UNIT-I

E-COMMERCE

Introduction
• It is a general concept covering any form of business transaction or information
exchange executed using information and communication technologies (ICT‘s)
• It includes electronic trading of goods, services and electronic material.
• It takes place between companies, between companies and their customers,
or between companies and public administrations.
Electronic Commerce Framework:
• E-Commerce application will be built on the existing technology infrastructure -
a myriad of computers Communication networks Communication software forming
information superhighway.

Building blocks of the infrastructure:

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 • Common business services for facilitating the buying and selling process

• Messaging & information distribution as a means of sending and retrieving information

• Multimedia content & network publishing, for creating a product &

a means to communicate about it

• The information superhighway- the very foundation-for providing the high

way system along which all e-commerce must travel

The two pillars supporting all e-commerce applications & infrastructure

• Public policy to govern issues such as universal access,privacy and information pricing.
• Technical standards to dictate the nature of information publishing ,user interfaces and
transport in the interest of compatability across the entire network

• Any successful e-commerce will require the I-way infrastructure in the same way that
regular commerce needs interstate highway network to carry goods from one point to
another
• I-way will be a mesh of interconnected data highways of many forms
Telephone,wires,cable TV wire
Radio-based wireless-cellular & satellite

• Movies=video + audio

Digital games=music + video + software

• Electronic books=text + data + graphics + music + photographs + video

• In the electronic ‗highway system‘ multimedia content is stores in the form

of electronic documents

• These are often digitized

• On the I-way messaging software fulfills the role, in any no. of forms: e-
mail, EDI, or point-to-point file transfers

• Encryption & authentication methods to ensure security

• Electronic payment schemes developed to handle complex transactions

• These logistics issues are difficult in long-established transportation

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 Anatomy of E-Commerce applications

E-Commerce applications are:

1. Multimedia Content for E-Commerce Applications

2. Multimedia Storage Servers & E-Commerce Applications

i. Client-Server Architecture in Electronic Commerce

ii. Internal Processes of Multimedia Servers

iii. Video Servers & E-Commerce

3. Information Delivery/Transport & E-Commerce Applications

4. Consumer Access Devices

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Multimedia Content for E-Commerce Applications

• Multimedia content can be considered both fuel and traffic for electronic
commerce applications.

• The technical definition of multimedia is the use of digital data in more than
one format, such as the combination of text, audio, video, images, graphics,
numerical data, holograms, and animations in a computer file/document.

• Multimedia is associated with Hardware components in different networks.

• The Accessing of multimedia content depends on the hardware

capabilities of the customer.

Multimedia Storage Servers & E-Commerce Applications:

• E-Commerce requires robust servers to store and distribute large

amounts of digital content to consumers.

• These Multimedia storage servers are large information warehouses capable

of handling various content, ranging from books, newspapers, advertisement
catalogs, movies, games, & X-ray images.

• These servers, deriving their name because they serve information upon
request, must handle large-scale distribution, guarantee security, &
complete reliability

i. Client-Server Architecture in Electronic Commerce

• All e-commerce applications follow the client-server model

• Clients are devices plus software that request information from servers or
interact known as message passing

• Mainframe computing , which meant for ―dump‖

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 • The client server model, allows client to interact with server through
request-reply sequence governed by a paradigm known as message
passing.

• The server manages application tasks, storage & security & provides
scalability-ability to add more clients and client devices (like Personal digital
assistants to Pc‘s. See in fig.

ii. Internal Processes of Multimedia Servers

• The internal processes involved in the storage, retrieval & management of

multimedia data objects are integral to e-commerce applications.

• A multimedia server is a hardware & software combination that converts

raw data into usable information & then dishes out.

• It captures, processes, manages, & delivers text, images, audio & video.

• It must do to handle thousands of simultaneous users.

• Include high-end symmetric multiprocessors, clustered architecture, and

massive parallel systems.

iii. Video Servers & E-Commerce

The electronic commerce applications related to digital video will include

1. Telecommunicating and video conferencing

2. Geographical information systems that require storage & navigation over maps

3. Corporate multimedia servers

4. Postproduction studios

5. Shopping kiosks.

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 • Consumer applications will include video-on-demand.

• The figure which is of video–on demand consist video servers, is an link

between the content providers (media) & transport providers (cable
operators)

Information Delivery/Transport & E-Commerce Applications

• Transport providers are principally telecommunications, cable, & wireless industries.

Transport Routers
• Computers with audio & video Mobile
Information Transport Providers computing

• Telecommunication • Telephonic devices

companies
• Consumer electronics
• Cable television companies
• Personal digital assistants (PDAs)
• Computer-based on-line
servers

• Wireless

communications Consumer

Access Devices

Information Consumers

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 Information Delivery Methods

long-distance telephone

lines; local telephone lines

Cable TV coaxial, fiber optic

& satellite lines Internet;

commercial on-line service

providers Cellular & radio

networks; paging systems

Access Devices

Personal/desktop
computing capabilities

Videophone

Television + set-top box Game

systems

Pen-based computing, voice-

driven computing

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 E-Commerce Consumer applications:

• People needs entertainment on demand including video, games, news

on-demand, electronic retailing via catalogs etc.

• Currently now we are taking the video on-demand.

• Why most companies betting heavily on this?

1. 93 million homes have television

2. Americans spend nearly half their free time watching television

3. Every evening, more than one-third of the population is in front of a television

4. Sight, sound, and motion combine to make television a powerful means of marketing

1. Consumer Applications and Social Interaction:

• Lessons from history indicate that the most successful technologies are
those that make their mark social

• In 1945, in U.S no one had TV. By 1960 about 86percent of households did

• Now contrast with Telephone. Bell invented the telephone in 1876 and by1940, 40% of
U.S. households and by 1980 about 95-98 percent of households connected

• Penetration was slower for Telephone than for TV because of the effort
needed to set up the wiring infrastructure

The impact of both was good on business, social, consumer behavior and
entertainment habits

Radio began in 1960, and by 1989, almost 3 decades later, just 319
radio stations followed the news format

In 1994, their number exceeded

1000 What do Consumers really

want?

1. They want quality and cost of service

2.If a new system requires more steps to do essentially the same things,
consumers may resist it

3.Some people fit that mold, but most of public prefers to lay back and just
watch television and let someone else do the work of figuring out the
sequence of television programming

What are Consumers willing to spend?

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 1. According to the video on-demand, consumers get the cable bill at basic
charge they will buy

2. If
it is doubled they will not buy and at the service provider economics
will increased then network operators might look to advertises to fill the
gap

Delivering products to Consumers

1. Packing and distribution must be considered

2. Blockbuster video collects the information and shows the typical consumer

3. Spends $12 a month on home video expenditures

4. Go to video store to select video on limited budget and has time to kill

5. Only periodically expends a large sum of

money Consumer Research and E-

Commerce

Consumer opinion about interactive

television is 46% be willing to pay

39% want video phone calls

63% would pay for movies on-demand

57% would pay for Television shows on-demand

78% said their worry about it is that they will pay for something that they
previously received free of charge

64% are think it make it harder for viewers to protect

privacy 41% are tell that it is too confusing to use

Changing business Environment

1. The traditional business environment is changing rapidly

2. Many companies are looking outside and within to shape business strategiesThese
activities include -
electroniccustomers,suppliers,distributors,industry groups etc
3.The I-superhighway will expand this trend so that it allow business to
exchange information.

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 E-Commerce and the retail Industry
1. Conditions are changing in the ―new economy‖ with respect to the retail industry
2.Consumers are demanding lower prices, better quality, a large selection of in-season
goods.

3. Retailers are filling their order by slashing back-office costs, reducing

profit margins, reducing cycle times. buying more wisely and making huge
investments in technology

4. Retailers are in the immediate line of fire and were first to bear the brunt of cost cutting

5. Marketing and E-Commerce

1.E-commerce is forcing companies to rethink the existing ways of doing target marketing
and even event marketing.

2. Interactive marketing is in electronic markets via interactive multimedia

catalogs

3.Users find moving images more appealing than still image and listening more appealing
than reading text on a screen

3. Consumer information services are a new type of catalog business

Inventory Management and Organizational Applications

1. With borders opening up and companies facing stiff global competition

2. Adaptation would include moving to computerized, ―paperless‖ operations to reduce

3.Once targeted business process is inventory management, solutions for these processes go
by different names

4.In manufacturing industry they‘re known as just-in-time inventory systems, in the retail as
quick response programs, and in transportation industry as consignment tracking systems

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Just-in-Time (JIT) Manufacturing

1. It is viewed as an integrated management system consisting of a number

of different management practices dependent on the characteristics of
specific plants

2. The first principle is elimination of all waste (time,materials,labour &

equipment) 3.The following management practices are focused factory,
reduced set-up times, group
technology, total productive maintenance, multifunction employees, uniform
workloads, IT purchasing,kanban total quality control & quality circles

Quick Response Retailing (QR)

1. It is a version of JIT purchasing tailored for retailing

2. To reduce the risk of being of out of stock, retailers are implementing QR systems

3. It provides for a flexible response to product ordering and lowers costly inventory levels

4. QR retailing focuses on market responsiveness while maintaining low levels of stocks

5.It creates a closed loop consisting of retailer, vendor, & consumer chain,& as consumers
make purchases the vendor orders new deliveries from the retailer through
its computer network

Supply Chain Management

1. QR and JIT address only part of the overall picture

2.Supply Chain Management (SCM) is also called ―extending‖, which means integrating the
internal and external partners on the supply and process chains to get raw materials to the
manufacturer and finished products to the consumer

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 3. It includes following functions

Supplier management: The goal is to reduce the number of suppliers

and get them to partners

Inventory management: The goal is to shorten the order-ship-bill cycle.

When a majority of partners are electronically linked, information faxed or
mailed

Distribution management: The goal is to move documents (accurate

data) related to shipping

Channel management: The goal is to quickly disseminate information about

changing operational conditions ( technical, product, and pricing
information) to trading partners

Payment management: The goal is to link company and the suppliers and
distributors so that payments can be sent and received electronically

Financial management: The goal is to enable global companies to manage

their money in various foreign exchange accounts

Sales force productivity: The goal is to improve the communication flow of

information among the sales, customer & production functions

In sum, the supply chain management process increasingly depends on

electronic markets Work group Collaboration Applications:

1.A internetwork that enables easy and inexpensive connection of various

organizational segments

2. It
is to improve communications and information sharing and to gather
and analyze competitive data in real-time

3. Videoconferencing, document sharing and multimedia e-mail, are

expected to reduce travel and encourage telecommuting

4. Improves the distribution channel for documents and records to suppliers,

collaborators and distributors

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 CONSUMER-ORIENTED E-COMMERCE

CONSUMER-ORIENTED APLICATIONS

• The wide range of applications envisioned for the consumer marketplace can
be broadly classified into:

(i) Entertainment

(ii) Financial Services and

Information

(iii) Essential Services

(iv) Education and Training

Consumer Life-Style Needs Complementary Multimedia Services

 Entertainment Movies on demand, video cataloging,
interactive Ads, Multi-user games, on-line
• Financial Services discussions.
and Financial news.
Home Banking, Financial services, Information,
• Essential
Services remote
diagnostics. Home Shopping, Electronic Catalogs, telemedicine,
 Education and Training
conferencing, on-line
databases. Interactive education, multiuser games, video

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1.Personal Finance and Home Banking Management

(i) Basic Services

(ii) Intermediate Services

(iii) Advanced services

2. Home Shopping

(i) Television-Based Shopping

(ii) Catalog-Based Shopping

3. Home Entertainment

(i) Size of the Home Entertainment Market

(ii) Impact of the Home Entertainment on Traditional Industries

4. Micro transactions of Information

1. Personal Finance and Home Banking Management:

• The newest technologies are direct deposit of payroll, on-line bill payment
and telephone transfers

• The technology for paying bills, whether by computer or telephone, is

infinitely more sophisticated than anything on the market a few years ago

• In 1980s were the days of ―stone age‖ technology because of technology

choices for accessing services were limited

• For home banking, greater demands on consumers and expanding need for
information, it‘s services are often categorized as basic, intermediate and
advanced

(i) Basic services

• These are related to personal finance

• The evolution of ATM machines from live tellers and now to home banking

• The ATM network has with banks and their associations being the routers
and the ATM machines being the heterogeneous computers on the network.

• This interoperable network of ATMs has created an interface between

customer and bank that changed the competitive dynamics of the industry.
See in next figure

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 • Increased ATM usage and decrease in teller transactions

• The future of home banking lies with PC‘s

(ii) Intermediate Services

• The problem with home banking in 1980 is, it is expensive service that
requires a PC, a modem and special software

• As the equipment becomes less expensive and as bank offers broader

services, home banking develop into a comprehensive package that could
even include as insurance entertainment

• Consider the computerized on-line bill-payment system

• It never forgets to record a payment and keeps track of user account

number, name, amount and the date and we used to instruct with
payment instructions. See in Fig;

(iii) Advanced Services

• The goal of advanced series is to offer their on-line customers a complete

portfolio of life, home, and auto insurance along with mutual funds, pension
plans, home financing, and other financial products

• The Figure explains the range of services that may well be offered by banks in future

• The servic3es range from on-line shopping to real-time financial

information from anywhere in the world

• In short, home banking allows consumers to avoid long lines and gives flexibility

2. Home Shopping:

• It is already in wide use.

• This enable a customer to do online shopping

(i) Television-Based Shopping:

• It is launched in 1977 by the Home Shopping Network (HSN).

• It provides a variety of goods ranging from collectibles, clothing, small

electronics, house wares, jewelry, and computers.

• When HSN started in Florida in 1977, it mainly sold factory overruns and
discontinued items

• It works as, the customer uses her remote control at shop different channels
with touch of button. At this time, cable shopping channels are not truly

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 interactive

(ii) Catalog-Based Shopping

• In this the customer identifies the various catalogs that fit certain
parameters such as safety, price, and quality

• The on-line catalog business consists of brochures , CD-ROM catalogs,

and on-line interactive catalogs

• Currently, we are using the electronic brochures

3. Home Entertainment:

• It is another application for e-commerce

• Customer can watch movie, play games, on-screen catalogs, such as TV guide.

• In Home entertainment area, customer is the control over programming

• In Table tells the, What will be required in terms of Television-based

technology for this telemart to become a reality

The Telemart: Present and Future Functions

• Compressing and decoding The transition to digital satellite

a digital signal(images and cable network head

are compress to reduce broad casting involves

quantity of information) linking the TV to decoder

to reconvert into an analog

signal

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 • Decoding a scrambled The broad casting of pay channel

signal requires the encryption of the

signal on emission & unscrambled

• Rapid loading of program An increase in the no. of individual

on memory interactive services is

possible only if n/w

overloading is kept

minimum

• Electronic money or Once separated from the telephone,

card payment terminal telemart will need a keyboard

up to the TV set in order to

ensure interactivity. The

keyboard will have a payment

connection to simplify the

billing process

Advanced Services

Size of the home Entertainment Market:

• Entertainment services are play a major role in e-commerce

• This prediction is underscored by the changing trends in consumer behavior.

• It is shown in Table

Impact of Home entertainment on traditional industries:

• This will have devastating effects on theater business

• Economic issues might allow theaters to maintain an important role in the movie industry

• Today average cable bill is approximately $30 a

month Industry Estimates of consumer

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 Expenditures

1980 ($4.7 1990 ($31.0 1993 ($37.8 bin)

bin) bin)
Theaters 13.2% $5.0
49.0% $2.3 14.5% $4.5
Basic cable 36.9% $13.9
35.0% $1.6 34.5% $10.7
Premium
14.0% $5.3
cable 16.0% $0.8 16.5%
$5.
1
Home video 33.8% $10.5

Pay per view 0.7% $0.

4. Micro transactions of information:

34.8% $13.2

1.1% $0.4

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 • One change in traditional business forced by the on-line information
business is the creation of a new transaction category called small-fee
transactions for micro services

• The customer by giving some information away for free and provide
information bundles that cover the transaction overhead.

• The growth of small-money transfers could foster a boom in other

complementary information services

• The complexity is also increased in micro services when an activity named,

reverification is entered.

• It means checking on the validity of the transaction after it has been

approved Desirable Characteristics of an Electronic marketplace

• Critical mass of Buyers and sellers: To get critical mass, use electronic mechanisms

• Opportunity for independent evaluations and for customer dialogue and

discussion: Users not only buy and sell products, they compare notes on who
has the best products and whose prices are outrageous

• Negotiation and bargaining: Buyers and sellers need to able to haggle over
conditions of mutual satisfaction, money, terms & conditions, delivery dates
& evaluation criteria

• New products and services: Electronic marketplace is only support full

information about new services

• Seamless interface: The trading is having pieces work together so that

information can flow seamlessly

• Resource for disgruntled buyers: It provide for resolving disagreements by

returning the product.

Mercantile Process models

• Mercantile processes define interaction models between consumers and

merchants for on- line commerce

Mercantile Models from the Consumer's Perspective

(i) Pre purchase preparation: The pre purchase preparation phase include search
and discovery for a set of products to meet customer requirements

(a) The consumer information search process.

(b) The Organizational search process.

(c) Consumer search experiences.

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 (d) Information brokers & brokerages.

(ii) Purchase consummation: The purchase consummation phase include mercantile protocols

(a) Mercantile process using digital cash.

(b) Mercantile transaction using credit cards.

(c) Costs of electronic purchasing.

(iii) Post purchase interaction: The post purchase interaction phase includes
customer service & support

(i) Pre purchase Preparation

• The purchase is done by the buyers, so consumers can be categorized into 3 types

• Impulsive buyers, who purchase products quickly

• Patient buyers, purchase products after making some comparisons

• Analytical buyers, who do substantial research before making decision

to purchase products,.

Marketing researches have several types of purchasing:

• Specifically planned purchases

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 • Generally planned purchases

• Reminder purchase

• Entirely unplanned purchases

The consumer information search process

• Information search is defined as the degree of care, perception,& effort

directed toward obtaining data or information related to the decision
problem

The Organizational search process

• Organizational search can be viewed as a process through which an

organization adapts to such changes in its external environment as new
suppliers, products, & services.

Consumer Search Experiences

• The distinction between carrying out a shopping activity ―to achieve a goal‖
(utilitarian) as opposed to doing it because ― u love it‖ (hedonic).

Information Brokers and Brokerages

• To facilitate better consumer and organizational search, intermediaries called

information brokers or brokerages

• Information brokerages are needed for 3 reasons: Comparison shopping,

reduced search costs, and integration

(ii) Purchase Consummation

• Buyer contacts vendor to purchase

• Vendor states price

• Buyer and Vendor may or may not engage in negotiation

• If satisfied, buyer ask the payment to the vendor

• Vendor contacts billing service

• Billing service decrypts authorization and check buyers account balance

• Billing service gives to the vendor to deliver product

• Vendor delivers the goods to buyer

• On receiving the goods, the buyer signs and delivers receipt

• At the end of the billing cycle, buyer receives a list of transactions

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 Mercantile process using Digital Cash

• Buyer obtains e-cash from issuing bank

• Buyer contacts seller to purchase product

• Seller states price

• Buyer sends e-cash to seller

• Seller contacts his bank or billing service to verify the validity of the cash

• Bank gives okay signal

• Seller delivers the product to buyer

• Seller then tells bank to mark the e-cash as ―used‖

currency Mercantile Transactions Using Credit Cards

• Two major components compromise credit card transactions in this process: electronic
authorization and settlement

• In retail transaction, a third-party processor (TPP) captures information at the

point of sale, transmits the information to the credit card issuer for
authorization, communicates a response to the merchant and electronically
stores the information for settlement and reporting.

• The benefits of electronic processing include the reduction in credit losses,

lower merchant transaction costs, & faster consumer checkout & merchant-
to-bank settlement

A step-by-step account of retail transaction follows:

• Step1: A customer presents a credit card for payment at a retail location

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 • Step2: The point-of-sale software directs the transaction information to the local network

• Step3: System verifies the source of the transaction and routes it.

• Step4: In this, transaction count and financial totals are confirmed between
the terminal and the network

• Step5: In this, the system gathers all completed batches and processes
the data in preparation for settlement

A merchant client takes one of two forms:

• Merchants are charged a flat fee per transaction for authorization and
data capture services

• The other form of billing allows merchants to pay a ‖bundled‖ price for
authorization, data capture, & settlement

Cost of Electronic Purchasing:

• Cash seems to be preferable to electronic payments, such as, on-line debit,

credit, and electronic check authorization

• Consumers appear to spend more when using cards then when spending cash

(iii) Post purchase Interaction

• Returns and claims are an important part of the purchasing process

• Other complex customer service challenges arise in customized retailing are:

Inventory issues: To serve the customer properly, a company should inform a

customer right away and if the item is in stock, a company must able to assign
that piece to customer

Database access and compatibility issues: Customers should get kind of services
by easy issues like calling an 800 number

Customer service issues: To clear the doubts of customer about product

Mercantile Models from the Merchant's Perspective

• To better understanding, it is necessary to examine the order management cycle (OMC).

• The OMC includes eight distinct activities.

• The actual details of OMC vary from industry to industry and also for
individual products and services

• OMC has generic steps

(i) Order planning & Order generation.

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 (ii) Cost estimation & pricing.

(iii) Order receipt & entry.

(iv) Order selection & prioritization.

(v) Order Scheduling

(vi) Order fulfillment & delivery.

(vii) Order billing & account/payment management.

(viii) Post sales service.

Order planning & order Generation

• Order planning leads to order generation.

• Orders are generated in a no. of ways in the e-commerce environment.

• The sales force broadcasts ads (direct marketing), sends personalized e-mail
to customers (cold calls), or creates a WWW page

Cost Estimation & pricing

• Pricing is the bridge between customer needs & company capabilities.

• Pricing at the individual order level depends on understanding the value to

the customer that is generated by each order, evaluating the cost of filling
each order; & instituting a system that enables the company to price each
order based on its value & cost

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Order Receipt & Entry

• After an acceptable price Quote, the customer enters the order receipt &
entry phase of OMC.

• This was under the purview of departments variously titled customer service,
order entry, the inside sales desk, or customer liaison.

Order Selection & Prioritization

• Customer service representatives are also often responsible for choosing

which orders to accept and which to decline.

• Not, all customers‘ orders are created equal; some are better for the business.

Order Scheduling

• In this phase the prioritized orders get slotted into an actual production or
operational sequence.

• This task is difficult because the different functional departments- sales,

marketing,, customer service, operations, or production- may have
conflicting goals, compensation systems, & organizational imperatives:

Production people seek to minimize equipment changeovers, while marketing

& customer service reps argue for special service for special customers.

Order Fulfillment & Delivery

• In this actual provision of the product or service is made.

• It involves multiple functions and locations.

Order Billing & Account/Payment Management

• After the order has been fulfilled & delivered, billing is given by finance staff.

• The billing function is designed to serve the needs and interests of the
company, not the customer.

Post sales Service

• This phase plays an increasingly important role in all elements of a

company‘s profit equation: customer, price, & cost.

• It can include such elements as physical installation of a product, repair &

maintenance, customer training, equipment upgrading & disposal.

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