects the user to the payment gateway which
provides options to make online payment through various means. Often,
payment gateways are accessedon secure HTTPS channels.
iii) Buyer selects the mode of payment (credit/debit/net banking) at payment
gateway.
iv) Payment gateway redirects the user to the page specific to mode of payment
selected.
v) Buyers enter the required details of digital financial instrument.Payment.

vi) gateways process the transaction and upon successful authentication, money
will be transferred to merchant's bank.
30

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 3.5.2 E-credit Accounts bect~onic Data
Interchange and
E'credit account allows an online business transaction to happen. Typically, B2B Electronic Payment
Svstf'ms
business transactions use e-credit accounts. Companies offering e-credit facilities offer a
higher end credit limit anda fixed repayment time period. E-credit account is mainly
used for large financial transactions without any physical presence. Sometimes, these
accounts are issued by credit card companies and are linked to customer's credit card
account for making virtual payments. Few companies like htlp://www.alibaba.com
permit e-credit for overseas buyers to boost trade. The idea of e-credit 'is fundamentally
same as that of credit card except that user does not have a physical device for the
account. Account holder will be given a credit limit for the transaction and once the
transaction is made, account holder needs to pay back the money within stipulated time
period,

3.5.3 E-money
E-money or digital cash is the financial instrument stored in computer systems and can be
example used for online transactions. They are electronic counter parts or representatives
of physical cash. For example, bit coins or EFT is referred to as e-money. Various
~cryptographic methods such as public-private key encryption, digital signatures are used
to authenticate and authorize the usage of e-money.
Currently e-money is used to indicate wide variety of things such as money stored in
e-wallet, money transferred via mobile devices, digital currency used in online payment
systems, and money stored in smart cards. •

The following are some of the scenarios where e-money is currently being used:

• Facilitate travel in public transport system using wireless payment, and

• Electronic pre-paid cards for various online transactions.

The ecosystem for e-money is still evolving and challenges such as security, prevention
of double spending etc. needs are to be addressed.
<ir Check Your Progress 2
(l) Debit cards are linked to
---
(2) Wireless payment is facilitated by _

(3) E-credit accounts are sometimes linked to user's

---

3.6 SUMMARY
In this unit, we started by understanding how EDI enables various business functions by
reducing manual effort. We also looked at the characteristics of EDI. In further sections,
we looked at the definition of EDI and various building blocks of EDI in the layered
architecture. We then looked at two popular EDI standards, namely, ANSI Xl2 and
EDIFACT with sample files for each ofthem. In the subsequent sections, we focused on
EPS and various tools used for electronic payment such as credit cards, debit cards,
e-credit accounts and e-money etc.

3.7 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress i
(1) Application Layer
r . '

\
\
(2) Transaction set \ \

'\

(3) Segments

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 E-Colllmerce Concepts Check Your Progress 2
and Models
(1) User's bank account.
(2) E-money
(3) Credit and account.

3.8 FURTHER READINGS

References
" 1. Demystifying EDlby Russell A. Stultz; Wordware Publishing Inc.; 2000.
2. Electronic Commerce by Gary Schneider; Cengage Learning; 2012.
3. http://en. wikipedia.org/wikilElectronic data interchange
,...-
4.- http://en.wikipedia.org/wikiIX12 Document List
5. http://www.xI2.org/
6. http://en. wikipedia.org/wiki/E-commerce payment system
.. 7. http://en. wikipedia.org/wikilEl.ectronic money
8. http://www.ledisource.coml

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 'UNIT 4 INTRODUCTION TO E-COMMERCE
MODELS
Structure
4.0 Introduction
4.1 Objectives

4.2 Inter-organization and Intra-organization E-commerce

4.3 Models ofE-commerce

4.3.1 B2B
4.3.2 'B2C
4.3.3 C2C
4.3:4 C2B
4.3.5 B2G
4.3.6 .G2B

.. 4.3.7 G2C

4.4 Summary

4.5 Further Readings

4.0 INTRODlJCTION
This unit introduces models of e-commerce. Any exchange of commodity made through
electronic medium is called e-commerce, E-commerce is available to the user through
EFT, supply chain management, Internet marketing, online transaction processing, EDI,
inventory management systems, and automated data collection systems. Modern
e-commerce typically uses the World Wide Web. E-commerce and e-business are
interrelated. Through e-commerce, technology enabled and technology mediated
transactions happen.

4.1 OBJECTIVES
After going through this unit, you should be able to know about

• inter and Intra-organizational e-commerce, and

• models of e-commerce.

4.2 INTER-ORGANIZATION AND

INTRA-ORGANIZATION E-COMMERCE !

When e-commerce transaction involves multiple organizations, then it is termed as

Inter- organizational e-commerce. When e-commerce transaction does not involve
multiple organizations, then, it is termed as Intra-organizational e-commerce.

4.3 MODELS OF E-COMMERCE

Various e-coinmerce models are given below:

• Business to Business (B2B),

• Business to Consumer (B2C),

• Consumer to Consumer (C2C), 33

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 E-Colllmcrce Concepts
and Models
• Consumer to Business (C2B),

• Business to Government (B2G),

• Government to Business (~2B),

• Government to Citizen (G2C), and

• Citizen. to Government (C2G).

4.3.1 B2B
In B2B e-commerce model (Figure 4.1), the transactions are between businesses. An
"
example of such transaction is between wholesaler and retailer. Examples of B2B portals
include http://www.infobanc.com, http://www.ask4plastic.coin,
http://www .matexnet.com, http://www .pcbindia.com, http://www.plastemart.com, and
http://www.vistaar.com.

Retailer Wholesaler

Figure 4.1: B2D Model

4.3.2 B2C
In B2C e-commerce model (Figure ~.:'), the transactions are between businesses and
consumers. An example of such transaction is between Indian Railways and Passenger.
Examples ofB2C portals include http://www.irctc.co.in, http://www.amazon.com,and
http://www.tatasky.com.

Figure 4.2: D2C Model

4.3.3 C2C
In C2C e-commerce model (Figure 4.3), the transactions are between consumers and
consumers. An example of such .transaction is between sellers and buyers of shares. In
C2C model, organizations may be present as intermediaries. Examples of C2C portals
include http://wWw.olx.in, and http://www.quickr.com.

Figure 4.3: C2C Model

4.3.4 C2B
In C2B e-commerce model(Figure 4.4), a consumer approaches website showing
multiple business organizations for a particular service. Consumer may place an estimate
of amount s/he wants to spend for a particular service. Interest rates of personalloanl ·car
loan provided.by various banks via website is an example. Business organization which
34

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fulfills the consumer's requirement within specified budget approaches the customer and I ntroduction to
provides its services. E-Commerce Models

Examples ofC2B portals include http://www.razerfinish.com s.

http://www .t:everseauction.com and http://www.priceline.com

Portal

Consumer
.
"

Figure 4.4: cm Model

4.3.5 B2G
B2G model (F.igure 4.5) is a variant ofB2B model. Such websites are used by
Government to trade and exchange information with various business organizations.
-Such websites are accredited by the Government and provide a medium to businesses to
submit applications to the Government. This type of transaction is more or less similar to
B2B.

An example ofB2G portal is http://www.lockheedmartin.com.

.~
L: Supplier HL __ p_o_rta_I
__ H Government

Figure 4.5: B2G Model

4.3.6 G2B
Govern nent uses G2B model (Figure 4.6) to approach business organizations. Such
websites support auctions, tenders and other functionalities such as submission of
application forms, etc. .
An example ofG2B portal is http://www.dti.gov.ul\.

Govern~L __ p_o_rta_I
__ H Supplier

Figure 4.6: G2B Model

4.3.7 G:~C
Government uses G2C model (Figure 4.7) to approach citizens in general. Such portals
may suppor: auctions of vehicles, machinery or any other material. Such portal also
provides services like registration of birth, marriage or death, etc. One of the main
objectives of a G2C portal is to reduce time for performing various government services.
An example ofG2C portal is http://www.incOll1.s:1axjndia,gQv.in.

Governme~_rt_a'_--,H Citizen

Figure 4.7: G2C Model

<7' Check Your Progress 1

r
(1) .What is meant by Inter Organizational e-commerce? How does it differ from
Intra Organizational e-commerce? Give examples.

P) Give examples of various models of e-commerce. (Don't repeat the same

examples that are given in the unit.)

35

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 E-Commerce Concepts
and Models 4.4 SUMMARY
E-commerce is growing rapidly. More and more trarisactions are being offered in
e-commerce mode. In this unit, inter-organizational and intra-organizational e-commerce
were introduced. Also, various models of e-comm~rce were introduced.

4.5 FURTHER READINGS

References
.., 1. Introduction to Electronic Commerce by Efraim Turban, David King and Judy
Lang; Prentice Hall; 2008.
2. . The Complete E-commerce Book: Design, Build and Maintain a Successful
. Web-based Business by Janice Reynolds; CRC Press; 2004.

3. http://www.tutoriaispcint!<om/ecommerce/ecommercebusinessmodels.htm
4. http://en.wikipedia.org
5. http://wiki.answers.com

,.

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 PDD/IGNOUJP.O. 3.5T/October, 2014 (Reprint)

ISBN: 978-81-266-6669-0
 l@J1 ·
Ignou
THE PEOPLE'S BCS-062
UNIVERSITY
Indira Gandhi National Open University E-Comrilerce
School of Computer and Information Sciences

Practices in E-Commerce
2
I
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$ ~ it m~ (,l1CfldSl Cfft ~ Cf)T 31Tm'{ ~
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fClt44(tkm ~ "¥ ~ ~ ~ CfiT ~ ~ ~
~%I"

.'. ----------------------------------

"Education is a liberating force, and in

our age it is also a democratising force,
cutting across the barriers of caste and
class, smoothing out inequalities imposed
by birth and other circumstances."

-Indira Gandhi
 BCS-062
1~II~g~o~~
"I:{(I UNIVERSITY
E-COMMERCE

Indira Gandhi National Open University

School of Computer and Information Sciences

"

·.
Block

2
PRACTICES IN E-COMMERCE
UNITS
E-Business S
UNIT 6
E-Security and Legal Issues 17
UNIT 7
M-Commerce 29
UNIT 8
Online Shopping Portal: An E-Commerce Case Study 37

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 PROGRAMME DESIGN COMMITTEE
Prof. Manohar Lal Prof. Arvind Kalia, Dept. of CS Sh. Akshay Kumar
SOCIS;I5JNOU"New J?eJ&i HP University, Shirnla Associate Prof.
~ • .,.. :'" "f ••••• ~A :. .•.•

SOCIS, IGNOU, New Delhi

Prof. H. M. Gupta Prof. Anju Sahgal Gupta
. Dept. of Elect. Engg. SOH, IGNOU, New Delhi Dr. P. K. Mishra, Associate Prof.
lIT, Delhi. Dept. of CS, BHU, Varanasi
Prof. Sujatha Verma
Prof. M. N. Doja, Dept. of CE . SOS, IGNOU, New Delhi Dr. P..V. Suresh, Associate Prof.
Jamia Millia, New Delhi SOCIS, IGNOU, New Delhi
Prof. V. Sundarapandian
Prof. C. Pandurangan IITMK, Trivandrum Sh. V. V. Subrahrnanyam
Dept. ofCSE, lIT, Chennai Associate Prof.
Prof. Dharamendra Kumar
Prof. I. Ramesh Babu SOCIS, IGNOU, New Delhi
Dept. of CS, GJU, Hissar
"
Dept. ofCSE Sh. M. P. Mishra, Asst. Prof.
Prof. Vikram Singh
Acharya Nagarjuna University SOCIS, IGNOU, New Delhi
Dept. of CS, CDLU, Sirsa
Nagarjuna Nagar (AP)
Dr. Naveen Kumar, Reader
Sh. Shashi Bhushan
Prof. N. S. Gill SOCIS, IGNOU, New Delhi
Associate. Prof.
Dept. of CS, MDU, Rohtak
SOCIS, IGNOU, New Delhi Dr. Subodh Kesharwani, Asst. Prof.
SOMS, IGNOU, New Delhi

COURSE CURRICULUM DESIGN COMMITTEE

Sh. Shashi Bhushan Prof. A. K. Tripathi Sh. Akshay Kumar
SOCIS, IGNOU, New Delhi Dept. of CSE, IIT(BHU) SOCIS, IGNOU, New Delhi
Dr. P. V. Suresh Varanasi
Prof. Manu Sood
SOCIS, IGNOU, New Delhi Dr. S. R. N. Reddy Dept. of CS
Dept. ofCSE HP University, Shimla
Sh. V. V. Subrahmanyam
lGDTUW Sh. ~,1.P. Mishra
SOCIS, IGNOU, New Delhi
New Delhi
SOCIS, IGNOU
Dr. Naveen Kumar
New Dethi
SOCIS, IGNOU, New Delhi

SOCIS FACULTY
Sh. Shashi Bhushan, Director Prof. Manohar Lal Dr. P. V. Suresh
Sh. Akshay Kumar Sh. V. V. Subrahrnanyam Associate Professor
Associate Professor Associate Professor Dr. Naveen Kumar
Sh. M. P. Mishra Dr. Sudhansh Sharma Reader
Asst. Professor Asst. Professor

PREPARATION TEAM
Content Editor: Block Writers: Units 7 and 8
Dr. P. V. Suresh Units 5 and 6 Sh. Shailesh Kumar Shiva Kumar
School of Computer and Research Scholar (SOCIS,
Ms. Nidhi Chawla
Information Sciences IGNOU) and Senior Technology
Company Secretary
IGNOU New Delhi Architect (Infosys Technologies)
New Delhi
Language Editor:
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(Retd.), Tenali

Course Coordinator: Dr. P. v Suresh, SOCIS, IGNOU, New Delhi

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MPDD-TGNOU MPDD-IGNOU
October, 20 14, (Reprint) /
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ISBN -978-81-266-6670-6
All rights reserved. No part of this work may be reproduced in any form.by mimeograph or any
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/
BLOCK INTRODUCTION
This block brings some of the best practices in e-commerce,
Internet is being used increasingly for purchase and sale of goods and services (including
after sales 'support), making payments, sharing of business information, conducting
business transactions, electronic banking, etc. With the sales as well as number of users
of smartphones, tablets, phablets, etc. increasing at an alarming pace, e-cornmerce has
become a normal feature in our day to day life. Further, with the introduction of various
safety measures in the field of technology, number of e-banking users are also increasing
and hence internet banking is catching fast with the traditional modes of payment. A
developed e-banking environment plays an important role in e-commerce by encouraging
people to shift from traditional modes of purchases to electronic purchases. The success •
or failure of an e-commerce transaction depends on various factors. The security of data
transmitted is most important. People using Internet for commercial transactions remain
at risk of disclosure of their confidential information such as passwords, credit card
details, etc. Hackers use various techniques to extract personal user information.
Mobile commerce is all about doing commerce transactions through mobile devices.
Surveys and estimates indicate that nearly half of all commerce transactions will happen
from mobile devices within next 2 years. Explosion and popularity of mobile devices
provide huge opportunities for business enterprises and consumers to do the selling
and purchasing on-the-go using mobility devices such as PDA, smart phones and other
hand-held devices. Commerce anywhere any time concept is becoming a reality due to the
advent of m-commerce.
This block consists of four units and is organized as follows: ;
Unit 5 deals with e-business. It covers web based bookshops, grocery suppliers, software
suppliers, software support, auctions, and stock trading.

Unit 6 deals with security and legal issues associated with e-commerce. It introduces
SSL, digital signatures, fire walls, cyber crimes, cyber laws as well as IT Act.
Unit 7 deals with m-commerce. It also glances at the future trends that may emerge in the
area of e-commerce,
Unit 8 is a case study As part of case study, Online Shopping Portal was discussed.

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 UNITS E-BUSINESS
Structure
5.0 Introduction
5.1 Objectives
5.2 Internet Bookshops
" 5.2.1 Shopping Procedure
5.2.2 Advantages
5.2.3 Disadvantages
5.3 Grocery Suppliers
5.3.1 Shopping Procedure
5.3.2 Advantages
5.3.3 Disadvantages
5.4 Software Supplies a.n~ Support
5.4.1 Shopping Procedure
5.4.2 Advantages
5.4.3 Disadvantages

5.5 Electronic Newspapers

5.5.1 Advantages
5.5.2 Disadvantages

5.6 Online A.uctions

5.6.1 Online Auction Procedures
5.6.2 Advantages
5.6.3 Disadvantages .
5.7 Online Trading System
5.7.1 Online Trading Procedure
5.7.2 Advantages
5.7.3 Disadvantages
5.8 Summary
5.9 Further Readings

5.0 INTRODUCTION
Internet is being used tremendously these days for purchase and sale of goods, services
(including after sales support), making payments, sharing of business information,
conducting business transactions, e-banking, etc. With the sales as well of number of
users of smart phones, tablets, phablets, etc. increasing at a rapid pace, e-commerce has
become a normal feature in our day to day life. .
Further, with the introduction of various safety measures in the field of technology,
number of e-banking users are also increasing and hence, Internet banking is catching up
fast with traditional modes of payment. A developed e-banking environment plays an
important role in e-commerce by encouraging people to shift from traditional modes of
purchases to online purchases. This unit explains the practices in e-commerce. That is,
the issues and prospects of applications of e-commerce in various fields. Hence, this unit
discusses about the usage of e-commerce for Internet based bookshops, grocery
suppliers, software suppliers and support, electronic newspapers, virtual auctions, and
online trading systems, etc. This unit will also throw some light on e-commerce security
concerns and issues related thereto.

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 Practices in E-Commerce
5.1 OBJECTIVES
After going through this unit, you should be able to
• know the impact of e-commerce on day to day life, and

• find services that can-be offered through e-commerce.

5.2 INTERNET BOOKSHOPS

"

Internet base bookshops are the online bookshops thatprovide an opportunity to users to
scroll through various books so as to pick and choose any book of their liking on a click
of a button while sitting in comfort of their homes or lounges. These bookshops also
provide for various options for placing an order as well as payment of consideration
either through credit cards or Internet banking etc. With the emergence of Internet, many
online bookshops have come up and provide an easy way to procure books. At its
simplest, these bookshops list the products for sale or the services offered and invite
customer to phone, fax or e-mail their order for COD (Cash On Delivery).

5.2.1 Shopping Procedure

Each Internet Bookshop follows a specific shopping precedure. For the convenience of a
new customer, these web sites include various tabs such as the following amongst others:

• How to order,
.;

• How to become a member,

•
-
How to check out,

• Shopping cart facility,

• Help desk,

• Discount/special packages,

• Payment procedure and options, and

• Delivery options.

5.2.2 Advantages
Some of the major advantages ofInternet based bookshops are given below:

• These bookshops act as databases of a vast amount of information about

books currently available in the market. All Internet users can use these
databases and have knowledge of the same.

• Online bookshops are open 24 x 7. The access is available to anyone, at

any time, from anywhere. At a click, all information can be obtained at the
user system.

• User can take time in searching and selecting books.

• These bookshops are extremely useful to people looking for specific books.
Any book not available nearby can be obtained from any part of the
r CountrylWorld by just ordering online thus avoiding long distance travel
and saving time.

• . The huge list of publications in each subject or topic can be accessed easily.
Such Internet based bookshops also provide-the user to select the best and
latest literature.

• In most of the instances, there will be a discount on the price of the book

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 E-Business
5.2.3 Disadvantages
Apart from above advantages, online bookshops also suffer from following
disadvantages:

• Any delay in updating of database in detail such as edition, cost, etc will
create problems in identifying the correct book and payment thereof.

• 'Security.issuesare another concern while making payment online especially

through credit cards. Any site with unsecure server or without encryption
facilities may not provide a safe environment for online transactions.
.
"

• Some users may not have access to credit card facility, hence will not be
able to transact and purchase booksonline,

• Mostly, Internet based bookshops charge extra as packing and shipping

charges which burdens-the user with additional costs.

• As there is no physical inspection of the product by customer before

purchase, there is a risk of receiving book in a damaged condition.

.
,
• There may be abnormal delays in shipping.

• A book that is different from what is ordered may be shipped.

In the light of above discussion, shopping for books online looks much simpler and fister
than purchasing from the market. However, the joy of browsing physically through the- .
book shelves and glancing through the pages before purchasing a book is not available
here. For specific requirements and crosschecking of bibliographic data of books, online
bookshops can always be used. . ",

Some of the renowned Internet based bookshops are http://www.amazon.com

(Figure 5.1), http://www.barnesandnoble.com.
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Figure 5.1: Snapshot of http://www.amazon.com 7

/
\
I
 Practices in E-Commerce
5.3 GROCERY SUPPLIERS
Purchasing of groceries is one of the basic shopping requirements. With a large customer.
base and increase in the usage of Internet, some big entrepreneurs have started the
concept of creation of e-stores for groceries. http://www.eazygrocery.com.
http://www.bigbasket.com (Figure 5.2) are some of the online grocery suppliers.

..
B",ngalore •. 00033:5~tOOO Freede!iyeryforOfder~1U.1000.00andabovt: NtwktBigBasket?,.. lOG!N REGi'HER i-'i
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Figure 5.2: Snapshot of http://www.bigbasket.com

5.3.1 Shopping Procedure

\
Figure 5.3 depicts the shopping procedure from online grocery suppliers. Its only
illustration and every online grocery supplier may have their own procedure.

I Customer makes list of required grocery items

I
~
I Opens website of vendors and registers if placing order for the first time
I
~
I Checks offers, selects items and adds them to shopping cart I
~
I Make payment using any of the payment options given
~.

I Server takes order and forwards it to the nearest retail outlet for fulfillment I
+
I Retailer fulfils the order I
.: <,
Retailer sends confirmation Retailer packs grocery
that the order is placed and ---+ items and delivers to the
will be delivered customer

·Figure5.3~,Shopping Procedurefrom Online Grocery Suppliers '.

8

/
\
I
 5.3.2 Advantages E-Business

The following are some of the advantages of On line Grocery Suppliers:

• E-grocery suppliers provide a wide range of products and various payment
?ptions ..

• It is a big welcome to an easy and relaxed way of browsing and shopping for
groceries at customers' comfort.

• The customer can discover new products and get everything right at the
doorstep .
.,
• The e-grocer guarantees timely delivery and best quality .

• From the grocer perspective, online selling helps in speedy transactions of

grocery items and cash. There is no credit system and payment is at a time
.and is normally before delivery.

• From the user perspective, free home delivery, time saving and various
payment options are the advantages of online grocery shopping.

5.3.3 Disadvantages
.
,
However, it is still out of the ambit of online shopping. Online grocers stand in a
different line from other e-retailers due to following potential risks:
• Online grocer caters to a specific city or certain areas.
• Online grocer caters Internet savvy customers only.
• Handling perishable products is a big challenge
• Late delivery of goods due to various reasons like traffic etc. can create
pro~lems.
• After sales is not convenient like replacement of incorrect product, questions
on acceptable quality, etc.
• Buyers still relate groceries with local store and malls.

• Buyers prefer to choose and pick best of fresh products.

r- "i

5.4 SOFTWARE
., SUPPLIES AND SUPPORT
.

With the phenomenal growth of Internet, selling software and providing related support
through Internet allows the seller to reach a large computer savvy global market easily,
economically and efficiently. Software is being ordered/delivered online and after sales
support is also being provided through remote access. Online software supplies and their
support contribute significantly to the revenue of the IT companies.

5.4.1 Shopping Procedure

With on line software suppliers and support, the entire sale/purchase including delivery of
the product is completed with an online transaction. The following is the shopping
procedure normally followed:

• Customer logs on to the web site.

• Places an order through a secure order form.
• Submits payment information.
• Proceeds to download the purchased software.

5.4.2 Advantages
The following are some of the advantages of purchasing software online:
• It is a great marketing channel for IT companies to market their products.

/
/
 Practices in &-Commerce
• By selling through the Internet, software sellers get an easy and cheap
distribution channel.

• It eliminates the need to manufacture and store large inventories of

shrink-wrapped goods, costly courier/shipping charges. In addition, it also
eliminates the need to manage potential back order situations.
• Software buyers get a quick and efficient way of getting software.

5.4.3 Disadvantages
The following are some of the disadvantages of purchasing software online by
.
" downloading:
• There may be portability issues as it may not be easy to port it to a machine
that is different from the machine to where it is downloaded.
.• Chances of online threats such as viruses, malware, etc. increases manifold.

• Not all software products are available for download.

• Bandwidth may become a major constraint as memory size of the software
product to be downloaded may be large.
Purchase of software and its on line support on a real time basis is a normal way of
transaction for IT companies and its users. In the new era of technology, purchase/use of
software/applications is a requirement of every individual and with the development in
E-commerce, it is accessible to even kids. Hence, its importance in our life cannot be
denied. However, one has to be cautious ofthe disadvantages, risks it has such as viruses,
etc. http://www.microsofistore.com (Figure 5.4) is an example of online software
supplier.
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Figure 5.4: Snapshot ofhttp://www.microsoftstore.com

5.5 ELECTRONIC NEWSPAPERS

Electronic newspaper is the newspaper which exists on the Internet either separately or as
online version of a printed periodical. Online newspapers are becoming more and more
popular to news readers who are Internet savvy. Electronic newspaper is normally called
e-paper.
10

/
I
 E-Business
5.5.1 Advantages
The following are advantages of electronic newspapers:

• It.is accessible 24 x 7. Online newspapers can be read anywhere, any time.

•. Content can be updated any number of times in a day by the online

newspaper.

• The reader can select the news of interest and leave the rest.
..
• Some e-papers are free.

• It ,is environmental friendly than getting a printed newspaper.

• there is no cluttering in the home.

• It is a reliable source of news information as it is updated at regular

intervals.

• It is available to reader before the print version is available due to time

consumed in shipping.

• Archives are easily available.

5.5.2 Disadvantages
The following is an important disadvantage of online newspaper:

• A newspaper company should be prepared for reduced revenues if it

provides e-paper free of cost.

There are a number of online newspapers available on the Internet which provides up to
date news and in depth coverage. With the access of Internet on tablets, smart phones etc.
and coupled with the fact that tech savvy people spend significant amounts of time
online, popularity of e-papers is increasing rapidly. http://www.thehindu.com ,
http://www.timesofindia.com (Figure 5.5) are examples:

T-:t. 01 l'1 'F r

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11
Figure 5.5: Snapshot of http://www.timesofindia.com

/
/
 Practices in E-Commerce
5.6 ONLINE AUCTIO~S
In an online auction, the seller sells the product or service to the person who bids the
highest price, These auctions facilitate online sale and purchase between the sellers and
buyers in different locations or geographical areas.'

. 5.6.1 Online Auction Procedure

Figure 5,6 depicts an online auction procedure:
"
Seller registers a particular item of auction at the online auction website

• Provides images of the item

..• Provides description of the item

• Sets a minimum bid

• Sets a specific duration of the auction

• Gives payment and shipping terms as well as other terms and conditions

Bidders registered at that online auction website get opportunity to search and
browse all active auctions

- Bidders start bidding at the auction in which they are interested

At the time set, the bidding process ends

The buyer pays the price and the seller dispatches the item

Figure 5.6: Procedure for OnJine Auction

5.6.2 Advantages
The following are advantages of online auction:

• May get goods cheaply.

Includes a large number of sellers and bidders which encourages, a high volume of online
business.

5.6.3 Disadvantages
The following are disadvantages of online auctions:

12
• There are chances of the product being a stolen or pirated one .

/
/
 E-Business
• Sellers will not always accept all forms of payment.

• There is always a risk of item not being of the value for which it is bought.
. .
Online auctions are one of the fastest growing segments of online business. Large
number of people buy and sell all types of goods on consumer auction sites each. year.

http://www.ebay.com and http://www.ubid.com (Figure 5.7) are examples:

• Onli.,. Auctions: llptop~ Oul<topt, TV••..

ubid,com e m· " . p 12·

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Figure 5.7: Snapshot of http://www.ubid.com

5.7 ONLINE TRADING SYSTEM

Online trading in securities refers to the opportunity to an investor to place orders using
Internet as trading platform offered by the trading member (broker). The transactions of
buying and selling are made through Internet. The investor / trader gets updated
information online. It leads to the decrease in the practice of an investor of looking at the
share price in the morning newspaper. The transaction is dealt at a price at a moment
checked in an online trading platform than issuing instructions for execution to brokers
by phone or by person.

Today, practically 99% settlement of shares take place in demat mode only. The physical
shares (share certificates) are converted into electronic form and are held in demat
account. SEBI (Securities nd Exchange Board of India) is the market regulator in India
who has made it compulsory to open a demat account if you want to buy/sell shares in
Indian stock market.

5.7.1 Online Trading Procedure

Figure 5.X depicts online trading procedure.

13
 Practices in E-Cummerce
• Find an online brokerage house.
• Make an application to open a Demat Account and Online Trading Account.

. ~
• Once the Demat Account and On line Trading Account are opened, bank account is
to be linked witli the trading account. Credentials to operate are received from
online brokerage house. .

1
" • Allocate funds from the bank account to the trading account.

~
• Go to the trading page of your brokerage account. Alternatively, you can look for a
stock of interest in trading and select to trade in that security.

~
• Buying or selling stock is done by placing 'Orders'. You can place a 'Buy Order' to
buy the stocks at a price. Similarly, to sell a stock at a price, you have to place a
.
,
'Sell 9rder'.
• Provide the following basic options when placing an order:
• Option to choose whether you wish to Buy or Sell a particular stock.
• The name/symbol of the particular stock which you want to either buy or sell.
• The number of shares (quantity) that you want to either buy or sell.
• The price at which you would like to either buy or self this stock.

~
• After you have confirmed the order, it is placed in the stock exchange through the
online trading system.

-
• Confirmation of placement order is received.

~
• Stocks are actually bought or sold once this order gets executed in the exchange.
• Confirmation of execution of order is received.
• Online trading is complete.

Figure 5.8: Procedure for Online Trading

5.7.2 Advantages
The following are the advantages of online trading:

• It leads to paperless transactions. That is, shares are held in electronic form
in the demat account.

• It helps in improving market transparency.

• It helps in smooth market operation while retaining the flexibility of

conventional trading practices.

• All the records of transactions are available online.

• The commission costs for trading are policy based rather than person based.

• Investor can manage his own stock portfolios. .

,.
• There is free access to high quality research reports generated by fmancial
players.

5.7.3 Disadvantages
The following are the disadvantages of online trading:

• There are chances of losing the trade if online trading system fails.
14
 E-Business
• The scope of manipulation, speculation and malpractice is more due to the
security issues associated with Internet.

• Due to the policy of online brokerage house, some stocks may not be
.available for trading online for whom the customer needs to contact other
brokerage houses. .

http://www.icicidirect.com and http://www.sharekhan.com (Figure 5.9) are

examples.

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''' Figure 5.9: Snapshot ofhttp://www.sharekhan.com

5.8 SUMMARY
This unit has evaluated the current state of e-commerce by focussing on its diversity in
different market areas. The e-commerce market is showing a promising development as
there is a tremendous increase in e-cornmerce turnover. World Internet user population is
increasing day by day which further brings immense advantages for e-businesses in
different market areas. A well designed portal positively impacts the customer's
purchasing intentions and their retentions. With the creativity, market strategies, and the
smartness and knowledge of individual customers, e-cornmerce is expanding to various
market areas leading to creation of new standards and diversification.

In this unit, various practices in e-commerce are discussed. Use of e-commeroe in

different market areas such as Internet based bookshops, online auctions, online software
suppliers and support, online grocery suppliers, on line trading systems, and electronic
newspapers are explained. The procedure for various types of transactions in
e-commerce, their advantages and disadvantages are also given. •
15
 Practices in E-Commerce
5.9 FURTHER READINGS
. References

. , . 1.

2.
Electronic Commerce by Whiteley David.Mc-Graw
E-Business and E-Commerce Management:
by Dave Chaffey; Prentice Hall; 2011.
Hill; 2000.
Strategy, Implementation and Practice

3. http://www.webopedia.com

. " 4. http:// en.wikipedia.org

.
,

16
 UNIT 6 E-SECURITY AND LEGAL.lSSUES
Structure
6.0 Introduction

6.1 Objectives

6.2 Security Concerns in E-commerce

6.2.1 Security Concerns of the Client
"

6.2.2 Security Concerns of the Communication Channel

6.2.3 Security Concerns of-Server
,
6.3 Other Issues in E-coJ?llllerce Security
6.4 . Secure Socket Layer (SSL)
. 6.5 Digital Signatures and Firewalls
6.5.1 Digital Signature
.. 6.5.2 Fi'rewalls
6.6 Introduction to IT Act, 2000

6.7 Cyber Crimes and Cyber Laws

6.7.1 Cyber Crimes
6.7.2 CyberLaws

Summary
.-
6.8
6.9 Solutions/ Answers

6.10 Further Readings

6.0 INTRODUCTION
In today's world, with increasing access to Internet, its use for purchase and sale of goods
and services (including after sales support), making payments', sharing of business
information, conducting business transactions, electronic banking etc. has grown
tremendously. With more and more people becoming computer-savvy, and the Internet
growing, e-commerce is fast becoming the default way of doing business. E-commerce
has automated the conduct of business between enterprises, suppliers, customers any time
and anywhere.
The success or failure of an e-commerce transaction depends on various factors. But the
security of data transmitted is most important. For all the advantages of e-commerce, the
major hindrance is threat to security.

People using Internet for commercial transactions always remain at risk of disclosure of
their confidential information such as passwords, credit card details etc. Hackers use
various techniques to extract personal user information.

6.1 OBJECTIVES
This unit examines the issues related to security of assets and transactions in
e-commerce, possible attack scenario in ane-commerce system (cyber crimes), provide
preventive strategies including security features (digital signatures, firewalls, SSL) and
relevant cyber laws applicable in India.
17
 Practices in E-Commerce Hence, after studying this unit, the learner should be able to:

• know the security concerns and issues in e-commerce,

• know about Secure Socket Layer (SSL),

• know about digital signatures and firewalls,

• know about Information Technology Act, 2000, and

• learn about cybercrimes, offences and penalties under the law.

"

6.2 SECURITY CONCERNS E-COMMERCE

Escqmmerce security is the protection of e-commerce from unauthorized access,
unauthorized usage, unauthorized alteration and unauthorized deletion.
Therefore, the main objectives of security in e-commerce are the following:

• Computer security: Protection of assets from unauthorized access, use,

alteration or destruction.

• Physical security: Includes tangible devices for prote~tion.

• Logical security: Protection of assets using non-physical means.

• Threat minimization: Any act or object that poses a danger to computer

assets.
An e-commerce system faces large number of threats which create issues and concerns
related to its security. Some of these are obvious and others are created and can be
understood only by experts. This means that attacks can be directed on a system from
- many different directions.
Security concerns in e-commerce can be studied from three perspectives as given
Table 6.1. E-commerce can be secured if the entire commerce chain is secured. That is,
the client computer, the messages travelling on the communication channel and
associated servers.
Table 6.1: Security Concerns in E-commerce

Security Concerns Security Concerns of Security Concerns of

of the Client the Communication the Server
Channel

•
•
Active Content
Malicious codes
•
•
Confidentiality
Integrity ,.• Web server
Commerce server
• Masquerading • Availability • Database
• Other Credentials

6.2.1 Security Concerns of the Client

Client security means privacy of the client and integrity of his Computer.

Active Content
Amongst various threats, active content is a major area of concern in client
,. security. Active content is the program embedded transparently in web pages
which can cause actions to occur. For example, display moving graphics,
download and play audio etc. It is used in e-commerce in the form of Java applets,
ActiveX controls etc. It creates security risk because malicious programs hidden
inside webpage can reveal and destroy the confidential and sensitive information
in the form of cookies. These cookies remember user names, passwords, etc. on the
client computers.

18
 Virus, Worms and Trojan Horses E-Security and
Legal Cases
Another security issue that arises to client and his computer are the viruses, worms
and Trojan horses which can create havoc to the systems.

• . Virus is a piece of software that is designed to replicate itself.by

copying itself into other programs stored in a computer which can
cause the program to operate incorrectly or corrupt the Computer's
memory.

"
• Worm is software that is capable of reproducing itself. It can also
spread from one computer to the next over a network.

• Trojan horse is a program that appears to have a useful function but

contains a hidden function which is harmful.

• These viruses can delete stored data or manipulate actual data.

Malicious software can damage the system and is a major threat.
'. Masquerading

.. Another security concern is masquerading. Masquerading occurs when one person

uses the identity of another to gain access to a computer. This may be done in
person or remotely. For example, a perpetrator could pretend to be a particular
vendor and divert the payment to his own benefit. But, the customer himself could
assume a false identity and make an invalid payment which the dealer would not
actually receive.

6.2.2 Security Concerns of the Communication Channel

Another major concern in any e-commerce application is the security of the
communication channel, That is, the security of the message when it passes through the
Internet. This is probably the most obvious issue for e-commerce applications since the
amount and severity of cyber-attacks are increasing. The data/message being transferred
through the network must be secured from any unauthorized disclosure and alterations.
Any theft of sensitive or personal information may become a significant danger.
Replaying old messages, tapping of communications, unauthorized changes to messages,
misuse of remote maintenance accesses are the dangers to the communication channel.

6.2.3 Securi9' Concerns of Server

Another major concern in any e-commerce application is the security of the web server,
commerce server and databases. Database contains valuable and sensitive information.
Any loss or manipulation of stored data can create irreparable damages. The server is
required to be protected from break-ins, site vandalism, and denial of service attacks. The
more complex software becomes, the higher is the probability that errors exist in the
codes. Revelation of server's folder names to a web browser leads to breach of
confidentiality .

6.3 OTHER ISSUES IN E-COMMERCE SECURITY

,

E-commerce security has the following main aspects: (i) Privacy, (ii) integrity,
(iii) availability, (iv) authenticity and (v) non-repudiation of the parties to the
e-commerce transaction. To deploy a fully secured e-ecommerce environment, it is
essential to consider all the above mentioned aspects while implementing the information
security policy.
The elements associated with e-commerce security are explained below:

Privacy/Confidentiality
Privacy/confidentiality is the extent to which individualslbusinesses make
personal/confidential information available to other individuals and businesses.
With any business, confidential information must remain secure and only be
accessible to the intended recipient and should not reach to unauthorized people. 19
 Practices in E-Commerce However, this becomes increasingly difficult when dealing with e-businesses
specifically. It is essential to secure data storage and data transmission of such
information.

Integrity
Integrity is the assurance that the data is consistent and correct. When the data is
transmitted over the Internet, there is a possibility of the tempering of data
intentionally or unintentionally. Data integrity may be compromised in a number
of ways due to human errors, hardware malfunction, natural disaster, bugs in
," software, and virus etc. In any e-commerce process, data integrity is of major
concern as the information being transmitted over the Internet is not altered in any
'way by any unauthorized party and the data received is same as the data sent.
Integrity involves maintaining the consistency, accuracy, and trustworthiness of
data over its entire life cycle. Integrity is violated when data received is not as that
has been sent.

Availability
Availability is the assurance that the e-commerce site continues to function as
intended. It needs to be ensured that the data associated with e-commerce
transactions is easily accessible. Lack of availability of data could be due to
network failure, transmission errors, etc.

Authenticity
Authenticity is the ability to verify the identity of a person, entity or website with
whom the transaction is to be made. It is an integral component of e-commerce as
it ensures the genuineness of parties, electronic documents, transactions and data.

- It is important to verify that all parties in a transaction are who they claim to be
and are duly authorized to perform the same. Identity can be checked by digital
signatures, certificates, biometrics, retinal scan etc. Such authenticity helps to
reduce instances of fraud.

Non-Repudiation
Non repudiation is the ability to ensure that the parties in ecommerce transactions
do not deny their online actions. It is a guarantee that the sender of a message
cannot later deny, having sent the message and the recipient cannot deny, having
received the message. This assurance makes the online transaction complete and
plays a major role in e-commerce. The responsibility of submitting or receiving an
electronic message is accepted by the sender and receiver, thereby protecting them
against any false assertions made later. E-commerce utilizes technology like
encryption and digital signatures to establish non-repudiation in a transaction.

C7 Check Your Progress 1

1. refers to preventing unauthorized data modification'.

2. Secrecy is the prevention of unauthorized disclosure of information.

(TruelFalse).

3. Process to verify the real identity of an individual, computer or e-commerce

website is known as -----

6.4 SECURE SOCKET LAYER

SSL is a web security protocol developed by Netscape. It operates between the
application and transport layers. It is commonly used to manage the security of message
transmission on the Internet. It establishes an encrypted link between a web server and a
web browser to exchange sensitive information. It secures the data during online
transactions or when transmitting confidential information. It is a solution to
20
 authentication, privacy and integrity problems and avoids attacks. SSL has been E-Security and
Legal Cases
universally accepted on the World Wide Web (www). SSL authenticates servers and
users. It establishes encrypted link to hide the data transmitted thus leading to data
integrity.
The following are the characteristics of SSL:
• It operates at TCPIIP transport layer,
• It uses a dedicated TCPIIP socket,

• It encrypts the communications between the server and client when

... connection is established, and
• It requires a server certificate.
Figure 6.1. depicts a SSL handshake:

..

Figure 6.1: SSL Handshake

The following are various steps of SSL handshake: .

L SSL client attempts to connect to a SSL server (website secured with SSL)
by sending a client hello message.

2. Web server responds with a server hello.

3. Client requests web server to prove its identity.
4. Web server sends a copy of its SSL certificate to authenticate its identity to
client.
5. Client verifies it. Accordingly, it sends a message to the server.
6. If the server requires client authentication, it asks for "client certificate
request".
7. Then the client sends its certificate.
8. SSL server verifies the signature on the client certificate.
9. Client sends a digitally signed acknowledgement to start sharing.
10. Server sends a digitally signed acknowledgement to start sharing.
11. The data in encrypted form is shared between the server and browser and a
secured session starts that protects message privacy, integrity and security.
A secure session starts between server and client enabling data to be
transmitted in encrypted form, thus ensuring privacy, integrity and security.

21
 Practices in E-Commerce
6.S DIGITAL SIGNATURES AND FIREWALLS
This section deals with digital signatures and firewalls.

6.5.1 Digital Signature

Digital signature authenticates the identity of the sender of a message or signature holder
of the document. It ensures that the contents of the message are intact. The sender cannot
repudiate it later on. Digital Signatures are easily transportable. They cannot be imitated.
They can be automatically time stamped.
.
"

As per Information Technology Act, 2000, Digital Signature may be defined as

authentication of any electronic record by a subscriber by means of an electronic method
or procedure in accordance with the provision of concerned sections of the Act.

IT Act ptovides the conditions subject to whom any electronic record(s) may be
authenticated by means of affixing digital signature.

TCS, Safescrypt and MTNL are some of the digital signature certifying authorities in
India licensed by the Controller of Certifying Authorities, Government of India.
.
,
The following are various steps in the working of a digital signature:

(a) Sender creates the message (electronic record).

(b) Electronic record is converted into message digest by using a mathematical

function known as hash function (which freezes the message).

(c) The message digest is encrypted with the sender's private key.

- (d)

(e)

(t)
Sender sends the message.

Receiver receives the message.

Receiver decrypts the message by the sender's public key.

(g) Receiver verifies the message.

6.5.2 FirewaUs
Firewall is a hardware or software based security system that filters the packets and
prevents some packets from entering the network based on a security policy. A firewall
allows to establish certain rules to determine what traffic should be allowed in or out of
the private network. All data entering or leaving the Intranet pass through the firewall,
which examines each packet and blocks those that do not meet the specified security
criteria. It acts as a gatekeeper and protects a computer network from unauthorized and
malicious access.

A firewall may be hardware or software or both.

• Hardware firewalls can be found in broadband routers and is an important

part of network setup. It protects Computer on the local network. Software
firewalls are installed on the Computer and can be customized to incorporate
protection features.

The following are four mechanisms used by firewalls (refer to Table 6.2):

• Packet filter firewalls

• Stateful inspection firewalls-

• Proxy server firewalls, and

• Application level firewalls.

22
 E-Secnrity and
Legal Cases
Table 6.2: Mechanisms used by Firewalls
Basis Packet Filter Stateful Proxy Server Application Level
FirewaUs Inspection FirewaUs FirewaUs
FirewaUs .
Evaluation Evaluates the headers Evaluates the state Acts as Include filtering
of incoming and ofTep intermediary capabilities and
outgoing packets. connection. between internal' additional validation
and external IP of packet content
addresses & blocks based on the
"
direct access to application.
internal network

Usage Used in small Inbound network Domain name Telnet, FTP, and
. officelhome office traffic servers, mail HTTP
(SOHO) and operating servers and web
systems servers.

Advantages Faster performance Faster Effectively hides Packets are evaluated

than application performance than true network completely.
firewalls. application addresses.
firewalls.
Effective and
transparent to users.

Disadvantages Does not support More complex Incompatible with Time taken for
advanced user than other all network evaluating eaoh
authentication. firewalls, and protocols, and packet slows network
incompatible with con figuring these traffic, and limited
some protocols. proxies is difficult. support for new
network applications
.• is provided .

In practice, many firewalls use two or more of these techniques in concert. A

frrewall is considered as first line of defense in protecting private information. For
greater security, data can be encrypted.·

6.6 INTRODUCTION TO IT ACT, 2000

Information technology generates information by processing data. It gives rise to a
variety oflegal problems. For dealing with legal problems, some countries have enacted
specific legislation. In India, the Information Technology Act (IT Act) was passed on
17thOctober, 2000.
It Act was amended on 2ih October 2009. Amended Act is known as The Information
Technology (Amendment) Act, 2008.
The following are some ofthe objectives ofIT Act:

• To provide legal recognition to transactions carried out by means ofEDI and

other means of electronic communication.

• To facilitate electronic filing of documents with government agencies.

• To amend Indian Penal Code, Indian Evidence Act, 1872, etc. to bring
electronic documentation within the purview of the respective enactments.
The following are some of the issues dealt by the IT Act:

• Legal P",r.••.gmtion of Electronic Documents.

• Legal Recognition of Digital Signatures.

• Offenses and Contraventions.

Recognition to Electronic Records
IT Act grants legal recognition to electronic records. It states that "if any
information is required in printed or written form 'under any law, the Information 23
 Practices in E-Commerce provided in electronic form, which is accessible so as to be usable for subsequent
use, shall be deemed to be lawful."

Thus, electronic record practically equates with the manual or typed record and e-
mail is a valid legal forin of communication in our Country that can be duly
produced and approved in a court oflaw.

Legal Recognition of Digital Signatures

As pet IT Act, whenever any law requires that information or any other matter
shall be authenticated by affixing the signature of any person, then such
requirement shall be satisfied if it is authenticated by means of digital signatures
"
affixed in such manner as may be prescribed by the Central Government. Hence,
digital signatures have been given legal validity and sanction in the Act.
Use 9f Electronic Records in Government and Its Agencies
As per IT Act, wherever any law provides for filing of any form, application, issue
of any license permit, etc. or receipt or payment of money, then, notwithstanding
anything in that law, the information provided in electronic form shall be deemed
to be lawful. Government can prescribe the manner and formats in which such
records shall be filed and the manner of payment of fees or charges for the same.
Retention of Electronic Records
, As per IT Act, records can be retained in electronic form so as that it remains
accessible for subsequent use, in the format which it was originally generated and
provide for the identification origin, destination, date and time of dispatch or
receipt of that record. Hence, companies can carry out commerce using the legal
infrastructure provided by the Act. Act now allows Government to issue
notification on the web thus emphasizing e-governance.

6.7 CYBER CRIMES AND CYBER LAWS

With the growth of cyber space and the onset of Internet, cyber crimes have also grown.
To tackle these cybercrimes, IT Act was passed in 2000:
However, the term cyber crime is neither defined in Information Technology Act 2000
nor in any other legislation in India. In common parlance, one can say that, it is just a
combination of crime and computer. To put it in simple terms 'any offence or crime in
which a computer is used is a cyber crime'.
Cyber crimes are referred to any act of causing financial, emotional or psychological
distress to any other party with the use of computer or cyber medium. It includes
hacking, spams, pornography, etc. Now, let us discuss various facets of cyber crimes in
detail.

6.7.1 Cyber Crimes

Cyber crimes can be classified on the following basis:

Against Person
• Harassment via e-mails: Repeatedly sending abusive messages via email.

• Cyber stalking: Use ofInternet to stalk someone like online harassment and
online abuse.

• Email spoofing: Emailing messages with a forged sender address.

• Unauthorised control/access over computer system.

• Publishing/transmitting of obscene material.

• Cyber defamation: causing injury to the reputation of a person with the help
of Internet by floating/publicizing negative messages.
24
 E-Security and
• Cheating and fraud: Any deliberate deception for unfair or unlawful gain
Legal Cases
online is fraud. Examples are no delivery of paid pro,ducts purchased online,
misrepresentation of a product advertised for sale, and fraudulent promises
for investment in securities.
Against Property
• Transmitting virus.

• Computer vandalism: Malicious attack on the software, stealing information,

hacking or destroying the Computer.

.
" • Unauthorized control/access of Computer system.

• Intellectual property crimes: Patent violations, copyright infringement,

trademark violations, etc.

Against Government/Corporate Entities

• Possession of information in an unauthorized manner.

• Cyber terrorism: Use of Internet for terror activities.

.
, • Distribution of pirated software.
Against Society at Large

• Pornography.

• Polluting the youth through indecent exposure.

• Financial crimes.

• Sale of illegal articles like narcotics, weapons, etc.

• Online gambling.

• Forgery - Manipulations in mark sheets, currency notes etc with the use of
information technology.
Table 6.3 lists various cyber offences and contraventions with related penalties under the
IT Act.

Table 6.3: Cyber Offences and Penalties

Cyber Offences and Related Section under Related Penalties under the IT
- Contraventions the IT Act, 2000 (as Act, 2000 (as Amended till Date)
Amended till Date)
a. Tampering with Computer source Section 65 Imprisonment up to three years or
documents. fine up to two lakh rupees, or
both.

b. Hacking the Computer system. Section 66 Imprisonment up to three years or

with fine which may extend up to
5 lakh rupees or both.

c. Sending offensive or false messages Section 66A Imprisonment up to three years

through communication service, etc. and with fine.
lt is also known as cyber stalking.

d. Dishonestly receiving stolen Section 66B Imprisonment up to three years or

computer resource or communication
device.
fine up to rupees one lakh or both. ..
e. Identity theft: Fraudulently or Section 66C Imprisonment up to three years or
dishonestly make use of the fine up to rupees one lakh.
.electronic signature, password or any
other unique identification feature of
any other person.
f. Cheating by impersonation by using Section 66D Imprisonment up to three years
computer resource. and fine up to one lakh rupees.

25
 Practices in E-Commerce g. Violation of privacy: Intentionally or
knowingly captures, publishes or
transmits the image of any person
without his or her consent, under
circumstances of violating the
privacy of that person.
h. Cyber terrorism: Whoever uses
cyber space with intent to threaten
the unity, integrity, security or
sovereignty of India or to strike
terror in the society or any section of
the people.
"
i. Publishing or transmitting obscene
material in electronic form
~,... '"
..
.'
j. Publishing or transmitting of material
containing sexually explicit act, etc.
in electronic form
Section 66E Imprisonment up to three years or
fme up to two lakh rupees or both.
-.
Section 66F Imprisonment which may extend
to life imprisonment.
.
Section 67 First conviction: Imprisonment
up to three years and with fme up
to five lakh rupees.
Subsequent conviction:
Imprisonment up to five years and
with fine up to ten lakh rupees .
Section 67A First conviction : Imprisonment
up to five years and with fine up
to ten lakh rupees.

.
,
k. Publishing or transmitting of material
depicting children in sexually
explicit act, etc. in electronic form
\. Preservation and retention of
information by intermediaries:
Intermediary shall preserve and
retain such information as may be
specified for such duration and in
such manner and format as the
Central Government may prescribe.
m. Misrepresentation about suppress a
material fact from the Controller or
Certifying Authority for obtaining
digital signatures
n. Breach of confidentiality and
privacy: Securing access to any
Computer, system or network
o. Disclosure of information in breach
of lawful contract
p. Knowing, creating, publishing etc. of
a Digital Signature Certificate for
any fraudulent or unlawful purpose
Subsequent conviction:
Imprisonment up to seven years
and fme up to ten lakh rupees.
Section 67B . First conviction: Imprisonment
up to five years and fine up to ten
lakh rupees.
Subsequent conviction:
Imprisonment up to seven years
and fme up to ten lakh rupees.
Section 67C Imprisonment up to tlJ.reeyears
and fine.
Section 71 Imprisonment up to two years or
fine up to one lakh rupees or both.
Section 72 Imprisonment up to two years or
fine up to one lakh rupees or both.
Section 72A Imprisonment up to three years or
fine up to five lakh rupees or both.
Section 73 Imprisonment up to two years or
fine up to one lakh rupees or both.

6.7.2 Cyber Laws

The Indian Penal Code, 1860
Relevant sections dealing with records and documents with strong legislation
covering substantive criminal law was amended with the introduction of IT Act,
2000. The word 'electronic' was inserted thereby treating the electronic records at
par with physical records.
The Indian Evidence Act, 1872
Another legislation amended by the IT Act was Indian Evidence Act. Prior to IT
Act, all evidences in the courts were in physical form only, Now, evidence can be
presented in electronic form also,
Hence, electronic records were made admissible as evidence.
26
 The Bankers' Books Evidence (BBE) Act, 1891 E-Security and
Legal Cases
With the passing ofIT Act, the provisions of Bankers' B09ks Evidence Act were
also amended to include printout from a computer system or disc as a valid
document and evidence, provided, it is accompanied by a certificate stating that it
is a true extract from the official records of the bank and that such entries or
records are from a computerised system with data integration.
The Reserve Bank of India Act, 1934
The Reserve Bank of India Act, 1934 was amended to insert a clause relating to
the regulation of funds transfer through electronic means between banks (Le.
.
" transactions like RTGS and NEFT and other fund transfers) to facilitate EFT and
ensure legal admissibility of documents and records therein.

er Check Your Progress 2

1. Sending offensive or false messages through communication service, etc is
known as
---
2. Electronic record is admissible evidence in the court oflaw. (True/false),
3. Causing injury to the reputation of a person with the help of Internet by
floating/publicizing negative messages is known as _

6.8 SUMMARY
In this unit, lines we discussed the issues related to security concerns to the client,
communication lines and server in an e-commerce process. The five aspects of a secured
e-commerce transaction, namely, confidentiality, integrity, availability, authenticity and
non-repudiation are also discussed. Security features such as digital signatures, firewalls
and SSL are explained. Finally, some of the cyber crimes and cyber laws applicable in
India (as per Information Technology Act, 2000) are given in the form of a table.

6.9 SOLUTIONS/ANSWERS
Check Your Progress 1
1. Integrity

2. True

3. Authentication
Check Your Progress 2
1. Cyber stalking
2. True
3. Cyber defamation

6.10 FURTHER READINGS

References
1. Effortless Eccommerce with PHP and MySQL by Larry Ullman; New Riders;
2013.
2. . E-commerce Security: Weak Links, Best Defenses by Anup K. Ghosh; Wiley;
1998.

3. Electronic Commerce by Elias M. Awad; Pearson Education; 2002.

4. Information Technology Act, 2000 and Information Technology (Amendment) Act
2008.
27
 Practices in E-Commeree 5. http://www.ecommercetimes.com
6. http://www.stuffworks.com

7. http://www.webopedia.com
8. http://en.wikipedia.org

"

'.

28
 ••
UNIT 7· M-COMMERCE
Structure
7.0 Introduction

7.1 Objectives

7.2 Benefits of M-Commerce

/'
(.,

., 7.3 Impediments of M -Commerce

7.4 M-Commerce Framework
7.5 M-commerc~ Application Flow
7.6 Emerging Trends in M-Commerce

7.7 Summary

7.8 Solutions/Answers

7.9 Further Readings

7.0 INTRODUCTION
M-commerce stands for Mobile Commerce. This section elaborates the concepts of m-
commerce. M-commerce is all about doing commerce transactions through mobile
devices. Surveys and estimates indicate that nearly half of all commerce transactions will
happen from mobile devices in near future. Explosion and popularity of mobile devices
provide huge opportunities for business enterprises and consumers to sell and purchase
on-the-go using mobile devices such as PDA, smart phones and other hand-held devices.
M-commerce is making the commerce anywhere any time concept a reality using a host of
technologies which are discussed in later sections.
Figure 7.1 depicts the outlook for m-commerce as per the forecast of research and
analysts.

~St resea,ch finds that

E-t ill I r.sea.-ch fn>ds ZOU.mobile
that7 of I'9tlIllon t oppi"l _ounU for
p an to invest In mo 163 Billion USO 01
eommarce about of

Figure 7.1: Outlook for M-Commerce

M-commerce involves performing financial or commerce transactions over wireless and

mobile devices which involve exchange of goods, services and information between end
consumers and merchants.
Key Drivers for M-Commerce
The following are the key drivers of m-commerce:

• Popularity of mobile devices: Hand held devices are quickly

overtaking the traditional desktops and laptops and are becoming the
primary channel for access.
29
 Practices in E-Commerce
• Wireless bandwidth advancements: Mobile devices can now
leverage enhanced bandwidths offered by 3G (Third generation) and
4G networks in addition to Wi-Fi and Wi-Max technologies.

• Location based services: M-commerce also offers unique ability to

get the offers and promotions based on the current location of the
subscriber.

• Convenience and afford ability of mobile devices.

Technology Enables
.
"

The following are the main technology components which help perform the
commerce transactions using mobile devices:

• GPRS (General Packet Radio Service) offers band width between

9.6 kbps and 115 kbps via GSM network and enables simultaneous
receiving and transmission. It is essentially a packet switching
wireless protocol which enables continuous connectivity for mobile
devices.
.
,
• W AP (Wireless Application Protocol) is a protocol that involves
Wireless Markup Language (WML). Like HTML, it provides support
for text and image presentation, etcJor mobile devices.
'-
• W-CDMA (Wideband Code Division Multiple Access) offers
2 Mbps bandwidth approximately.

• UMTS (Universal Mobile Telecommunications System) also

known as 3G network which offers 2 Mbps approximately for both
up-linking and down-linking.

• Satellite based communication provides wide coverage over various

geo locations.

There may be variations to the bandwidths indicated above.

Attributes of M-Commerce

The following are the attributes of m-commerce:

• Ubiquity: Transaction service access from anywhere in real-time.

Weather and stock updates are examples.

• Convenience: Mobile devices enable access from anywhere and

any time.

• Interactivity achieved through responsive user experience.

• Personalization: Possible to personalize the experience based on user

identification and preference as well as location. Flashing relevant
advertisements and recommendations are examples.

• Context-aware localization: Using GPS (Global Positioning System)

and triangulation techniques it is possible to identify the location of
the user and push relevant promotions and offers. Directory services
,. are an example.

7.1 OBJECTIVES
After going through this unit, you should be able to

• understand key concepts of m-commerce,

30
 • know the benefits and challenges of m-commerce, M-Commerce

• know the m-commerce framework, and .

• know the emerging trends of m-commerce.

7.2 BENEFITS OF M-COMMERCE

The following are some of the benefits of m-commerce:
• Timely and on-the-go access to information such as stock quotes during
travel. .

• Enables purchase of products any time anywhere.

• Availability of location based promotions and sales offers.
• Opportunity to use mobile device for instant payments.
• Mobile technology covers wider distance and enhances the reach of
potential customers.
'.
• Many vendors are pushing deals to encourage m-commerce which can be
leveraged by customers.
• Reduces overall transaction cost through streamlined business processes and
offers competitive price to customers.
The four main categories of benefits of m-commerce are shown in Figure 7.2.

i
-
!

Figure 7.2: Benefits of M-commerce

The following is the list of some of the prominent m-commerce services available:

• Mobile money transfer,

• Mobile ticket delivery,

• Mobile coupons,

• Mobile banking,

• Mobile auctions,

• Mobile shopping, and

• Mobile marketing
31
 Practices in E-Commerce rr Check Your Progress 1
I, attribute of in-commerce helps mobile users to access service
anywhere in real time.
2. Pushing personalized and user relevant content is known as _
3. Four main categories of m-commerce include _

7.3 IMPEDIMENTS OF M-COMMERCE

"
Though m-commerce is a promising technology, there are few challenges which are
preve~ting it from wider adoption. Some of the prominent impediments are given below.

• Mobile security: This is one of the prime concerns which is further

increased due to the transactions happening over wireless networks.
Similarly, the security issues related to mobile payment systems is another
limitation.

• Mobile network coverage and bandwidth: Wireless networks offering

.. high bandwidths are not available in all areas posing challenges to
commerce transactions.

• Mobile experience: Due to the wide variety, of mobile devices, operating

systems and device form factors, it requires a design that leads to robust user
experience that caters to consumers of all these devices. Applications not
conforming to standards pose challenges across various mobile platforms.

• Screen size is limiting user experience.

- • Interoperability across multiple networks, protocols and devices also pose

challenges.

• Web page performance is not optimized for mobile devices resulting in

slower page loads on mobile platforms.

7.4 M-COMMERCE FRAMEWORK

A m-commerce framework is given in Figure 7.3.

Mobile Commerce Applications (Payment gateway integrators.

Inventory management etc.'

Mobile Infrastructure
C:oMumer Devices

Mlddleware & Application Suppliers

C D
Enterprise Platform,

~,~~~

Service Providers

~ ~c=o=n=t=en=t=c=r=ea=t=io=n=&==A=!:~:re=g~a=ti=Q=n~ ~)

Mobile Infrastructure (Wireless stations. Satellites)

Figure 7.3: M-commerce Framework

32
/
 Various components of m-commerce framework given in Figure 7.3 are explained below: M-Commerce

• Mobile infrastructure: It includes sufficient cell towers to provide wide

coverage and sufficient network bandwidth for users to have smooth
e-commerce transactions. 3G networks provide bandwidth sufficient for
most of the m-commerce transactions. The mobile infrastructure should also
provide robustness in providing seamless switch over to heterogeneous
networks. It also provides multicast support and user access to multiple
networks.

..
' • Content creation and aggregation: This layer is responsible for generating
the content used for m-commerce transactions. The content could be stored
locally such as marketing campaigns, promotion materials; targeted ads and
emails or the content could be aggregated from multiple sources.

• Mobile middleware: Lot of enterprise vendors such as SAP, Microsoft

provide middleware software for m-commerce. This layer consists of
various tools and technologies to perform following functions:

Maintaining a device repository of all mobile devices.

Using device repository for providing most optimal user experience

and navigation experience.

Enforce device specific policies.

Provide network optimization techniques such as compression etc. to

improve response times and reliability:

• Service providers: These operators are responsible for maintaining the

,f
quality of mobile service such as bandwidth, coverage, availability,
reliability and scalability. Some of the popular service providers include
Airtel, Vodaphone, AT&T and Verizon, etc.

• M-commerce applications: These are the applications running on mobile

devices. The applications can be of two types: Native applications for
targeted mobile platforms or browser based applications. With the
emergence ofHTML5 and CSS3 standards and in addition to responsive
web design (RWD) concepts, more and more commerce applications are
becoming browser based. The applications include sellinglbuying product,
mobile inventory management, payment gateway integrations, etc.

• Legal and industry regulation and governance process: This layer

consists of various processes to comply with regulations at both national and
intemationallevels.

7.5 M-COMMERCE APPLICATION FLOW

Figure 7.4 depicts the flow of an m-commerce application.

M-commerce application flow with reference to Figure 7.4 is explained below:

1. End user uses one of the mobile devices to perform a e-commerce
transaction such as buying the product.

2. The transaction is supported by the wireless network provider by providing

wireless network bandwidth and signal coverage.

3. The mobile request will then be intercepted by mobile middleware. The

mobile middleware authenticates the user and the web site 'through
validation of certificate. It also optimizes the rendition using device specific
policy as well as experience using its rich device repository 33
 Practices in E-Commerce 4. The request reaches the e-commerce store which does a variety of tasks:
• Gets the inventory and pricing information from internal ERP
systems.

• Gets the product metadata from product database.

• • Gets product attributes from product catalogue .

• Uses payment gateway to execute the financial transaction.

"

Mobile Wireless Network Baekend systems

Devices· IProvidefS
I
I

:¥~
•••
I

I
I
I
I
1

Figure 7.4: M-commerce Application Flow

7.6 EMERGING TRENDS IN M~COMMERCE

The following are some of the emerging trends in the space of m-commerce:

• M-wallet: Using mobile devices for various ranges of financial transactions.

• Near Field Communications (NFC) enable radio communication between

smart phones and other similar devices which are in proximity (normally not
more than a few inches) or when they touch each other.

• Mobile coupons are expected to become popular at retail stores.

• Majority of purchase decisions may be done via mobile phones during

shopping. It includes product research, product comparison etc.

• Mobile shopping is going to play a major role in the shopping space.

• In-store personalization based on mobile app which indicates the available

sales and acts as a smart store guide.
34
 M-Commerce
• Taking off of Moblle first strategy wherein the enterprises design their
online strategy predominantly around mobile devices first making the user
experience on mobile devices more friendlier.

• Social commerce enablement though mobile devices.

• Mobile inventory management using RFID on products and track the

inventory in real time.

rT Check Your Progress 2

,., l. Device recognition feature is provided by __ in m-commerce framework.

2. Exchange of data between mobile devices located in proximity is known as

7.7 SUMMARY
In this unit, we started discussing the broad trends and outlook of m-commerce. We then

.. discussed the benefits of m-commerce and the current challenges. We also saw various
layers in m-commerce framework and the flow of control and data for a e-commerce
transaction. With the increasing number of mobile users, more and more services are
being offered in the mobile space. People want to perform maximum transactions using
their mobile devices.

7.8 SOLUTIONS/ANSWERS
Check Your ~rogress 1

l. Ubiquity.

2. Context-aware localization.

3. Media, finance, collaboration and data services.

Check Your Prog ess 2

1. Mobile middleware layer.

2. Near Field Communications.

7.9 FURTHER READINGS

References

• M-commerce by Paul Skeldon; Crimson Publishing Company; 2012.

• Mobile Commerce 2.0: Where Payments, Location and Advertising

Converge; CreateSpace Independent Publishing Platform; 2013.

• M-commerce: Technologies, Services, and Business Models by Norman

Sadeh; John Wiley and Sons; 2002.

• Mobile Commerce: Technology, Theory and Applications by Brian E.

Mennecke and Troy J. Strader; IGI Global; 2002.

• http://en.wikipedia.org

• http://www.webopedia.com

35
 Practices in E-Commerce
• http://www.mcommerce.io

• http://mcom.cs.cmu.edu

• http://www.practicalecommerce.com/articles/62685- 5-Keys- to- Mobile-

Ecommerce-Opt~mization-in-20 14.

"

..

I"

36
 .UNIT 8 ONLINE SHOPPING PORTAL:
AN E-COMMERCE CASE STUDY
Structure
8.0 Introduction

8.1 Objectives

..
'
8.2 Online Shopping Portal: An E-Commerce
8.2.l Business Scenario
Case Study

8.2.2 Main Functionalities

8.2.3 Architecting Online Shopping E-commerce Portal
8.2.4 Designing Online Shopping E-commerce Portal
8.2.5 User Experience of Online Shopping E-commerce Portal
8.2.6 Conformance to QoS Standards
8.3 Popular E-Commerce Sites

8.0 INTRODUCTION
This unit discusses a real-world e-commerce case study detailing the requirement of a
typical B2C ecommerce system and then explains the design/implementation approach of
it. The unit also describes few popular e-commerce web sites along with their salient
features. There are abbreviations used in this unit. The expanded forms are not indicated
for all the abbreviaticins.

8.1 OBJECTIVES
After going through this unit, you should be able to know the

• terminology of e-commerce,

• advantages and limitation of e-commerce, and

• terminology of m-commerce.

8.2 ONLINE SHOPPING PORTAL:

AN E-COMMERCE CASE STUDY
This case study is about architecting and designing an online shopping application which
offers various items such as books, apparels, electronic items etc. for web users. This
case study show cases most of the e-commerce features in B2C space.

8.2.1 Business Scenario

A team of entrepreneurs want to develop an online shopping application which provides
seamless advantage for web users to provide a "single-stop-shop" e-commerce
experience for all its customers. The team is planning to launch the e-commerce
application in a developing ~conomy in which the tech-savvy population who are ready
to trust and transact in online platform is fast increasing. They want to take the
"early-mover" advantage in this demography where there are minimal competitors.
The following are the key business objectives and metrics for the team:

• Enroll at least 1000 customers in first 3 months

• Sell items worth 10 Lakhs INR in first 3 months

• Achieve the conversion ratio (the ratio of visitor to purchaser) to 30%.

37
 Practices in E-Commerce
8.2.2 Main Functionalities
The team wants to incrementally roll out the functionalities. The main functionalities are
listed phase wise below:
Phase-It Functionality

Category - Functionality
User Experience • The e-commerce application should be visually appealing,
responsive and interactive.

"
• The web application should contain consistent hierarchy and layout
structure.
• The web application should provide consistent branding and
immersive visual elements.
Search Feature • The application should allow the user to search for the product by
its attributes such as name, and brand.
/
• The search should be filtered based on price, brand, and product
features.
Cross-sell and up- e The application should provide product promotion features.
'. sell features
• During search results and check out flow, the application should
push other "related products" which .customer may be interested in.
• During search results and check out flow, the application should
provide "packaging" option to bundle multiple products for a
discount.
Personalization • The applicatiorr should provide personalized recommendations
based on recent purchase history and user profile attributes for

-
registered users.
Marketing • The application should support marketing campaigns such as
BOGO (Buy One Get One).
• The application should support.running campaigns and promotions.
Product purchase • The application should allow shopping cart and check out features.
• The application should support various electronic payments such as
/
online payment, COD (Cash On Delivery), etc.
Integrations The application should be integrated with following applications for
achieving commerce functionalities:
• Internal inventory system through SOA (Service Oriented
Architecture) based integration.
• Internal Pricing system through SOA based integration.
• External payment gateway system.
• Internal database for product information.
Security • Application should support authentication and authorization.
Quality of Service • Availability: The application should be available 99.999% of times.
(QoS) and Non • Performance: The application should respond within 5 second page
Functional response time.
Requirements
(NFR) • Scalability: The application should support 1000 users per second in
peak load, 100 users per second average load.
,. • Maintainability: There should be less than 15 defects per month.
• Extensibility: It should be easy to add future functionality to the
application.
• Reusability: Platform and library components should be reusable.
Social features • E-Commerce application should support social features to promote
and advertise the product(s).

38
 Pbase-2: Functionality Onliae Shopping Portal:
An E-Commerce
Category Functionality Case Study

Localization • The e-commerce application be available in 10 languages

including Hindi, Kannada, Malayalam, Telugu, Tamil, .
Punjabi, Marathi, Oriya, Guajarati and Assamese.
Mobile enablement • The application should be accessible through mobile
devices.

8.2.3 Architecting Online Shopping E-commerce Portal

In order to architect a flexible and extensible e-commerce portal to satisfy the
requirements it,is necessary to adopt a three-tier architecture model. The following is a
sample logical architecture of the online shopping e-commerce portal (refer to
Figure 8.1).
Web
-End Users' ·······Server
layer···· ·-·_-------In!tCfltlon SV$t9ms--""j
layer
Application Server
Upt- &V'''''''
.
,
WCbUSNS
__ Layer
B.oIM" Layo<

JSR
••••••••
UXMgmI
Ft-'urn

- --
Lay•••
s-.o !ngIoe
OpIImIutioo
s.m•••

CompontnII

'- Nlllvlgatlon
e ••• """"""
( ...........

---
tompo"""",
Admins Commun&tl Poraonaflutlo eomp",,"
•• n ~
0.••••
Custom Component.
'-ne
S<rIpIt InterprllO ---..-
ShoppIngC""
·ldMlayer·· StrYic:. SUI
WIdgoI> CIIIIog
U__ ~
Man ••••••
"'-""Y
M.wogomtnI
WebAI'I.lytla:

,------""~

...-
."....
~""

Content M.nagemtnt Sy.tem API'lkI'II"". (InYfnlory IV.'tm, Pricing

ContonI..........-,_
Ic;.n •••• ~_.
Iy" •••,

r••••••• MCUI'Ily,
1ocAII1__ uplood.
RIdITood_,
On"n, Peym,nr OMtWIY

t
--,
-
Monltorln. & M.lnt.n.n •• Compon,n"

Figure 8.1: Architedore of ODline Shopping E-commerce Portal

Various components of Figure 8.1 are explained below. The multi-layered architecture is
mainly based on MVC architecture:

• Presentation Layer: Includes presentation components like web pages and user
experience components. The key components are explained below:

o Web pages: HTML compliant pages such as home page, search page,
products page, shopping cart and check out page.

o ThemeslLayout: Pages will be designed with consistent themes and layout.

o Navigation components: Include navigation ain" ~.. ' 1 ~~+ navigation
component, etc. 39
 Practices in E-Commerce
o Personalization engine: The engine tracks the purchase history of user and
uses the user profile attributes such as interests, location to provide
personalized product recommendations. The engine also tracks customer's
web behaviors, click path, downloads to fine tune the product
recommendation.

o Search Engine Optimization (SEO): Makes the pages search engine

friendly so that they get higher ranking in search engine results driving more
traffic.

" • E-commerce Components: Include server side business components and services
to satisfy the core e-commerce requirements.

,0 Campaign management module: Helps the business and marketing team

to setup the sales and marketing campaigns, and seasonal offers and
promotions. The content is mainly retrieved from content management
systems (CMS) to perform dynamic delivery.

o Order processing module: Manages all parts of order flow such as order
placement, order fulfilment, and order tracking. This is integrated with
online payment gateways and supports varieties of payment modes. For
Indian context, COD is also added as one of the modes of payment along
with net banking and credit/debit card based..payment.

o Shopping cart module: Allows the user to add to and update shopping cart.
o Inventory management module: Interacts with internal inventory
management ERP (Enterprise Resource Planning) system.

o Catalog management module: Maintains and categorizes product catalog.

- o

o
Web analytics module: Tracks user behavior on the web pages to improve
the effectiveness of personalization and recommendation.

Search: Includes keyword based product search. User can filter the search
results based on price, model, product attributes such as color, size, brand
etc.

• Integration Layer: Primarily involves service based integration components.

o Data services component: Uses Data Access Object (DAO) to access the
product database.

o Web services component: Is built into the application using JAX-WS to

support any future services based integration.

o Iframe/link based integration component is provided to support any future

link based integration.

o Search engine component: Helps in indexing product details to provide

query-based search results.

• Identity Management (IDM) Layer: It includes security manager, LDAP and

SAML providers.

o LDAP server acts as the user registry. It stores the user profile information.

,. o Online shopping applications provide security at coarse-grain level through

authentication and at fine-grained level through authorization. Additional
security measures include admin access to catalog management and
personalized promotion management.

• Monitoring and Maintenance Component: Includes real time application SLA

monitoring, automatic alerts and notifications, system health check/ heart beat
monitoring, scheduled maintenanceibackup jobs, critical activity monitoring and
system CPU/ memory monitoring.
40
 • Real-time application SLA monitoring components would check the live Online Shopping Portal:
An E-Commerce
production of web pages.
Case Study
• Automatic alerts and notification through email when the page/system
performance falls below a pre-configured threshold value. .,

• System health-check/heartbeat monitoring to ping the availability of portal

system and all interfacing systems to ensure that they are responding within
expected response time. Automatic notification is trigged if any system is
down.
., • Scheduled maintenance and backup jobs to perform system clean-up and
back up activities.

• Web analytics will be configured to monitor the business-critical

process/activities in real-time. This could include activities such as page
load time, search processing time etc. Additionally reports would be
. designed to display th~ monitoring data.

• System CPU I Memory monitoring is done.

.. 8.2.4 Designing Online Shopping E-commerce Portal

End-to-end design of online shopping portal involves key stages as detailed in Figure 8.2.

Business, &
Architecture
Strategy

• Business
Visioning • Business • Plan for • Personalized
Requirements Technology experience and • Support
• Channel and Process Infrastructure recommendatio
Strategy Maintenance
• Site Navigation • Webstore ns • Operations
• Marketing and Worldlows design & • Flexible
• Customer/Pe • Infrastructure
• Architecture development shopping and Management
rsona Principles and • Intuitive site order
Analysis processing • Enhancement
Standards navigation,
• Product search and • Multi-channel • Upgrades
• Organizational
Strategy Ali ent product support
• Business discoverability • Loyalty
Case & ROI programs
Analysis • Alerts & news
• Awareness letters
campaigns

Figure 8.2: Stages of Designing of Online Shopping E-commerce Portal

• E-commerce vision and strategy: At this stage, the business team lays out the
vision and business objectives of online shopping portal application. They also do
the market and competitor surveys and defines the solution strategy. Business
teams also do awareness campaigns including the paid ads on search engines to
route the traffic, carries out seasonal campaigns and product banners, and creates
one-off microsites.

• Business and Architecture Strategy: At this stage, the business and technical
teams finalize the business flow, architecture principles and standards. It involves
defining key business processes, finalizing technology stack, etc.

• Development: E-commerce web store will be developed during this stage with all
commerce functionality. User experience development involves intuitive and
responsive site design along with friendly navigation aids and enhanced product
discoverability through search.

• Servlclng. At this stage, the list of personalized services that are to be provided to
the customer such as customized look and feel, personalized content and product
recommendations, access to social communities and forums and multi-channel
41
 '. Practices in E-Commerce support through live chat, email and phone are made. Online shopping application
also rewards customer loyalty through targeted promotion and discount campaigns.

• Operations: Involves regular site maintenance and upgrade activities. This stage
also ensures that application is accessible 24 x 7 and provides good response time
, across geographies. Operations teams will also install code updates and software
patches.

8.2.5 User Experience of Onlfne Shopping E-commerce Portal

In this section let us look at the key user experience elements and features offered in
"
online shopping portal.

Home Page: The home page of the user after login is shown below (refer to Figure 8.3).

Header Search

'.
Featured Products

Services
Promotion & Offers

Prod et Ticker With Personalized Recommendations

•
Figure 8.3: Home Page of OnIine Shopping ~mmerce Portal

The elements of Figure 8.3 are explained below:

• Element 1: This element provides the registered user name along with
option to edit profile and logout.

• Element 2: This left navigation element provides various categories of

products. Users can expand the product to see the products belonging to that
category.

• Element 3: All features and promotions are provided. It also includes

advertisement banners and seasonal sales offers.

• Element 4: A featured video is shown in this space.

• Element 5: Personalized promotions and offers are shown here.

42
 Online Shopping Portal:
• Element 6: Top best sellers of products are shown here for cross-selling
An E-Commerce
purposes. .
Case Study
• Element 7: The ticker/carousel element provides personalized product
recommendations. Recommendations aregiven based on purchase history
and product view history

• Element 8: In each page, a search feature is provided to help user to quickly

find the product by its name or model.

Product Details Page: This page shows details of a selected product. The page mockup
is shown in Figure 8.4.

\. ~elcomeJiml S&gnout IHelp

Header

'.

Offe s

Product Description

HelpCe.QteJ-

Prod uct'Video
User Revie\"tS 8; Rating Product 8und e Opt

•
Footer

Figure 8.4: Web Page of a Product in Online Shopping E-commerce Portal

The elements of Figure 8.4 are explained below:

• . Element 1: This element provides the registered user name along with
option to edit profile and logout.

• Element 2: This section provides the details of the product such as product
images, technical specification, product features, availability and pricing
information, accessories etc.

• Element 3: Any applicable promotions for this product are shown here.

• Element 4: Help center provides various ways in which customer can learn
more about product and helps in easing his/her purchase experience. It
includes real time chat or email or phone based support.

• Element 5: It shows the product demo video.

43
 Practices in E-Commerce
I • Element 6: This section shows all the review comments given by other
users of this product along with overall rating.

• Element 7: All product bundling or packaging options are shown here for
up-selling. It iricludes packaging complimentary products, accessories, etc.

Shopping Cart Page: This page show the details of shopping cart. Mockup is shown in
Figure 8.5.

WelcomeJim I Sign Out I Help

"

. Header

.. Shopping Cart (Items, Quantity and Price)

- Recommendations P du Bundl

Footer

Figure 8.5: Web Page of Shopping Cart in Online Shopping E-commerce Portal

The elements of Figure 8.5 are explained below:

• Element 1: This element provides details of shopping cart including the list
of all products in the cart along with its quantity and total price.

• Element 2: This section provides the recommended products which user can
add to shopping cart.

• Element 3: All product bundling or packaging options are shown here for
up-selling. This includes packaging complimentary products, accessories,
etc.

8.2.6 Conformance to QoS Standards

The following are explicitly stated NFR requirements:
• System Performance: 99% of pages must be loaded within five seconds or
less

• Scalability: Maximum 1000 concurrent users

• Availability: 99.999 percent of core working hours

44 • Security: Minimum 128-bit encryption

 Behavior of system attributes during heavy load (stress load) conditions: Online Shopping Portal:
An E-Commerce
(i) Explicitly Stated NFR Case Study

The following are explicitly stated NFR:

• P.erformance: The following techniques are used for ensuring the required
performance:
o Caching:
• Frequently used objects, controlled lists are cached in memory .
.., • Caching is employed at every layer:
• Presentation tier: browser caching, merging and
minifying of global assets, http compression, placement
of external JS files at the bottom of the page to improve
the perceived page load times.
• Server end: Cache frequently used objects and use
connection/thread pool.

'. • CDN (Content Delivery Network) to provide edge side

caching.
• Scalability: The scalability techniques that are followed are given below:'
o Usage of optimal amount of RAM which can handle peak load of
1000 concurrent users. However the clustered deployment also
provides additional load distribution and RAM availability if the load
exceeds 1000 users. The application server infrastructure has server
cluster consisting of two 8 GB RAM nodes which will be used for
, load balancing.
o Adopting network load balancers and clustered deployment.
o Connection pooling and thread pooling: Pooling technique is
followed to obtain connection or thread from the pool maintained by
the application server to ensure optimum resource utilization. The
thread pool size settings are as follows:
• Maximum thread pool size: 100
• Thread time out: 10 minutes (600 seconds)
This configuration is tested to handle a peak load of 500 users per second.
For database connection pooling, following settings are used:
• Maximum thread pool size: 100
• Minimum pool size: 100
• Idle pool time out: 120 seconds
o NM (Java Virtual Machine) parameters like heap size, GC (Garbage
Collection) values are optimally tuned to obtain the optimum scaling.
For optimal heap size, following NM parameters are used:
java -Xms 1024m -Xmx 1024m -Xgc: parallel
This allocates 1GB of heap size for Online Shopping Portal which is
, ~.-. sufficient to handle a very high level of peak load. .
• Availability: The following techniques are followed for high availability:
o High availability clustered deployment:
• Server cluster consists of primary node and fail-over node for
handling load and to serve as fallback node.
• Session fail-over is adopted to ensure the continuity of sessions . 45
 Practices in E-Commerce • Load-balancer to ensure that load is optimally distributed
across various nodes.
• Session replication and cache replication will be used to avoid
session fail over.
o Stand-by backup cluster with on-demand cluster routing: The
production environment also has an additional back-up cluster which
mirrors the production cluster in code base and data. The load
balancer is configured to route the requests to the back-up cluster only
on-demand when there is a failure of the primary live cluster. This
provides additional high availability to the system to handle any
.,
fail-over of the primary cluster.
o Disaster recovery environment: The application code and
environment is mirrored in diversified geographies to handle any
unforeseen disaster.
o Hot deployment: To avoid the unavailability of the application
during deployment, hot deployment is followed.
o Roll out deployment and maintenance: All deployment and
maintenance activities are followed node-by-node basis to avoid
outage during these times.
o Continuous monitoring: Set up production monitoring agents to
continuously monitor the availability and setup a notification
mechanism to alert the administrators when the site performance falls
below a pre-defined threshold. .
o Frequent data backups: The data stored in database and the

-
application data is backed up on daily basis to ensure recoverability.

o Security tests: Security and vulnerability tests are conducted

frequently to ensure that application does not have any vulnerability.

• Security
o Transport Level Security:
• All internal and external communications are done using
secured transport layer leveraging HTTPS protocol.
• Firewall software blocks all ports except for the ones that are
required.
• All secured content are encrypted using one-way hash
encryption algorithms.
o Application Level Security:
• The application is thoroughly tested for security related
vulnerabilities like SQL injection, buffer overflow, cross-site
scripting, etc.
• Application server specific data sources are used to obtain a
connection instead of storing the database user id and password
within the application.
• Web service security: Following security measures will be
adopted to address the security issue related to web service.

• Web service is invoked using HTTPS .

• Vendor provided web service security features will be
leveraged to ensure the message integrity and security.

46
 • Transport level security will be implemented using SSL Online Shopping Portal:
for connection between client and web service server. An E-Commerce
Case Study
• Additionally, other vendor provided security features
will be leveraged for the web service invocations.

o Authentication and authorization:

• JAAS based login module is used for user authentication with

LDAP based user registry.
(ii) Other NFR

The following are the other NFR:

• Ex~ensibility: The application supports extensibility in following ways:

o The application follows MVC architecture pattern which allows clear

"
separation of concerns for each layer. This would also provide the
flexibility for the application to change the technologies in each layer
without impacting other layers.

o Individual service classes implement abstract service which can also

.
, be extended by future services.

o All integrations are based on standards. This would help plugging in

extensions in future.

• Maintainability

o Testing at all layers will be done to ensure good maintainability of the

code.

o .All major classes and interfaces will have sufficient documentation

includingjavadocs.
o Proper interface documentation would be provided for all
integrations.

• Portability

o Application will be developed based on standards.

o Vendor specific code/feature usage will be kept to the most minimal

possible extent.

• Reliability

o Ensure that all unit test cases are developed for all classes.

o Ensure that significant amount of code is covered by test cases.

o Include functional, integration, performance and security testing as

gating criteria for release sign-off.

• Testability

o Code would be developed so that it is testable.

o Out of box dependency injection principle would be followed

wherever applicable to make it more testable.

o Each class addresses only single concern/functionality to ensure

proper testability.

• Accessibility

o Presentation components such as JSF are developed to adhere to

WCAG 2.0 guidelines.

47
L
 Practices in E-Commerce
8.3 POPULAR E-COMMERCE SITES
The following are some of the popular Online Shopping E-commerce portals:

• http://www.amazon.com

• http://www.ebay.com

•
.. http://www.flipkart.com

http://www.myntra.com
"
• http://www.olx.in

• http://www.snapdeal.com
- ';" ~~
'-"'

'.

48
pDD/IGNOU/P.O. 3.5T/October, 2014 (Reprint)

ISBN: 978-81-266-6670-6