Chapter 1: Introduction to Ecommerce

Learning objectives:

 Definition of E-commerce
 Evolution of ecommerce
 Difference b/n ecommerce and E-business
 Types of E-commerce
 Benefits and limitations of Ecommerce

1.1 Definition

Electronic commerce, commonly known as e-commerce or eCommerce, or e-business consists of the buying
selling and exchanging of products or services over electronic systems. It is the use of the Internet and the Web
to transact business. More formally, digitally enabled commercial transactions between and among
organizations and individuals.

E-Commerce vs. Traditional Commerce

Key elements E-commerce Traditional commerce

Value Creation Information Product/Service
Strategy Sense and respond Simple rules Classical
Competitive edge Speed Quality/Cost
Competitive force Low barriers of entry Power of suppliers
Power of customers Product substitution
Resource focus Demand side Supply side
Customer interface Screen-to-face Face-to-face
Communication Technology-mediated channels Personal
Accessibility 24 x 7 Limited time
Customer interaction Self-service Seller influenced
Consumer behavior Personalization Standardization
One-to-one marketing Mass/one-way marketing
Promotion Word of mouth Merchandising
Product Commodity Perishables, feel & touch

The use of E-commerce is conducted in the following ways:

 Spurring and drawing on innovations in electronic funds transfer,

 Supply chain management,
 Internet marketing,
 Online transaction processing,
 Electronic data interchange (EDI),
 Inventory management systems, and
 Automated data collection systems.

Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's
lifecycle, although it can encompass a wider range of technologies such as e-mail as well.

Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer
usually via the internet. There is no intermediary service. The sale and purchase transaction is completed
electronically and interactively in real-time such as Amazon.com for new books. If an intermediary is present,
then the sale and purchase transaction is called electronic commerce such as eBay.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the
exchange of data to facilitate the financing and payment aspects of the business transactions.

1.2 History

 E-commerce applications began in the early 1970s with such innovations as electronic transfer of funds.
However, the applications were limited to large corporations and a few daring small businesses.
 Then came electronic data interchange (EDI), which added other kinds of transaction processing and
extended participation to all industries.
 The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in
the 1980s were also forms of electronic commerce. Since the commercialization of the Internet and the
introduction of the Web in the early 1990s, EC applications have rapidly expanded.
 From the 1990s onwards, electronic commerce would additionally include enterprise resource planning
systems (ERP), data mining and data warehousing. Commercial enterprise on the Internet was strictly
prohibited until 1991.
 Although the Internet became popular worldwide around 1994 when the first internet online shopping
started, it took about five years to introduce security protocols and DSL allowing continual connection
to the Internet.
 By the end of 2000, many European and American business companies offered their services through
the World Wide Web. Since then people began to associate a word "ecommerce". In 2004 alone, e-
commerce generated well over $100 billion in retail business and over $1.5 trillion business-to-business
traffic. Table 1: Early Years of E-Commerce Compared To E - Commerce Today

1.3 Advantages and Disadvantages of Electronic Commerce

Like any conventional business, electronic commerce is also characterized by some advantages and inherent
drawbacks. Let's have a look at some of these important advantages and disadvantages of electronic commerce.
Benefits of Ecommerce
Table 2: Benefits of ecommerce
In general Potential benefits of E-business are:

 More product/service selections

 Higher Productivity
 Improved accessibility and convenience
 Better availability of information
 Shorter lead time
 Improved communication
 Stronger competitive position

1.4 Limitations of E-commerce

E-commerce is not suitable for perishable commodities like food items and such business sectors. The time
period required for delivering physical products can also be quite significant in case of e-commerce. A lot of
phone calls and e-mails may be required till you get your desired products. However, returning the product and
getting a refund can be even more troublesome and time consuming than purchasing, in case if you are not
satisfied with a particular product.

Thus, on evaluating the various pros and cons of electronic commerce, we can say that the advantages of e-
commerce have the potential to outweigh the disadvantages. A proper strategy to address the technical issues
and to build up customers trust in the system, can change the present scenario and help e-commerce adapt to the
changing needs of the world.
Table 3: Limitations of E-commerce
 1.5 The Difference Between E-Commerce and E-Business
 Some argue that 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’s infrastructure.
 Others argue, on the other hand, that e-business encompasses the entire world of internal and external
electronically based activities, including e-commerce.
 E-business the digital enablement of transactions and processes within a firm, involving information
systems under the control of the firm.

E-commerce primarily involves transactions that cross firm boundaries. E-business primarily involves the
application of digital technologies to business processes within the firm.

Fig 1.1: Difference b/n E-commerce and E-business

 E-business is a process that an organization conducts over a computer-mediated network.

  Production – procurement, ordering, stock replenishment, payment processing, production
control, etc.
 Customer-focused – marketing, selling and customer order processing, etc.
 Internal or management-focused – employee service, training, recruiting, information sharing,
etc.
 Electronic-Business Infrastructure - The share of total economic infrastructure used to support e-
business processes and conduct e-commerce transactions.(see the ecommerce framework for more info)
• Hardware • Support services
• Software • Human resources
• Telecommunication networks
 E - Commerce is any transaction completed over a computer-mediated network that involves the transfer
of ownership or rights to use goods or services. Completed transactions may have a zero price.

1.6 Unique Features Of E-Commerce Technology

Table 4: Features of e-commerce

1.7 Classifying E-commerce

Classification of Ecommerce can be discussed in terms of a macro-environmental perspective and in terms of
transacting partners.

I. Classification in terms of transacting partners

E-commerce types Definition Example

Business-to- The exchange of products, services or information  The auto parts wholesaler
Business (B-to-B) between business entities. Web-based B-to-B (reliableautomotive.com); and
includes: the chemical B-to-B exchange
 Direct selling and support to business (as in (chemconnect.com).
the case of Cisco where customers can buy  Specialized search sites and
and also get technical support, downloads, trade and industry standards
patches online). organization sites. E.g. new
 E-procurement (also known as industry market makers.com is a leading
portals) where a purchasing agent can shop for portal for B-to-B news
supplies from vendors, request proposals, and,
in some cases, bid to make a purchase at a
desired price.
 Information sites provide information about a
particular industry for its companies and their
employees.
Business-to- The exchange of products, information or services  Amazon.com and dell.com in
consumer (B-to-C) between business and consumers in a retailing the USA and lastminute.com in
relationship. In this case, the ‘c’ represents either the UK.
consumer or customer
Business-to- The exchange of information, services and
Government (B-to - Products between business organizations and
G) government agencies on-line.
This may include,
 E-procurement services, in which businesses
learn about the purchasing needs of agencies
and provide services.
 A virtual workplace in which a business and a
government agency could coordinate the work
on a contracted project by collaborating on-
line to coordinate on-line meetings, review
plans and manage progress
 Rental of on-line applications and databases
designed especially for use by government
agencies.
Business-to-Peer This would be the provision of hardware,
Networks (B-to-P) Software or other services to the peer networks.
An example here would be Napster who provided
the software and facilities to enable peer
networking.
Consumer-to- This is the exchange of products, information or
Business (C-to-B) services from individuals to business. A classic
example of this would be individuals selling their
services to businesses.
Consumer-to-Peer networking is and so is a slightly redundant
Networks (C-to-P) distinction since consumers offer their computing
 facilities once they are on the peer network
Consumer-to- Examples where consumers provide services to
Government (C-to- government have yet to be implemented.
G)
Consumer-to- In this category consumers interact directly  eBay.com
Consumer (C-to-C) With other consumers. They exchange  The case of the New York
information such as: Times-affiliated abuzz.com
 Expert knowledge where one person asks a website.
question about anything and gets an e-mail  Opinions about companies and
reply from the community of other individuals products, for example
epinions.com.
Table 5: E-commerce classification
II. Classification in terms of a macro-environmental perspective:

Fig 1.2 A framework to E-commerce