Unit -1 E-commerce

What Is E-Commerce?

 E-commerce involves the use of the Internet, the World Wide Web (Web), and
mobile apps and browsers running on mobile devices to transact business.
 The Internet is a worldwide network of computer networks, and the Web is one
of the Internet’s most popular services, providing access to billions of web pages.
An app (short-hand for application) is a software application. The term is typically
used when referring to mobile applications, although it is also sometimes used to
refer to desktop computer applications as well. A mobile browser is a version of
web browser software accessed via a mobile device.
 Examples of E-Commerce are online retailers like amazon, flipkart, Myntra,
paytm mall, seller of digital goods like ebooks, online service etc.

Note: - The terms Internet and Web are often used interchangeably; they are
actually two very different things.

Why we should study E-Commerce?

 This study of E-commerce presents entrepreneurs with opportunities to create

new business models and businesses in traditional industries and in the process,
disrupt, and in some instances, destroy existing business models and firms.
 The rapid growth of e-commerce is also providing extraordinary growth in career
and employment opportunities.

It is important to study e-commerce in order to be able to perceive and understand

the opportunities and risks that lie ahead.

We will be able to identify the technological, business, and social forces that have
shaped, and continue to shape, the growth of e-commerce, and be ready to
participate in, and ultimately guide, discussions of e-commerce in the firms
where you work.

More specifically, we will be able to analyze an existing or new idea for an e-

commerce business, identify the most effective business model to use, and

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understand the technological underpinnings of an e-commerce presence,

including the security and ethical issues raised, as well as how to optimally
market and advertise the business, using both traditional e-marketing tools and
social, mobile, and local marketing.

The Difference between E-Commerce and E-Business

E-commerce: E-commerce encompasses the entire world of electronically based

organizational activities that support a firm’s market exchanges—including a
firm’s entire information system infrastructure.

Examples of E-Commerce are online retailers like amazon, flipkart,

Myntra, paytm mall, seller of digital goods like ebooks, online service etc.

E-business: E-business encompasses the entire world of internal and external

electronically based activities, including e-commerce.

Examples of E-Business are e-commerce companies and its various internal

business activities, auction site, classified site, software and hardware developer site etc.

E-commerce and e-business systems blur together at the business firm boundary, at the
point where internal business systems link up with suppliers or customers (see
Figure(CB).

Figure(CB) : The Difference Between E-Commerce And E-Business.

E-commerce primarily involves transactions that cross firm boundaries. E-business

primarily involves the application of digital technologies to business processes within the
firm

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E-commerce v/s E-business

S.No. E-COMMERCE E-BUSINESS
01. E-Commerce refers to the E-Business refers to performing
performing online all type of business activities
commercial activities, through internet.
transactions over internet.
02. E-Commerce is a narrow E-Business is a broad concept and
concept and it is it is considered as a superset of E-
considered as a subset of Commerce.
E-Business.
03. Commercial transactions Business transactions are carried
are carried out in e- out in e-business.
commerce.
04. In e-commerce In e-business transactions are not
transactions are limited. limited.
05. It includes activities like It includes activities like
buying and selling procurement of raw
product, making materials/goods, customer
monetary transactions etc education, supply activities buying
over internet. and selling product, making
monetary transactions etc over
internet.
06. It usually requires the use It requires the use of multiple
of only a website. websites, CRMs, ERPs that
connect different business
processes.
07. It involves mandatory use It involves the use of internet,
of internet. intranet or extranet.
08. E-commerce is more E-business is more appropriate in
appropriate in Business Business to Business (B2B)
to Customer (B2C) context.
context.
09. E-Commerce covers E-Business covers internal as well
outward/external as external business
business process. process/activities.

Technological Building Blocks Underlying E-Commerce: The Internet, Web, and

Mobile Platform

The technologies behind e-commerce are the Internet, the Web, and increasingly, the
mobile platform.

Internet:

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 The Internet is a worldwide network of billions of computers and other electronic

devices (such as smartphones, tablets, smartwatches, connected TVs, and remotes)
built on common standards.
 The Internet links businesses, educational institutions, government agencies, and
individuals together, and provides users with services such as e-mail, document
transfer, shopping, research, instant messaging, music, videos, and news.
Note: - Experts estimated that in 2019, the number of devices connected in
Internet had reached 22 billion, growing to an estimated 38.6 billion by 2025.
Internet has rapidly growing into the world’s largest network.
One way to measure the growth of the Internet is by looking at the number
of Internet hosts with domain names.
In the United States, over 280 million people of all ages use the Internet at
least once a month.

World Wide Web (Web):

 World Wide Web, which is also known as a Web, is a collection of websites or
web pages stored in web servers and connected to local computers through the
internet. These websites contain text pages, digital images, audios, videos, etc.
 The World Wide Web (the Web) is an information system that runs on the Internet
infrastructure.
 The Web was the original “killer app” that made the Internet commercially
interesting and extraordinarily popular.
 The Web provides access to billions of web pages indexed by Google and other
search engines. These pages are created in a language called HTML (HyperText
Markup Language). HTML pages can contain text, graphics, animations, and other
objects.
 The Web was developed in the early 1990s.
 The Internet prior to the Web was primarily used for text communications, file
transfers, and remote computing. The Web introduced far more powerful
capabilities of direct relevance to commerce. In essence, the Web added color,
voice, and video to the Internet, creating a communications infrastructure and
information storage system that rivals television, radio, magazines, and libraries.

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Note: - There is no precise measurement of the number of web pages in existence,

in part because today’s search engines index only a portion of the known universe
of web pages. Google has identified over 130 trillion individual web pages, up
from 30 trillion in 2013, although many of these pages do not necessarily contain
unique content (Schwartz, 2016). In addition to this “surface” or “visible” Web,
there is also the so-called deep Web that is reportedly 500 to 1,000 times greater
than the surface Web. The deep Web contains databases and other content that is
not routinely identified by search engines such as Google (see Figure(web)).
Although the total size of the Web is not known, what is indisputable is that web
content has grown exponentially since 1993.

Figure(web): The Deep web

Mobile Platform:
 The mobile platform provides the ability to access the Internet from a
variety of mobile devices such as smartphones, tablets, and laptop
computers via wireless networks or cell phone service.
 The mobile platform has become a significant part of Internet infrastructure.
Note: - Mobile devices are playing an increasingly prominent role in
Internet access. In 2018, over 91% of Americans who accessed the Internet

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used a mobile device. Figure (mp) illustrates the variety of devices used by
Americans to access the Internet.

Figure (mp):

Major Trends in E-Commerce

The major trends in e-commerce in 2019—2020 from a business, technological,

and societal perspective are:

BUSINESS:
 Retail e-commerce continues to grow worldwide, with a global growth rate
of over 20%, and even higher in Asia-Pacific.
 Retail m-commerce sales skyrocket, reaching over $2.2 trillion in 2019.
 The mobile app ecosystem continues to grow, with over 2.5 billion people
worldwide using mobile apps in 2019.
 Social e-commerce, based on social networks and supported by
advertising, emerges and continues to grow, generating an estimated $16.5
billion from social commerce in the United States in 2018.
 Local e-commerce, the third dimension of the mobile-social-local e-
commerce wave, is also growing, fueled by an explosion of interest in on-
demand services such as Uber.

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 B2B e-commerce revenues continue to expand, reaching about $27 trillion

worldwide in 2019.
 On-demand service firms like Uber and Airbnb attract billions in capital,
garner multi-billion dollar valuations, and show explosive growth.
 Mobile advertising continues growing at astronomical rates, accounting for
over 70% of all digital ad spending.
 Small businesses and entrepreneurs continue to flood into the e-commerce
marketplace, often riding on the infrastructures created by industry giants
such as Apple, Facebook, Amazon, Google, and eBay.

TECHNOLOGY:
 A mobile computing and communications platform based on
smartphones, tablet computers, wearable devices, and mobile apps
becomes a reality, creating an alternative platform for online transactions,
marketing, advertising, and media viewing. The use of mobile messaging
services such as Facebook Messenger, WhatsApp, and Snapchat
continues to expand, and these services are now used by almost two-thirds
of smartphone users.
 Smart speakers such as Amazon Echo and Google Home become
increasingly popular, providing an additional platform for e-commerce.
 Cloud computing completes the transformation of the mobile platform by
storing consumer content and software on “cloud” (Internet-based)
servers and making it available to any consumer-connected device from
the desktop to a smartphone.
 The Internet of Things (IoT), comprised of billions of Internet-connected
devices, continues to grow exponentially.
 As firms track the trillions of online interactions that occur each day, a
flood of data, typically referred to as big data, is being produced.
 In order to make sense out of big data, firms turn to sophisticated software
called business analytics (or web analytics) that can identify purchase
patterns as well as consumer interests and intentions in milliseconds.

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SOCIETY:
 User-generated content, published online as social network posts, tweets,
blogs, and pins, as well as video and photo-sharing, continues to grow and
provides a method of self-publishing that engages millions.
 Social networks encourage self-revelation, threatening privacy, as Facebook
comes under fire for allowing third parties such as Cambridge Analytica to
mine its database of user information without user consent.
 The EU General Data Protection Regulation takes effect, impacting all
companies that operate in any of the EU member nations.
 Concerns increase about the increasing market dominance of Facebook,
Amazon, and Google, leading to calls for government regulation in both the
European Union and United States.
 Conflicts over copyright management and control continue, but there is
substantial agreement among online distributors and copyright owners that
they need one another.
 Surveillance of online communications by both repressive regimes and
Western democracies grows.
 Concerns over commercial and governmental privacy invasion increase.
 Online security continues to decline as major companies are hacked and lose
control over customer information.
 Spam remains a significant problem.
 On-demand service e-commerce produces a flood of temporary, poorly paid
jobs without benefits.

UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY

Figure(uf) illustrates eight unique features of e-commerce technology that both

challenge traditional business thinking and help explain why we have so much interest in
e-commerce.
These unique dimensions of e-commerce technologies suggest many new
possibilities for marketing and selling—a powerful set of interactive, personalized, and
rich messages are available for delivery to segmented, targeted audiences.

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Figure(Uf): Eight Unique Features Of E-Commerce Technology

Information asymmetry: refers to any disparity (imbalance) in relevant market

information among parties in a transaction.
Traditional: It was so expensive to change national or regional prices in
traditional retailing (what are called menu costs) that one national price was the
norm, and dynamic pricing to the marketplace (changing prices in real time) was
unheard of.
Consumers were trapped by geographical and social boundaries, unable to
search widely for the best price and quality. Information about prices, costs, and
fees could be hidden from the consumer, creating profitable information
asymmetries for the selling firm
E-commerce: E-commerce technologies make it possible for merchants to
know much more about consumers and to be able to use this information more
effectively than was ever true in the past.
Online merchants can use this information to develop new information
asymmetries, enhance their ability to brand products, charge premium prices for
high-quality service, and segment the market into an endless number of subgroups,
each receiving a different price.
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These same technologies also make it possible for merchants to know more
about other merchants than was ever true in the past.

1. Ubiquity: it is available just about everywhere, at all times.

In traditional commerce, a marketplace is a physical place you visit in
order to transact.
E-commerce, in contrast, is characterized by its ubiquity: It liberates the
market from being restricted to a physical space and makes it possible to shop
from your desktop, at home, at work, or even from your car, using mobile e-
commerce. From a consumer point of view, ubiquity reduces transaction costs and
Cognitive energy.

Note: Cognitive energy refers to the mental effort required to complete a task .

2. Global Reach: E-commerce technology permits commercial transactions to cross

cultural, regional, and national boundaries far more conveniently and cost-
effectively than is true in traditional commerce. As a result, the potential market
size for e-commerce merchants is roughly equal to the size of the world’s online
population. The Internet makes it much easier for startup e-commerce merchants
within a single country to achieve a national audience than was ever possible in the
past. The total number of users or customers an e-commerce business can obtain is a
measure of its reach.
In traditional commerce is local or regional—it involves local merchants or
national merchants with local outlets. Television, radio stations, and newspapers, for
instance, are primarily local and regional institutions with limited but powerful
national networks that can attract a national audience.

3. Universal Standards: the technical standards of the Internet are shared by all
nations around the world.
In traditional commerce technologies differ from one nation to the next. For
instance, television and radio standards differ around the world, as does cell phone
technology.
E-commerce: The universal technical standards of e-commerce:
 Greatly lower market entry costs— the cost merchants must pay just to bring
their goods to market.

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 For consumers, universal standards reduce search costs—the effort required

to find suitable products.
 And by creating a single, one-world marketspace, where prices and product
descriptions can be inexpensively displayed for all to see, price discovery
becomes simpler, faster, and more accurate.
 Users, both businesses and individuals, also experience network
externalities—benefits that arise because everyone uses the same
technology.

4. Richness: Information richness refers to the complexity and content of a message.

Traditional markets, national sales forces, and retail stores have great
richness: they are able to provide personal, face-to-face service. The richness of
traditional markets makes them a powerful selling or commercial environment. In
traditional, there was a trade-off between richness and reach: the larger the
audience reached the less rich the message.
E-commerce technologies have the potential for offering considerably more
information richness than traditional media, because they are interactive and can
adjust the message to individual users.
Chatting with an online sales person, for instance, comes very close to the
customer experience in a small retail shop.
The richness enabled by e-commerce technologies allows retail and service
merchants to market and sell “complex” goods and services that heretofore
required a face-to-face presentation by a sales force to a much larger audience.

5. Interactivity: Interactivity allows an online merchant to engage a consumer in ways

similar to a face-to-face experience.
Traditional television or radio, for instance, cannot ask viewers questions
or enter into conversations with them, or request that customer information be
entered into a form.
E-commerce technologies allow for interactivity, meaning they enable two-
way communication between merchant and consumer and among consumers.
Comment features, community forums, and social networks with social
sharing functionality such as Like and Share buttons all enable consumers to
actively interact with merchants and other users.

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Websites, that change format depending on what kind of device they are being
viewed on, product images that change as a mouse hovers over them, the ability to
zoom in or rotate images, forms that notify the user of a problem as they are being
filled out, and search boxes that autofill as the user types.

6. Information Density:
E-commerce technologies vastly increase information density—the total
amount and quality of information available to all market participants, consumers
and merchants alike.
It also reduces information collection, storage, processing, and
communication costs.
It greatly increases the currency, accuracy, and timeliness of information—
making information more useful and important than ever.
As a result, information becomes more plentiful, less expensive, and of
higher quality.
Advantages for consumers: Prices and costs have become more transparent. Price
transparency refers to the ease with which consumers can find out the variety of
prices in a market; cost transparency refers to the ability of consumers to
discover the actual costs merchants pay for products.
Advantages for merchants: Online merchants can discover much more about
consumers; this allows merchants to segment the market into groups willing to
pay different prices and permits them to engage in price discrimination—selling
the same goods, or nearly the same goods, to different targeted groups at different
prices.

7. Personalization and Customization:

E-commerce technologies permit personalization: merchants can target their
marketing messages to specific individuals by adjusting the message to a person’s
name, interests, and past purchases. Today this is achieved in a few milliseconds
and followed by an advertisement based on the consumer’s profile. The technology
also permits customization— changing the delivered product or service based on a
user’s preferences or prior behavior.
Personalization and customization allow firms to precisely identify market segments
and adjust their messages accordingly.

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In traditional commerce technologies, personalization and customization are

unthinkable.

8. Social Technology: User-Generated Content And Social Networks:

E-commerce technologies have evolved to be much more social by allowing
users to create and share content with a worldwide community. Using these forms
of communication, users are able to create new social networks and strengthen
existing ones.
All previous mass media in modern history, including the printing press,
used a broadcast model (one-to-many).
The telephone is a one-to-one technology.
E-commerce technologies provide a unique, many-to-many model of mass
communication.

Note: Summery of Business Significance of the eight unique features of E-Commerce Technology

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