ELECTRONIC COMMERCE
What
is electronic commerce?
Electronic commerce, commonly written as e-commerce,
is the trading or facilitation of trading in products or services using
computer networks, such as the Internet. Electronic commerce draws on
technologies such as mobile commerce, 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 for at
least one part of the transaction's life-cycle, although it may also use other
technologies such as e-mail.
History of e-commerce
The beginnings of e-commerce can be traced to the 1960s, when businesses
started using Electronic Data Interchange (EDI) to share business documents
with other companies. In 1979, the American National Standards Institute
developed ASC X12 as a universal standard for businesses to share documents
through electronic networks. After the number of individual users sharing
electronic documents with each other grew in the 1980s, in the 1990s the rise
of eBay and Amazon revolutionized the e-commerce industry. Consumers can now
purchase endless amounts of items online, both from typical brick and mortar
stores with e-commerce capabilities and one another.
One
of the most popular activities on the Web is shopping. It has much allure in it
— you can shop at your leisure, anytime, and in your pajamas. Literally anyone
can have their pages built to display their specific goods and services.
History
of ecommerce dates back to the invention of the very old notion of "sell
and buy", electricity, cables, computers, modems, and the Internet.
Ecommerce became possible in 1991 when the Internet was opened to commercial
use. Since that date thousands of businesses have taken up residence at web
sites.
At
first, the term ecommerce meant the process of execution of commercial
transactions electronically with the help of the leading technologies such as
Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) which
gave an opportunity for users to exchange business information and do
electronic transactions. The ability to use these technologies appeared in the
late 1970s and allowed business companies and organizations to send commercial
documentation electronically.
Although
the Internet began to advance in popularity among the general public in 1994,
it took approximately four years to develop the security protocols (for
example, HTTP) and DSL which allowed rapid access and a persistent connection
to the Internet. In 2000 a great number of business companies in the United
States and Western Europe represented their services in the World Wide Web. At
this time the meaning of the word ecommerce was changed. People began to define
the term ecommerce as the process of purchasing of available goods and services
over the Internet using secure connections and electronic payment services.
Although the dot-com collapse in 2000 led to unfortunate results and many of
ecommerce companies disappeared, the "brick and mortar" retailers
recognized the advantages of electronic commerce and began to add such
capabilities to their web sites (e.g., after the online grocery store Webvan
came to ruin, two supermarket chains, Albertsons and Safeway, began to use
ecommerce to enable their customers to buy groceries online). By the end of
2001, the largest form of ecommerce, Business-to-Business (B2B) model, had
around $700 billion in transactions.
There are 5 common types of E-commerce:
1. Consumer to business E-commerce
2. Business to business E-commerce
3. Business to consumer E-commerce
4. Consumer to consumer E-commerce
5. Government to Consumer
5. Government to Consumer
CONSUMER-TO-BUSINESS (C2B)
Consumer-to-business is a
business model in which consumers (individuals) create value and businesses
consume that value. For example, when a consumer writes reviews or when a
consumer gives a useful idea for new product development then that consumer is
creating value for the business if the business adopts the input. In C2B e-commerce, consumers post a project with a
set budget online, and companies bid on the project. The
consumer reviews the bids and selects the company
BUSINESS-TO-BUSINESS
(B2B)
Refers to a situation where
one business makes a commercial transaction with another. This involves companies doing business with each
other. One example is manufacturers selling to distributors and wholesalers
selling to retailers.
BUSINESS TO CONSUMER
(B2C)
Business to consumer is
business or transactions conducted directly between a company and consumers who
are the end-users of its products or services. B2C consists of businesses selling to the general
public through shopping cart software, without needing any human interaction.
This is what most people think of when they hear "e-commerce." An
example of this would be Amazon.
CONSUMER TO CONSUMER
(C2C)
Electronic commerce involves
the electronically facilitated transactions between consumers through some
third party. A common example is the online auction, in which a consumer posts
an item for sale and other consumers bid to purchase it; the third party
generally charges a flat fee or commission. This takes place within online classified ads,
forums or marketplaces where
individuals can buy and sell their goods. Examples
of this include Craigslist, eBay and Etsy.
GOVERNMENT TO
CONSUMER (G2C)
The Federal Government makes a commercial transaction with consumer. A common example is the tenders of public offering for enhance access between the citizen.
Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices.
E-commerce is recognized for its ability to allow business to communicate and to form transaction anytime and anyplace.
Thus, switching barriers and switching costs may shift.
IMPACT ON MARKETS AND RETAILERS
E-commerce is recognized for its ability to allow business to communicate and to form transaction anytime and anyplace.
Thus, switching barriers and switching costs may shift.
The benefits of e-commerce
include its around-the-clock availability, the speed of access, the wide
availability of goods and services for the consumer, easy accessibility, and
international reach. Its perceived downsides include sometimes-limited customer
service, consumers not being able to see or touch a product prior to purchase,
and the necessitated wait time for product shipping.
The e-commerce market
continues to grow: Online sales accounted for more than a third of total U.S.
retail sales growth in 2015, according to data from the U.S. Commerce
Department. Web sales totaled $341.7 billion in 2015, a 14.6% increase over
2014. E-commerce conducted using mobile devices and social media is on the rise
as well: Internet Retailer reported that mobile accounted for 30% of all U.S.
e-commerce activities in 2015. And according to Invesp, 5% of all online
spending was via social commerce in 2015, with Facebook, Pinterest and Twitter
providing the most referrals.
The rise of e-commerce forces
IT personnel to move beyond infrastructure design and maintenance and consider
numerous customer-facing aspects such as consumer data privacy and security.
When developing IT systems and applications to accommodate e-commerce
activities, data governance related regulatory compliance mandates,personally
identifiable information privacy rules and information protection protocols
must be considered.
Government regulations for e-commerce
In the United States, the
Federal Trade Commission (FTC) and the Payment Card Industry (PCI) Security
Standards Council are among the primary agencies that regulate e-commerce
activities. The FTC monitors activities such as online advertising, content
marketing and customer privacy, while the PCI Council develops standards and
rules including PCI-DSS compliance that outlines procedures for proper handling
and storage of consumers' financial data.
To ensure the security,
privacy and effectiveness of e-commerce, businesses should authenticate
business transactions, control access to resources such as webpages for
registered or selected users, encrypt communications and implement security
technologies such as the Secure Sockets Layer and two factor authentication.
E-commerce applications
E-commerce is conducted using a variety of applications, such as email, online catalogs and shopping
carts, EDI, annd web services. This
includes business-to-business activities and outreach such as using email for unsolicited
ads (usually viewed as spam) to consumers and other business prospects, as well
as to send out e-newsletters to subscribers. More companies now try to entice
consumers directly online, using tools such as digital coupons, social media marketing and targeted
advertisements.
Advantages of Ecommerce
1. Overcome Geographical Limitations
If you have a physical store,
you are limited by the geographical area that you can service. With an
ecommerce website, the whole world is your playground. Additionally, the advent
of mcommerce, ecommerce on mobile devices, has dissolved every remaining
limitation of geography.
2. Lower Costs
One of the most tangible
positives of ecommerce is the lowered cost. A part of these lowered costs could
be passed on to customers in the form of discounted prices.
3. Locate the Product Quicker
It is no longer about pushing
a shopping cart to the correct aisle, or scouting for the desired product. On
an ecommerce website, customers can click through intuitive navigation or use a
search box to immediately narrow down their product search. Some websites
remember customer preferences and shopping lists to facilitate repeat purchase.
4. Eliminate Travel Time and Cost
It is not unusual for
customers to travel long distances to reach their preferred physical store.
Ecommerce allows them to visit the same store virtually, with a few mouse
clicks.
5. Provide Abundant Information
There are limitations to the
amount of information that can be displayed in a physical store. It is
difficult to equip employees to respond to customers who require information
across product lines. Ecommerce websites can make additional information easily
available to customers. Most of this information is provided by vendors, and
does not cost anything to create or maintain.
6. Create Targeted Communication
Using the information that a
customer provides in the registration form, and by placing cookies on the
customer's computer, an ecommerce merchant can access a lot of information
about its customers. This, in turn, can be used to communicate relevant
messages. An example: If you are searching for a certain product on Amazon.com,
you will automatically be shown listings of other similar products. In
addition, Amazon.com may also email you about related products.
7. Remain Open All the Time
Store timings are now
24/7/365. Ecommerce websites can run all the time. From the merchant's point of
view, this increases the number of orders they receive. From the customer's
point of view, an "always open" store is more convenient.
E-commerce businesses may employ some or all of the following:
- Providing or participating in online marketplaces, which process third-party business-to-consumer or consumer-to-consumer sales
- Business-to-business buying and selling
- Gathering and using demographic data through web contacts and social media
- Business-to-business electronic data interchange
- Marketing to prospective and established customers by e-mail or fax (for example, with newsletters)
- Engaging in pretail for launching new products and services
- Online financial exchanges for currency exchanges or trading purposes