E-COMMERCE

INDEX

SR.NO. CONTENTS PAGE NO.

1. Introduction To E - Commerce 1
2. History Of E - Commerce 3
3. Benefits Of E - Commerce 6
4. Scope Of E - Commerce 9
5. Future Of E - Commerce 18

E-COMMERCE

Introduction:

21st century is known as the information technology age. This age

is characterized by the extensive use of global communications which is called the internet.

The globalization of business and easy access of global information has given a new meaning

to the concept of “information”. The internet changed the way the world does business.

Common functions like reading and gathering information, distributing, advertising is done

through the internet.

Electronic commerce was popularized after the invention of

internet. Electronic commerce is a general concept of covering any form of business

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transaction using information technology. Electronic commerce that is conducted between

businesses is referred to as Business-to-business or B2B. B2B can be open to all interested

parties or limited to specific, pre-qualified participants.

A large percentage of electronic commerce is conducted entirely

electronically for virtual items such as access to premium content on a website, but most

electronic commerce involves the transportation of physical items in some way. Online

retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail.

Almost all big retailers have electronic commerce presence on the World Wide Web.

A wide variety of commerce is conducted in this way, 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 system

Definition of e-commerce.

Electronic commerce, commonly known as e-commerce

or eCommerce, consists of the buying and selling of products or services over electronic

systems such as the Internet and other computer networks.it includes electronic rading of

goods,services and electronic material.

According to the european union wesite, “Electronic

commerce is a general concept covering any form of business transactions or

information exchange executed using information and commuication technology between

companies,between companies and their customers or between companies and public

administrations.”

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History of e-commerce

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. From the 1990s onwards,

electronic commerce would additionally include enterprise resource planning systems (ERP),

data mining and data warehousing.

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Perhaps it is introduced from the Telephone Exchange

Office, or maybe not,its not certain.The earliest example of many-to-many electronic

commerce in physical goods was the Boston Computer Exchange, a marketplace for used

computers launched in 1982. The first online information marketplace, including online

consulting, was likely the American Information Exchange, another pre-Internet online

system introduced in 1991.

Although the Internet became popular worldwide in 1994,it was

only by the end of 2000, a lot of European and American business companies offered their

services through the World Wide Web. Since then people began to associate a word

"ecommerce" with the ability of purchasing various goods through the Internet using secure

protocols and electronic payment services.

Timeline

 1990:

Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT

computer.

 1992:

J.H. Snider and Terra Ziporyn publish Future Shop: How New Technologies Will Change

the Way We Shop and What We Buy.

1994:

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Netscape releases the Navigator browser in October under the code name Mozilla. Pizza

Hut offers pizza ordering on its Web page. The first online bank opens. Attempts to

offer flower delivery and magazine subscriptions online. Adult materials also becomes

commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL

encryption that made transactions secure.

 1995:

Jeff Bezos launches Amazon.com and the first commercial-free 24 hour, internet-only

radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to

aggressively use Internet for commercial transactions. eBay is founded by computer

programmer Pierre Omidyar as AuctionWeb.

 1998:

Electronic postal stamps can be purchased and downloaded for printing from the Web.

 1999:

Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for

US $150,000. The peer-to-peer filesharing software Napster launches.

 2000:

The dot-com boom.

 2002:

eBay acquires PayPal for $1.5 billion. Niche retail companies CSN Stores and NetShops

are founded with the concept of selling products through several targeted domains,

rather than a central portal.

 2003:

Amazon.com posts first yearly profit.

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 2007:

Business.com acquired by R.H.Donnelley for $345 million.

 2008:

US eCommerce and Online Retail sales projected to reach $204 billion, an increase of 17

percent over 2007

Growth and Evolution

Matthew Gray, of the Massachusetts Institute of Technology, estimated there were a mere

130 web sites in June 1993, which had risen to 650,000 by January 1997. Leading search

engine Google now claims to index 1,346,966,000 web pages. Global Reach placed the

worldwide number of Internet users at 369,400,000 in Sept 2000.

Payment Diagram

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1. Consumer places an order with the merchant through any number of sales channels: Web

Site, Call Center, Retail, Wireless or Broadband.

2. Authorize.Net detects an order has been placed, securely encrypts and forwards the

Authorization Request to the Consumer's Credit Card Issuer to verify the consumer's

credit card account and funds availability.

3. The Authorization (or Decline) Response is returned via Authorize.Net to the Merchant.

Round trip this process averages less than 3 seconds.

4. Upon approval, the Merchant fulfills the consumer's order.

5. Authorize.Net sends the settlement request to the Merchant Account Provider.

6. The Merchant Account Provider deposits transaction funds into the Merchant's Checking

Account

The Benefits of e-commerce

The potential benefits of e-commerce have been covered categorically in e-market and EDI.

Besides that there are a number of other benefits too, to consumers and business alike.

 Finding the Best Deal

For the consumer the Internet provides an environment of near perfect competition in

which prices from many suppliers can be compared within seconds. Bloor predicts that

"Arbitrage will become a fact of life in the electronic economy. Nowhere will artificially

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high prices be sustainable". Sites such as Deal Time and my Simon enable consumers to

find the best online deal for whatever they want - free of charge.

 Convenience
For the elderly, disabled or those simply short of time, goods may be ordered online and

delivered to their doorstep.

 Flexibility
e-commerce increases the variety of ways in which business may be transacted. The use

of auction has become increasingly common with sites such as eBay permitting anyone to

auction anything in a variety of auction styles. An interesting variation is provided by

Priceline.com , where customers enter the price they are willing to pay for air tickets,

the company then surveys the major airlines to find if one is willing to sell at that price.

These alternative business methods would not be possible without the real-time

information sharing capabilities of the Internet.

 The Global Marketplace

Cyberspace means business is no longer constrained by physical distance. The Internet

provides a potential worldwide audience of over 300 million, which is growing daily.

Savings in overheads will be made as retail outlets and office space become redundant.

Many more workers will be freed from the daily drudgery of commuting as home working

becomes widespread.

 New Opportunities
the new medium provides unprecedented opportunity for small operators. Whittle writes

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"The web site of a small company fills just as much of an individual's screen as the web

site of a multi-national conglomerate". 'Net shapers such as Yahoo, Netscape, Amazon

and even Microsoft all started small.

To business

Benefits of e commerce
World-wide reach
To customers
Any hour of the day, any day of the year
From the comfort of home or office
Find and retain new customers
Any hour of the day, any day of the year
Eliminate intermediaries
Access to worldwide choices
Low cost and global marketing channel
Access to cost competition
Update product catalogs in real-time
Online test of digital products (e.g., music)
Deliver personalized shopping experience
Immediate download of digital products

Reduce credit and collections expenses

Scope of e-commerce

The scope of e commerce is much wider since commercial transactions are extended to the

global market. The three main applications of e-commerce are:

 Electronic markets,

 Electronic data interchange,

 Internet Commerce.

1. ELECTRONIC MARKETS:

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An electronic market is basically the search and negotiate phase of the trade cycle. It is

the online trading and auctions. The electronic market places the emerging marketing

economy where producers, intermediaries, and consumers interact electronically. It is a

virtual representation of a physical market. Electronic market brings together the product,

price and service information from many suppliers of a particular class of goods in a specific

sector.

It provides facility for the execution and settlement of the transaction.

Usage of an electronic market

 It exists in commodity exchanges and stock trade

 It is extensively used in the airline industry for booking system in which the site can

inform the customer about the flights available for the journey, and then on the

basis of convenience, price and loyalty scheme the customer can book his flight.

 It is a perfect market where there are worldwide buyers and sellers who have the

detailed information about the market and the products.

Advantages and disadvantages of E-market

ADVANTAGES:-

 No need of intermediaries : Since buyers and sellers come in direct contact with
each other there is no need of a middleman. Thus reducing costs.

 Use of adoptive technology: E-market uses adoptive technologies as these

technologies can be changed and updated from time to time.

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 Commonplace for worldwide buyers and sellers: since there is a commonplace for
buyers and sellers, the competition is severe and thus E-market is efficient.

 Expansion of market: buyers and sellers can join hands to increase their reach thus
expansion is easy, quick and relatively quick.

DISADVANTAGES:-

 Inefficient search: To search a complete database on the web the consumer has
to pay some amount. Also some sellers do not provide full and correct information

which results in loss of sale.

 Need of intermediaries: E-market doesn’t need intermediaries such as wholesale

or retail outlets but it requires certification authorities and mediators for

conflict resolution etc, thereby increasing the cost of the transaction.

 Mindset of customers: many people do not know how to use the web thus they
prefer the traditional approach of buying and selling.

 Regular updates: regular and prompt updates are required within a short span of
time to keep the website up to date which can prove to be a tedious job.

2. ELECTRONIC DATA INTERCHANGE.

EDI stands for electronic data interchange. It was developed in the 1960s to

accelerate the movement of documents. It is a computer to computer exchange of

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business transactions. It does not create any new process but expands the existing

one. It is used in trade sectors for regular and repeat transactions.

Definition of EDI

‘‘EDI is the exchange of documents in a standardized electronic form between

organizations in an automated manner directly from a computer application to

the application in the other organization.’’ It usually includes the exchange of

purchase orders, invoices, inquiries, planning, pricing etc.

Steps in EDI:-

 At the first stage, representatives of two companies who want to exchange data
electronically, specify the application which they will implement. The companies are

called “trading partners”.

 Then the company adds the EDI program in its computer, to translate data into a

standard format that will be used for transmission. These EDI programs can be

used to reverse translate the data it receives.

 Before sending any data, the sender confirms the identity of the recipient using the

program and then transmits the data in the EDI format. Mechanisms are provided

for error detection and correction.

 Once the data is received the recipient translates the formatted message with the

EDI program.

BENEFITS OF EDI:-

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EDI is beneficial both for the sender and receiver in the following manner:

 Reduced paperwork: The entire EDI process can be done without using a single
piece of paper. Electronic transactions reduce the time spent on transfer of

data. EDI minimizes the efforts to maintaining records, paper related supplies,

filling cabinets and other storage systems. It also reduces postage expenses

since there is no need to spend on sending the papers.

 Reduced data entry errors: As EDI goes directly from one computer to
another without involving a human being, there is no need to retype the data at

the receivers end. This reduces data entry errors.

 Improved customer service: EDI reduces the processing time to complete the
cycle. As soon as orders are entered into the system they can be processed on

the receiving side in seconds. Hence it saves the time of document transfer and

provides better customer services.

 Reduced cost: Saving time is as helpful as saving money. Over a long period of
time, processing documents with EDI is cost effective as compared to process

the document in paper form.

 Cash flow: Speeding up the trade cycle by getting invoices quickly and directly
matched to the corresponding orders and deliveries.

 Customer lock in: Established EDI system is an advantage to both

suppliers and customers. A customer once associated does not shift to another

base.

 Reduced stock holding: The amount of goods kept in the store room

gets reduced if orders are regular. It reduces working capital requirement.

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How does EDI work?

If a certain Mr. A wants to send a purchase order to a certain

Mr.B in such a way that only he can read it then Mr. A encrypts the purchase order

called the plain text with an appropriate encryption key and then sends the

encrypted text to Mr. B. this encrypted purchase order is called cipher text. At

the receiving end, Mr.B decrypts the cipher text with the decryption key and reads

the purchase order. In between the hacker may obtain the cipher text as it passes

through the network, but without the decryption key, it is not possible to recover

the message to the hacker.

3. Internet Commerce

The transactions over the internet are basically referred to as internet

commerce.

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Internet commerce

Business to business Business to consumer Consumer to consumer

How does internet commerce work?

How are products purchased through the internet?

 Every cyber surfer who visits an e-commerce website through his browser

is a potential customer

 After browsing he selects a product and adds to his shopping cart. products

are advertised by targeted e-mails,banners,pop-ups etc.

 Then he checks his shopping cart and begins his check out process in which

he gives his details liked addresss, credit card number, contact/phone number etc.

 Taxes and shipping charges are levied based on the place f residence and

the country of the customer

 Customers makes payments through his credit card, the credit card number

is securely transmitted over the internet.

 The vendor then sends an invoice along with a purchase order to the

customer and then the order is confirmed.

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 The vendor then checks the inventory and ships the product to the

customer.

There are basically 2 types of trancations that take place over the internet:-

1. Credit transaction

2. Cash transaction

Credit transaction:-these transactions are regular in nature. Where the execution

and settlement are independent.

Cash transaction:-these transactions are irregular where the execution and

settlement are one and the same.

These transactions are affected by 3 factors:-

1. The nature of the organization involved

2. The frequency of trade between the partners to the exchange.

3. The nature of goods and services being exchanged

Thus we can divide the various steps of internet commerce in the following ways:-

1. Search

2. Negotiate

3. Order

4. Deliver

5. Invoice

6. Payment

7. After sales

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CONSUMER-TO-CONSUMER (C2C): Individuals use Web for private sales or

exchange.

Suitability of products in internet commerce

Suitability of products depends upon 4 factors:

 Price: the internet can have a price advantage. There is no retail outlet.

Also business facilities needed are relatively cheap.

 Product: some products are more suited over the others to sell over the

internet. Existing transactions give you an idea that technical products are not sold

much.

 Promotion: the internet provides a cheap way of promoting a company and a

product.

 Place: information can be provided easily but tangible goods require costly

physical delivery depending upon the distance. For bulky items someone must be

there to receive the delivery.

Some other networks of e commerce include:

• Television

• Mobiles

Disadvantages of E-commerce

 Taxes: How would you tax a business selling goods over the Internet? This question
arises when e-commerce became more popular. Should consumers pay sales tax on web

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purchases? If the business and customer are in different states, who state tax would

be applied? During the end of the 20th century, the government was trying to ask this

question. If web purchases were free from tax, then brick-and-mortar stores will lose

business but customers will pay more over the web since shipping and handling fees are

applied. Also, small businesses may lose out both ways because they may not have

resources to buy expensive software to figure out the different state taxes for each

customer.

 Security: The biggest disadvantage of e-commerce is the issue of security. Even with
the improvements with data encryption, there is still the danger of someone getting a

hold of your personal and financial information. Also, some sites don't have the

capabilities to prove authentic transactions. If someone gets your credit card, they can

go to one of these sites and purchase items without proving who they are. All they need

is your name and credit card number which is already printed on the card.

The use of e-commerce can violate codes such as, "Avoid harm to others." The risk of

identity theft is one problem that businesses who use the concept of e-commerce of

their site. A customer who is a victim of this can have their credit history ruin, even

their identity stolen. Also, the codes states, "Respect the privacy of others" Since

there is not real standard for security enforced for online transactions, many sites do

not have high encryption. Many other sites often illegally collect buying statistics on

their customers without permission. Business owners complain that transactions over

the internet are not tax and that businesses that did not have physical stores were

being discriminated against

 Unable to Examine Products Personally: If we buy products through the internet, we

are not able to examine the products physically and the quality of the product. Images

of the products may be available for viewing. But we can’t buy the product by seeing the

image on the internet. There is a risk involved in the quality of the product that the

consumer is purchasing.

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 Online Purchasing Security: There are possibilities of credit card number theft.
 Hardware and Software: There are specific hardware and software that are essential
to start up an e-commerce company that may be big and costly.

 Distribution: Distribution must be very efficient especially when catering to a global

market.

 Maintenance of Website: The website must be maintained and updated regularly and
this may lead to extra labor costs. The website should update the current information

of the new product and the cost of the new product instantly.

 Costs: Even though the company may initially save money by cutting intermediaries, and

not having to invest much on capital assets, other costs may be incurred by start-up

costs of the company in terms of hardware and software as well as training of

employees, costs to maintain the website, and distribution costs.

 Website Stickiness and Customer Loyalty: A company can have a website and exist
within the Internet but there may not be enough people visiting the site and purchasing

services or products from the company. The Internet provides less expensive

advertising but also because of its sheer vastness and the existence of websites of

established businesses, it is critical to create a website that is “sticky” enough to

attract market share and create loyalty among the acquired market share.

 Training and Maintenance: The Company needs well-skilled and trained workers to
maintain and create the ecommerce facilities of the company. Many companies prefer to

outsource their development and programming tasks to decrease labour costs.

 Security: An e-commerce business exposes itself to security risks and may be

susceptible to destruction and disclosure of confidential data, data transfer and
transaction risks (as in online payments) or virus attacks.

The Future

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e-commerce has experienced phenomenal growth in the last five years both in terms of the

number of participants and the variety and sophistication of features which e-tailers can

use to promote their product. Continuing improvements in communications technology and

access devices coupled with an ever richer array of software tools which designers can

employ to convey their message across the 'net suggest the impact of e-commerce is set to

increase unabated for the foreseeable future. The momentum acquired thus far is likely to

inspire innovative solutions to remaining problems such as security issues and

representational difficulties as intelligent agents become more sophisticated and more

widely deployed it would appear that profit through artificially high prices will cease to be

feasible. Merchants of near-identical goods and services will need to provide some form of

added value to their core purpose in order to differentiate themselves from their

competitors and earn a share of the market. For those that can successfully achieve this,

potential rewards are enormous.

e-commerce promises to liberate business, consumers and workers alike but is set to impact

widely on the existing economy forcing traditional businesses to adapt and creating

numerous opportunities for new entrants.

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