Electronic Commerce

Uma Lakshmi K
 Electronic Commerce

Distributing, buying, selling, marketing and

Servicing of products or services over
electronic systems such as computer and
other networks.

It is an electronic business application aimed at

commercial transactions.
 Electronic Commerce

“The seamless application of information and

communication technology from its point of
origin to its end point along the entire value
chain of business processes conducted
electronically and designed to enable the
accomplishment of a business goal”
 Information Era – Dramatic Roles

 1955 – 1974 Electronic Data Processing (EDP)

 1975-1994 MIS & Strategic Information Era

 1995-2014 Internet
 backdrop of E-Commerce
Internet
 Late 1800s;Emergence of large business organizations

 1950’s; use of computers in Business

 1960’s; information exchange on punched cards and magnetic

tapes. But only large trading corporations could afford it as the
translating formats were specific to companies. Majorly freight and
shipping companies

 Late 1969’s –ARPANET,US Defence dept

control weapon systems and transfer research files
 1970’s EDI; the Senior of E-Commerce
 backdrop of E-Commerce
Internet
 1979; e-mail on USENET by students of Duke and North Carolina University

 1989; NSF (National Science Foundation) permitted two commercial e-mail services,
MCI-mail and CompuServe

 1991 – 1994; privatization of Internet, with the new structure based on four Network
Access Points (NAP), each operated by a separate company called Network Access
Providers., who sell network access rights directly to large customers and indirectly to
small firms through ISPs (Internet Service Providers)

 Potential of Internet not realized initially; within 30 years it has become one of the
most amazing technologies and social accomplishment of 20th century. Every year
apart from information, billions of dollars change hands over internet.
 backdrop of E-Commerce
World Wide Web
 1990; Tim Berner Lee at CERN (Conseil Europeen pour la Recherche Nucleaire), the
European Laboratory for Particle Physics in Geneva, Switzerland, proposed HTML to
enable exchange of information among high-energy physics community.

 1991; WWW publicly available from CERN.

 1993; 50 web servers, GUI web browser for X Windows and Macintosh available.

1993; Marc Andreessen at NCSA (National Centre for Super computing Applications)
developed web browser for X Windows called “Mosaic” and 1994 he started his own
company later known as “Netscape Communications”.
1994; World Wide Web Organization was announced by CERN and MIT, which later
was known as W3C (World Wide Web Consortium) , to guide technical
developments and standards for the evolution of the web.

1994’s Amazon.com ; the pioneer of E-Commerce

1995; Netscape navigator (Mozilla)

2000’s Dot-com burst

E-Commerce now is more of a norm than exception

 E-Commerce – some
milestones
 1992 – 1 million hosts
 1993 – 50 web servers
 1993- InterNic created to handle domain name
registration
 1996- 12.8 million hosts
2,12,155 hosts
25 million users
90% users are from USA
 1997- 1.3 million domain names
 2007- 1350 million users
 Dimensions of E-Commerce

 Business
 Technology
 Society

- E-Commerce has challenged the concept of

privacy, intellectual property, national
Sovereignty, and governance.
 E-Commerce

 Technology mediated exchanges between

parties (Individuals & Organizations or within
organizations) electronically facilitated.

E-Business
 Digital enabling of transactions and processes
in a firm involving Information Systems.
 Testimonials from Amazon
 1994 - “Jeff Bejos” , Sr.VP at a wall street investment
Bank read that Internet is likely to grow at 2300% per
year.
 1996- 3 million titles of Books – No “touch and feel”
required by customers.
 December, 1999 – “Person of the year”
on Time Magazine.
$113.00 / share
 Jan, 2001 - $545 million net loss in the last quarter itself.
1300 employees laid off.
 September , 2008 – Top Web billionaire of the world
 Characteristics of e-commerce

 Exchange of Digitized Information between

Parties
 communication, coordination for the
transmission of goods/ services
 It is technology enabled (web browsers, ATM
interfaces)
 Technology mediated transactions more than
human contact.
 Intra and inter organizational activities that
exchange in Business environment.
 Characteristics of e-commerce

 Universal Standards shared by all nations.

 Information density with technology reducing
the cost of Information and raising the quality
of information.
 Richness of the data: Text, graphic, Audio,
and Video
 Dynamic (continuous change)
 Customization and interactivity; sense and
respond – listening to customers in a new
way.
 Advantages of E-Commerce
 Complements traditional business
 24 X 7 operations
 Global reach
 Relatively less cost of acquiring, serving, and
retaining customers
 An extended enterprise including suppliers,
retailers, and customers is easy.
 Disintermediation:Reduced intermediaries
between customer and supplier
 Improved customer service(reduced lead
time)
Advantages of E-Commerce
 A technology based customer interface with GUI
and interactivity which does not need
unnecessary follow ups
 Interaction controlled by customer.(Any time
interaction can be closed)
 Easy to observe and track customer/ consumer
behavior
 Network economics: In Information centric
industries gain more mileage.
 Financial Institutions can reduce the no. of
branches due to increasing online transactions.
 Friction free commerce
Disadvantages of E-commerce
 Perishable foods, highly expensive jewellery,
antiques may be difficult to inspect from remote
location.
 With emerging and dynamic technology like E-
Commerce, it is difficult to calculate ROI
 Micro transactions may include more transaction
charges than product price.
 Difficulty in integrating online and off-line
processes.
 Recruitment and retention of technical people.
 Cultural and legal obstacles.(cyber laws not
sufficient enough and security concerns)
 Disciplines concerned with E-
commerce
Management Computer science
science

Economics

Sociology

Finance &
Information Accounting
System

Marketing
E-Commerce I (1995 – 2000) Vs E-Commerce II (2001
onwards)
 Technology driven  Business Driven
 Revenue growth emphasis  Earning and profit
emphasis
 Venture capital financing  Traditional financing
 Ungoverned  Strong regulation and
governance
 Large traditional firms
 Entrepreneurial
 Strengthening
 Disintermediate
intermediation
 Imperfect with markets,
 Perfect markets brands, network effect
 Pure online strategy  Mix of “click and brick”
 First mover advantage  Strategic follower strategy
 Fact file

 Nearly $125 billions of venture capital went

into thousands of dot-coms by 1999.

 Only 15% of the dot-coms since 1995,

survived after 2000

 B2C sales growing by 45 – 50% per year.

 Network effect

Goes by Metcalfe’s law which postulates that

the value of a network grows by the square of
number of participants.
 Challenges for e-Commerce
 One world, the web world may expect “one
price”; entrepreneurs must find ways to show
differentiation in product and service.
 Nearly 65% of transactions stop at shopping
cart level because of customer uncertainties.
 Constantly changing prices not realistic.
 Security concerns among people
 Internet yet to reach third world beyond US
and other developing countries.
 Categories of E-Commerce

B C

B B2B C2B

B2C C2C / (P2P)

C
 B2B
 Business-to-business (B2B) describes commerce
transactions between businesses, such as
between a manufacturer and a wholesaler, or
between a wholesaler and a retailer.
 The volume of B2B (Business-to-Business)
transactions is much higher than the volume of
B2C transactions
B2B
B2B Web sites can be sorted into:
• Company Web sites, since the target audience for
many company Web sites is other companies and
their employees. Company sites can be thought of as
round-the-clock mini-trade exhibits. Sometimes a
company Web site serves as the entrance to an
exclusive extranet available only to customers or
registered site users. Some company Web sites sell
directly from the site, effectively e-tailing to other
businesses.
• Product supply and procurement exchanges,
where a company purchasing agent can shop for
supplies from vendors, request proposals, and, in
some cases, bid to make a purchase at a desired
price. Sometimes referred to as e-procurement sites,
some serve a range of industries and others focus on
a niche market.
B2B (contd..)

• Specialized or vertical industry portals which

provide a "subWeb" of information, product
listings, discussion groups, and other features.
These vertical portal sites have a broader purpose
than the procurement sites (although they may
also support buying and selling).
• Brokering sites that act as an intermediary
between someone wanting a product or service
and potential providers. Equipment leasing is an
example.
 B2B Commerce

• Information sites (sometimes known as

infomediary ), which provide information about a
particular industry for its companies and their
employees. These include specialized search sites
and trade and industry standards organization
sites.
• Many B2B sites may seem to fall into more than
one of these groups. Models for B2B sites are still
evolving.
• Another type of B2B enterprise is software for
building B2B Web sites, including site building
tools and templates, database, and
methodologies as well as transaction software.
B2B
• Business-to-business (B2B) e-commerce is
significantly different from business-to-consumer
(B2C) e-commerce. While B2C merchants sell on
a first-come, first-served basis, most B2B
commerce is done through negotiated contracts
that allow the seller to anticipate and plan for
how much the buyer will purchase. In some cases
B2B is not so much a matter of generating
revenue as it is a matter of making connections
with business partners.
B2B Commerce
 Supplier management
 Procurement
 Inventory Management
 Sales and marketing activities
Industry sponsored marketplaces (ISMs)
& consortia-led exchanges
Covisint, an e-marketplace backed by the major auto makers General
Motors, Ford Motor Co., and DaimlerChrysler, was first announced in
February 2000
Worldwide Retail Exchange (WWRE), was formed in early 2000 by a group
of retailers including the Gap, Target, Walgreen, Best Buy, and
Albertson's, among others.
GNX was also formed in early 2000. Its founding companies included Sears,
Roebuck & Co., Carre-four, and Oracle.

Transora is a consortia-led exchange serving packaged goods

manufacturers and the retail industry. It began with 57 original
investors, including companies such as Coca-Cola and Procter & Gamble
 B2C
 Business-to-consumer (B2C, sometimes also
called Business-to-Customer) describes
activities of businesses serving end
consumers with products and/or services.
 B2C stands for "business-to-consumer" and
applies to any business or organization that
sells its products or services to consumers
over the Internet for its own use.
 Ex: Amazon.com
Shopping.Sify.com
 B2C Commerce
• Using the latest internet application technology,
individual sites can be created within minutes of
the retailer selecting a template and supplying
graphics such as logos. Typically, retailers will pay
only a modest monthly rental charge – and
retailers require no specialist hardware or
software, other than internet access.
• These days, a web site should be a standard part
of the promotional and advertising mix for every
business, along with other tools such as Yellow
Pages, newspaper advertising and signage.
B2C
Advantages of B2C e-commerce
B2C e-commerce has the following advantages:
• Shopping can be faster and more convenient.
• Offerings and prices can change instantaneously.
• Call centers can be integrated with the website.
• Broadband telecommunications will enhance the buying
experience.

Challenges faced by B2C e-commerce

• The two main challenges faced by B2C e-commerce are building
traffic and sustaining customer loyalty. Due to the winner-take-all
nature of the B2C structure, many smaller firms find it difficult to
enter a market and remain competitive.
• In addition, online shoppers are very price-sensitive and are easily
lured away, so acquiring and keeping new customers is difficult.
 B2C
• B2C (Business to Consumer): Refers to a business
communicating with or selling to an individual rather
than a company. B2C e-commerce jumped from $11.2
billion in 1998 to $31.2 billion in 1999,
• Doing business online no longer requires a huge
investment by retailers, thanks to developments in
template-based online stores which are based on
packaged applications that are delivered over the
internet.
• As nearly all online stores will require the same
functions: catalogues, order baskets, payment
processing, content management and member
management, it makes sense for those components to
be created once and shared by all stores, with each store
effectively ‘renting’ its own copy of the applications.
 C2B
• A consumer posts his project with a set budget online
and within hours companies review the consumer's
requirements and bid on the project.
• The consumer reviews the bids and selects the
company that will complete the project.
• A student wants to fly from London to New York, but
has only £200 ($320) in the bank to pay for this round
trip. They put up an ad in an Internet C2B site, seeking
airlines that are willing to offer the transatlantic round
trip for £200 or less. The beauty of the Internet is that it
brings together a large number of customers to create a
marketplace that a number of airlines (that will have to
otherwise fly with empty seats) will be interested in.
 C2B

 Many analysts state that C2B and C2C e-

commerce will thrive in the near future. It
is a challenging task, however, to
construct these e-commerce systems
because of their diverse nature.
 Ex: ebay.com
C2C

• C2C applications are any transactions

between and amongst consumers (QUT
School of International Business, 2003, p. xv).
They are often described as Peer-to-Peer
(P2P)
 C2C

 A variation in C2C is P2P,

“Gnutella” is a software application that
permits consumer to share music with one
another directly without the intervention of
third party.
Other Miscellaneous commerce

• G2G (Government-to-Government), G2E

(Government-to-Employee), G2B
(Government-to-Business), B2G (Business-to-
Government), G2C (Government-to-Citizen),
C2G (Citizen-to-Government) are other forms
of ecommerce that involve transactions with
the government--from procurement to filing
taxes to business registrations to renewing
licenses.
C2C
• Ebay.com is an online auctioning site that facilitates the
trade of privately owned items between individuals (May,
2000, p.109). The website claims that through Ebay,
“practically anyone can trade practically anything�
(Ebay, 1995-2004). The company began in September 1995
when Pierre Omidyar decided to establish the first online
marketplace (Ebay, 1995-2004). Since that time, the
company has continued to grow both in size and popularity.
Ebay is now considered one of the most successful C2C
eBusinesses ever.
• Other examples of Consumer-to-Consumer applications are
service and employment websites such as
• Monster.com,
• Seek.com.au and
• CareerOne.com.au. These websites provide a valuable
service to consumers looking for jobs. Employers can
advertise on these websites and potential employees can
contact their organization for an interview.
 Internet and
evolution of Corporate Computing
Computing Technology Business Application

Mainframes ( 1950 – 1975) Transaction Automation

Payroll and Accounts Receivables
Mini computers (1970 – 80) Business Function Automation
Marketing, HR, Design
Personal Computer (1980 – present) Desktop automation
Word , spreadsheets, DBMS
LAN , client/server computing Workgroup Automation
(1980 – present) Document sharing
Project Management
E-mail, messaging
Enterprise wide computing Enterprise Automation
(1990 – present) ERP, HRP
Integrated Finance, manufacturing
Internet and WWW (1995 – present) Industrial system Automation
SCM, CRM,
Channel management system
 Protocol
 A network protocol is a set of rules for
communication between computers. protocols
govern format, timing, sequencing and error control.

 At the sender system, this software prepares data for

transmission, and sets the transmission in motion
and at the receiving end takes the data off the wire
and prepares it for the computer.
 Protocol architecture
 If the protocol does not come as a single module,
but as a structured set of modules, it is refereed
to as protocol architecture / protocol stack

 OSI protocol stack (7 layers)

Open System Interconnection
theoretical in nature

TCP/IP protocol stack ( 5 layers)

Transmission Control Protocol/ internet Protocol
More realistic
OSI protocol stack (7 layers)
Application

Presentation

Session

Transport

Network

Data link

Physical
TCP/IP Protocol
Architecture
Application layer

Transport layer (TCP)

Network layer (IP)

Data link

Physical
 Protocol stack

 Application layer: user interface

 Presentation layer: removes all file and character formats.

Encryption (decryption) and compression (decompression)of data

 Session layer: dialog control (half-duplex or full duplex),

synchronization with checkpoints in the data
Transport layer: service point addressing (ports), segmentation and
reassembly, connection control, error control, flow control

Network layer: routing of packets from source system to destination

system between diff. networks. (same network- no role)

Data link layer: framing data, adds physical addresses of systems in

frame’s header.

Physical layer: transmission media

 Headers and trailers
Except for application layer and physical layer, everywhere
headers are added to data by each layer.

 Data link:
H2—at the beg. of frame with physical address of source &
destination
T2..signifies end of frame

 Network:
H3—IP address
 Transport :
H4– port address
 Session layer:
 Presentation:
 Protocols in
Application + presentation + session

 SMTP
 FTP
 TELNET
 DNS
 SNMP
 NFS and RPC
 TFTP
 IP addressing

 A 32 bit number used to identify the host

systems on the internet, which makes routing
easy.
 It is a unique identification on internet.
 Has two parts: net-id and host-id
 No two physical networks on the internet have
same net-id.
 No two systems on a physical network have
same host-id.
 Ex: 128.11.2.21
Backbone controlling
organizations
 AT & T
 Sprint
 ANS Advanced Networking Services
 Uunet
 BBN planet