E-Commerce

Trends and Issues

Prepared by:
Ms. Sairine C. Pregonero
Instructor
Learning Objectives:
1. To demonstrate an understanding of the foundations and importance of
E-commerce;
2. To analyze the impact of E-commerce on business models and strategy;
3. To describe Internet trading relationships including Business to
Consumer, Business-to-Business etc.;
4. To identify the major categories and trends of e-commerce applications;
5. To identify the essential processes of an e-commerce system; and
6. To recognize and discuss global E-commerce issues.
 Electronic commerce (EC) is an emerging model of new selling
and merchandising tools in which buyers are able to participate in all
phases of a purchase decision, while stepping through those
processes electronically rather than in a physical store or by phone
(with a physical catalog).
The processes in electronic commerce include enabling a
customer to access product information, select items to purchase,
purchase items securely, and have the purchase settled financially.
Kalakota and Whinston (1997) define EC
from these perspectives:
• From a communications perspective, EC is the delivery of information,
products/services or payments over telephone lines, computer networks, or
any other electronic means.
• From a business perspective, EC is the application of technology toward the
automation of business transactions and work flow.
• From the service perspective, EC is a tool that addresses the desire of firms,
consumers, and management to cut service costs while improving the
quality of goods and increasing the speed of service delivery.
• From an online perspective, EC provides the capability of buying and selling
• products and information on the Internet and other online services.
 Electronic commerce applications started in the early 1970’s, with such
innovation as electronic fund transfers (EFT). However, the extent of the
applications was limited to large corporations, financial institutions, and a few
daring small businesses.
Then EDI came, which expanded from financial transactions to other
transaction processing and enlarged the participating companies from financial
institutions to manufacturers, retailers, and services and so on.
Many other applications followed, ranging from stock trading to travel
reservation systems. With the commercialization of the Internet in the early 1990s
and its rapid growth to millions of potential customers, the term electronic
commerce was coined and C applications expanded rapidly.
One reason for the rapid expansion of the technology was the development
of networks, protocols, software, and specifications. The other reason is the
increase in competition and other business pressures
Ubiquity – Internet/Web technology is available everywhere: at work, at home, and elsewhere
via mobile devices, anytime. The marketplace is extended beyond traditional boundaries and
is removed from a temporal and geographic location. “Marketspace” is created; shopping can
take place anywhere. Customer convenience is enhanced and shopping costs are reduced.
Global Reach – The technology reaches across national boundaries and around the earth.
Commerce is enabled across cultural and national boundaries seamlessly and without
modification. “Marketspace” includes potentially billions of customers and millions of
businesses worldwide.
Universal Standards – There is one set of technology standards, namely Internet standards.
There is only one set of technical media standards across the globe.
Richness – Video, audio, and text messages are possible. These are integrated into single
marketing message and consuming experience.
Interactivity – The technology works through interaction with the user. Consumers are
engaged in a dialog that dynamically adjusts the experience to the individual and makes the
consumer a co- participant in the process of delivering goods to the market.
Information Density – The technology reduces information costs and raise quality.
Information processing, storage, and communication costs drop dramatically, while currency,
accuracy, and timeliness improve greatly. Information becomes plentiful, cheap, and accurate.
Personalization/Customization – The technology allows personalized messages to be
delivered to individuals as well as groups. Personalization of marketing messages and
customization of products and services are based on individual characteristics.

The benefits of ecommerce to merchants or organizations are as follows:

• Electronic commerce expands the marketplace to national and international markets. With
minimal capital outlay, a company can easily and quickly locate the best suppliers, the most
suitable business partners worldwide, and more customers.

• Ecommerce decreases the cost of creating, processing, distributing, and retrieving paper-
based information. For example, by introducing an electronic procurement system,
companies can cut the administrative purchasing costs.

• Ecommerce reduces the time between the outlay of capital and the receipt of products and
services.

• Other benefits include improved image, improved customer service, simplified processes,
increased productivity, and increased flexibility.
The benefits of ecommerce to consumers are as follows:
• Ecommerce enables customers to shop or do other transactions
24 hours a day, all year round, from almost any location.
• Ecommerce provides customers with more choices: they can
select from many vendors with a large range of products.
• Ecommerce frequently provides customers with less expensive
products and services by allowing them to shop in many places and
conduct quickcomparisons.
• Customers can receive relevant and detailed information in
seconds, rather than days or weeks.
The disadvantages of ecommerce are as follows:
Cost and justification – The cost of developing EC in- house can be very high and any
mistakes due to lack of experience may result in delays. There are many opportunities for
outsourcing but where and how to do it is not a simple issue.
Security and Privacy – These issues are especially important in the Business-toconsumers
area, especially security issues which are perceived to be more serious than they really are
when appropriate encryption is used. Privacy measures are constantly improved. Yet, the
customers perceived these issues very important and the EC industry has a very long and
difficult task of convincing customers that online transactions and privacy, are in fact, very
secure.
Lack of trust and user resistance – Customers do not trust an unknown faceless seller,
paperless transaction, and electronic money. So, switching from physical to virtual stores
may be difficult.
Other limiting factors – Lack of touch and feel online. Some customers like to touch items
such as clothes and like to know exactly what they are buying.
Major types of ECommerce
Business-to-Consumers (B2C) is a type of ecommerce that serves direct consumers. The important
activity here is buying. There are retailing transactions with individual shoppers. For example, the typical
shopper at Amazon.com is a consumer orcustomer.
Benefits of B2C to Business
• Lower distribution costs
• New business opportunities
• More accurate and up-to-date consumer data (potentially anyway)
• Opportunity for added value services
• Better customer support
• Lower operating costs
Benefits of B2C to Consumers
• Convenience
• Information
• Ability to compare and choose among many offers
• Lower prices, at times but not always
• Personal Service
Business-to-Business (B2B) is a type of ecommerce that serves businesses.
The important activity of B2B is purchasing. Purchasing is different from buying
because instead of individuals departments are involved, formal processes are
followed, high monetary values may be involved and complex negotiations and
contracts may take place.
Advantages of B2B:
• Lower:
o purchasing costs
o sales costs
o marketing costs
• Reduced inventory
• Efficient logistics
• Lower cycle time
• Better customer support
B2B Electronic Commerce: Areas of Growth
Goods
o computing and electronics
o motor vehicles
o petrochemicals
o utilities
Services
o financial
o professional
o administration
o travel
o telecom
 Consumer-to-Consumer (C2C) is a type of ecommerce that involves consumers
selling directly to consumers.
Examples are individuals posting classified ads (e.g.; www.buyandsell.com.ph)
and selling residential property, cars, cell phones and so on. Advertising personal
services on the Internet and selling knowledge and expertise is another example of C2C.
Several auction sites are running intranets and other organizational internal networks to
advertise items for sale or services.
Benefits of C2C:
• increased liquidity (products, services, advice)
• reduced search costs
Peer-to-Peer (P2P) is a type of ecommerce that links users, enabling them to share
files and common resources without a common server. The challenge in P2P
ventures is developing viable, legal business models. Examples of P2P include
Kazaa andGroove networks.
Mobile Commerce is a type of ecommerce which uses wireless devices or
transactions like cell phones, and Palms. This has been popularized mainly in Japan
and Europe wherein it takes traditional ecommerce business models and leverages
emerging new wireless technologies. The key technologies used in Mobile commerce
are telephone_x0002_based 3G, Wi-Fi, and Bluetooth. This technology continuously
evolves even though it is a disappointment in the US.
 Web Technology
• Internet refers to a collection of computers and cables forming a communications network,
just like telephones and cables forming the telephone system. The Internet is intended to carry
computer data, like telephone network which is intended to carry conversations. The Internet
carries various data including email, videoconferences, and instant messages. The Web
page contents are another type of data that is carried over the Internet. In other words, the
Internet is a network of all networks where a user at any computer, with permission, can
access and get information from any other computer.
• The Internet was envisioned by the Advanced Researched Projects Agency (ARPA) of the
US Government where they called it as ARPANET then. They aim to create a network that
would allow users of a research computer at one university to be able to "talk to" research
computers at other universities. This is because they wanted to protect the messages that are
being routed or rerouted in the event of a military attack or from any other disaster that can
destroy their communication.
• Intranet is a private network contained in an enterprise that includes connections through
one or more gateway computers to the outside Internet. Its purpose is to share company
information and computing resources among employees. It can also facilitate working in
groups and teleconferences.
• On the other hand, extranet is a private network that uses the Internet technology and
the public telecommunication system to securely share a part of a business's information
or operations with suppliers, vendors, partners, customers, or other businesses. An
extranet can be viewed as part of a company's intranet that is extended to users outside
the company. It has also been described as a "state of mind" in which the Internet is
perceived to do business with other companies as well as to sell products to customers.
• In order to use Internet, you must have a web browser installed on your computer to
access different web pages and sites. A web browser is an application software allowing
users to access and view web pages. A web page is a page consisting of HTML
documents stored on a web server. In contrast, web sites are a collection of connected
web pages stored on a web server.
• Hypertext Transfer Protocol (HTTP) and Hypertext Markup Language (HTML) are the two most
important elements of the Web. Both contain “hypertext” in their names. Hypertext is a key concept for
understanding the Web. The idea of hypertext originated much earlier than the Web, or even the Internet.
• An article called “As we may think” written by an engineer named Vannevar Bush, in 1945 described a
microfilm-based machine called the Memex that could link associated information or ideas through “trails”.
The idea became known in the mid-1960s when Harvard graduate, Ted Nelson, conceived the term
“hypertext” to describe a computer system that could store literary documents, link them according to
logical relationships, and permit readers to comment and annotate what they read.
• Many areas of hypertext have become a reality on today’s Web. Every Web page is based on a document
stored in a file identified by a unique address, called a Uniform Resource Locator (URL) or a web
address. You can type the URL to the Address bar of a web browser to access any documents. Another
way is by clicking an underlined word or phrase called a hypertext link (or simply “link” or “hyperlink”) to
access related documents. An example of a URL is http://www.google.com, while example of a link is
http://en.wikipedia.org/wiki/Hyperlink
• HTTP and HTML are the two basic building blocks from which today’s Web-style hypertext is crafted. You’ll
have a better grasp of how the Web works and its potential for future development if you have some
background on these building blocks.
• The two (2) major ingredients that define the Web are HTTP and HTML. You’ll have a pretty complete list
of the basic technologies that make the Web work.
• A Web server stores one or more Web pages of a Web site. Each page is saved as
an HTML document. This document may be plain text, or ASCII, document with
embedded HTML tags. Some of these tags indicate how the document is to be
displayed when viewed in a browser. Other tags comprise links to related documents,
sound files, and graphics that are also stored on Web servers. Aside from storing
these files, a Web server runs a Web server software that carries reuests for specific
Web pages.
• Web client software called a browser is used to surf the Web (as defined above). If
you type a URL into the browser’s Address box, you are actually requesting an HTML
document of the Web page that you want to view. The browser forms a request for the
specified file using a command provided by the HTTP communications protocol.
• The Web is only one of the services that the Internet offers. They almost changed our ways of
communicating to others, such as through emails, discussion of certain topic, and the likes. Many times,
communications take place completely in writing – without the parties ever meeting each other.
• Email, short for electronic mail, is the transmission of messages via a computer network. It is the original
service that the Internet offers. Before, only the scientists and researchers that work for government-
sponsored projects to communicate to their colleagues based on other locations uses this service. Today,
email is said to be the primary source of communication whether for personal or business purposes. Email
programs are used to create, send, received, forward, store, print, and delete messages. Such programs
include Outlook and Outlook Express which are the popular among other email programs.
• File Transfer Protocol (FTP) is an Internet service that allows a user to upload and download files from
other computers on the Internet. Uploading refers to the process of transferring a file to the Internet while
downloading refers to the process of obtaining a file from the Internet. The file refers to documents, graphics,
and other objects from a computer server. An FTP server is a computer that allows you to upload/download
files. An FTP site is a collection of files that reside in an FTP server.
• Newsgroups and Message Boards is an online area that allows a group of users to discuss a particular
topic. In such a discussion, one will send a message to a group then the other group will read and respond
to the message. Usenet is what they call the collection of tens of thousands of newsgroup about multitude
topics. Topics may include news, recreation, society, business, science, and computers.
• Mailing Lists is another online service where email addresses are stored. All email
addresses stored in it receives the message when a user uses it. In essence, a mailing list is
like a distribution list usually used to group certain email addresses.
• Chat Rooms are a technology that consists of online and live communication over the
Internet. It is a location in the Internet server that allows users to have almost like a real-time
communication. Anyone in the chat room can participate in the conversation which usually is
specific to a particular topic. Before you can enter a chat room, you must be connected to a
chat server through a program called chat client which can also be downloaded from the web.
• Instant messaging is in essence a chat but you can choose certain users that you want to
communicate with. Not like chat rooms that talk about a particular topic, IM allows you to
communicate all the topics that you want. Many users make use of IM for personal purposes
but be sure to always observe “Netiquettes”.
• Internet Telephony, commonly known as Voice over IP (Internet Protocol), allows the user
to speak to other users over the Internet using computers, mobile computer, or mobile devices.
You will need a high- speed Internet connection, Internet telephone service, and a microphone
or telephone to be able to use this technology and place a call.
 The following are various types of web sites to
choose and search from.
• Portals are sites that offers you a variety of Internet services such as search engine/or
subject directory, news, sports and weather, free web publishing services, reference tools such
as yellow pages, stock quotes and maps, shopping malls and auctions, email and other forms of
online communication.
• News web sites provides you newsworthy material including stories and articles relating to
current events, life, money, sports, and weather. Most news that is uploaded on the Internet is
not included in the print because it is the most updated media. Newspapers, televisions, and
radios are the ones that maintain the news web sites.
• Informational web sites contain factual information. Many government agencies provide
information such as tax codes, loans you can mortgage from SSS. Other organizations provide
information such as public transportation schedules and published research findings.
• Business/Marketing web sites provide you marketing and business contents that promotes
and sells products and services. Up to date, most business and marketing companies have their
own web sites where you can place your orders online and simply browse in their products.
• Educational web sites offer you exciting and challenging course in formal and informal
teaching and learning. There exist many educational web sites that allow online training for
employees and classes for colleges. Most instructors use these types of web sites to enhance
classroom teaching by publishing course materials, grades, and other related class information.
• Entertainment web sites offer users an interactive and engaging environment. Popular
entertainment web sites offer music, videos, sports, games, ongoing web episodes, and the
likes. Other complicated web sites tie up with other networks to allow users to vote in their
polls on television shows.
• Advocacy web sites provide contents that describe a cause, opinion, or idea. Its purpose is
to convince the reader of the validity of the cause, opinion, or idea. These web sites usually
present views of a particular group or association.
• Blog, short for web log, is a journal format regularly updated that reflect to the interests,
opinions, and personalities of the author and sometimes the site visitors. These consist of
ideas and collection of thoughts in an informal style of a single individual. Personal web sites
are a private individual’s site usually not associated in any organization. This is usually about
someone’s interest that may contain their own images, favorite music and videos, and the likes
for some personal reasons. Some intend for job hunting and so they post their resumes. Some
simply want to share life experiences with the world.
A search engine is a program that finds web sites and pages. It helps the
user find particular information about certain topics or locate particular web
pages for which they do not know the exact web address. There are
thousands of search engines available, some are general and can perform
searches on any topic but some restricts to certain subjects like finding people,
job hunting, or locating real estate.
A search text box is available. It is where you enter a topic, a subject or a
keyword which can be a simple word or phrases that will define the item about
which you want information. Search engines respond with results that include
thousands of links to web pages that answer in little or no bearing on your
research.
• Google is the largest search engine in the web whose purpose is to organize the world’s
information and make it universally accessible and useful. Queries received by Google reaches
several hundred millions each day through its various services. As of February 2004, Google
received 2.5 billion queries.
• Google uses an algorithm called PageRank that ranks web pages which matches a given
search string. The algorithm computes a recursive figure of merit for web pages based on the
weighted sum of the PageRanks of the pages linking to them. Aside from indexes and HTML
that Google caches, there are other 13 file types that it can search: PDF, Word documents,
Excel spreadsheets, Flash SWF, plain text files, among others.
• Yahoo! is the first navigational portal to the web created by Jerry Yang and David Filo, both
electrical engineering graduates at Stanford University. They built this portal by creating and
organizing their own favorite web sites in 1994. The next year, Yang and Filo, together with
some fellow students named it Yahoo! and released it to the Internet community.
• Yahoo! stands for Yet Another Hierarchical Officious Oracle. What makes Yahoo! unique
than the others is that its staff members build the directory by assuming the role of a typical web
researcher.
Source:
https://www.scribd.com/document/496219797/ITE101-Living-in-the-IT-Era-Week-13