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Understanding E-Commerce: Benefits & Drawbacks

E-commerce refers to online shopping and commercial activities conducted electronically, primarily through the internet. It offers advantages like 24/7 operations, global reach, and improved customer service, but also has disadvantages such as difficulties in ROI calculation and consumer security concerns. Various business models exist within e-commerce, including B2C, B2B, and C2C, each with distinct characteristics and revenue models.

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Maruf Ahmed
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23 views7 pages

Understanding E-Commerce: Benefits & Drawbacks

E-commerce refers to online shopping and commercial activities conducted electronically, primarily through the internet. It offers advantages like 24/7 operations, global reach, and improved customer service, but also has disadvantages such as difficulties in ROI calculation and consumer security concerns. Various business models exist within e-commerce, including B2C, B2B, and C2C, each with distinct characteristics and revenue models.

Uploaded by

Maruf Ahmed
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

What is e-commerce?

E-commerce is online shopping via internet. It is any commercial activity conducted


electronically, particularly via private or open networks, such as internet. The key
point of this definition is that e-commerce is a confluence of business operations
with electronic and network technologies.
Combining a range of processes, such electronic data interchange (EDI), electronic
mail (E-MAIL), World Wide Web (WWW) and internet applications, e-commerce
provide ways to exchange information between individuals, companies and
countries. E-commerce is the movement of business on to the World Wide Web. Ecommerce companies core business process of buying, selling goods, services and
information over the internet.
Advantages of e commerce.
24*7 operations:
Round-the-clock operation is an expensive proposition in the in the brick andmortar world, while it is natural in the click-and-conquer world.
Global-reach:
The net is being inherently global; reaching global customers is relatively easy on
the net compared to the world of bricks.
Cost of acquiring serving and retaining customers:
It is relatively cheaper to acquire new customers over the net, thanks to 24*7
operations and its global reach. Though innovative tools of push technology, it is
also possible to retain customers loyalty with minimal investments.
An extended enterprise is easy to build:
The internet provides an effective way (often less expensive) to extend the
enterprise beyond the narrow confines of the organization.
Disintermediation:
Using the internet, one can directly approach the customers and suppliers, cutting
down on the number of levels and in the process, cutting down the costs.
Improved customer service to the clients:
It results in higher satisfaction and more sales.
Knowledge of customer behavior:

Companies can track a host of behaviors on websites visited, length of stays on a


site, page views on a site, contents of wish lists and shopping carts, purchases,
dollar amounts purchases.
Write about the disadvantages of e-commerce.
Disadvantages of e-commerce:
1. Business often calculates the return on investment before committing to
any new technology. This has been difficult to do with commerce, since the
costs and benefits have been hard to quantify.
2. Many firms have had trouble in recruiting and retaining employees with
technological, design, and business process skills needed to create an
effective e-commerce atmosphere.
3. Another problem facing firms that want to do business on the internet is the
difficulty of integrating existing databases and transaction processing
software designed for traditional commerce into a software that enables ecommerce.
4. Many business face cultural and legal obstacles in conducting commerce.
5. Some consumers are still somewhat fearful of sending their credit card
numbers over the internet.
6. Other consumers are simply resistant to change and are uncomfortable
viewing merchandise on a computer screen rather than in person.
E business model:
It is based on the relationship of transaction parties and transaction types.
A business model is the method of doing business by which company can sustain
itself.
The business model spells out how a company makes money by specifying where it
is positioned in the value chain.
Summary of the e-business transaction model
model
B2C
B2B

B2G

description
Sells products or service
directly to the customers
Sells products or services
to other business or brings
multiple buyers and sellers
together
in
central
marketplace.
Business selling to local,
state
,
and
federal

examples
[Link]
[Link]

[Link]

agencies.
C2C

Consumer sells directly to


other consumers.
Consumers fix price on
their own,which business
accept or decline.

C2B

business

[Link]
[Link]

business

government

consumer

consumer

Classification by revenue model:


Product sales model: charges customers directly for products or services that they
buy.
Subscription model:
That changes a fixed monthly or annual rental for the service
Transaction fee model:
That charges a service fee based on volume and value of the transaction offered
ADVERTISE SUPPORT MODEL:
That charges advertisers instead of charging users.
Sponsorship model:
That provides sponsorship by companies for non-financial reasons.
Classification by distribution channel:

Direct marketing:
Where manufacturers such as dell, Nike, Lego or Sony market directly from
company sites to individual customers.
Pure-play e-tailers:
Who have no physical stores, only an online sales [Link] is an
example of such a model.
Click-and-mortar retailers:
Who are traditional retailers with a supplementary website, like [Link].

Give the reasons why one should opt for B2C.


B2C e-business includes retail sales, often called e-retail and other online purchases
.many people were excited about the use of B2C on the internet, because this new
communication medium allowed business and consumers to get connected in
entirely new ways.
Some of the reasons for choosing B2C are:
Inexpensive
costs,
big
opportunities:
once on the internet, opportunities are immense as companies can market their
products in the whole world without much additional cost.
Globalization:
Even being in a small company, the web can make you appear to be a big player
which simply means that the playing field has been leveled by e-business. The
internet is accessed by millions of people around the world and definitely, they are
all potential customers.
Reduced operational cost:
Selling through the web means cutting down on paper costs, customer support
costs, advertising costs and order processing costs.
Customer convenience:
Searchable content, shopping carts, promotions and interactive and user-friendly
interfaces facilitate customer convenience, thus generating more business.
Customers can also see order status, delivery status, and get their receipts online.
Knowledge management:

Through database systems and information management you can find out who
visited your site, and how to create, better value for customer.
How does B2C work?
B2C e-commerce is more than just an online store. It really is about managing the
entire process, but just using technology as a tool for order processing and
customer support.
Visiting the virtual mall:
The customer visits the mall by browsing the online catalogue- a very organized
manner of displaying products and their related information such as price,
description and availability.
Customers registers:
The customer has to register to become a part of the shopper registry. This allows
the customer to avail of the shops complete services.
Customer buys products:
Through a shopping cart system, order details, shipping charges, taxes, additional
charges and price totals are presented in an organized manner.
Merchant process the order:
The merchant then processes the order that received from the previous stage and
fills up the necessary forms.
Credit card is processed:
The credit card of the customer is authenticated through a payment gateway or a
bank. Other payment methods can be used as well. Such as debit cards, prepaid
cards, or bank-to bank transfers.
Operations management:
When the order is passed on to the logistics people, the traditional business
operations will still be used. Things like inventory management, total quality
management, warehousing, optimization and project management should still be
incorporated even through it are an e-business. Getting the product to the customer
is still the most important aspect of e-commerce.
Shipment and delivery:

The product is then shipped to the customer. The customer can track the
order/delivery as virtual malls have a delivery tracking module on the website which
allows a customer to check the status of a particular order.
Customer receives:
The product is received by the customer, and is verified. The system should then
tell the firm that the order has been fulfilled.
After sales service:
After the Sale has been made, the firm has to make sure that it maintains a good
relationship with its customers. This is done through customer relationship
management or CRM.
Characteristics of brokerage model-54
Advantages of brokerage model -54

Give the different types of auction brokers.


English auction:
The English auction is one of the most common auction formats. It is also known as
the open-outcry auction or the ascending-price auction. It is frequently used for
selling art,wine and other physical goods,which do not have a limited lifetime.
The English auction is defined in the following way: the auctioneer starts off the
auction with the lowest acceptable price or the reserve [Link] then receives bids
from the bidders until the point from which indicates that the highest bidder will
receive the item in exchange for the sum of money he bid for.
Dutch auction:
The dutch auction was developed in the Netherlands to auction flower and other
products with a limited [Link] is also know as the decending price auction. In a dutch
auction,the opening price is set extremely high. The price then decends with a
predefined amount predefined time intervals,until a buyer claims the product to be
mine.
First-price sealed-bid auction:
First-price sealed-bid auction has the main characteristic of not being an open-cry
auction,like the English or dutch auction , and thus the individuals bids are hidden
from the other bidders.

This auction has two different phases- a bidding phase in which all the bids are
collected, and a resolution phase in which the bids are opened and the winner is
determined. During the bidding phase,each bidder submits his bid,which is badsed
on his own valuation. The bidder is thus totally ignorant of all the other bids that
have been submitted. The resolution phase works like this all the bids are opened
and sorted from the highest to the lowest bid.
Vickrey auction:
Willium vickrey , the winner of the 1996 nobel prize in economics developed the
vickrey auction. It is also called the uniformed second-price auction.
In a vickrey auction the bids are sealed and each bidder bids from his own
intuitiveknowledge ignorant of all the other bids. What is different in this auction
formet compared to the first-price sealed-bid auction is that , the winning bidder will
pay the price of the second highest bid, which is the same as the highest
unsuccessful bid. Thus the winner pays less than what he has bidden.
Write about the types of aggregators model.
The aggregators are the connectors between the buyers and sellers. They are
involved in the overall process of selection, organization, matching the buyers
requirement.
There are four types of aggregators such as the following:
Content aggregators:
They are among the first large scale sites on the web and mostly represent large
publishing companies e.g. [Link]. their basic challenge is that content has
to be attractive enough to make the site viable. For example: [Link] that
gives every news about the cricket.

Common questions

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The English auction, an ascending-price auction, involves starting with a reserve price and allowing bidders to offer increasingly higher bids until the highest bidder wins . This method is transparent and allows participants to see the current highest bid. In contrast, the Dutch auction is a descending-price auction where the price is initially set high and decreases until a bidder accepts the price . Unlike the English auction, it encourages quick decision-making from bidders, who aim to secure the item before the price drops further .

Transitioning to e-commerce presents challenges such as recruiting and retaining employees with the necessary technological, design, and business process skills to create an effective online environment . Additionally, firms often struggle to integrate existing databases and transaction-processing software developed for traditional commerce with new e-commerce software . These challenges are compounded by the need for a return-on-investment analysis, which is complicated by the difficulty in quantifying the costs and benefits of e-commerce .

E-commerce offers significant advantages in customer acquisition and global reach. The ability to operate 24*7 naturally in an online environment, as opposed to the costly round-the-clock operations in the physical world, allows businesses to acquire customers irrespective of time zones . Moreover, the internet's inherent global nature enables companies to easily reach international customers, unlike brick-and-mortar businesses that are often geographically limited . Traditional brick-and-mortar businesses consequently face pressure due to these factors, as e-commerce businesses can potentially reach a larger audience with lower operational costs, thereby altering competitive dynamics .

Content aggregators in e-commerce collect and organize information from various sources, presenting it to users in a cohesive manner . They act as intermediaries that enhance the overall online experience by offering comprehensive content from different web publishers, often making the site more attractive to visitors seeking consolidated information. An example of a content aggregator is espncricinfo.com, which provides extensive news and updates about cricket, catering to enthusiasts seeking detailed coverage from multiple sources .

The brokerage model connects buyers and sellers by facilitating transactions between them . Its advantages include access to diverse market participants, efficiency in transactions, and aggregation of supply and demand . By acting as intermediaries, brokers can generate revenue through commissions or fees on each transaction, thus benefiting from increased market activity without necessarily holding inventory themselves .

The C2C model benefits sellers by providing a platform to reach a broad audience without the need for a physical storefront, while buyers enjoy access to a wide range of products often at competitive prices . This model fosters direct interaction between consumers, promoting a marketplace environment where individuals can negotiate terms. An example of a platform that utilizes the C2C model is eBay, where users can list items for auction or direct sale and interact directly with other consumers .

E-businesses adopt various revenue models, including the product sales model, subscription model, transaction fee model, advertising support model, and sponsorship model . Each model has a distinct impact on business sustainability. The product sales model generates direct revenue from sales, key for immediate cash flow. Subscription models offer steady income, beneficial for predicting future revenues. The transaction fee model scales with transaction volume, potentially increasing income with business growth. Advertising support and sponsorship models rely on attracting a large user base to generate revenue from third parties, creating reliance on user retention for sustainability .

The Vickrey auction, known as the second-price sealed-bid auction, allows the highest bidder to win but only pays the second-highest bid amount . This format incentivizes truthful bidding since the winner pays less than their maximum bid, reducing the risk of overpayment compared to the first-price sealed-bid auction where the highest bidder must pay their bid amount . In the Vickrey auction, bidders are not influenced by others since bids are sealed, encouraging them to bid their true valuation without strategic underbidding .

The C2B model allows consumers to set prices for products or services which businesses can accept or reject, differing from traditional models where businesses offer set prices . This model contrasts with B2C, where businesses sell directly to consumers, and B2B, where businesses trade with each other . C2B caters to consumer empowerment and price negotiation, offering businesses insight into consumer willingness to pay, unlike other models that primarily focus on business-driven pricing strategies .

B2C e-commerce offers substantial advantages in customer convenience and operational cost reduction. It simplifies customer interaction through searchable content, shopping carts, and user-friendly interfaces, making it easier for consumers to find and purchase products . Customers have the added convenience of accessing order information, delivery status, and receipts online . Furthermore, businesses benefit from reduced costs from cutting down on paper, support, and order processing expenses, as well as less spending on traditional advertising, making operations more cost-efficient .

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