UNIT-I

Introduction to E-Commerce: Meaning, nature, concepts, advantages, disadvantages and reasons for transacting online, Electronic
Commerce, Types of Electronic Commerce, Electronic Commerce Models, Challenges and Barriers in E-Commerce environment;
E-Commerce in India: Transition to E-commerce in India, Indian readiness for E-commerce, E-Transition challenges for Indian
corporate.

CHAPTER 1

1. E-Commerce
E-commerce, short for "electronic commerce," refers to the buying and selling of goods, services, or information over the internet or through
electronic means. It involves online transactions and the exchange of money for products or services using electronic communication and digital
technologies. E-commerce encompasses a wide range of activities, including online retail, digital marketplaces, electronic payments, online
auctions, and various forms of business-to-business (B2B) and business-to-consumer (B2C) interactions conducted through electronic
platforms.
E-commerce has become a fundamental part of the modern economy, providing businesses and consumers with the ability to engage in
commercial activities without the constraints of physical location or traditional brick-and-mortar stores. It offers convenience, accessibility, and
efficiency in buying and selling, and it has revolutionized the way people shop and conduct business in the digital age.

1.1 Electronic Commerce can be defined from following four perspectives:

1. Communications Perspective: Electronic commerce is the delivery of information, products/services, or payments via telephone lines,
computer networks, or any other means.
2. Business Process Perspective: Electronic commerce is the application of technology toward the automation of business transactions and
workflows.
3. Service Perspective: Electronic commerce 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.
4. Online Perspective: Electronic commerce provides the capability of buying and selling products and information on the Internet and other
online services.

1.2 Elements of E-Commerce

E-commerce encompasses various elements and components that work together to enable online buying and selling. These elements are
essential for the functioning of e-commerce platforms. Here are the key elements of e-commerce:
1. Website or Online Store: The digital storefront where products or services are displayed, and transactions occur. This includes product
listings, descriptions, images, and pricing information.
2. Product or Service Catalogue: The comprehensive list of items or services available for purchase on the e-commerce platform, often
organized into categories and subcategories.
3. Shopping Cart: A virtual cart that allows customers to select and temporarily store items they wish to purchase while continuing to browse
the website. Customers can review and edit the contents of their shopping cart before proceeding to checkout.
4. Payment Gateway: An online service or software that securely processes and authorizes payment transactions. It enables customers to pay
for their purchases using various payment methods, such as credit cards, digital wallets, or alternative payment options.
5. Checkout Process: The series of steps a customer follows to complete a purchase, which typically includes providing shipping information,
payment details, and order confirmation.
6. User Accounts and Profiles: Customers can create accounts and profiles on the e-commerce platform, which allows them to save their
information, order history, and preferences for a more personalized shopping experience.
7. Search and Navigation: Features that help users search for products, filter results, and easily find what they are looking for on the website.
8. Security and Trust: Implementing security measures such as SSL certificates, encryption, and secure payment processing to protect
customer data and build trust in the e-commerce platform.
9. Inventory Management: Tools and systems for tracking product availability, stock levels, and managing restocking or discontinuation of
items.
10. Order Processing: The system and procedures for managing incoming orders, including order confirmation, picking, packing, and shipping.
11. Shipping and Delivery Options: Providing customers with various shipping methods, delivery timeframes, and associated costs. This
includes integrating with shipping carriers and tracking services.
12. Returns and Refunds: A clear policy and process for handling returns, exchanges, and refunds, including communication with customers
and managing returned merchandise.
13. Customer Support and Communication: Channels for customers to seek assistance, get answers to questions, and resolve issues, such as
live chat, email, and customer support forms.
14. Reviews and Ratings: Customer feedback and reviews that help others make purchasing decisions and provide insights for product
improvement.
15. Mobile Responsiveness: Ensuring the e-commerce platform is accessible and functional on various devices, including smartphones and
tablets.
16. Marketing and Promotions: Strategies and tools for promoting products, running discounts, launching marketing campaigns, and engaging
with customers through email, social media, and online advertising.
17. Analytics and Reporting: Tracking and analyzing data on website traffic, customer behavior, sales, and other metrics to make informed
business decisions.
18. Legal and Compliance: Adherence to legal and regulatory requirements, such as privacy policies, terms and conditions, and compliance
with data protection laws.
19. Integration with Third-Party Services: Connecting with external services, such as inventory management systems, customer relationship
management (CRM) software, and other tools to enhance the functionality of the e-commerce platform.
20. Scalability and Performance Optimization: Ensuring that the e-commerce platform can handle increased traffic and sales, and optimizing
its performance to provide a smooth user experience.
These elements are crucial for the successful operation of an e-commerce business, and they help create a user-friendly, secure, and efficient
online shopping environment for customers.

1.3 Reasons for transacting online

Online transactions have become increasingly popular due to the convenience, efficiency, and accessibility they offer. There are various reasons
why people choose to transact online. Here are some of the primary reasons for transacting online:

• Convenience: Online transactions allow people to shop for products and services from the comfort of their homes or any location with
internet access. They can browse and make purchases at their own convenience, 24/7, without the need to travel to physical stores.
• Time-Saving: Online transactions save time by eliminating the need for commuting, standing in lines, and dealing with physical paperwork.
This is particularly valuable for busy individuals who want to streamline their tasks.
• Wider Selection: Online platforms often provide access to a vast array of products and services from around the world, giving consumers a
broader selection than what may be available in local stores.
• Price Comparison: Consumers can easily compare prices and features of products or services across multiple websites, helping them find
the best deals and make informed purchasing decisions.
• Availability: Online transactions offer the advantage of products and services being available at all times. This is especially important for
those who work irregular hours or have unpredictable schedules.
• Secure Payment Options: Many online platforms offer secure payment methods, including credit cards, digital wallets, and encrypted
transactions, giving consumers confidence that their financial information is protected.
• Reviews and Recommendations: Online reviews and user recommendations play a crucial role in helping consumers make informed
choices. They can read about the experiences of others to decide whether a product or service is right for them.
• Ease of Returns and Refunds: Many online retailers have straightforward return and refund policies, making it easier for customers to
return products that do not meet their expectations.
• Digital Access and Downloads: Online transactions facilitate the purchase and immediate download of digital products such as e-books,
music, software, and digital courses.
• Subscription Services: Subscriptions for streaming services, software, magazines, and more are easily managed online. Customers can sign
up, cancel, or modify their subscriptions with a few clicks.
• Booking and Reservations: Online transactions are commonly used for booking flights, hotels, restaurant reservations, event tickets, and
other services, allowing customers to plan and secure their arrangements in advance.
• Contactless and Hygienic Transactions: In response to the COVID-19 pandemic, online transactions became even more appealing as they
limit physical contact and reduce the risk of virus transmission.
• Gift Shopping: Online shopping is a popular choice for finding gifts for friends and family. It allows buyers to browse a wide range of
options and have items delivered directly to recipients.
• Access to Specialized Markets: Online transactions can provide access to niche or specialized markets that may not have a physical
presence in the buyer's geographic location.
• Environmental Considerations: Some consumers prefer online transactions because they perceive them as more environmentally friendly
due to reduced travel and less paper usage for receipts and invoices.

1.4 Difference between traditional commerce and ecommerce

Characteristic Traditional Commerce E-Commerce
Physical Presence Business transactions are conducted in physical E-commerce takes place in the digital realm, where
brick-and-mortar stores, where customers visit to businesses and customers interact online. There is no
make purchases. physical store presence in e-commerce.
Location It is location-based, and customers must be in the E-commerce transcends geographical boundaries,
same geographic area as the store to make purchases. allowing customers to shop from anywhere with an
internet connection.
Operating Hours Traditional stores have set operating hours, limiting E-commerce platforms are accessible 24/7, providing
the times when customers can shop. customers with the flexibility to shop at any time.
Overhead Costs Traditional businesses often have higher overhead E-commerce businesses typically have lower
costs, including rent, utilities, and employee salaries. overhead costs because they don't require physical
storefronts or as many on-site employees.
Inventory and Stocking Traditional retailers need to manage physical E-commerce businesses may use dropshipping, just-
inventory and stocking of products. in-time inventory, or digital products, reducing the
need for physical stocking.
Customer Interaction In traditional commerce, face-to-face interactions E-commerce relies on digital interactions, which can
with customers are common, and personal include live chat, email, or customer reviews and
relationships can play a significant role in sales. ratings.
Payment Methods Traditional businesses often accept cash, credit cards, E-commerce transactions are primarily conducted
and checks as payment methods. online, using credit cards, digital wallets, and online
payment systems.
Global Reach Traditional businesses are typically limited to local E-commerce allows businesses to reach a global
or regional markets. audience, potentially expanding their customer base
significantly.
Security and Privacy Payment information is typically processed E-commerce platforms invest in secure online
manually, which may pose security risks. payment systems and encryption to protect customer
data.
Convenience and Accessibility Customers need to physically visit a store, which E-commerce offers convenience as customers can
may be inconvenient and time-consuming. shop from the comfort of their homes or on the go.
1.5 Features of E-Commerce
1. Ubiquity: E-commerce is widespread, that is, it is available everywhere always. It sets free market from being restricted to a physical space
and makes it possible to shop from computer (such as desktop, laptop). The result is called a market space.
For consumers, ubiquity cuts transaction costs for exploring products in a market. Consumers can acquire any information whenever and
wherever they want, regardless of their location. It is no longer necessary that buyer spend time and money for traveling to a market. In all, it
saves the cognitive energy needed to transect in a market space.
2. Global Reach: E-commerce technologies enable a business to easily reach across geographic boundaries around the earth far more
conveniently and effectively as compared to traditional commerce. Globally, companies are acquiring greater profits and business results by
expanding their business with e-commerce solutions. As a result, the potential market size for e-commerce merchants is approximately equal
to size of online population.
3. Universal Standards: Universal Standards are standards shared by all the nations around world. These are technical standards of Internet
for conducting e-commerce. It gives all the ability to connect at the same "level" and it provides network externalities that will benefit
everyone. Universal technical standards lower entry costs and minimal search costs.
4. Inter
activity: E-
commerce
technologies
permits two-
way
communicati
on between
customer and
sellers which
makes it
interactive. It
proves as
significant
feature of e-
commerce
technology
over the
commercial
traditional
technologies
 of the 20th century.
5. Information Density: Information density means total amount and quality of information available over Internet to all market buyers and
sellers. Internet vastly increases information density. Information density offers better quality information to consumer and merchants. E-
commerce technologies increase accuracy and timeliness of information. For example, flipkart.com store has variety of products with prices.
6. Richness: Richness refers to the complexity and content of a message. Richness means all commercial activity and experience, conducted
through a variety of messages. For example, text, pictures, videos, sound, links, SMS (Short Message Services) etc.
7. Personalization: E-commerce technology offers personalization. Personalization means designing marketing messages according to
particular individuals by customizing it as per customer personal details like name, interests, and past purchases record. Products or services
can be modified or altered according to the user's choice or past buying record.

1.6 Advantages of E-Commerce

The advantages/benefits of e-commerce can be divided into two categories:
Advantages of E-Commerce to Customers:
1. Reduced Prices: The products available on websites have reduced prices because the different stages of value chain are decreased between
source and destination. The intermediaries such as retail store are eliminated by the company and they sell their products to consumer
directly instead of distributing through intermediaries.
2. Global Marketplace: E-commerce provides global marketplace from where consumers can purchase products according to their needs
situated anywhere in the world.
According to World Trade Organization (WTO), "there are no custom duties put on products bought and traded globally electronically".
Global Marketplace also provides large collection of products and services to consumers with their prices.
3. Anytime Access: Online businesses are open 24 hours, 7 day a week and 365 days in a year and never sleep. Consumers can do transactions
and enquiry about any product/services provided by company at anytime and anywhere from globe. Consumer can purchase any product in
day or night using Internet connections and computer at single click of mouse.
4. More Choices: Online businesses provide their consumers more choices of purchasing. Before purchasing any product, consumer can study
products and their features of all major brands.
5. Quicker Delivery: E-Commerce offers consumer more options and provides quicker delivery of products and services. Some e-commerce
company provides free home delivery service to their consumers.
6. Relevant Information: E-commerce provides relevant and detailed information about products and services within seconds to its consumers.
Consumer can compare products and their prices in easy manner.
Advantages of E-Commerce to Businesses:
1. Low Barriers to Entries: In today's world, small and large firms have opportunities to start up and conduct business on the Internet. Firms
entry cost to the Internet is minuscule (Very small) because they do not need the space for rent. All the business over Internet are virtual means
that there is no need of large number of employees to conduct business.
2. Increased Potential Market Share: Businesses are increasing their market share by making their business internet enabled. Online
businesses are accessed at any time to international markets.
3. Low-Cost Advertising: Internet provides low-cost advertisement as compared to advertisement on newspapers or television. In today's
world, Internet has become inexpensive advertising medium used by firms for commerce. The different methods of advertising are: e-mail,
banners, pop-ups, steaming video and audio etc.
4. Strategic Benefit: E-commerce enabled business have many strategic benefits because they :
a) Reduces cost of mail preparation, document preparation and data entry.
b) Finds errors easily.
c) Lowers cost of calling over telephone.
d) Lowers delivery time and labour costs.
e) Lowers data entry and management expenses.
5. Global Reach: E-commerce enabled business has ability to reach globally at low cost. They are able send messages world-wide at any time.
Since online businesses are globally accessed so e-commerce helps to attract new consumers and business clients from anywhere in the world.

1.7 Disadvantages of E-Commerce

The disadvantages/limitations of e-commerce can be divided into two categories:
Technical Disadvantages of E-Commerce:
1. Lack of Security: Consumer needs to be confident and trust over e-commerce payment providers. Any fraud, hacking or forgery can break
the trust of consumer.
2. Low Bandwidth: In many countries, network might cause an issue because of low bandwidth.
3. Difficulty in Integrating E-Commerce: It is difficult to integrate e-commerce software or website with some existing applications and
databases. Vendors need special web servers to, deal with integration problem in addition to network servers.
4. Not All Customers have Access to Internet: Internet access is not universally available so much of the effort made does not actually reach
the consumer. Many potential customers that are living in remote villages have not Internet access facility.
Non-Technical Disadvantages of E-Commerce:
1. Initial Cost: The initial cost to develop e-commerce web site in-house is very high. This may need high cost of hiring qualified staff to
maintain and updating e-commerce web site. There are also companies have opportunities for outsourcing e-commerce to other e-commerce
companies. But where and how to do outsourcing is a difficult task.
2. Security and Privacy: The major issues in online businesses are security and privacy. Customers feel hesitant to disclose credit card
numbers over Internet because of security problems such as theft of credit card number. If consumers do not have any confidence on the online
business, they will refuse to purchase anything over the Internet.
3. Lack of Trust and User Resistance: Face-to-face contact and paper transactions are important in business deals and transactions since it is
related to trust. So for any consumer switching from physical to online stores is difficult.
4. Lack of Touch and Feel: Consumers may want to touch and feel a product before purchasing online. Online businesses do, not provide the
touch and feel experience to consumer on items such as clothes, shoes etc.
5. Customers Relation Problems: Organization needs loyal customers to run their online business for long time. Online businesses cannot
continue without loyal customers in today's competition.
6. Corporate Vulnerability: Online businesses have high availability of information related to product, price, catalogues, and others. This
information makes web sites vulnerable to access by competition. This process of extracting business intelligence from competitor's web pages
is called Web farming.
7. Legal Issues: When buyers and sellers do not know each other, there is, chance of fraud over the Internet. Hence there are many legal
problems related to e-commerce. Some common legal issues encountered in e commerce are:
a) Software and Copyright Violations
b) Credit Card-Fraud and Stolen Identities
c) Illegal Bargains and Criminal Law

1.8 Reasons for Transacting Online

Consumers are accustomed to being instantly connected -to information, to entertainment, to one another via text message and social media,
and to items they want to buy. With this expectation that nearly every need can be immediately solved with the help of technology, it's no
wonder that they've become so privy to online payments -and the businesses that accept them.

Here's a look at the top reasons people prefer on line transaction

 1. They eliminate geographical boundaries
When a person travels to a different country or continent, they have to adapt what's in their wallet. This may include exchanging currency, and
even using a different credit card than they would typically use. Online payments eliminate the obstacles to participating in a global
marketplace.
Many payment processors equip businesses to accept a range of different currencies, automatically calculate the proper exchange rate based on
the type of currency - and even adapt the language and information prompted in checkout forms to accommodate the different languages buyers
might speak, based on the currency used.
2. They've never been more convenient
Payment technology has evolved to the point that consumers can complete an online payment even if they don't have a card or physical wallet
on hand. In addition to the increasing popularity of mobile wallets, like Apple Pay, research by Javelin Strategy indicates that simpler forms of
alternative funding (think PayPal or Bill Melater) remain well received by online consumers. In fact, more than 80 percent of respondents to
Javelin's study said they'd used one of these card-free payment tools in the last year to make an online payment.
3. They give consumers more time
Online payments aren't just convenient in the sense of transaction speed - they eliminate the need for consumers to travel to a store, invest their
time, and wait in line to pay. Studies on the psychological impact of waiting in line reveal just how precious time is to consumers: They tend to
overestimate how much waiting will deplete their time by nearly 40 percent. Whether the amount of time a customer loses from waiting in line
is real or imagined, perception is reality: Online payments deliver a tangible benefit, simply by offering the buyer a choice of how to spend their
time.

4. They provide an additional layer of purchase protection

Buying from a small business, whether in person or online, requires that customers establish some degree of trust with a merchant with
whom they may have no previous experience. Regardless of how clearly a business communicates its return, exchange, and customer
satisfaction policies, there may be a sense of hesitancy for consumers. Online payments can overcome this obstacle. When online payments
are made using a credit card that guarantees the lowest price for a stated number of days, extends manufacturer warranties, and offers a
cardholder the right to dispute a purchase, for example, the customer has peace of mind that they will be protected, regardless of the
merchant's policy.
5. They replicate their existing financial habits
 Online banking has become a tool that more than half of America ns rely on to transfer funds, pay bills, and track their budgets, according to
few Research Centre. Online payments replicate the financial habits and behaviours that have become the "new normal" for so many
consumers.

6. They provide cost-free benefits

In addition to all of the benefits customers can gain from online payments, they cost consumers nothing in return. In a world where so
few things are free, online payments offer consumers a value-added convenience, with no additional investment required. Though
businesses may incur a small fee for accepting credit cards, the fact that consumers are given the option to pay in the means they prefer
will likely negate the nominal fee that's involved in the transaction.

Online payments give consumers the hassle-free experience they want at no cost -and plenty of timesaving benefits. In tandem, they
provide small businesses that accept them with the operational efficiencies they need to meet (and hopefully exceed) customer
expectations.

CHAPTER 2

2. Types or Business Models of E-Commerce

On the basis of Buyer and seller, E-Commerce is classified as:

2.1 Business to Business (B2B)

B2B is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer. B2B
refers to business that is conducted between companies, rather than between a company and individual consumer. B2B transactions tend to
happen in the supply chain, where one company will purchase raw materials from another to be used in the manufacturing process. These
transactions are also commonplace for auto industry companies, as well as property management, housekeeping etc. It requires two or more
business entities interacting with each other directly or through an intermediary. The intermediaries in B2B may be the market makers and
directory service providers that assist in matching the buyers and sellers and striking a deal. The business application of B2B electronic
commerce can be utilized to facilitate almost all facets of the interactions among organizations, such as Inventory Management, Channel
Management, Distribution Management, Order fulfilment and delivery, and payment management.
The B2B electronic commerce can be

– Supplier-Centric

– Buyer-centric

– Intermediary-centric.
B2B: Supplier-Centric
A supplier sets up the electronic commerce market place for various buyer businesses to interact with the supplier at its electronic market place.
Typically, a dominant supplier in the domain of products sets up such a market place. The supplier may provide customized solutions and
pricing to fit the needs of buyers’ businesses. Usually, differential price structure is dependent upon the volume and loyalty discount. Example,
Cisco Connection Online (CCO)
B2B: Buyer-Centric
The major business with high volume purchase capacity creates an electronic marketplace for purchase and acquisition. The electronic
marketplace is used for placing requests for quotations (RFQs) and carry out the entire purchase process on-line by the buyer. This kind of
facility may be utilized by high volume and well-recognized buyers, as they may have adequate capacity and business volumes to lure suppliers
to bid at the site. Example, General Electric's Trading Process Network
B2B: Intermediary-Centric
A third party may set up the electronic marketplace and attract both the buyer and seller businesses to interact. The Buyers and Sellers, both
benefit from the increased options in terms of pricing, quality, availability and delivery of goods. The third-party electronic marketplace acts as
a hub for both the suppliers and buyers, where buyers place their request for the quotations and sellers respond by bidding electronically leading
to a match and ultimately to a final transaction. It is essential that Intermediary Company represent large number of the members in those
specific markets segment, i.e., both the buyers and the sellers. The Intermediary reduces the need of buyers and sellers to contact a large number
of potential partners on their own. Example, IndiaMart.com

2.2 Business 2 Consumer (B2C)

The two or more entities that interact in this type of transactions involve a business and a consumer. The businesses offer a set of merchandise at
given prices, discounts and shipping and delivery options.

The sellers and consumers both benefit:

– Through the round the clock shopping

– Accessibility from any part of the world,

– Increased opportunity for direct marketing,

– Customizations and Online customer service.

2.3 Consumer 2 Business (C2B)
The transaction originated by the customer have the set of specifications and the required price for a commodity, service or an item. The
business entity is expected to match the requirements of the consumers to the best possible extent. The Consumer to Business (C2B) enables a
consumer to determine the price of a product and/or service offered by a company. It reduces the bargaining time and increases the flexibility at
sales place for both the merchant and the consumer. For Example, PriceLine.com.

Some of the key aspects of C2B e-commerce are:

• Individuals as Suppliers: In C2B, individual consumers or freelancers offer products, services, or expertise to businesses. This could
include graphic designers, photographers, writers, consultants, or any individual with a skill or service to offer.
• Freelancing Platforms: Platforms such as Upwork, Fiverr, and Freelancer.com are examples of C2B e-commerce. They connect
businesses looking for specific services with individual freelancers or independent contractors offering their skills.
• Crowdsourcing and User-Generated Content: C2B can involve crowdsourcing where companies solicit ideas, content, or solutions from
individual consumers. Examples include design contests or asking consumers for feedback and ideas for product development.
• Bid Platforms: Some C2B platforms allow individual consumers to bid on jobs or projects posted by businesses. This creates a
marketplace where consumers compete based on their skills, expertise, and proposed prices.
• Customized Services: C2B often involves personalized or customized services offered by individuals to businesses. This can include
anything from creating custom artwork to providing specialized consulting services.
• Flexible Work Arrangements: C2B platforms offer flexibility for individuals who can work remotely, set their own rates, and choose the
projects they want to work on. This flexibility appeals to freelancers and independent workers.
• Direct Interaction: C2B e-commerce often involves direct communication between the consumer-seller and the business-buyer,
enabling negotiation, customization, and clear understanding of the service or product being offered.
 • Ratings and Reviews: Reputation and credibility are crucial in C2B e-commerce. Ratings, reviews, and portfolios of individual sellers
on these platforms help businesses assess the quality of services being offered.
• Payment Systems: Payment in C2B transactions can be done through various methods, such as direct transfers, escrow services, or
platforms that handle payment processing between the consumer and the business.

2.4 Consumer 2 Consumer (C2C)

It promotes opportunity for consumers to transact goods or services to other consumers present on Internet. The C2C in many a situation models
the exchange systems with a modified form of deal making. For the deal making purposes large virtual consumer trading community is
developed. The customer operates by the rules of this community to compete, check and decide his own basic transaction prices. It mimics the
traditional economic activities corresponding to 'classified ads' and auctions of personal possessions. Much of the transactions in this category
correspond to the small gift items, craft merchandise and similar items that are normally sold through the 'flea' markets or Bazaars. For
Example, Ebay.com, BaaZee.com.

2.5 Business to Employee (B2E)

B2E services are typically offered by Intranet Applications to provide all the needed information to the employees of an organization.

2.6 Business to Government (B2G)

B2G is similar to B2B except Governments operate under own set of rules that may have to adhered by other businesses. Companies sell
products, services and information to governments or government agencies
2.7 Government to Business (G2B)
Information and services are provided by the government to business organizations through vast network of government websites. Such
websites support auctions, tenders and application submission functionalities. A business organization can get the information about business
rules, requirement and permission needed for starting a new enterprise and other specifications.

2.8 Government to Citizen (G2C)

■ E-Governance
■ Offer a variety of information and communication technology services in an efficient and economical manner.
■ Strengthen the relationship between government and citizens using technology.
■ Registration for birth, e-passport, marriage or death certificates.

3. E-Commerce Revenue Models

3.1 What is Revenue Model?

A revenue model is the means by which a business plans to make money. Depending on the revenue model, which can be pretty standard or fairly
complex, a company may take into consideration manufacturing, warehouse kitting, purchasing, distribution, fulfilment marketing, and other
costs, until the business arrives at a profit. The revenue model is considered a high-level look at the revenue structure of a business. Within this model,
a company can have a number of different revenue streams, i.e. different sources of income.

The ultimate goal of any business is, of course, to make money. While most companies do care about their customers and an increasing number of
them are even giving back to their communities through charitable efforts, if a company doesn’t have a sustainable revenue model, it simply cannot
succeed. There are various eCommerce revenue models which are as follows:

3.1.1. Sales Revenue Model

The most common of all eCommerce revenue models, here profits are achieved by selling products or providing services online versus, or in addition
to, brick-and-mortar stores. Any business selling items through the internet, regardless of their business model, is following the sales revenue model.
While they may have other revenue streams, this tends to be their bread-and-butter.

3.1.2. Advertising Revenue Model

The advertising revenue model is when popular platforms allow others to advertise with them for a fee. Media sites, such as magazines, newspapers,
and TV channels also frequently use this model. While they may charge a flat fee for advertising, generally cost is based on pay-per-click (PPC),
which is the number of people who click on the ad.

3.1.3. Subscription Revenue Model

When it comes to the subscription revenue model, a lot of people think of Netflix or Spotify. However, there are also many popular subscription
box brands like Bark Box, Hello Fresh, Ipsy, and Harry’s. Regardless of the offering, with this model users are charged a recurring fee (monthly or
annual) for using services or having existing products replenished and delivered regularly. Today, there are an estimated 7,000 subscription box
services operating globally.

3.1.4. Transaction Fee Revenue Model

This model charges a fee every time a transaction is made through their platform. For example, eBay charges sellers a fee whenever an item is sold;
PayPal charges users a fee for transferring money; eTrade gains a transaction fee whenever a stock is sold; and so on. While fees tend to be minimal, if
people are making thousands of transactions per day, the revenue can be substantial.

3.1.5. Affiliate Revenue Model

With this model, businesses earn revenue just by promoting and selling another person’s (or company’s) product on their site (as opposed to the
advertising revenue model, which doesn’t allow for purchase on the host’s site). The concept of affiliate marketing is based on revenue sharing. If a
business has a product and wants to earn more, you can promote complementary products or services of another company that will, in turn, pay you for
your referrals. It’s a win-win for both parties; the affiliate gains a new, passive revenue stream, and the merchant gains new customers.

3.2 Developing the Right Revenue Models for eCommerce

For developing right revenue model you need to understand your customer and their expectations, assess your current resources to
find a realistic revenue model, and identify your budget allocation. And, there are many other types of revenue streams to consider
within these five models. Of course, while competition is fierce in the online world, there has never been a better time to get in on
the action. According to TechCrunch, COVID-19 accelerated the shift to eCommerce by five years in just one year, boosting
revenue growth in eCommerce and making it the number one shopping choice of customers everywhere.
 4. Challenges and Barriers in E-Commerce environment

4.1 Common Challenges Faced by E-commerce

There are many challenges which are faced by the E-Commerce but some of the major challenges are as follows:
1. Finding the right products to sell

Shopping cart platforms like Shopify have eliminated many barriers of entry. Anyone can launch an online store within days and
start selling all sorts of products. Amazon is taking over the e-commerce world with their massive online product catalog. Their
marketplace and fulfilment services have enabled sellers from all over the world to easily reach paying customers.

2. Attracting the perfect customer

Online shoppers don't shop the same way as they used to back in the day. They use Amazon to search for products (not just
Google). They ask for recom mendations on Social Med ia. They use their smartphones to read prod uct reviews while in-
store and pay for purchases using al l sorts of payment methods. Lots have changed including the way they consume content and
communicate online. They get easily distracted with technology and social media.
 3. Generating targeted traffic

Digital marketing channels are evolving. Retailers can no longer rely one type of channel to drive traffic to their online store. They
must effectively leverage SEO, PPC, email, social, display ads, retargeting, mobile, shopping engines and affiliates to help drive
qualified traffic to their online store. They must be visible where their audience is paying attention.

4. Capturing quality leads

Online retailers are spending a significant amount of money driving traffic to their online store. With conversion rates ranging
between 1°/o to 3°/o, they must put a lot of effort in generating leads in order to get the most out of their marketing efforts. The
money is in the list. Building an email subscribers list is key for long term success. Not only will help you communicate your
message, but it will also allow you to prospect better using tools such as Facebook Custom Audiences.
 5. Nurturing the ideal prospects

Having a large email list is worth less if you're not actively engaging with subscribers. A small percentage of you r email list will
actually convert into pa ying customers. Nonetheless, retailers must always deliver value with their email marketing efforts. Online
retailers put a lot of focus on communicating product offering as well as promotions, but prospects need more than that. Value and
entertainment goes a long way but that requires more work.

6. Converting shoppers into paying customers

Driving quality traffic and nurturing leads is key if you want to close the sale. At a certain point, you need to convert those leads in
order to pay for your marketing campaigns. Retailers must constantly optimize their efforts in converting both email leads as well
as website visitors into customers. Conversion optimization is a continuous process.

7. Retaining customers

Attracting new customers is more expensive than retaining the current ones you already have. Retailers must implement tactics to
help them get the most out of their customer base in increase customer lifetime value.
 8. Achieving profitable long-term growth
Increasing sales is one way to grow the business but in the end, what matters most is profitability.
Online retailers must always find ways to cut inventory costs, improve marketing efficiency, reduce overhead, reduce shipping
costs and control order returns.

9. Choosing the right technology & partners

Some online retailers may face growth challenges because their technology is limiti ng them or they've hired the wrong
partners/agencies to help them manage their projects. Retailers wa n ti ng to achieve growth m ust be built on a good tech nology
fou nda tion. They m ust choose the right shopping cart solution, inventory management software, email software, CRM systems,
analytics and so much more. In addition, hiring the wrong partners or agencies to help you implement projects or oversee
marketing campaigns may also limit your growth. Online retailers must choose carefully who to work wit h.

4.2 Barriers to E-Commerce

There are many barriers to E-Commerce but some of them are as follows:

1. Search Engine Rankings

• The difficulty to rank high in search engines is the leading barrier facing the majority of E-commerce websites, especially
newer ones.
• Using descriptive and relevant page titles, descriptions and URLs are some of the easiest things you can do to influence
your rankings, according to Google.

2. Web Design
• In an E-Commerce study many people said website design impacts customer’s brand perception leading to higher
conversion rates.
 • High performing E-Commerce websites have a clean and uncluttered appearance, are fast, provide great content and
make it easy for visitors to shop.

3. Mobile Browser Compatibility

• Whilst sales of desktop PCs are dropping, those of smart phones and tablets are increasing.
• Since more visitors will be shopping online from mobile devices, e-commerce websites need to ensure cross-platform
compatibility across all web browsers.

4. Slow website performance

• A website that takes a long time to load its pages can lead to a high bounce rate and lead to lower search engine rankings.
• There are a variety of factors that can impede website performance including hosting service, database response, coding,
images and video to name a few.

5. Shopping Cart/Purchasing
• How easy or difficult it is for someone to make purchase and checkout online can affect conversion and shopping cart
abandonment rates.
• E-commerce websites that do well recommend related products, display user ratings and enable shoppers to purchase
and check out with the least amount of price.
 10. Attracting and hiring the right people to make it all happen

Let's face it, online retailers may have visions and aspirations but one true fact remai ns, they
need the right people to help them carry out their desires. Attracting the right talent is key in
order to achieve desirable online growth. Also, having the right leader plays an even bigger
role. Retailers should be out there getting their name out within the online community by
attending e-commerce conferences, speaking at events and networking. Employees want to
work for companies that care about them and their future. Having a sense of purpose is key.

E-Commerce in India : Transition to E-commerce in India, Indian readiness for E-commerce, E-

Transition challenges for Indian corporate

5. E-Commerce in India

5.1 Overview

E-commerce is witnessing a global resurgence, and E-commerce in India is booming based, in

part, on increased access to the internet in India and other emerging economies. This creates
varied business opportunities that will drive organizations to become more up-to-date and enable
increased competitiveness.

India's huge and still-expanding base of internet users includes increasing penetration into the
rural market. This promises a bright future for e-commerce. Whether purchasing e-tickets from
Indian Railways or fast-moving consumer goods (FMCG) and other lifestyle products, consumers
have started getting accustomed to the online platform, which enables easier transactions and
delivery at the preferred location.

The gradual change in the buying patterns of Indian consumers resulted in the mushrooming of
start-ups in the e-commerce market. By offering options for payment on delivery and return
policies, plus attractive deals and discounts, online retailers have retained and grown their base of
online consumers. According to reports, India's e-commerce industry has some of the key players
in the $100-million club. These include established player, Amazon, plus Flipkart, Snapdeal, Ola
Cabs, Paytm, InMobi, Zomato, Quikr and many other start-ups that are propelling growth of this
sector.

5.2 Scope of E-commerce Boom in India

According to NASSCOM, India's $14 billion Indian e-commerce market which started as a niche
industry a few years ago has been gaining momentum and shows more than 25 percent growth.
Online travel is the largest segment with about 70 percent market share, a figure that's likely to
escalate. E-commerce is expanding its reach to the general masses on the back of social media,
which not only provides a mechanism for advertising but also for receiving feedback, building
brand image, and promoting new launches. Online retailers also use social media to track the
first-time and repeat buyers of a product. Social media has become a platform to study consumer
lifestyles and spending patterns.

E-commerce, driven by digitization and internet penetration in the rural market, is creating huge
opportunities for consumers. Competitive prices, deals, and efficient delivery coupled with the
convenience of avoiding long queues have completely altered the buying experience. According
to NASSCOM, India's e-commerce market is forecasted to cross a whopping $200 billion by 2030
due to increased analytics, transactions, and internet penetration.

E-commerce is revitalizing consumer demand and catalysing growth in India's retail industry. The
focus has shifted a pricing model to a more value-added model. Among the fastest growing
domestic segments, the most popular categories are tours & hotel reservations; airline and railway
tickets; and lifestyle and entertainment related products. The innovative business models of the "e-
tail" market attract more repeat customers. Although there is a strong build-up of the e-commerce
industry, a vast portion of the population is not yet aware of the benefits. This represents a huge
potential untapped market for e-tailers.

Among many other components, product availability is one of the primary drivers that cannot be
overlooked. In smaller cities where the consumers may be confined to limited brands and
availabilities, online shopping with the flexibility of delivery options and possibility of getting
what they are looking for has a wider scope.

A robust supply chain and a well-established reverse logistics network in India will enhance the
success of e-commerce companies. E-commerce companies and similar enterprises seek a
particular logistics requirement that may not be executed by traditional logistics suppliers. The
courier companies that generally deliver documents are not experienced in delivering commercial
goods. Thus, the e-commerce companies are establishing their own delivery network. One such
example is Flipkart's logistics, which is calls "eKart." On the other hand, logistics vendors like
Express Logistics deliver bulk loads to the retailers and distributors. They have a pre-established
working relationship with the dealers, enabling good execution.

5.3 Strategies for the E-commerce Boom in India

E-commerce in India has experienced rapid growth driven by the millennials' (Generation Y)
purchasing power, influence of the internet leading to development of varied mobile applications
and websites, and the much-needed infrastructure. Mobile penetration accounts for a vast market
in India, making it more convenient for consumers to shop for a wide variety of retail products.
Other factors enabling growth of the industry include:

• Ease of access: Growing internet usage at affordable rates and rise of smartphones lead to
easier access. This connectivity enables other services like booking train/hotel/cab/movie
tickets; mobile and electric bill payments, etc.
• Connecting the financial system: People now use e-banking and other schemes. Soon,
digitization of the financial system will become the norm.
 • Global reach of homegrown companies: Indian startups in e-commerce industry are
utilizing global channels, thereby increasing their customer base and broadening the scope
of growth.
• Attracting repeaters: A strong focus on customer service is the prime reason that attracts
and retains buyers. Cash on delivery (COD), reasonable pricing, deals & discounts, faster
delivery turnarounds with zero prices, and reverse logistics are some of the drivers
transforming the industry into a booming sector.
• Leveraging technology for innovation: Information sharing between all stakeholders in
the supply chain is very crucial. The integration between various supply chain aspects will
help the e-commerce company have an edge over the competition. Some of the initiatives
may include the use of bar-coding in logistics systems: EDI for communicating between
partners; visibility into the operations; tracking and tracing of the goods at any given point.
• Analytics: Capturing real-time data and understanding purchasing dynamics form the crux
of this industry. The buying preferences, tastes, and demographics of a customer can be
addressed by gathering customer data. The volume and complexity of data require
analytics to derive customer insights, optimize channels, and calculate ROI.

5.4 E-commerce Challenges in India

While this sector shows immense promise, certain challenges need to be addressed. Some of the
pressures that constrain growth include:

Logistics: Logistics, a key element in providing customer service, is one of the major challenges
confronting the e-commerce players. Local logistics firms in India are generally not up to meeting
the requirements of e-tailers; hence e-commerce firms have to make huge investments to build
their own logistics.

Infrastructure: E-commerce players also need to address the infrastructure needed to overcome
payment problems, build offline presence, implement more push-marketing, manage price-
sensitive customers, and compete on a global turf. The payment gateway infrastructure is still at
the nascent stage. The merchants have yet to make amendments on the mobile front. As an
example, one of the leading e-commerce players in India could not handle the requests of its
customers on Big Billion Days' sale program due to unorganized delivery framework.

Competitive Analysis: E-commerce companies have to focus on issues pertaining to rapid

additions of customer segments and product portfolios. Information should be collected related to
market intelligence on growth, size and share, and managing multiple customer engagement
platforms in order to expand into new geographies, brands & products; while simultaneously
controlling a very competitive pricing environment.

Digitization of Available Networks: At present, social media plays a significant role in the life
of an internet surfer/customer. Thus companies have to provide a rich experience by managing
erratic demands and inconsistent brand experience across platforms, in addition to handling time-
to-market efforts for new launches, applications, and websites.

Mode of Transactions: Concerns about security, privacy, and tracking fraudulent purchases are
some external forces that impact a business. Other factors like cross-border tax, back-end service
tax, and regulatory issues can have serious implications for e-commerce companies.
Other issues e-commerce businesses must deal with include inability of the organizational
structure to keep pace with the rapid changes, cybersecurity for preventing fraudulent transactions
and insider threats, tax restructuring, and legal compliance.