E- Commerce

Unit – I

Introduction to E-commerce

E-commerce is buying and selling goods and services over the Internet. E-business is a
structure that includes not only those transactions that center on buying and selling goods and
services to generate revenue, but also those transactions that support revenue generation. These
activities include generating demand for goods and services, offering sales support and customer
service, or facilitating communications between business partners.

By the help of the flexibility offered by computer networks and the availability of the
Internet , E-commerce develops on traditional commerce . E-commerce creates new
opportunities for performing profitable activities online. It promotes easier cooperation between
different groups: businesses sharing information to improve customer relations; companies
working together to design and build new products/services; or multinational company sharing
information for a major marketing campaign.

The followings are the business uses of the Internet. These services and capabilities are a
core part of a successful e-commerce program. They are either parts of a value chain or are
included as supporting activities:

• Buying and selling products and services

• Providing customer service

• Communicating within organizations

• Collaborating with others

• Gathering information (on competitors, and so forth)

• Providing seller support

• Publishing and distributing information

• Providing software update and patches

Airline and travel tickets, banking services, books, clothing, computer hardware,
software, and other electronics, flowers and gifts are some popular products and services that can
be purchased online. Several successful e-businesses have established their business models
around selling these products and services. Ecommerce has the potential to generate revenue and
reduce costs for businesses and entities. Marketing, retailers, banks, insurance, government,
training, online publishing, travel industries are some of the main recipients of e-commerce. For
instance, banks use the Web for diverse business practices and customer service.

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Simple Definitions
1.1. Electronic Commerce - business trading with other businesses and internal processes that
companies use to support their buying, selling, hiring, planning, and other activities.
1.2. Electronic Business - the transformation of key business processes through the use of
Internet technologies.
1.3. Transaction - Exchange of value, such as a purchase or a sale
1.4. Commodity item - product/service that is hard to distinguish from the same products
provided by other sellers
1.5. Strategic Business Unit - a particular combination of product, distribution channel, and
customer type
1.6. Strategic Alliance - stable relations with other companies based on shared purposes
1.7. Law of Diminishing Returns - Characteristic of most activities to yield less value as
amount of consumption increases
1.8. Network Effect - Increase in value of a netowrk to its participants, which occurs as more
people or organizations participate in the network. Ie: what email was in terms of value and what
is it today
1.9. Industry Value Chain - Larger stream of activities in which a particular business unit's
value chain is embedded

Meaning of E-commerce

E-commerce or electronic commerce simply refers to carrying out business transactions

over the internet. The commercial activities are accomplished electronically over the global
network of computers.

Just like in conventional businesses, electronic commerce has all the aspects of a business
transaction such as buying, selling, and payments. The major difference is that this business
model is based on electronic transactions.

In e-commerce, companies set up stores on the internet and provide user interfaces that
allow for the purchase and selling of merchandise. There is no physical contact between the
seller and the buyer since purchases are done online.

E-commerce adopts the use of technology to meet customer demands and settle
transactions. In this business model, an entrepreneur does not need to have a physical premise;
only a store for keeping commodities.

E-commerce involves emerging electronic technologies such as:

 internet banking,
 mobile banking,
 online shopping sites,
 automated processing of transactions,

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  online advertising and promotion,
 online database management systems,
 enterprise resource planning over internet, etc.

E-commerce can between:

 Business-to-business (B2B): It refers to the commercial transactions among business

through electronic modes. For example, the whole-sellers place the orders online by going
to the manufacturers web-portal.
 Business-to-consumer (B2C): Business set up online stores. Individual customers buy the
good and services over the internet. Examples: online shopping portals.
 Consumer-to-consumer (C2C): A third party (such as an online agent) facilitates
transactions between consumers. Example: auction sites, job sites, matrimonial sites, social
networking sites, etc.
 Consumer-to-business (C2B): The consumer makes an offer to the business. The
businesses may accept or reject the consumers offer. For example, a blog writer may make
an offer to write guest posts for the company.

Working of E commerce

E- Commerce, is the trading or facilitation of trading in products or services using

computer networks, such as the Internet.
The diagram above outlines the path the information travels to create an ecommerce
transaction. Here is an explanation of each piece.

 Customer
Hopefully, this one is obvious and needs no explanation!
 Website
Your visitors are constantly sending and receiving information over the
internet from their computer to your web server. An ecommerce transaction would send credit
card data to perform a transaction.
 SSL Certificate
While most data can flow freely, we want to be sure the credit card data is
transmitted safely. So it is encrypted as it is sent to keep prying eyes from seeing it. An SSL
Certificate is what accomplishes this task.

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 Online Gateway
The gateway is the "middle-man" that allows a website to send data to a
merchant (credit card) account. The website sends the credit card data to [Link], who
performs a live check on the card and received a charge authorization (or decline). This
information is passed back through to the website. We use the major player out
there: [Link].
 Merchant Account
A merchant account allows your business to accept credit cards. We have
partnered with First Data, Amercia's leading processor, to offer preferred rates to our customers.
 Bank Account
The money paid is deposited to your bank account within a few days!

Here's one example of how a sophisticated, fully computerized e-commerce system might work.
Not all e-commerce systems work in exactly this way:

1. Sitting at her computer, a customer tries to order a book online. Her Web browser
communicates back-and-forth over the Internet with a Web server that manages the
store's website.
2. The Web server sends her order to the order manager. This is a central computer that sees
orders through every stage of processing from submission to dispatch.
3. The order manager queries a database to find out whether what the customer wants is
actually in stock.
4. If the item is not in stock, the stock database system can order new supplies from the
wholesalers or manufacturers. This might involve communicating with order systems at
the manufacturer's HQ to find out estimated supply times while the customer is still
sitting at her computer (in other words, in "real time").
5. The stock database confirms whether the item is in stock or suggests an estimated
delivery date when supplies will be received from the manufacturer.
6. Assuming the item is in stock, the order manager continues to process it. Next it
communicates with a merchant system (run by a credit-card processing firm or linked to a
bank) to take payment using the customer's credit or debit card number.
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 7. The merchant system might make extra checks with the customer's own bank computer.
8. The bank computer confirms whether the customer has enough funds.
9. The merchant system authorizes the transaction to go ahead, though funds will not be
completely transferred until several days later.
10. The order manager confirms that the transaction has been successfully processed and
notifies the Web server.
11. The Web server shows the customer a Web page confirming that her order has been
processed and the transaction is complete.
12. The order manager sends a request to the warehouse to dispatch the goods to the
customer.
13. A truck from a dispatch firm collects the goods from the warehouse and delivers them.
14. Once the goods have been dispatched, the warehouse computer e-mails the customer to
confirm that her goods are on their way.
15. The goods are delivered to the customer

Electronic Business

E-business can comprise a range of functions and services, ranging from the development
of intranets and extranets to e-service, the provision of services and tasks over the Internet
by application service providers.

Today, as major corporations continuously rethink their businesses in terms of the

Internet, specifically its availability, wide reach and ever-changing capabilities, they are
conducting e-business to buy parts and supplies from other companies, collaborate on sales
promotions, and conduct joint research. With the security built into today's browsers, and
with digital certificates now available for individuals and companies from VeriSign, a certificate
issuer, much of the early concern about the security of business transaction on the Web has
abated, and e-business by whatever name is accelerating.

IBM was one of the first companies to use the term when, in October 1997, it launched a
thematic campaign built around e-business.

Online Business or e-business is a term which can be used for any kind of business or
commercial transaction that includes sharing information across the internet.
Commerce constitutes the exchange of products and services between businesses, groups
and individuals and can be seen as one of the essential activities of any business.
Electronic commerce focuses on the use of ICT to enable the external activities and
relationships of the business with individuals, groups and other businesses or e business refers to
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business with help of internet i.e. doing business with the help of internet network.[1] The term
"e-business" was coined by IBM's

E-business (electronic business) is the conduct of business processes on the Internet.

These electronic business processes include buying and selling products, supplies and services;
servicing customers; processing payments; managing production control; collaborating
with business partners; sharing information; running automated employee services; recruiting;
and more.

Categories of E-commerce Application

Applications of E-commerce and its development is an unavoidable factor in the present

day today life.
E-Commerce is an area which is used in various fields of business like wholesale, retail
as well as manufacturing unit. E-Commerce is a subset of the e-business that concerns
commerce. The activity of the exchange of goods and services with some or the other kind of
payment methods can be intended as commerce. .
E-Commerce world is an application of information sharing among business trading
basically online commercial transaction with clients. Ecommerce is categorized into six major
types they are:
1. Business-to-Business
2. Business-to-Consumer
3. Business-to-Administration
4. Consumer-to-Consumer
5. Consumer-to-Business
6. Consumer-to-Administration
E-Commerce development and its applications is an unavoidable sector in the present day
today life. Given below are the most common E-Commerce applications.
Retail & wholesale
There are numerous applications for retail as well as wholesale in case of ecommerce.
Here comes e-retailing or may be called as online retailing. This refers to the selling of goods
and other services through electronic stores from business to consumers. These are designed and
equipped using shopping cart model and electronic catalog.
Marketing
Using web and ecommerce, data collection about the following are possible
1. Preferences
2. Behaviour
3. Needs
4. Buying patterns
The marketing activities like price fixing, product feature and its enhancement,
negotiation, and the relationship with the customer can be made using these.
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Finance
E-Commerce is being used by the financial companies to a large extent. By the name
finance we know that there will be customers and transactions. The customers can check the
balance in their savings account, as well as their loan account. There are features like transferring
of money from and to their own accounts, paying of bills online and also e-banking. Online stock
trading is also another feature of ecommerce.
Manufacturing
E-Commerce is included and used in the chain operations (supply) of a company. There
are companies that form electronic exchange. This is by providing buying and selling items
together, trading market information and the information of runback office like inventory
control. This is a way that speeds up the flow of finished goods and the raw materials among the
business community members.
Auctions
E-Commerce customer to customer is direct selling of goods among customers. It
includes electronic auctions that involve bidding system. Bidding allows prospective buyers to
bid an item. In Airline Company they give bidding opportunity for customers to quote the price
for a seat on specific route, date and time.
Entertainment
E-Commerce application is widely used in entertainment area also for video cataloging,
multiplayer games, and interactive ads and for online discussion.
Education
In educational training also ecommerce has major role for interactive education, video
conferencing, and online class and for connecting different educational training centers.