Unit 1

E-Commerce

Vishakha Sehdev Verma

Astt. Proffesor(IT)
Concept of E-Commerce
 “E-Commerce or Electronic Commerce, is the purchasing, selling and exchanging of goods and
services over computer networks (such as Internet) through which transactions are performed”.

 E-Commerce takes place between companies, between companies and their customers. It
includes electronic trading of goods, services and electronic material.
FEW EXAMPLES OF E-Commerce are:
• Amazon.com, an online bookstore started in 1995 grew its revenue to more than 600$
million in 1998.
• Microsoft Expedia, an integrated online travel transaction site helps to choose a flight, buy
an airline ticket, book a hotel, rent a car etc. in only a few minutes.
History of E-commerce
• E-commerce was made possible by the development of electronic data interchange (EDI),
the exchange of business documents from one computer to another in a standard format
• History of E-commerce is unthinkable without Amazon and Ebay which were among the first
internet companies to allow electronic transactions.
1. In the 1960s, very early on in the history of Ecommerce, its purpose was to exchange long
distance electronic data. In these early days of Ecommerce, users consisted of only very
large companies, such as banks and military departments, who used it for command control
communication purposes. This was called EDI, and was used for electronic data interchange.
4. Originally, electronic commerce was identified as the facilitation of commercial
transactions electronically, using technology such as Electronic Data Interchange (EDI) and
Electronic Funds Transfer (EFT).
The growth and acceptance of credit cards, automated teller machines (ATM) and telephone
banking in the 1980s were also forms of electronic commerce

5. In 1982 Transmission Control Protocol and Internet Protocol known as TCP & IP was
developed. This was the first system to send information in small packets along different
routes using packet switching technology, like today's Internet!
Scope of E-commerce

 E-Commerce is a general concept covering any form of business transaction or information

exchange executed using information and communication technologies ((ICT’s).
 E-commerce is popularized by the advent of commercial services on the Internet.
 There are three categories of e-commerce

Electronic
Markets

EDI Internet
Commerce
Electronic Markets: Use of information and communications technology to present a range of
offerings available in a market segment so that the purchaser can compare the prices. Example:
Airline Booking System

Electronic Data Interchange: Used for regular transactions between organizations.

Used by organizations that make large number of regular transactions.
Example : Supermarket Chains for transactions with their suppliers
Adv: No need of printed orders , Avoid error in paper handling

Internet Commerce: Information and communications technologies can be used to advertise and
make sales of wide range of goods and services.
This type of E-commerce makes commercial use of Internet.
Example: Use of Internet for the purchase of books that are then delivered by post.
Advantages of E-commerce to Consumers
 Lower Cost: Doing e-business on the Internet is extremely cost effective. For instance,
intermediaries can be eliminated by the company directly selling to the customers instead of
distributing through a retail store.
 Better Customer Service: It emphasizes better and quicker customer service.
 Quick Comparison Shopping: Help consumers to comparison shop.
 24-Hour Access:- Online businesses never sleep as opposed to brick and mortar businesses. E-
Commerce allows people to carry out businesses without the barriers of time.
 Global Marketplace:- Consumers can shop anywhere in the world. Currently according to World
Trade Organization (WTO) there are no custom duties put on products bought and traded globally
electronically. This also provides wide selection of products and services to consumers.
 Advantages of E-commerce to Business

 Increased potential market share:- The internet enables businesses to have access to
international markets thereby increasing their market share
 Low cost Advertising:- Advertising on the internet costs less than advertising on print or
television depending on the extent of advertisement
 Low barriers to Entries:- Anyone can start up a company on the internet. Start-up costs are a
lot lower for companies since there is less need for money for capital.
Limitations of E-commerce
 Hidden Costs:- It Includes hidden cost like high shipping, re-stocking fees and unacceptable delivery times.
 Lack of Security:- There is lack of security for on-line transactions. For e.g. Consumers provides credit card
information over the Internet. Hackers breaking into e-business and stealing credit card information.
 Lack of Privacy: Database routinely contain information about customer purchasing habits, credit information
etc. Companies sell customer database information to marketing companies. In turn, the marketing companies
engage in massive e-mail campaigns to attract new customers. Customer email box filled with unwanted email
(Spam).
 Network Unreliability:- Network reliability problems may be generated by such factors as:-
1. Equipment failure in the network connection provider.
2. Accidental problems caused by nature-such as lightning, floods, earthquakes that affect communication
lines.
3. Long response time due to increased network traffic or inadequate bandwidth.
 Low Service Levels:- Another common complaint about doing business online is the low level of customer
service that online companies tend to provide. Therefore e-commerce websites must provide:-
1. The website design is an important interface.
2. Readily available easily used feedback options.
3. Quick complaint resolution.
4. Timely and low-cost shipping delivery to customers.
 E-Commerce vs Traditional Commerce
 E- Commerce is about the sale and purchase of goods or services by
electronic means, particularly over the internet. In a pure e-commerce
system, transactions take place via electronic means.
 In a physical or traditional commerce system, transactions take place via
contact between humans usually in a physical outlet such as a bookstore.
For e.g. if you want to buy a book, you will go to a physical bookstore and
buy the physical book from a salesman.
 In e-commerce customer interface is screen to face while in traditional
commerce it is face to face
 The accessibility in e-commerce is 24*7 while in traditional is fixed.
Difference between Traditional Commerce and E-commerce
Issues & Challenges in E-commerce
Infrastructural Problems:
 Internet is the backbone of e-commerce.
 It is difficult for e-commerce to reach to 1,000 million population spread over 37 million
households
Absence of Cyber Laws:
 Other big challenge associated with e-commerce market is the near absence of cyber
laws to regulate transactions on the Net.
Privacy and Security Concern:
 As of to-day, quite vulnerable issues related to e-commerce are privacy and security. So
far, there is no protection offered either by Website or outside watchdogs against hazard
created by exploiting one’s privacy.
Payment and Tax Related Issues:
 Issues related to payment and tax is yet another problem continuously hinting e-
traders.
 Similarly, tax administration is yet another complex problem in this seamless
worldwide e-commerce.
Digital Illiteracy:
 At present, digital illiteracy is one of the formidable problems e-commerce is facing
in India
 E-Business
1. E-business (electronic business) is the conduct of business processes on the Internet.
These electronic business processes include buying and selling products, supplies and
services; servicing customers; processing payments; managing production control;
collaborating with business partners; sharing information; running automated employee
services; recruiting;
2. E-Business means connecting critical business systems directly to customers, vendors
and suppliers- via the Internet, Extranet and Intranets.

E-Business enables organizations to accomplish the following goals:-

1. Reach new markets.
2. Create new products or services.
3. Build customer loyalty
4. Make the best use of existing and emerging technologies.
5. Achieve market leadership and competitive advantage.
Types of E-Commerce/ E-Commerce Market Models:
There are five types of E-Commerce
 Business To Business (B2B)
 Business To Consumer (B2C)
 Consumer To Business (C2B)
 Consumer To Consumer (C2C)
 Business To Government (B2G)

Business To Business (B2B):-

 E-commerce activities between businesses.
 An E-Commerce company can be dealing with suppliers or distributers or agents.
(transactions through Electronic Data Interchange (EDI). EDI is an automated format of
exchanging information between businesses over private networks).
 For e.g. manufacturers and wholesalers are B2B Companies.
Business To Customer (B2C):-
 B2C refers to E-Commerce activities that are focused on consumers rather than on businesses.
 purchasing services from an insurance company, conducting on-line banking and employing travel
services.

Customer To Business (C2B):-

 Individual customers offer to sell products and services to companies who are prepared to
purchase them.
 Enables buyers to name or demand their own price, for a specific good or service. The website
collects the demand bids then offers the bids to participating sellers.
 Elance was one of the first web sites to offer this type of transactions.
Customer To Customer (C2C):-

 C2C refers to E-commerce activities, which use an auction style model such as Ebay where an
individual can list an item for sale and other individuals can bid to purchase it
 Auction sites normally charge commission to the sellers using them. They act purely as
intermediaries who match buyers with sellers
 They have little control over the quality of the products being offered, although they do try to
prevent the sale of illegal goods, such as pirate CDs or DVDs.
Business To Government (B2G):-
 This type of E-Commerce is used by the government departments to directly reach to the
citizens by setting up the websites.
 Such websites are used by governments to trade and exchange information with various business
organizations. Such websites are accredited by the government and provide a medium to
businesses to submit application forms to the government.
 These websites have government policies, rules and regulations related to the respective
departments.
E-Commerce Applications

1. E-Marketing:-
 E-Marketing also known as Internet Marketing, Online Marketing, Web Marketing.
 It is the marketing of products or services over the internet.
 It is consider to be broad in scope and also done through Email, social networking websites,
,SEO and mobile marketing.
 Internet marketing is associated with several business models i.e., B2C, B2B, C2C.
2. E-Advertising:-
 It is also known as online advertising it is a form of promotion that uses internet and World
Wide Web to deliver marketing messages to attracts customers.
 Example: Banner ads, Social network advertising, online classified advertising etc.
 The growth of these particular media attracts the attention of advertisers as a more productive
source to bring in consumers
3. E-Banking:-
 Means any user with a personal computer and browser can get connected to his banks, website
to perform any of the banking functions. In internet banking system the bank has a centralized
data base.
 SERVICES THROUGH E-BANKING:
1. Bill Payment Service 2. Fund Transfer
3. Investing through Internet Banking 4. Shopping
4. E-Learning:-
 E-Learning comprises all forms of electronically supported learning and teaching.
 Content is delivered via the internet, intranet/extranet, audio, or video tape.
 E-Learning is naturally suited to distance and flexible learning,
 A learning management system (LMS) is software used for delivering, tracking, and managing
training /education.
6. Online Shopping:-
 Online shopping is the process whereby consumers directly buy goods or services
 An online shop, e-shop, e-store, internet shop web shop, web store, online store, or virtual shop
evokes the physical analogy of buying products or services in a shopping center.
 In order to shop online, one must be able to have access to a computer, a bank account and debit
card.
 Online shoppers commonly use credit card to make payments , however some systems enable users
to create accounts and pay by alternative means ,such as Debit cards and Gift cards
 Online stores are usually available 24 hours a day
Entertainment:-The conventional media that have been used for entertainment are
 1. Books/magazines.
 2. Radio.
 3. Television/films.
 4. Video games.
 Online books /newspapers, online radio, online television, online firms, and online games and
Online social networking websites are one of the biggest sources of E-entertainment
5. Mobile Commerce:-
 Mobile Commerce also known as M-Commerce, is the ability to conduct, commerce as a mobile
device, such as mobile phone.
 Banks and other financial institutions use mobile commerce to allow their customers to access
account information and make transactions, such as purchasing, withdrawals etc.,
 Using a mobile browser customers can shop online without having to be at their personal
computer.
SERVICES ARE:
 1. Mobile ticketing
 2. Mobile contract purchase and delivery mainly consumes of the sale of ring tones, wallpapers
and games of mobile phones.
 3. Local base services like Local discount offers and Local weather
 4. Information services like News, Sports and Scores
E-Commerce Trade Cycle
 A trade cycle is the series of exchanges, between a customer and supplier, that take place when a
commercial exchange is executed
The trade cycle varies depending on:-
 The nature of the organization (or individuals) involved.
 The nature and type of goods or services being exchanged.
 The frequency of trade between the partners to the exchange process.
The trade cycle has to support:-
 Finding goods or services appropriate to the requirement and agreeing the terms of trade often
referred to as search and negotiation.
 Placing the order, taking delivery and making payment i.e., execution & settlement of
transaction.
 After sales activity such as warrantee, service etc.
 There are numerous categories of trade cycles depending on the factors outlined above and, for
many transactions, further complicated by the complexities of international trade.
Three Generic Cycle can be identified:
1. Regular repeat transactions between commercial trading partners.
2. Irregular Transaction between commercial trading partners where execution and settlement are
separated.(Credit Transaction).
3. Irregular Transactions in once-off trading relationships where execution and settlement are
typically combined(cash transaction).

1. Pre Sales: Finding a supplier and agreeing the terms.

2. Execution: Selecting goods and taking delivery.
3. Settlement: Invoice and payment
4. After Sales: Following up complaints or providing maintenance.
Electronic Markets:-
 It increases the efficiency of the market.
 It reduces the search cost for the buyer and makes it more likely that buyer will continue the
search until the best buy is found.
 It exists in financial markets & they are also used in airline booking system.
Electronic Data Interchange:-
 It is used for regular repeat transactions.
 It takes quite a lot of work to set up systems.
 Mature use of EDI allows for a change in the nature of the product or service.
 e.g. Applications are sending test results from the pathology laboratory to the hospital or
dispatching exam results from exam boards to school.
Internet Commerce:-
The first stage
 Advertising appropriate goods and services.
 Internet sites offer only information & any further steps down the trade cycle are conducted on the
telephone.
The Second stage
 An increasing no. of sites offer facilities to execute & settle the transaction.
 Delivery may be electronic or by home delivery depending on the goods and services.
The final stage
 After-sales service.
 On-line support & On-Line services.
 Functions of E-Commerce

1. Marketing:- One of the areas it impacts particularly is direct marketing. In the past this was
mainly door-to-door, home parties (like the Tupperware parties) and mail orders using catalogues or
leaflets. This moved to telemarketing and TV selling with the advance in television technology and
finally developed into e-marketing.
2. Human Resource Management:- Issues of on-line recruiting, home working and ‘entrepreneurs’
working on a project by project basis replacing permanent employees
3. Business law and ethics:- The different legal and ethical issues that have arisen as a result of a
global ‘virtual’ market. Issues such as copyright laws, privacy of customer information etc.
4. Management Information System:- Analysis, design and implementation of e-business systems
within an organization
5. Economy:- The impact of E-commerce on local and global economies; understanding the concepts
of a digital and knowledge based economy
Tools & Technologies for E-Commerce

 Electronic data interchange (EDI)

 Bar codes
 Electronic mail
 Internet
 World Wide Web
 Product data exchange
 Electronic forms
Electronic Data Interchange (EDI)
 EDI is the computer-to-computer exchange of structured business information in a standard
electronic format.
 Information stored on one computer is translated by software programs into standard EDI format
for transmission to one or more trading partners.
 The trading partners in turn, translate the information using software programs into a form they
can understand.
Bar Codes
 Bar codes are used for automatic product identification by a computer. They are a rectangular
pattern of lines of varying widths and spaces. Specific characters (e.g. numbers 0-9) are assigned
unique patterns, thus creating a "font" which computers can recognize based on light reflected
from a laser.
 Example-Bar code on consumer products such as packaged foods. These codes allow the products
to be scanned at the checkout counter. As the product is identified internal systems such as
inventory and accounting are automatically updated.
 Electronic Mail

Messages composed by an individual and sent in digital form to other recipients via the Internet.

Internet
1. The Internet is a global network of millions of diverse computers and computer networks.
These networks can all "talk" to each other because they have agreed to use a common
communications protocol called TCP/IP.
2. The Internet is a tool for communications between people and businesses. The network is
growing very, very fast and as more and more people are gaining access to the Internet, it is
becoming more and more useful.
World Wide Web

 The World Wide Web is a collection of documents written and encoded with the Hypertext
Markup Language (HTML).
 With the aid of a relatively small piece of software (called a "browser"), a user can ask for
these documents and display them on the user’s local computer, although the document can be
on a computer on a totally different network elsewhere in the world.
 HTML documents can contain many different kinds of information such as text, pictures, video,
sound, and pointers, which take users immediately to other web pages.
 It is this ability to jump from site to site that gave rise to the term "World Wide Web." Browsing
the Web (or "surfing the Net") can be a fascinating activity, especially to people new to the
Internet.
Product Data Exchange
 Product data refers to any data that is needed to describe a product. The data could be in
graphical form, as in the case of pictures, drawings and CAD files. In other cases the data may be
character based (numbers and letters), as in the case of specifications, bills of material,
manufacturing instructions and test results.
 Product data exchange differs from other types of business communications in two important
ways.

1. First, because graphics are involved users must contend with large computer files and with
problems of compatibility between software applications

2. Product designs, even late in the development cycle, are subject to a great deal of change, and
because manufacturing processes are involved, even small product changes can have major
consequences for getting a product into production.
Electronic Forms

 Electronic form is a technology that combines the familiarity of paper forms with the power of
storing information in digital form.
 Imagine an ordinary paper form, a piece of paper with lines, boxes, check-off lists, and places
for signatures. To the user an electronic form is simply a digital analogue of such a paper form,
an image, which looks like a form but which appears on a computer screen and is filled out via
mouse, and keyboard.
 Data from electronic forms are captured in digital form, thus allowing storage in data bases,
automatic information routing, and integration into other applications.
 E-COMMERCE FRAMEWORK
 E-commerce framework assumes that E-commerce applications will be built on the existing
technology

Common business services

infrastructure(security/authenticatio
n, electronic payment, directories)

The messaging and information

distribution infrastructure

Multimedia content and network

publishing, infrastructure

The information superhighway

infrastructure (telecom, cable T.V,
wireless, Internet Technical standards
Public for electronic
policy legal documents,
and privacy multimedia and
issue network protocols
Building blocks in infrastructure:
 Common Business Services which facilitates buying and selling(security, payment).
 Managing and information distribution as a means of sending and retrieving information.
 Multimedia content and information management work, publishing, for creating a product
and a means to communicate about it.
 The information superhighway is the very foundation for providing the highway system along
with all e-commerce must travel.
The two big pillars supporting the e-commerce applications and infrastructure are:
 The public policy to govern such issues as universal access, privacy and information
processing.
 The technical standards, to direct the nature of information publishing, user interface and
transport in the interest of various compatibilities across the entire network.
 The successful e-commerce application will require the I-way infrastructure in the same way
as is required in the traditional business.
 I-way : Information superhighway is a high speed global communication network that can carry
data, voice, video and other services around the world using technology such as the satellite,
optical fibre and cellular telecommunications. As internet develops into I-way changes will
take place in infrastructure not in internet.
Electronic Data Interchange (EDI)

 It is the process used by organizations in order to transmit the data between organizations by
electronic means.
 It is used to transfer electronic documents or business data from one computer system to
another computer system, i.e. from one trading partner to another trading partner without
human intervention.
Here, are two major parties i.e. Customer & Merchant,
 Customer firstly order for the required product. Trading party then give confirmation, Delivery
note, Invoice & Acknowledgements for the product status. At the end, customer pays for the
product.
 EDI is used by organizations for transactions that occur on regular basis to a predefined format.
 Organizations that send or receive documents between each other are referred to as "trading
partners" in EDI terminology. The trading partners agree on the specific information to be
transmitted and how it should be used.
 EDI is also known as paperless trading.
 EDI is basically-
 “The transfer of structured data, by agreed message standards, from one computer system
to another, by electronic means.”
EDI has four elements, each of them essential to an EDI system:

 Structured Data: EDI transactions are composed of codes, & short pieces of text. Each Element
with a strictly defined purpose. For e.g An order has codes for the customer & product & values
such as quantity ordered.
 Agreed Message Standards: The EDI transaction have a standard format. The standard is not just
agreed between the trading partners but is a general standard agreed at national or international
level. A purchase order will be one of a number of agreed message standards.
 From one computer system to another: The EDI message sent is between two computer
applications. There is no requirement for people to read the message. For e.g. The message is
directly between the customer’s purchasing system & the supplier’s order processing system.
 By electronic means: Usually this is by data communications. Often networks specifically
designed for EDI will be used.
Main Features of EDI:
 EDI’s use structured formatted messages that are based on agreed standards - in this way the
messages can be read by any system that understands the rules they are governed by. However,
this is not always as simple as it seems, as there are also the provision of EDI translation
software packages.
 Required to set up an interface between the company computer and the EDI sent/received
document.
 EDI provides a relatively fast delivery of electronic documents from sender to receiver.
 EDI provides direct communication between applications, rather than between computers.
 EDI includes data management and networking capabilities, data processing, the efficient
capture of data into electronic form, the processing and retention of data, controlled access to
it, and efficient and reliable data transmission between remote sites.
Benefits of EDI:
 Reduced paperwork: It reduces the handling costs of sorting, distributing, organizing,
and searching paper documents.
 Cost cutting:. EDI allow a company to take advantage of the benefits of storing and
manipulating data electronically without the cost of manual entry. It reduces the
stationary cost.
 Reduced Errors: EDI reduces the errors, such as shipping and billing errors, because EDI
eliminates the need to rekey documents on the destination side.
 Faster Response: With EDI the customer can be informed straight way giving time for an
alternative product to be ordered
 Improved funds transmission: Due to this increased efficiency of non-paper accounts,
cash flow will improve as electric fund transmission is able to begin much earlier than
previously.
 Improved Shipping Service: EDI provides quick and efficient information as it relies on
barcode information to communicate. It is able to track inventory and eliminates the
incidence of lost packages
 EDI payment: EDI payment system can also generate an EDI payment advice that can be
electronically matched against the relevant invoices, again avoiding query & delay.
Difference between EDI & Email:
 EDI sounds similar to electronic mail (email), but is actually quite different. While
email allow for free unstructured test messages to be sent from one computer to
another (or multiple) computers, EDI supports structured business messages to be
transmitted between partners. Previously these would have been hard copy
documents or printed business documents. So rather than having documents pass
from person to person, they go from computer to computer.

EDI: THE NUTS AND BOLTS

EDI Standards:
 The essence of EDI is the coding & structuring of the data into a common & generally
accepted format.
 Documents sent via EDI can serve as input for company's business application because they are
formatted according to standards that stipulate where certain information should be located,
such as where net total amount should appear on an invoice.
 These standards also define how individual pieces of information should be represented. For
example, in the standards for an electronics industry purchase order, there are specific codes
defined to identify the type of product or service being requested, e.g. PN (company part
number), BY (buyers part number), VP (vendors part number), PW (part drawing), etc.
Components of EDI
 1. Application service
 2. Translation service
 3. Communication service
Application Services :-
 It provides the link between application and EDI. It allows you to send documents from an EDI
system. The set of callable routine is used to transfer document from the business application
into EDI document, destination can be either intra-company or to the external companies.
Translation service:-
Converts the outgoing documents from an internal format file to an agreed external format.
Communication service:-
The communication service sends and receives transmission files to and from the trading partners
either directly or by using party service called a valued added network (VAN).
Cc- management of input and output data
EDI creates following files as a document passes through the system:

1. Internal format file (IFF):-

 It contains single document for single trading partner.
2. External format file (EFF):-
 It contains same data as the internal format file translated into the appropriate standard
document format.
3. Transmission file:-
 It contains one or more document for the same trading partner. Documents of same format are
packed into functional groups.
EDI software
Translators:-
 Every EDI sender and receiver should have EDI translator. It varies based on the computer on
which it is going to reside. The computer may be a micro computer or a midrange or a
mainframe. Translator reads the fixed length file and generates valid EDI standard and maintains
control information.
Application link software:-
 Application link software is used to collect information from the business application and then it
formats into fixed length computer file and passes it onto translators.

Types of EDI standards:

 Proprietary standard - EDI standard developed for a specific company or industry. This is also
called a non-public or private standard.
 Public standard - EDI standard developed for use across one or more industries.
EDIFACT
 Electronic Data Interchange for Administration, Commerce, and Transport is the international set
of EDI standards
 Became a UN standard in 1987
 Maintenance and further development is the responsibility of the United Nations Centre for Trade
Facilitation and Electronic Business (UN/CEFACT)
 Includes syntax rules and implementation guidelines, message design guidelines, data elements,
code sets, and other definitions
 Used for business-to-business (B2B) communication rather than business-to-consumer (B2C)
 Allows multi-country and multi-industry exchange
The four pillars of EDIFACT

Syntax
• Rules for the definition of a message structure
Data elements
• Smallest data unit
• Include codes & the values for items such as date
&address code
Segments
• Groups of related data elements
Messages
• Ordered sequence of segments
• Defines a business transaction
EDIFACT Structure Chart
For EDIFACT each document type is referred to as a message. For trade purposes the
documents include order, dispatch advice, invoice, payment order & remittance advice.
Other sectors include their own documentation requirements, sectors using EDIFACT
include:
 Transport
 Customs
 Finance
 Construction
 Statistics
 Insurance
 Tourism
 Healthcare
 Social Administration
 Public Administration
Questions
 What is E-Business? (2016)
 What are the Benefits of E-Commerce? (2016, 2012)
 Draw and explain the various types of Generic Trade Cycle. (2016)
 Define E-Commerce. Explain in detail the various types of E-Commerce models used
with the help of an example. (2015, 2014)
 Explain the relationship between E-Commerce and E-Business
 Define E-Commerce. What are the problems with manual system of business? (2013)
 Discuss various tools and technologies for E-Commerce. (2013)
 Differentiate between traditional commerce and E-Commerce? (2012,2016)