E-Commerce

INTRODUCTION

Compiled by
Sanjesh Rimal
2021
 CONCEPT OF E-COMMERCE
E-Commerce (electronic commerce) is buying and selling of products or services
(real and virtual), using the electronic means.

E-commerce is defined as the use of the Internet, the web (www), the mobile
apps and the browsers to transact business. It is digitally enabled commercial
transactions between and among organizations and individuals.

E-commerce includes all electronically mediated information exchanges between

an organization and its external stakeholders.

E-commerce is the exchange of information across electronic networks, at any

stage in the supply chain, whether within an organization, between businesses,
between businesses and consumers, or between the public and private sector,
whether paid or unpaid.

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E-commerce is facilitated by a range of digital technologies that enable electronic
communications. These technologies include Internet communications through
web sites and e-mail as well as other digital media such as wireless or mobile and
media for delivering digital television such as cable and satellite.

PERSPECTIVES ON E-COMMERCE

§ A communication perspective→ the delivery of information, products or

services or payment by electronic means.

§ A business process perspective→ the application of technology towards the

automation of business transactions and workflows.

§ A service perspective→ enabling cost cutting at the same time as increasing

the speed and quality of service delivery.

§ An online perspective→ the buying and selling of products and information

online.

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PURE Vs. PARTIAL E-COMMERCE
E-commerce can be either pure or partial depending on the nature of its three
major activities: ordering and payments, order fulfillment, and delivery to
customers. Each activity can be done physically or digitally. If all activities are
digital, it is pure e-commerce; if none- are digital, it is no e-commerce; otherwise,
it is partial e-commerce.

For example, purchasing a computer from Dell’s website or a book from

[Link] is partial e-commerce, because the merchandise is physically
delivered. However, buying an e-book from [Link] or a software product
from [Link] is pure e-commerce, because ordering, processing, and
delivery to the buyer are all digital.

Purely physical companies are referred to as brick-and-mortar, whereas companies

that are engaged only in e-commerce are considered virtual organizations. Click-
and-mortar (click-and-brick) organizations are those that conduct some e-
commerce activities, usually as an additional marketing channel. Gradually, many
brick-and-mortar companies are changing to click-and-mortar ones (e.g., GAP,
Walmart, Target). 4
 E-COMMERCE TERMINOLOGIES AND
FUNDAMENTALS
§ E-commerce→ Buying and selling of goods and services through the Internet
is known as e-commerce. It includes financial transactions and it covers
customers, suppliers, distributors, etc.

§ E-business→ It is an electronic presence of business, by which all the

business activities are conducted through the Internet such as servicing
customers, collaborating with business partners, delivering e-learning, and
conducting electronic transactions within organizations. E-commerce is a
major component of e-business. It includes monetary as well as non-financial
activities and it covers internal as well as external processes.

§ E-tailing (e-retailing)→ Virtual storefront with catalogue of merchandise

products and usually include a shopping cart system to enable consumers to
purchase online with the means of online payment system.

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§ E-marketplace (e-market/ virtual market)→ An electronic space where buyers
and sellers conduct commercial transactions such as selling goods, services,
or information. It include computerized systems that makes electronic market
more efficient by providing updated information and various support services,
such as rapid and smooth executions of transactions.

§ Shopping cart system→ A software application in a virtual space where goods

to be purchased are accumulated until checkout. It include the features like
incrementing or decrementing or addition or alteration or deletion of the
products along with the changes in price cost.

§ Online marketing→ It is focused on targeting the customers those are

interested in the products or services , identified by business intelligence and
business analytics.

§ E-payment system→ Electronic payment mechanism involving transfer of

funds from the bank of a buyer to a seller.

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§ M-commerce (mobile e-commerce)→ It is a term used for e-commerce
through mobile technologies with Internet access through cellular
connectivity. It is anywhere commerce or commerce on a move, using
battery powered wireless devices, such as laptops, mobile phones, PDAs,
and tablets. It includes transaction using mobile web browser and apps along
with mobile payment services.

§ Social e-commerce→ It is an electronic commerce conducted over social

networking sites that involve social interaction. This type of commerce
utilizes user ratings, referrals, online communities and social advertising to
facilitate online shopping. It allows to purchase from a third-party company
within the native social media experience. For example, one can browse and
compare products on Facebook and then make the purchase on Facebook
itself vs. going to the company’s site to make the purchase.

§ Local e-commerce→ It is an e-commerce that is focused on engaging the

consumer based on his or her current geographic location.

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 MAJOR TRENDS IN E-COMMERCE
§ Retail e-commerce in the United States continues double-digit growth (over
15%), with global growth rates even higher in Europe and emerging markets
such as China, India, and Brazil.

§ Mobile e-commerce (both retail and travel sales) explodes and is estimated to
reach over $180 billion in the United States in 2016.

§ The mobile app ecosystem continues to grow, with over 210 million
Americans using mobile apps.

§ Social e-commerce, based on social networks and supported by advertising,

emerges and continues to grow, generating $3.9 billion in revenue for the top
500 social media retailers in the United States in 2015.

§ B2B e-commerce in the United States continues to strengthen and grow to

$6.7 trillion.
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§ On-demand service firms like Uber and Airbnb attract billions in capital, garner
multi-billion dollar valuations, and show explosive growth.

§ Mobile advertising continues growing at astronomical rates, accounting for

almost two-thirds of all digital ad spending.

§ Small businesses and entrepreneurs continue to flood into the e-commerce

marketplace, often riding on the infrastructures created by industry giants such
as Apple, Facebook, Amazon, Google, and eBay.

§ Cloud computing completes the transformation of the mobile platform by

storing consumer content and software on cloud (Internet-based) servers and
making it available to any consumer-connected device from the desktop to a
smartphone.

§ The Internet of tThings, comprised of billions of Internet-connected devices,

continues to grow exponentially.

§ As firms track the trillions of online interactions that occur each day, a flood of
data, typically referred to as big data, is being produced.
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§ In order to make sense out of big data, firms turn to sophisticated software
called business analytics (or web analytics) that can identify purchase patterns
as well as consumer interests and intentions in milliseconds.

§ User-generated content, published online as social network posts, tweets,

blogs, and pins, as well as video and photo-sharing, continues to grow and
provides a method of self-publishing that engages millions.

§ The amount of data the average American consumes continues to increase,

more than doubling from an average of about 34 gigabytes in 2008 to an
estimated 74 gigabytes today.

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 FEATURES OF E-COMMERCE
1. Ubiquity→ E-commerce is characterized by its ubiquity; it is available just
about everywhere, at all the time. It liberates the market from being restricted
to a physical space and makes it possible to shop from personal computer, at
home, at work, or even from a car, using mobile e-commerce.

2. Global Reach→ E-commerce technology permits commercial transactions to

cross cultural, regional, and national boundaries far more conveniently and
cost-effectively than in traditional commerce. Internet makes it much easier
for start-up e-commerce merchants to achieve a global audience than was ever
possible in the past.

3. Universal Standard→ Having Internet, one-world market space, where prices

and product descriptions can be inexpensively displayed for all to see, price
discovery becomes simpler, faster, and more accurate. Also, it is possible to
easily find many of the suppliers, prices, and delivery terms of a specific
product anywhere in the world, and to view them in a coherent, comparative
environment.
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4. Richness→ Information richness refers to the complexity and content of a
message. E-commerce technologies have the potential for offering
considerably more information richness than traditional media such as printing
presses, radio, and television because they are interactive and can adjust the
message to individual users.

5. Interactivity→ E-commerce technologies allow for interactivity, it enable two-

way communication between merchant and consumer and among consumers.
Traditional television, for instance, cannot ask viewers questions or enter into
conversations with them, or request that customer information be entered into
a form. In contrast, all of these activities are possible in an e-commerce site
and it is now a commonplace with smartphones, social networks, and twitter.

6. Information Density→ E-commerce technologies vastly increase information

density, the total amount and quality of information available to all market
participants, consumers, and merchant. It reduce information collection,
storage, processing, and communication costs, and increase the accuracy, and
timeliness of information, making information more useful and important than
ever.
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7. Personalization/ Customization→ E-commerce technologies permit
personalization, merchants can target their marketing messages to specific
individuals by adjusting the message to a person’s name, interests, and past
purchases. Today this is achieved in a few milliseconds and followed by an
advertisement based on the consumer’s profile. The technology also permits
customization, changing the delivered product or service based on a user’s
preferences or prior behavior.

8. Social Technology→ In a way quite different from all previous technologies,

e-commerce technologies have evolved to be much more social by allowing
users to create and share content with a worldwide community. Using these
forms of communication, users are able to create new social networks and
strengthen existing ones.

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 TYPES OF E-COMMERCE

Type of e-commerce based on the nature of the market relationships

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BASIC TYPES OF E-COMMERCE MODELS
§ B2B (Business to Business)
→ Online business selling to other businesses. Participants are business entities;
in a form of producer, wholesaler, supplier, distributors.
→ It is the largest form of e-commerce, with around $6.7 trillion in transactions
in the United States in 2016.
→ There is an estimated $14.5 trillion in business-to-business exchanges of all
kinds, online and offline, suggesting that B2B e-commerce has significant
growth potential.
→ For example, Dell buying CPU for its computer system from Intel.

§ B2C (Business to Consumer)

→ Online business attempt to reach/ sell products to the consumers.
→ B2C e-commerce includes purchases of retail goods, travel and other types
of services, and online content.
→ Even though B2C is comparatively small (an estimated $600 billion in 2016
in the United States), it has grown exponentially since 1995, and is the
type of e-commerce that most consumers are likely to encounter
→ For example, target store, barnesandnoble offering products to consumers.
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§ C2C (Consumer to Consumer)
→ It provides a way for consumers to sell to each other, with the help of an online
market maker (also called a platform provider) such as eBay or Etsy, the
classifieds site Craigslist, or on-demand service companies such as Airbnb and
Uber.
→ In C2C e-commerce, the consumer prepares the product for market, places the
product for auction or sale, and relies on the market maker to provide catalog,
search engine, and transaction-clearing capabilities so that products can be
easily displayed, discovered, and paid for.
→ In 2015, eBay by itself generated around $82 billion in gross merchandise
volume, it is probably safe to estimate that the size of the C2C market in 2016
is more than $100 billion (eBay, 2016).

OTHER TYPES OF E-COMMERCE MODELS

§ C2B (Customer to Business)
→ Consumer selling services online to the businesses.
→ For example, individual applying in a job portal.

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§ B2G (Business to Government)
→ Business entities selling products online to the government agencies.
→ For example, IBM selling computers/ servers to government ministries.

§ G2C (Government to Consumer)

→ Government agency offering online service to consumers.
→ For example, Consumer paying tax through online portal.

§ G2B (Government to Business)

→ Government agency offering online service to businesses.
→ For example, Business registration over government online portal.

§ C2G (Consumer to Government)

→ Consumer applying online for service to the government.
→ For example, individual apply for government jobs.

§ G2G (Government to Government)

→ Government selling products online to other governments.
→ For example, Indian oil corporation supplying fuel to Nepal oil corporation.
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 CHALLENGE
IDENTIFY THE E-COMMERCE MODELS
a) A restaurant get a company registration certificate from administration.

b) A graduate apply for a job in an online portal. The recruiter contacted him and
gets him registered at Inland Revenue Department for PAN (personal accounts
number).

c) A college inquire for the text books in e-commerce website of the Ekta Store.
The store manager of Ekta have insufficient quantities of the text books in its
inventory; thus, makes a telephone call to the publisher and ask them to supply
some of the books. In the following week, the publisher parcel the text books
to the Ekta store. The Ekta store receives it the next day and the store manager
writes the email to the college mentioning about the availability of the text
books. The books are collected by the college and distributed to the students.

d) A government agency request for proposal to supply for the construction

materials and the contractor procure it from the international authorized
dealer. 18
 BENEFITS OF E-COMMERCE
Benefits to Organizations
§ Global Reach→ Quickly locating customers and business partners
worldwide.

§ Cost Reduction→ Lower cost of information processing, storage, and

distribution. E-commerce is used in virtual environment; thus, it avoids
overhead cost of infrastructure, like showroom space, furniture, and decors.

§ Increase Sales→ Global market leads to increase in sales.

§ Digital Records→ All the static and transactional data are recorded
digitally and various reports can be generated easily.

§ Efficient Supply Chain→ Reduce delays, inventories, and cost.

§ Online Business→ Business always open, 24/7/365; thus, no overtime or

other costs.
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§ Customization/ Personalization→ Make order as per customer preference.

§ Improved Customer Service and Relationship→ Direct interaction with

customers, better CRM.

§ Provide Competitive Advantage→ Lower prices, better service, improve

brand image.

Benefits to Consumers
§ Availability→ Huge selection to choose from (vendor, products,
information styles).

§ Ubiquity→ Shop any time from any place.

§ Personalization→ Self-customizable products.

§ Find Bargains→ Use comparison engine, pay less.

§ Social Interaction and Engagement→ In social networks, get reviews,

recommendations. 20
Benefits to Society
§ Close the Digital Divide→ Allow people in rural areas and developing
countries to use more online services and purchase what they really like.

§ Enable Telecommuting→ Facilitate to work remotely; less traffic, pollution.

§ Better Public Services→ Provided by e-government (e.g., e-health).

§ Increased Standard of Living→ Buy cheaper and better products/ services.

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 LIMITATIONS OF E-COMMERCE
Technological Limitations

§ Universal Standard→ Lack of universal standards for quality, security, and

reliability.

§ Technical Knowledge→ Need for technical expertise for better customer

experience, e-marketing.

§ Security→ Threat of cyber crime.

§ Slow Connectivity→ The telecommunication bandwidth may be insufficient,

especially for m-commerce, videos, and graphics.

§ Internet Accessibility→ Still expensive and/or inconvenient for many.

§ Replenishment Systems→ Large scale B2C requires special automated

warehouses for order fulfillment.
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Non-technological Limitations

§ Security and Privacy Concerns → Deter customers from buying.

§ Scam and Frauds→ Dishonest scheme, threat of false transaction.

§ Conventional Customers→ Resistance to change.

§ Legal and Public Policy Issues→ Many legal and public policy issues are not
resolved or are not clear.

§ Lacks Feel and Touch→ Products are offered with attractive looks; but the
buyer can not feel it physically.

§ Service→ Tedious claims and return.

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 ENVIRONMENT OF E-COMMERCE
§ Workforce
→ The e-commerce workforce comprises of technical (IT), administrative
(management, accounts, finance), operation (order tracking, customer
support), and logistics (packaging, transportation). They all coordinate to
one another as per the business workflow.
→ E-commerce company may have its own workforce for all the activities as
well as it may outsource a job from other dedicated third party service
providers. For eg, delivery of the product may be contracted to a postal/
parcel service.

§ Competitors
→ Business competitors are indispensable part of e-commerce environment,
where companies from around the world can get access, competing on price,
quality and service of the product.

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§ Partners
→ There are various business stakeholders including partners in the e-commerce,
regardless of product and services.
→ Suppliers, intermediaries, third-party services are the partners of e-commerce
environment.

§ Customers/ Clients
→ Customer takes part in e-commerce environment as a buyer or an user.
→ E-commerce company focus on its marketing strategies in different schemes to
attract the new customers, customer conversion (from competitors) and
customer retention.

§ Communities
→ Different communities in the e-commerce environment influences the business.
It acts as a review or feedback; so that other people would get different idea on
the product and services.

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§ Legal/ Regulation
→ E-commerce is drive by the law and regulation. Tax calculation, privacy
policy are governed by the law of a sovereign state.
→ Thus, legal obligations of a country determines a favourable environment for
the business as well as the customers.

§ Technology
→ Technologies are dynamic in nature; thus, features and functionalities of e-
commerce need to adapt consistently for the better operation and enhancing
user experience.
→ Mobile e-commerce, social e-commerce, electronic customer relationship
management are the technological aspects of e-commerce activities.

§ Economic Force
→ The success of e-commerce is determined (much or less) by the economic
condition of the country. People tends to spent more while earning more and
vice-versa.

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 SETTING UP AND RUNNING
E-COMMERCE WEBSITE
Back Office Activities
Domain
Design and Develop Go Live and Market
Registration and
E-Commerce Website the Service
Website Hosting

Generate Receipt and Packaging as per

Customer Registration
Delivery of Shopping Cart and
and Record the Orders
the Products Payment Process

Front Office Activities

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 QUESTIONS

1) Justify how e-commerce is a new way of doing business? Differentiate

between e-commerce and e-business?
2) Discuss on various e-commerce models? Which one has a wide majority
than others and why?
3) Why e-commerce is so important? Discuss on e-commerce environment?
4) Briefly explain the activities for setting up and running e-commerce
website?
5) Write short notes on:
a) E-business
b) M-commerce
c) Social e-commerce
d) E-marketplace
e) E-payment system
f) Online marketing

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