Everything you need to know about the E- Commerce. The term electronic commerce or e-commerce refers to any sort of business transaction that involves the transfer of information through the internet.
By definition it covers a variety of business activities which use internet as a platform for either information exchange or monetary transaction or both at times.
E-commerce means using the Internet and the web for business transactions and/or commercial transactions, which typically involve the exchange of value (e.g., money) across organizational or individual boundaries in return for products and services.
Here we focus on digitally enabled commercial transactions among organizations and individuals.
Electronic commerce, known as E-Commerce, occurs daily when sellers and buyers use the internet to conduct business transactions. Technology makes it possible for anyone to buy or sell practically anything online.
1. Introduction to E-Commerce 2. History of E-Commerce 3. Meaning 4. Objectives 5. Features 6. Types 7. Need 8. Business Applications
9. Channels 10. Essentials and Procedures 11. Segments 12. Managerial Issues 13. Impact 14. Advantages 15. Disadvantages 16. Threats to Present Day E-Commerce and Its Solution.
E-Commerce: History, Meaning, Objectives, Features, Types, Need, Business Application, Channels and Other Details
- Introduction to E-Commerce
- History of E-Commerce
- Meaning of E-Commerce
- Objectives of E-Commerce
- Features of E-Commerce
- Types of E-Commerce
- Need for E-Commerce
- Business Applications of E-Commerce
- E-Commerce Channels
- Essentials and Procedures of E-Commerce
- Segments of E-Commerce
- Managerial Issues in E-Commerce
- Impact of E-Commerce
- Advantages of E-Commerce
- Disadvantages of E-Commerce
- Threats to Present Day E-Commerce and Its Solution
E-Commerce – Introduction
E-commerce means using the Internet and the web for business transactions and/or commercial transactions, which typically involve the exchange of value (e.g., money) across organizational or individual boundaries in return for products and services. Here we focus on digitally enabled commercial transactions among organizations and individuals.
E-business applications turn into e-commerce precisely, when an exchange of value occurs. Digitally enabled transactions include all transactions mediated by digital technology and platform; that is, transactions that occur over the Internet and the web.
Hence, e-tailing is a subset of e-commerce, which encapsulates all “commerce” conducted via the Internet. It refers to that part of e-commerce that entails the sale of product merchandise and does not include sale of services, namely railway tickets, airlines tickets and job portals.
There are three types of destinations that cater to retail sales:
i. Traditional retail- brick-and-mortar
ii. Corporatized retail- brick-and-mortar
iii. Corporatized retail- e-tailing
E-Commerce – History of E-Commerce
The history of E-commerce begins with the invention of the telephone at the end of last century. EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce if we consider ecommerce as the networking of business communities and digitalization of business information. Large organizations have been investing in development of EDI since sixties. It has not gained reasonable acceptance until eighties. The meaning of electronic commerce has changed over the last 30 years.
Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of E-commerce was the airline and railway reservation system.
Online shopping, an important component of electronic commerce was invented by Michael Aldrich in the UK in 1979. The world’s first recorded business to business was Thomson Holidays in 1981. The first recorded Business to consumer was Gateshead SIS/Tesco in 1984. During the 1980s, online shopping was also used extensively in the UK by auto manufacturers such as Ford, General Motors and Nissan. The systems used the switched public telephone network in dial-up and leased line modes.
From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. An early online information marketplace, including online consulting, was the American Information Exchange, another pre Internet online system introduced-in 1991. In 1990 Tim Berners-Lee invented the World Wide Web and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www(dot)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 “E-commerce” with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.
The Internet and the Web:
The Internet was conceived in 1969, when the Advanced Research Projects Agency (a Department of Defense organization) funded research of computer networking. The Internet could end up like EDI without the emergence of the World Wide Web in 1990s. The Web became a popular mainstream medium (perceived as the fourth mainstream medium in addition to print, radio and TV) in a speed which had never been seen before. The Web users and content were almost doubled every a couple of months in 1995 and 1996.
E-Commerce – Meaning
The term electronic commerce or e-commerce refers to any sort of business transaction that involves the transfer of information through the internet. By definition it covers a variety of business activities which use internet as a platform for either information exchange or monetary transaction or both at times.
For example, the numbers of consumer brand retail sites like Amazon(dot)com and Flipkart(dot)com which normally provides information about products and also allows monetary transactions to happen over the internet.
On the contrary there are the auctions sites like Quickr(dot)com and Ebay(dot)com where the information about certain listed products and services are provided but the monetary transactions normally happen physically.
Apart from these two categories of e-commerce sites, there are some sites which enable businesses to exchange trading goods and also service between two or more companies. All of these forms of internet based business platforms are known as e-commerce.
Over the last decade the advent of e-commerce has actually transformed the manner in which people used internet. People now are not only just using internet for gathering information, leisure or socializing online but also at the same time they are seeking measures to conduct business.
Even popular social networking sites like Facebook(dot)com are allowing people to promote and sell products and services online and the introduction of computer and mobile based e-commerce application software like Shopify provides evidence of how e-commerce have boomed over the past 5 years.
E-Commerce – Objectives: Development of Business-Relationship, Better-Customer Service and Getting More Customers
The various objectives of the e-commerce can be laid down as follows:
1. Development of Business-Relationship:
The business development can be done through the e-commerce being the primary and the basic object. As their direct contact in between the company and the consumer, their business relationship will be enhanced. Hence the area of the market can be increased.
As it is done round the clock, the customer will always have online help regarding the products. As all the information is furnished to the customer, it becomes easy to him to choose the best product among all other alternatives. As even the service can also be done through the net immediately, the customer service will be ballooned. By highlighting the customer service, the companies are trying to subjugate a lion-share in the market.
In these days it becomes the mandate of the companies to double its customers, and this can be done by rendering the value add service and maintaining the quality. Hence, it is also one of the primary objectives of the companies which supply impetus for the robust growth in sales and overall profit.
E-Commerce – 9 Important Features: Technology-Enabled, Mediated,Universality,Intercommunication,Delivery of Information,Virtual Communities and a Few Others
E-Commerce has pertain key features which are explained as follows:
Feature # 1. E-Commerce is Technology-Enabled:
Traditional commerce is taking place since times immemorial but E-commerce is result of integration of digital technology with business processes and commercial transactions. The technological foundations of E-commerce are internet, WWW and various protocols.
Feature # 2. Technology Mediated:
In E-commerce buyers and sellers meet in cyber space rather than physical place. Hence E-commerce does not involve face to face contact.
Feature # 3. Universality:
Buying and selling take place through websites in E-Commerce. The websites can be accessed from anywhere around the globe at any time therefore it possess the feature of universality.
Feature # 4. Intercommunication:
E-commerce technology ensures two way communications between buyer and seller. On one hand by using E- commerce firms can communicate with customers through E-commerce enabled websites. On the other end, customers can also fill order forms, feedback forms and can communicate with business operating firms.
Feature # 5. Delivery of Information:
E-commerce serves as the best channel of communication. E-commerce technologies ensure speedy delivery of information at very low cost and considerably increase information density as well.
Feature # 6. Electronic Completion of Business Processes:
By using E- commerce we can perform business transactions like accounting and inventory through computers at global level.
Feature # 7. Virtual Communities:
Virtual Communities are online communities created by means such as chat rooms and specifically designed sites like, where people can interact with each other having common interest using the internet.
Feature # 8. Inter-Disciplinary in Nature:
Implementation of E-Commerce needs a lot of knowledge of managerial, technological, social and legal issues. Besides this, understanding of consumer behaviour, marketing tools and financial aspects is as crucial as designing interactive E- Commerce websites.
Feature # 9. Customization:
With the use of E-commerce technology, the world is moving from mass-production to mass-customization. Product customization ensures that goods are tailor made as per the requirements and preferences of customers.
Like Dell Computers Website www(dot)dell(dot)com enables the consumers to mention configuration of a Computer and then the product is made available and delivered as per the configuration ordered by the customer.
E-Commerce – 5 Major Types: Business-to-Business, Business-to-Consumer, Business-to-Government, Consumer-to-Consumer and Mobile Commerce
The major different types of E-Commerce are:
I. Business-to-Business (B2B);
II. Business-to-Consumer (B2C);
III. Business-to-Government (B2G);
IV. Consumer-to-Consumer (C2C);
V. Mobile Commerce (M-Commerce).
Type # I. Business to Business (B2B):
1. Business to Business or B2B refers to E-Commerce activities between businesses.
2. In E-Commerce B2B, transactions are usually carried out through Electronic Data Interchange or EDI. EDI is an automated format of exchanging information between businesses over private networks.
3. EDI is composed of standards that enable businesses’ computers to conduct transactions with each other, without human intervention.
4. For Example- Manufacturers and wholesalers are B2B companies.
Type # II. Business to Customer (B2C):
1. Business to Customer or B2C refers to E-Commerce activities that are focused on consumers rather than on businesses.
2. For instance, a book retailer would be a B2C company such as Amazon.com.
Type # III. Customer to Business (C2B):
1. Customer to Business or C2B refers to E-Commerce activities, which use reverse pricing models where the customer determines the price of the product or services.
2. For example – tele workers and online auctions are C2B processes.
Type # IV. Customer to Customer (C2C):
1. Customer to Customer or C2C refers to E-Commerce activities, which uses an auction style model.
2. Customers are also the business and C2C enables customers to directly deal with each other. An example of this is peer auction giant, E Bay.
Type # V. M-Commerce (Mobile Commerce):
1. M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology i.e., handheld devices such as cellular telephones and personal digital assistants. Japan is seen as a global leader in m-commerce.
2. As content delivery over wireless devices becomes faster, more secure and scalable, some believe that m-commerce will surpass wire line e-commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users.
E-Commerce – Need in Modern Business Era: Wider Audience, Cost Efficiency, Faster Information and Enhanced Service
Electronic commerce, known as E-Commerce, occurs daily when sellers and buyers use the internet to conduct business transactions. Technology makes it possible for anyone to buy or sell practically anything online.
The study of following factors show the need for E-Commerce in modern business era:
1. Wider Audience- The internet provides businesses, access to millions and millions of people. A 2010 survey by Internet World Stats showed there are 266,244,500 internet users in North America. On the World Wide Web, companies move beyond geographic limits to reach wider audience.
2. Cost Efficiency- At the beginning of the internet age in the 1990s, creating websites was a costly undertaking. As the years passed, building websites became less and less expensive. In fact, small businesses can now build their own sites.
3. Faster Information- The information superhighway permits speedy exchange of data across the world, which also means new information, is available faster.
4. Enhanced Service- Development of E-Commerce equipped domestic providers to offer more services to clients.
E-Commerce – Business Applications: Sale, Purchase of Goods, Real Estate Market, Online Banking, Delivery of Goods, Import and Export, E-Tailing and a Few Others
Following are the major business application areas where E-Commerce is used widely:
1. Sale, Purchase of Goods:
By using E-Commerce, consumers can buy the various products and services from the different manufacturers. Industries can purchase raw materials, components etc. using E- Commerce. Sellers can sell their products by using E-commerce.
2. Real Estate Market:
Online real estate services are provided by websites that show listing of houses, shops and flats put up for sale and rent. Online real estate sites play supporting role for property dealers.
Now builders can use virtual reality technology on their website to demonstrate three dimensional floor plans to buyers. This helps real estate companies to attract buyers. So transactions normally can be initiated online but materialize offline in a face to face contact of parties. Many websites are providing online real estate services.
3. Online Banking:
Online Banking is also known as electronic banking, Net banking, virtual banking and internet banking online banking is defined as automated delivery of new and traditional banking products and services through electronic and interactive communication channels. Customers can access online banking services by using electronic devices like personal computer, laptop, palmtop, ATM, kiosks etc.
4. Delivery of Goods:
E-Commerce allows the delivery of products. For example, the computer software is directly downloaded by the software manufacturer on computer of the customer.
5. Import and Export:
Electronic payments are playing a great role in import and export business. The internet has simplified the import and export business. By using E-commerce importers can make enquiries about the products, their manufacturers, price, quality, other terms and conditions etc.
Exporters can also make enquiries about suitable customers. Payments can be made by electronic modes including digital means like internet payment or internet money transfer.
6. Supply Chain Management:
A supply chain is a set of relationships between a number of companies who have a symbiotic relationship with each other in that one company supplies commodities or services to other companies which, in turn, supply commodities or services to other companies, and so on.
An important point about an application such as this one is that information should be kept confidential as it flows across the internet.
E-tailing refers to retailing over the internet. Thus an e-tailer is a B2C business that executes a transaction with the final consumer. E-tailers can be pure play businesses like amazon(dot)com or businesses that have evolved from a legacy business, Tesco(dot)com. E-tailing is a subset of e-commerce.
E-Commerce – Channels: Commercial Channels and The Internet
These are of following two types:
(i) Commercial Channels:
Various companies have set up on-line information and marketing services that can be accessed by those who have signed up for the service and pay a monthly fee. These channels provide information, news, libraries, education, travel, sports and reference, entertainment, shopping services, dialogues opportunities and e-mail etc.
(ii) The Internet:
The Internet is a global web of computer networks that has made instantaneous and decentralised global communication possible. Internet usage has spread with recent development of the user-friendly World Wide Web (www) browser software such as Netscape Navigator and Microsoft Internet Explorer.
Users can surf the Internet and experience fully integrated text, graphics, images and sound. Users can send e-mail, exchange views, shop for products, and access news and business information. The users need to pay an Internet provider-to be hooked up to it through their computers.
Internet Strategies for Business and Key Success Factors in E-Commerce:
Internet users are better educated, better informed. As more and more people find their way onto the internet, the cyberspace population is becoming more mainstream and diverse.
Younger users of Internet in general place a greater value in information, entertainment, socialising etc.
Old users are more likely to use Internet for investment and more serious matters. In general, Internet users respond to messages aimed at selling, and receive information about products and services. In on-line marketing through internet, the consumers, and not the marketer, gives permission and controls the interaction.
Internet ‘search engines’ such as “Yahoo” and “Google” give consumers access to varied information sources, making them better informed and more discerning shoppers.
Consumers gain the following capabilities in the E-commerce providing information-rich regime:
1. They can get objective information for multiple brands, including costs, prices, features and quality without relying on the manufacturer or retailers.
2 They can initiate requests for advertising and information from manufacturers.
3. They can use software agents to search for and invite offers from multiple sellers. These new buyer capabilities mean that the exchange process in the age of information has become customer initiated and customer controlled.
Marketers and their representatives are held at bay till customers invite them to participate in the exchange process, customers define the rules of engagement, and insulate themselves with the help of agents and intermediaries.
Customers define what information they need, what products or services they are interested in and what prices they are willing to pay.
E-Commerce – Essentials and Procedures: Product/Service, Processing Mechanism, Payment Gateway, Delivery of Product, After Sale Service and Reverse Logistics
E-commerce operates digitally. It has some unique ways to put a business transaction in place.
Let’s see how this happens:
For E-commerce to happen there should be a product or service that has value and for which someone is willing to pay a price. If this criterion is met, then you can sell anything on ecommerce websites—gadgets, books, automobiles, grocery, toys, apparel, vegetables and digital goods such as music, e-books, software, air tickets, magazine subscriptions and the like.
2. Processing Mechanism:
The ecommerce website of a company should put an easy process in place so that the customer browsing through the site can place an order. The software that makes this happen is called a shopping cart.
3. Payment Gateway:
Once the customer fills the cart with items that he or she has shopped, the site should take the customer towards the payment gateway, which collects money electronically. If the product is downloadable such as music, e-book etc., the website must also provide for that after accepting payment from customer.
4. Delivery of Product:
Once customers make the payment, the e-commerce site must ensure the delivery of product in good condition on time. Logistics is a specialized function, so most sellers outsource it to third party logistics providers. Like Amazon using the services of FedEx.
5. After Sale Service:
Customers need to be serviced pre-sales as well as post sales. Before the sale, customers might have queries about product features that are not mentioned on the website. They might have questions about customization and accessories. After the sale, customers might have queries related to the usage, repair or enhancement of the products or services that they have already purchased.
6. Reverse Logistics:
There is no guarantee of supplying an error-free product. If products get damaged or stop functioning after a while, or a wrong product is delivered—the ecommerce seller must ensure the flow of products in the reverse direction—known as reverse logistics—where goods flow from customer to the seller.
E-Commerce – 4 Major Market Segments: E-Tailing, E-Advertising and E- Marketing (With Advantages and Disadvantages)
E-commerce is a means of conducting business, where the buying or selling of goods and services or the transmitting of funds or data, occur via electronic medium. There are no physical market places and the entire process of marketing and selling of goods, takes place on-line or electronically. This means, the buyer and the seller do not often meet face to face. It is a replica of a physical market place in the virtual world.
E-commerce, also called e-trading, operates in all four major market segments – Business to Business, Business to Consumer, Consumer to Consumer and Consumer to Business. Examples of E-commerce include on-line shopping, electronic payments, on- line auctions, internet banking, on-line ticketing etc.
E-Tailing is the abbreviation of electronic retailing. It is the sale of goods and services through the internet. E-tailing involves business-to-business or business-to-customers transactions. It can be regarded as the internet front of any traditional retailer.
E-tailing shops believe in building strong brands. The web sites they create are easily understood by the visitors. They also provide discounts and offers to engage the customers. The pricing, in E-tailing shops, is generally lower than that of a traditional shop.
In this way the e-tailing shops lure the customers to make purchases on-line. The customers also get benefited from the fact that he/she does not need to physically visit the shop for making the purchase. The customers are free to make their own decisions regarding the purchase, at their own leisure time.
However, e-tailing shops need to have a strong distribution network in order to secure the delivery of the products. Otherwise, the purpose of the e-tailing site will be defeated. Big e-tailing sites like Ebay(dot)com and Amazon(dot)com are making great business in this country.
1. No requirement of physical infrastructure.
2. Order completion is smoother than that of physical shops.
3. Customers might get addicted to on-line shopping, which in turn boost sales and increase revenue.
4. It is easy to review the product before, actually, purchasing it.
5. Most items available on-line are cheaper with quick and easy shipping and returns.
1. Creating and maintaining an e-tailing web site is an expensive process.
2. Customers do not often get to check the actual dimensions of the products and the quality displayed there.
3. Customers may have trust issues before providing their personal details and credit card details.
E-Advertising is the mechanism of promoting products or services on-line. It is the process of gaining attention of the customers, through the digital media.
The main purpose of e-advertising is to reach out to a wider range of customers. It is more cost effective when compared to the traditional forms of advertising. E-advertising also enables you to target the specific customers.
On safeguard to be taken regarding E-advertising is that advertisement had to be consistently monitored and controlled because if it is done poorly, it can severely damage the image of the company.
1. E-advertising will only be published on the internet.
2. Sometimes e-advertising will provide hyperlinks to the company’s web site.
3. Can include image, texts, and even animations within the advertisements.
There are various types of e-advertising:
(a) Wallpaper Advertising – It changes the background of the web site to the chosen promotion.
(b) Pop Up Advertising – It pops up a new screen upon clicking on a certain link on the web site, that it advertises the product.
(c) Floating Advertising – The floating e-advertising is a kind of a floating banner on the web site, which tempts the visitor to click on it.
(d) Ad Sense Advertising – This refers to companies’ paying major search engines (such as Google) to promote their business within the first three links that appear when a search is entered.
Electronic marketing (e-marketing) is also known as internet marketing, web marketing and digital marketing on on-line marketing. It is the process of marketing a product or service using the internet, e-mail and wireless media. Unlike e-advertising, e- marketing is very subtle. It is not always a direct message of persuasion but rather it is something which will educate the customers and convince them to buy the product or service.
Digital marketing techniques include Search Engine Optimization (SEO), Search Engine Marketing (SEM), content marketing, e-commerce marketing, social media marketing, display advertisement, marketing through SMS and on-hold mobile ring tones, etc.
When compared to the means of traditional marketing, e-marketing offers several advantages.
Advantages of E-Marketing:
1. E-marketing provides much better return on the investment made by the marketer.
2. It reduces the cost of marketing campaign.
3. The marketer can easily monitor and track the results of the campaign.
4. The results are often easily measurable and quickly obtained.
5. E-marketing allows marketers to create viral content, allowing viral marketing.
Disadvantages of E-Marketing:
1. Devising a strong online marketing campaign involves spending money, the cost of which is ultimately borne by the customer. The cost of website design, software, hardware, maintenance of website, online distribution cost and invested time, are also factored in, while deciding the cost of providing a service or a product online.
2. Website of the company has to be constantly updated, which required research and skills and thus timing of updates are also critical.
3. Digital marketing is not suitable for marketing of industrial goods and pharmaceutical products making it useful for only specific categories of products, namely consumer goods.
Types of E-Marketing:
There are several options through which the e-marketers can promote their product and services:
1. Article Marketing – Writing articles about products and services often helps in the process of educating the customers.
2. Affiliate Marketing – It is a kind of referral marketing where reference of any product will be provided on the other websites and when the customer buy’s the product based on the recommendation this website owner with gets commission.
3. Video Marketing – In this kind of e-marketing, a video will be shared describing the usage and benefits of the product or a service. It is often similar to television commercials.
4. Email Marketing – Direct emails are being sent to potential customers describing benefits of the product or service.
5. Blogging – Publishing blogs about similar products is also a very subtle way of marketing some business.
6. Social Media Marketing – This form of marketing means promoting company’s products and service on social media handles like Facebook, Twitter and Instagram – It is cost-effective because these platforms allow business to create profiles for free.
E-Commerce – Managerial Issues: Formulate Ecommerce Strategy, Re-Engineering for ecommerce, Managing Ethical, Cultural and Legal Issues and a Few Others
Nowadays companies are transforming themselves into e-commerce enabled organizations. To assure successful implementation of e- commerce, management of the organization has to deal with certain type of issues.
Some of the important issues before the organizational management are explained as follows:
i. Formulate E-Commerce Strategy:
Management has to develop e-commerce strategy based on the analysis of industry and competition. Many companies like IBM created independent division for formation .and implementation of e-commerce in the organization. The e-commerce division, formulates strategy in the light of corporate strengthens and weaknesses.
Then e-commerce division communicates the vision of top management throughout the organization and annual objectives are identified. Essential education and training is given to those who are to implement the e-commerce plans. Efforts are made to change the behaviour and attitude of executives, managers, and trading partners.
The management needs to view electronic commerce potential in the light of the competition and not just as technological advancement. E-commerce needs to be used as a strategic tool to gain and sustain competitive advantage in the industry.
ii. Re-Engineering for E-Commerce:
Organizations are to be restructured and re-engineered in to a network based organization. Therefore, building and integrating infrastructure is a big challenge faced by company managements. Integrating information technology with existing business processes is a big task. In fact network of computers, complex transmission lines and dozens of pieces of software must all work together to make E-commerce happen.
The business process re-engineering team has to ensure that they do not miss anything significant while building and implementing E- commerce system Manufacturers have to decide whether the whole manufacturing and distribution system is to be restructured to become committed to direct Internet based supply chain and marketing or to use e-commerce website as a simple channel of distribution.
Company management has to make decision regarding in sourcing or outsourcing. Big companies go for in-house development of website. It means company’s own staff build e-commerce enabled website. Company management can also outsource this task to some third party, normally an experienced web development firm.
iii. Managing Ethical, Cultural and Legal Issues:
There exist big ethical and cultural differences between countries. Something may be ethical in our country but unethical in another country. So MNCs have to study culture of each country and develop corporate ethical code.
For example, France has certain language and cultural laws that must be obeyed. Therefore, it is necessary that advocates, accountants and executives of the companies must understand legal, trade, cultural and monetary issues of the countries with which their company has to deal.
iv. Making Cost Benefit Analysis:
Company management has to make cost benefit analysis of implementing e-commerce venture. Costs associated with e-commerce includes costs of hardware like PC clients, web servers, transaction servers routers and other networking devices, leased line and software like operating system, firewall, application software, web server software and transaction processing software, cost of recruiting and training staff for e-commerce etc.
Benefits can be measured through economic indicators like return on investment or through indicators like numbers of online customers, customer satisfaction and business partner satisfaction.
Organization of developed countries that have implemented e-commerce solutions have gained by way of realizing lower cost per transaction and taking advantage of economies of scale. In developing countries cost may exceed benefits in initial years of e-commerce initiatives.
v. Promoting E-Commerce Venture:
Company management has to take steps to promote the website.
Broadly, promotional activities can be classified into two categories:
a. Online Promotional Activities:
Online promotion is concerned with submitting your site to search engine. The objective is to get your site registered with the search engine so that the site appears as a link in search results of certain keywords-typed by internet user at the search engine like Google. This requires use of appropriate keywords in META tag.
Moreover, web team needs to search related sites and contact them so that their pages provide link to their web pages. So seeking reciprocal link is an effective way of promoting your e-commerce web site. Moreover, e-mails can be made of customers. Company that have advertising budget can promote the site by placing banner ads at popular websites and portals.
b. Offline Promotional Activities:
As far as offline promotion is concerned, company can advertise the web address through visiting cards, letter pads, bill books etc. Moreover, URL can also be advertised at various trade fairs, exhibitions and business related events like seminars, conferences etc. Therefore, company management has to set up advertising budget and decide the tools that it shall use to promote the e-commerce website.
vi. To Deal with Security & Privacy Issues:
Websites collect information about visitors through filled in order forms, questionnaires and by recording browser information thought programs like cookies. But the personal information so collected must be used for stated business purposes. But many surveys have shown that online consumers have little privacy protection.
Therefore, it is necessary that company management must form privacy practice and must assure consumers and partners that information so collected shall be kept confidential.
In addition management needs to form security policy. Data security and network security are major issues. There have been cases when vital information like credit card numbers are stolen by hackers. Similarly e-mails can be and are often intercepted as they travel through the network.
This type of data and message security needs security measures like encryption, password protection etc. Similarly network security measures like firewall needs to be installed so that intruders are not able to make authorized access to corporate network. The firewall prohibits hackers from entering corporate network via internet. Therefore management needs to set up some kind of intrusion detection system an establish security policy.
vii. Handling Human Resource Management Related Issues:
Electronic commerce is changing the manner in which staff is recruited, motivated, trained and educated. Two way interactions are now possible in video conferencing used for employee training and education. So, management needs to incorporate the impact of e-commerce on its human resource management practices.
viii. Adopting Electronic Fund Transfer System:
Company management has to make agreement with acquiring bank, Credit Card Company and payment gateway to ensure that it is able to receive and make payments electronically through modes like credit cards, smart cards, e-cash etc. The management has to devise ways and means of integrating Internet based payment system with offline system.
E-Commerce – Impact of E-Commerce: Impact on Direct Marketing, Organisation, Manufacturing, Finance and Supply Chain Management
E-commerce has made a profound impact on society. People can now shop online in the privacy of their own homes without ever having to leave. This can force larger brick and mortar retailers to open an online division. In some cases, it can also force smaller businesses to shut their doors, or change to being completely online.
It also changes the way people look at making purchases and spending money. E-commerce has changed the face of retail, services, and other things that make our economy work. Undoubtedly, it will continue to influence how companies sell and market their products, as well as how people choose to make purchases for many years to come.
The following are the impacts of e-commerce on the global economy:
i. Product Promotion – E-commerce enhances promotion of products and services through direct, information-rich, and interactive contact with customers.
ii. New Sales Channel – E-commerce creates a new distribution channel for existing products. It facilitates direct reach of customers and the bi-directional nature of communication.
iii. Direct Savings – The cost of delivering information to customers over the internet results in substantial savings to senders when compared with non-electronic delivery. Major savings are also realized in delivering digitized products versus physical delivery.
iv. Reduced Cycle Time – The delivery of digitized products and services can be reduced to seconds. Also, the administrative work related to physical delivery, especially across international borders, can be reduced significantly, cutting the cycle time by more than 100 percent.
v. Customer Service – Customer service can be greatly enhanced by enabling customers to find detailed information online. Also, intelligent agents can answer standard e-mail questions in seconds and human experts’ services can be expedited using help-desk software.
vi. Corporate Image – On the web, newcomers can establish corporate images very quickly. Corporate image means trust, which is necessary for direct sales. Traditional companies such as Intel, Disney, Dell, and Cisco use their web activities to affirm their corporate identity and brand image.
vii. Customization – E-commerce provides for customization of products and services, in contrast to buying in a store or ordering from a television, which is usually limited to standard products. Dell Computers Inc. is a success story of customization.
Today, we can configure not only computers but also cars, jewellery, gifts, and hundreds of other products and services. If properly done, one can achieve mass customization. It provides a competitive advantage as well as increases the overall demand for certain products and services.
viii. Advertisements- With direct marketing and customization comes as one-to-one or direct advertisement, which is much more effective than mass advertisement. This creates a fundamental change in the manner in which advertisement is conducted not only for online trades but also for products and services that are ordered in traditional ways.
ix. Ordering Systems- Taking orders from customers can drastically be improved if it is done online. When taken electronically, orders can be quickly routed to the appropriate order-processing site. This saves time and reduces expenses, so sales people have more time to sell. Also, customers can compute the cost of their orders, saving time for all parties involved.
x. Markets- The physical market disappears as does the need to deliver the goods to the marketplace. In a market space, which is an electronic market, goods are delivered directly to buyers when purchasing is completed making markets much more efficient.
Already, small but powerful software packages are delivered over the internet. This fundamentally affects packaging and greatly reduces the need for historical distribution.
New selling models such as shareware, freeware are emerging to maximize the potential of the internet. New forms of marketing will also emerge, such as web-based advertising, linked advertising, direct e-mail, and an increased emphasis on relationship marketing. Customer’s convenience is greatly enhanced, availability of products and services is much greater, and cheaper products are offered.
i. Technology and Organizational Learning:
Rapid progress in e-commerce will force companies to adapt quickly to the new technology and offer them an opportunity to experiment with new products, services, and processes. New technologies require new organizational approaches.
For instance, the structure of the organizational unit dealing with E- commerce might have to be different from the conventional sales and marketing departments. To be more flexible and responsive to the market, new processes must be put in place. This type of corporate change must be planned and managed.
ii. Changing Nature of Work:
The nature of work and employment will be transformed in the digital age; it is already happening before our eyes. Driven by increased competition in the global marketplace, firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly less expensive.
The upheaval brought on by these changes is creating new opportunities and new risks and forcing us into new ways of thinking about jobs, careers, and salaries.
The digital age workers will have to become very flexible. Few of them will have truly secure jobs in the traditional sense, and all of them will have to be willing and able to constantly learn, adapt, make decisions, and stand by them.
iii. New Product Capabilities:
E-commerce allows for new products to be created and existing products to be customized in innovative ways. Such changes may redefine organizations’ missions and the manner in which they operate.
E-Commerce also allows suppliers to gather personalized data on customers. Building customer profiles as well as collecting data on certain groups of customers, can be used as a source of information for improving products or designing new ones.
Mass customization enables manufacturers to create specific products for each customer, based on his or her exact needs. For example, Motorola gathers customer needs for a pager or a cellular phone, transmits them electronically to the manufacturing plant where they are manufactured, along with the customer’s specifications and then sends the product to the customer within a day.
3. Impacts on Manufacturing:
The production systems are integrated with finance, marketing, and other functional systems, as well as with business partners and customers. Using web-based ERP systems, orders that are taken from customers can be directed to designers and to the production floor, within seconds.
Production cycle time is cut by 50 percent or more in many cases, especially when production is done in a different country from where the designers and engineers are located.
4. Impacts on Finance:
E-commerce requires special finance and accounting systems. Traditional payment systems are ineffective or inefficient for electronic trade. The use of the new payment systems such as electronic cash is complicated because it involves legal issues and agreements on international standards.
Nevertheless, electronic cash is certain to come soon and it will change the manner in which payments are being made. In many ways, electronic cash, which can be backed by currency or other assets, represents the biggest revolution in currency since gold replaced cowry shells.
Its diversity and pluralism is perfectly suited to the internet. It could change consumers’ financial lives and shake the foundations of financial systems and even governments.
5. Impact on Supply Chain Management:
Electronic commerce and the internet are fundamentally changing the nature of supply chains, and redefining how consumers learn about, select, purchase, and use products and services.
The result has been the emergence of new business-to business supply chains that are consumer- focused rather than product-focused. They also provide customized products and services. E-commerce impacts supply chain management in a variety of keyways.
i. Cost Efficiency:
E-commerce allows transportation companies of all sizes to exchange cargo documents electronically over the internet. E-commerce enables shippers, freight forwarders and trucking firms to streamline document handling without the monetary and time investment required by the traditional document delivery systems.
By using e-commerce, companies can reduce costs, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service. Ocean carriers and their trading partners can exchange bill of lading instructions, freight invoices, container status messages, motor carrier shipment instructions, and other documents with increased accuracy and efficiency by eliminating the need to re-key or reformat documents.
The only tools needed to take advantage of this solution are a personal computer and an internet browser.
ii. Changes in Distribution System:
E-commerce will give businesses more flexibility in managing the increasingly complex movement of products and information between businesses, their suppliers and customers. E-commerce will close the link between customers and distribution centres. Customers can manage the increasingly Complex movement of products and information through the supply chain.
iii. Customer Orientation:
E-commerce is a vital link in the support of logistics and transportation services for both internal and external customers. E-commerce will help companies deliver better services to their customers, accelerate the growth of the e-commerce initiatives that are critical to their business, and lower their operating costs. Using the Internet for e-commerce will allow customers to access rate information, place delivery orders, track shipments and pay freight bills.
E-commerce makes it easier for customers to do business with companies: Anything that simplifies the process of arranging transportation services will help build companies’ business and enhance shareholder value.
By making more information available about the commercial side of companies, businesses will make their web site a place where customers will not only get detailed information about the services the company offers, but also where they can actually conduct business with the company.
Ultimately, web sites can provide a universal, self-service system for customers. Shippers can order any service and access the information they need to conduct business with transportation companies exclusively online. E-commerce functions are taking companies a substantial step forward by providing customers with a faster and easier way to do business with them.
iv. Shipment Tracking:
E-commerce will allow users to establish an account and obtain real-time information about cargo shipments. They may also create and submit bills of lading, place a cargo order, analyse charges, submit a freight claim, and carry out many other functions.
In addition, e-commerce allows customers to track shipments down to the individual product and perform other supply chain management and decision support functions. The application uses encryption technology to secure business transactions.
v. Shipping Notice:
E-commerce can help automate the receiving process by electronically transmitting a packing list ahead of the shipment. It also allows companies to record the relevant details of each pallet, parcel, and item being shipped.
vi. Freight Auditing:
This will ensure that each freight bill is efficiently reviewed for accuracy. The result is a greatly reduced risk of overpayment, and the elimination of countless hours of paperwork, or the need for a third-party auditing firm. By intercepting duplicate billings and incorrect charges, a significant percent of shipping costs will be recovered.
In addition, carrier comparison and assignment allows for instant access to a database containing the latest rates, discounts, and allowances for most of major carriers, thus eliminating the need for unwieldy charts and tables.
vii. Shipping Documentation and Labelling:
There will be less need for manual intervention because standard bills of lading, shipping labels, and carrier manifests will be automatically produced; this includes even the specialized export documentation required for overseas shipments. Paperwork is significantly reduced and the shipping department will therefore be more efficient.
viii. Online Shipping Enquiry:
This gives instant shipping information access to anyone in the company, from any location. Parcel shipments can be tracked and proof of delivery quickly confirmed. A customer’s transportation costs and performance can be analysed, thus helping the customer negotiate rates and improve service.
E-Commerce – Advantages: Convenience, Information, Fewer Hassels, Lower Cost, Relatively Building, Audience Sizing, On-Line Marketing and a Few Others
E-commerce provides the following main advantages:
(i) Convenience – Customers can order products or services 24 hours a day wherever they are.
(ii) Information – Customers can find reams of comparative information about companies, products, competitors and prices without leaving their office or home.
(iii) Fewer Hassels – Customers don’t have to face sales people or open themselves upto persuasion and emotional factors, they also don’t have to wait in line.
(iv) Quick Adjustment to Market Conditions by Marketers – Companies can quickly add products to their offering and change prices and descriptions.
(v) Lower Cost – On-line Marketers avoid the expense of maintaining a store and the costs of rent, insurance and utilities.
They can produce digital catalogues for much less cost than the cost of printing and mailing paper catalogues.
(vi) Relatively Building – On-line marketers can dialogue with consumers and learn from them. Marketers can download useful reports or a free demo of their softwares.
(vii) Audience Sizing – On-line Marketers can learn how many people visited their web site and how many of them shopped at particular places on the site. This information can help them improve offers and advertisements.
(viii) On-line Marketing – It is easy affordable by small firms, who otherwise would not have been able to advertise in the print or broad cost media.
(ix) E-Commerce – E-commerce through Internet and web site can access and retrieve information very fast, compared to overnight mail and even fax.
(x) Large and Medium – These companies have designed their own websites to automate corporate purchasing. The high cost on invoices and purchase order copies including time are saved a great deal due to E-commerce and Internet phase.
(xi) Internet newsgroups set up for commercial purposes help companies place on-line advertisements and thus save cost and time.
(xii) New groups, Bulletins board systems (BBSs) and Web committees help also buyers, sellers and people in general to have access to valuable information on diverse topics including information of cultivation for farmers.
E-Commerce – Disadvantages: Security, System and Data Integrity, System Scalability, ecommerce is Not Free, Customer Relationship Problems and a Few Others
Security continues to be a problem for online businesses. Customers have to feel confident about the integrity of the payment process before they commit to the purchase. Banks such as ICICI Bank, HDFC Bank, State Bank of India have added secure payment gateways to process online banking transactions quickly and safely.
2. System and Data Integrity:
Data protection and the integrity of the system that handles the data are serious concerns. Computer viruses are rampant, with new viruses discovered every day. Viruses cause unnecessary delays, file backups, storage problems, and other similar difficulties. The danger of hackers accessing files and corrupting accounts adds more stress to an already complex operation.
3. System Scalability:
A business develops an interactive interface with customers via a website. After a while, statistical analysis determines whether visitors to the site are one-time or recurring customers. If the company expects 2 million customers and 6 million show up, website performance is bound to experience degradation, slowdown, and eventually loss of customers. To stop this problem from happening, a website must be scalable, or upgradable on a regular basis.
4. E-Commerce is Not Free:
So far, success stories in e-commerce have forced large business with deep pockets and good funding to invest in creating on-line websites. According to a report, small retailers that go head-to-head with e-commerce giants are fighting losing battle. As in the brick-and-mortar environment, they simply cannot compete on price or product offering. Brand loyalty is related to this issue, which is supposed to be less important for online firms. Brands are expected to lower search costs, build trust, and communicate quality. A search engine can come up with the best music deals, for example, yet consumers continue to flock to trusted entities such as HMV.
5. Consumer Search is not Efficient or Cost-Effective:
On the surface, the electronic marketplace seems to be a perfect market, where worldwide sellers and buyers share and trade without intermediaries. However, a closer look indicates that new types of intermediaries are essential to e-commerce. They include electronic malls that guarantee legitimacy of transactions. All these intermediaries add to transaction costs.
6. Customer Relations Problems:
Not many businesses realise that even e-business cannot survive over the long term without loyal customers. Building customer loyalty to a specific site is not an easy task. Customers are notoriously fickle-minded, and do not minding visiting a competing website just to avail even one-time benefits or discounts.
7. Products-People Won’t Buy Online:
Imagine a website called furniture, com or living.com, where venture capitalists are investing millions in selling home furnishings online. In the case of a sofa, you would want to sit on it, feel the texture of the fabric etc. Beside the sofa test, online furniture stores face costly returns which makes the product harder to sell online.
8. Corporate Vulnerability:
The availability of product details, catalogues, and other information about a business through its website makes it vulnerable to access by the competition. The idea of extracting business intelligence from the website is called web framing. And such threats are increasing day by day in this digital, networked world.
9. High Risk of Internet Start-Up:
Many stories unfolded in 1999 about successful executives in established firms leaving for Internet start-ups, only to find out that their get-rich dream with a dot.com was just that – a dream.
E-Commerce – Threats to Present Day E-Commerce and Its Solution
Major threats to present day e-commerce may be listed thus:
i. Money Thefts E-commerce services are about transactions, and transactions are very largely driven by money. This attracts hackers, crackers and everyone with the knowledge of exploiting loopholes in a system. Once a kink in the armor is discovered, they feed the system (and users) with numerous bits of dubious information to extract confidential data (phishing).
This is particularly dangerous as the data extracted may be that of credit card numbers, security passwords, transaction details etc. Also, Payment gateways are vulnerable to interception by unethical users. Cleverly crafted strategies can sift a part or the entire amount being transferred from the user to the online vendor.
ii. Identity thefts Hackers often gain access to sensitive information like user accounts, user details, addresses, confidential personal information etc. It is a significant threat in view of the privileges one can avail with a false identity. For instance, one can effortlessly login to an online shopping mart under a stolen identity and make purchases worth thousands of dollars.
He/she can then have the order delivered to an address other than the one listed on the records. One can easily see how those orders could be received by the impostor without arousing suspicion. While the fraudsters gains, the original account holder continues to pay the price until the offender is nabbed.
iii. Threats to the system Viruses, worms, Trojans are very deceptive methods of stealing information. Unless a sound virus-protection strategy is used by the ecommerce Solutions firm, these malicious agents can compromise the credibility of all ecommerce web solution services. Often planted by individuals for reasons known best to them alone, viruses breed within the systems and multiply at astonishing speeds. Unchecked, they can potentially cripple the entire system.
The following precautionary steps might prove to be helpful:
Most notable are the advances in identification and elimination of non-genuine users. E-commerce service designers now use multi-level identification protocols like security questions, encrypted passwords (Encryption), biometrics and others to confirm the identity of their customers. These steps have found wide favour all around due to their effectiveness in weeding out unwelcome access.
ii. Intrusion Check:
The issue of tackling viruses and their like has also seen rapid development with anti-virus vendors releasing strong anti-viruses. These are developed by expert programmers who are a notch above the hackers and crackers themselves. Firewalls are another common way of implementing security measures. These programmes restrict access to and from the system to pre-checked users/access points.
iii. Educating Users:
E-commerce is run primarily by users. Thus, E-commerce service providers have also turned to educating users about safe practices that make the entire operation trouble free. Recent issues like phishing have been tackled to a good extent by informing genuine users of the perils of publishing their confidential information to unauthorized information seekers.