E-COMMERCE

UNIT I
1.1 Introduction
WE are living in e-century. The Internet and information and communications technologies
(ICT) are central to economic growth and productivity. Internet-based technologies and networks
can increase productivity, decrease costs and open new market opportunities.
Now-a-days, using the Internet and email to conduct business is not uncommon. However,
lack of technical and management skills in Information and Communications Technology is a
barrier. There are a wide variety of resources available to help you to improve your e-commerce
skills. Simply, decide what skills you need and identify the appropriate resources to help you to
build those skills.
The skills that may be required range from basic abilities, like word processing and Internet
navigation, to more complex capabilities such as designing and building websites and database
management.
There are a range of resources to help you broaden your understanding of the e-commerce
environment and develop your technical skills. These include online resources, books and
magazines, seminars and training courses.
Keeping this in mind, a summary on the background of Electronic Commerce is being
provided.

1.2 E-Commerce: Meaning

E-Commerce or Electronics Commerce is a methodology of modern business which addresses
the need of business organizations, vendors and customers to reduce cost and improve the quality of
goods and services while increasing the speed of delivery. E-commerce refers to paperless exchange
of business information using following ways.
● Electronic Data Exchange (EDI)

● Electronic Mail (e-mail)

● Electronic Bulletin Boards

● Electronic Fund Transfer (EFT)

● Other Network-based technologies

The concept of e-commerce is all about using the internet to do business better and faster.
 E-commerce is the process of buying and selling over the Internet, or conducting any
transaction involving the transfer of ownership or rights to use goods or services through a
computer-mediated network without using any paper document.
Electronic commerce or e-commerce refers to a wide range of online business activities for
products and services. It also pertains to “any form of business transaction in which the parties
interact electronically rather than by physical exchanges or direct physical contact.”
Business transacted through the use of computers, telephones, fax machines, barcode readers,
credit cards, automated teller machines (ATM) or other electronic appliances without the exchange
of paper-based documents. It includes procurement, order entry, transaction processing, payment
authentication, inventory control, and customer support.
E-commerce is subdivided into three categories: business to business or B2B (Cisco),
business to consumer or B2C (Amazon), and consumer to consumer or C2C (eBay) also called
electronic commerce.
E-commerce the phrase is used to describe business that is conducted over the Internet using
any of the applications that rely on the Internet, such as e-mail, instant messaging, shopping carts,
Web services, UDDI, FTP, and EDI, among others.
A type of business model, or segment of a larger business model, that enables a firm or
individual to conduct business over an electronic network, typically the internet. Electronic
commerce operates in all four of the major market segments: business to business, business to
consumer, consumer to consumer and consumer to business.
Ecommerce has allowed firms to establish a market presence, or to enhance an existing market
position, by providing a cheaper and more efficient distribution chain for their products or services.

1.2.1 Examples of E-Commerce

● An individual purchases a book on the Internet.
● A government employee reserves a hotel room over the Internet.
● A business calls a toll free number and orders a computer using the seller's interactive telephone
system.
● A business buys office supplies on-line or through an electronic auction.
● Retailer orders merchandise using an EDI network or a supplier's extranet.
● A manufacturing plant orders electronic components from another plant within the company using
 the company's intranet.
● An individual withdraws funds from an automatic teller machine (ATM).
● Accepting credit cards for commercial online sales
● Driving information through a company via its intranet
● Driving manufacturing and distribution through a value chain with partners on an extranet
● Selling to consumers on a pay-per-download basis, through a Web site, etc

1.3 E-Commerce Definitions

The definition of e-commerce includes business activities that are business-to-business (B2B),
business-to-consumer (B2C), extended enterprise computing (also known as "newly emerging value
chains"), d-commerce, and m-commerce.
Ecommerce is simply a part e-business, more specifically, the trading aspect of e- business.
Although there are many definitions and explanations of e-commerce, the following definition
provides a clear distinction. There are many definitions and understanding about E- Commerce.
They are as follows:
1. According to the editor-in-chief of International Journal of Electronic Commerce, Vladimir Zwass,
‘Electronic commerce is sharing business information, maintaining business relationships and
conducting business transactions by means of telecommunications networks’.
2. Electronic Commerce is where business transactions take place via telecommunications networks,
especially the Internet – E. Turban, J. Lee, D. King and H.M. Chung,
3. Electronic commerce is about doing business electronically – P. Timmers
4. Electronic commerce or e-commerce refers to a wide range of online business activities for products
and services – Anita Rosen
5. It pertains to “any form of business transaction in which the parties interact electronically rather
than by physical exchanges or direct physical contact.” – MK, Euro Info Correspondence Centre
(Belgrade, Serbia),
6. E-commerce is usually associated with buying and selling over the Internet, or conducting any
transaction involving the transfer of ownership or rights to use goods or services through a
computer-mediated network. – Thomas L. Mesenbourg
7. A more complete definition is: E-commerce is the use of electronic communications and digital
information processing technology in business transactions to create, transform, and redefine
relationships for value creation between or among organizations, and between organizations and
 individuals. – Emmanuel Lallana, Rudy Quimbo, Zorayda Ruth Andam, ePrimer From your reading
it should be apparent to you that electronic commerce is more than online shopping.

1.4 E-Commerce – Features

Electronic commerce, or e-Commerce, refers to the purchasing and selling of goods or
services via electronic means, such as the Internet or mobile phone applications. It may also refer to
the process of creating, marketing, servicing and paying for services and goods. Businesses,
governments and the public can participate in e-Commerce transactions. The following discussion
will elicit the unique features of e-commerce. The unique features of e-commerce technology
include:
1.4.1 Ubiquity:

e-Commerce is ubiquitous, It is available just about everywhere and at all times by using
internet and Wi-Fi hotspot such as airport, coffee cafe and hill station places. Consumer can connect
it to the Internet at any time, including at their homes, their offices, on their video game systems
with an Internet connection and mobile phone devices. E-Commerce is ubiquitous technology
which is available everywhere Moreover, individuals who have cell phones with data capabilities
can access the Internet without a Wi-Fi connection.
1.4.2 Global reach:
The potential market size is roughly equal to the size of the online population of the world. E-
Commerce Technology seamlessly stretches across traditional cultural and national boundaries
and enables worldwide access to the client. E-Commerce website has ability to translate the
multilingual websites as well as allow the access to visitors all over the world, purchase products
and make business interactions.
1.4.3 Universal standards:
The technical standards of the Internet are shared by all of the nations in the world. The whole
online tradition are growing and expanding their features in the world. To development any kind of
business need Internet and communication application which make the business relationship more
lovingly and attractive for secure business and successful business.
1.4.4 Richness:

Users can access and utilize text messages and visual and audio components to send and
receive information. An individual may see information richness on a company's blog if a post
contains a video related to a product and hyperlinks that allow him to look at or purchase the
product and send information about the post via text message or email.
1.4.5 Interactivity:

E-commerce technologies allow two-way communication between the merchant and the
consumer. As a result, e-Commerce technologies can adjust to each individual’s experience. For
example, while shopping online, an individual is able to view different angles of some items, add
products into a virtual shopping cart, checkout by inputting his payment information and then
submit the order.
1.4.6 Personalization:

Technologies within e-Commerce allow for the personalization and customization of

marketing messages that groups or individuals receive. An example of personalization includes
product recommendations based on a user's search history on a Web site that allows individuals to
create an account.
1.4.7 Information density:
The use of e-Commerce reduces the cost to store, process and communicate information, At
the same time, accuracy and timeliness increase; thus, making information accurate, inexpensive
and plentiful. For example, the online shopping process allows a company to receive personal,
shipping, billing and payment information from a customer all at once and sends the customer's
information to the appropriate departments in a matter of seconds.
1.4.8 Social technology:
E-Commerce technology has tie up the social media networking application to provide the
best source of content sharing technology and e-Marketing systems. You can share your content or
data easily in just one click.
1.4.9 User-Generated Content:
Social networks use e-Commerce technologies to allow members, the general public, to share
content with the worldwide community. Consumers with accounts can share personal and
commercial information to promote a product or service. When a company has a professional social
networking account, a member of the same social network has the option of associating himself
with the company or a product by saying he likes or recommends it. When an individual updates his
status on a social networking account, he may also mention a product or company by name, which
creates word-of-mouth advertising.

Differences between Traditional Commerce and E-Commerce

Point of E-commerce Traditional Commerce

Difference
Cost E-commerce is cost effective. The cost Cost has to be incurred for the role of
Effective incurred on middlemen is eliminated as middlemen to sell the company’s
there is direct link between the business products. The total overhead cost is
and the customers. . The total overhead more. Running a traditional business
cost required to run e- business is require a head office with several
comparatively less. Running an e- branches to cater to the needs of
business require only a customers situated in different places.
head office. Overhead cost can be
eliminated by hosting a website.
Time A lot of valuable time for both the It takes a lot of time to complete a
consumers and business is saved. A transaction.
product can be ordered and the
transaction can be completed in few
minutes through internet.
Convenien It provides convenience to both It is not so convenient method as that
ce customers and business. It provides of
better connectivity for its prospective E-commerce. Customers have to move
and potential customers as the website away from their home or work place
can be accessed virtually from to locate and purchase a desired
anywhere, anytime through internet. It product.
is not necessary to move away from
their work place or home to locate and
purchase a desired product.
Accessibili It is easy to expand the size of the It may not be easy to expand the size
ty market from regional to international of the market from regional to national
level. By hosting a website, a business level. Business organizations have to
can penetrate into global market. It is incur a lot of expenses to enter
quite easy to attract customers from international market.
global markets at a marginal cost.
Introductio It is easy to introduce a product on the It takes a lot of time and money to
n of new website and get the immediate feedback introduce a new product and analyse
product of the customers. Based on the the response of the customers.
 response, the products can be Initially, cost has to be incurred to
redefined and modified for a successful carry out pilot
launch. surveys to understand the taste of the
customers.
Profit It helps the organization to enjoy The cost incurred on the middlemen,
greater profits by increasing sales, overhead, inventory and limited sales
cutting cost and streamlining operating pulls down the profit in traditional
processes. commerce.
Physical It does not allow physical inspection of It is possible to physically inspect
Inspection goods. goods
before the purchase.
Time Round the clock service is available. Business is open only for a limited
accessibilit time.
y
Product It not suitable for perishable goods and It is suitable for perishables and ‘touch
suitability high value items such as jewellery and and feel’ items.
antiques. It is mostly suitable for
purchasing tickets, books, music and
software.
Human It requires technically qualified staff It does not have such problems
resources with an aptitude to update themselves in associated with human resources.
the ever changing world. It has
difficulty in recruiting and retaining
talented people.
Customer The interaction between the business The interaction between the business
interaction and the customer is screen-to-face. and the consumer is a face-to-face.

Process Automated processing of business There are chances of clerical errors to

transactions helps to minimize the occur as there is manual processing of
clerical errors. business transactions.
Business Business relationship is characterized Business relationship is vertical or
relationshi by end-to-end. linear.
p
 Fraud Lot of cyber frauds take place in e- Fraud in traditional commerce is
commerce transaction. People generally comparatively less as there is personal
fear to give credit card information. interaction between the buyer and the
Lack of physical presence in markets seller.
and unclear legal issues give loopholes
for frauds to take place in e-
business transactions.
Informatio Little dependency on person to person Heavy dependency on information
n sharing information exchange. It provides a exchange from person to person. No
universal platform to support business uniform platform for information
activities across the globe. sharing as it depends heavily on
personal communication.
Method of Communication can be done in Communication is done in
Communic asynchronous way. Electronics system synchronous way. Manual
ation automatically handles when to pass intervention is required for each
communication to required person or do communication or transaction.
the transactions.
Strategy A uniform strategy can be easily It is difficult to establish and maintain
established and maintain. standard practices.

1.5 Functions of E-Commerce

The following are five functions you should be doing daily in your e-commerce business.
a) Search Engine Optimization (SEO)
● Generate unique relevant content. Google loves unique content that is related to what your site is all
about. Ensure you are using good keywords you want to focus on.
● Every page should have an H1 tag around what is the focus of the page, such as a product name,
category name, or static content title. Use H2 tags as well for other important page sections.
● Keywords in optimized page titles.
● Internal linking. Link keywords in your unique content to pages related to that keyword. This is
huge!!!
● Friendly URLs with related phrases. E.g. When talking about Zobrist’s eZcommerce solution, the
URL looks like this: http://www.zobristinc.com/our_solutions/eZ_Commerce/
b) Selecting New Products
● Sell what the customer wants to buy, not what you want to sell! This is a common mistake,
especially when merchandisers are given a great price to sell a particular product. If nobody wants
to buy that product, it doesn’t matter what price you set it at.
● Find out what customers want. What is your value proposition on products you sell? Capitalize on
your niche!
c) Merchandising New Productions
● Pictures, pictures, pictures! It is very important to have high quality images of the products.
● Hero photos: if you have a big seller, feature it on a category page with a hero image of the product.
● Promote latest releases in your newsletters and feature them in categories or on your homepage.
● Market to customers who have purchased related items in the past.
d) Customer Service
● Make your customers happy.
● Delivery orders on time.
● Ensure order accuracy.
● Reship promptly if a package was failed to be delivered to the customer, if it came damaged, or if it
was missing parts.
● Don’t try to save every penny on an order. You may need to take a loss to make a customer happy
in order to retain their loyalty to you, and therefore be very valuable for many orders to come
 e) Monitoring your KPIs / Analytics
● Monitor your analytics reports. View what items are selling and bubble them to the top of
product listings so customers can find them easier. A great tool for this, if you are on IBM
WebSphere Commerce, is our Smart Merchandiser product. With it, you can see analytic
overlays on each product in each category to help you make smart merchandising decisions.
● Tackle cart abandonment. Remarket those products to the customers if you have their email
addresses. Incentivize them to complete their checkout within X days.
1.6 Scope of E-Commerce
Today, online shopping is a reality in India. The market place is flooded with several e-
commerce options for shoppers to choose from. In the recent past, the growth of e-commerce
industry in India has been phenomenal as more shoppers have started discovering the benefits of
using this platform. There is enough scope for online businesses in the future if they understand
the Indian shopper’s psyche and cater to their needs. Listed below are the reasons that guarantee
the future prospect of E-commerce in India.
⮚ Enhancing domain registrations

⮚ Rising internet users

⮚ Easy access to internet

⮚ Awareness about internet even in rural areas

⮚ Rising number of cyber cafes

⮚ Growing need for E-commerce

a) Cash on delivery (COD)

Indian e-commerce industry has evolved over a period of time with innovations that have
changed the rules of the game globally. COD is one such example. In a country where credit card
penetration is much lower than other developed markets and where e-commerce companies are
still working hard to build trust among shoppers, introducing cash on delivery has been one of
the key factors for the success of the segment. At present, COD is the preferred payment mode
for close to 55-60% of all online transactions in the fashion and lifestyle segment in India.
Executing COD efficiently and painlessly for the customer is critical to the success of any e-
commerce player in the country
b) Delivering experiences
E-commerce needs to focus on customer experience to build trust and confidence.
Customer experience encompasses every interaction of a customer from placing an order to
interacting with customer service team, to the actual delivery experience. Providing a great
delivery experience is one of the core aspects to delighting customers. This not only mean faster
deliveries but also consistency and reliability. The more faith the customer has in your delivery
service, the more likely he is to buy again. Besides, it builds a good brand image and word-of-
mouth publicity.
c) Growing the base
India has more than 130 million online users at present, out of which as many as 10% are
engaging in online transactions. The online user base is expected to cross 300 million in the next
2 – 3 years and a larger percentage of people are expected to transact online by the end of 2015.
This large base will provide vast scope for e-commerce businesses to establish themselves in
India.
d) Growing opportunities
The e-commerce industry is growing at a rapid pace and changing the dynamics of the
retail industry. In the coming years, e-commerce is expected to contribute close to 8-10% of the
total retail segment in India. This growth is bound to continue provided e-commerce companies
focus on innovating, building strong technology infrastructure and delivering the best customer
experience.
e) Online Travel Segment
The online travel segment has seen a CAGR of 55.5% from 2007-2012. The is due to rise
of disposable income, surge in demand for domestic travel and the boom of the tourism industry.
Domestic travel contributed to as much as 50% of the total market, followed by railways tickets,
international air tickets, hotel bookings and bus tickets.
f) E-Tailing

E-tailing encompasses buying consumer items like apparels, electronic devices, home and
kitchen appliances, jewellery, online. Competition is intense due to low entry barrier of this
segment. However, Amazon.com, flipkart, snapdeal.com,jabong.com, and myntra.com are some
of the major players. This segment is expected to grow further as people become more pressed
for time. Also the choice that e-tailing sites offer to customers will drive demand for this
segment. However, there will
 intense price based competition in this sector and consolidations are in the order.
g) Online Financial Services
The financial services segment includes applying for insurance, paying online bills, and
premiums and online transactions for financial services. The costs of these insurance policies are
lesser with premiums being 40%-60% cheaper. This is a win-win situation for both the insurance
provider and the customers. Also the convenience provided by online portals has led to more
customers choosing the online route for bill payment.
h) Classifieds

It is in a very promising stage and has lot of scope for growth. Online advertising is lot
cheaper than conventional methods and unlike the latter, it is not constrained to a geographic
location. The growth is mainly fuelled by services like online job (60% of the segment), online
matrimony, B2C classifieds and B2B classifieds. Naukri.com, timesjob.com, monster.com are
the major players in the job market while jeevansathi.com, shaadi.com are the major matrimonial
sites.
i) Other online Services
These include sites offering online services like buying entertainment tickets, food and
grocery.

1.7 Benefits and limitations of E-Commerce

1.7.1 Benefits of E-Commerce
Electronic commerce can increase sales and decrease costs. Advertising done well on the
web can get even a small firm’s promotional message out to potential consumers in every
country in the world. A firm can use electronic commerce to reach narrow market segments that
are geographically scattered. The web is particularly useful in creating virtual communities that
become ideal target markets for specific types of products or services. A virtual community is a
gathering of people who share a common interest, but instead of this gathering occurring in the
physical world; it takes place on the internet.
Some key benefits of e-commerce are summarized below:
❖ By becoming e-commerce enabled, businesses now have access to people all around the world.
In effect all e-commerce businesses have become virtual multinational corporations.
❖ The cost of creating, processing, distributing, storing and retrieving paper-based information has
decreased.
❖ The pull-type processing allows for products and services to be customized to the customer’s
requirements.
❖ Enables reduced inventories and overheads by facilitating ‘pull’-type supply chain management
– this is based on collecting the customer order and then delivering through JIT (just-in-time)
manufacturing.
❖ The Internet is much cheaper than value added networks (VANs) which were based on leasing
telephone lines for the sole use of the organization and its authorized partners. It is also cheaper
to send a fax or e-mail via the Internet than direct dialing.
❖ Software and music/video products can be downloaded or e-mailed directly to customers via the
Internet in digital or electronic format.
❖ Businesses can be contacted by or contact customers or suppliers at any time.

❖ 24/7 access: Enables customers to shop or conduct other transactions 24 hours a day, all year
round from almost any location.
❖ Customers not only have a whole range of products that they can choose from and customize, but
also an international selection of suppliers.
❖ Customers can ‘shop’ around the world and conduct comparisons either directly by visiting
different sites, or by visiting a single site where prices are aggregated from a number of
providers and compared (for example www.moneyextra.co.uk for financial products and
services).
❖ This can range from the immediate delivery of digitized or electronic goods such as software or
audio-visual files by downloading via the Internet, to the on-line tracking of the progress of
packages being delivered by mail or courier.
❖ An environment of competition where substantial discounts can be found or value added, as
different retailers view for customers. It also allows many individual customers to aggregate their
orders together into a single order presented to wholesalers or manufacturers and obtain a more
competitive price.
❖ Enables more flexible working practices, which enhances the quality of life for a whole host of
people in society, enabling them to work from home. Not only is this more convenient and
provides happier and less stressful working environments, it also potentially reduces
 environmental pollution as fewer people have to travel to work regularly.
❖ Enables people in developing countries and rural areas to enjoy and access products, services,
information and other people which otherwise would not be so easily available to them.
❖ Facilitates delivery of public services like health services available over the Internet (on- line
consultation with doctors or nurses), filing taxes over the Internet through the Inland Revenue
website.
❖ A business can reduce the costs of handling sales inquiries, providing price quotes, and
determining product availability by using electronic commerce in its sales support and order-
taking processes.
❖ Electronic commerce provides buyers with a wider range of choices than traditional commerce.

❖ Electronic commerce provides buyers with an easy way to customize the level of detail in the
information they obtain about a prospective purchase.
❖ Electronic payments of tax refunds, public retirement, and welfare support cost less to issue and
arrive securely and quickly when transmitted over the internet.
❖ Electronic payments can be easier to audit and monitor than payments made by cheque,
providing protection against fraud and theft losses.
❖ Electronic commerce can also make products and services available in remote areas.

1.7.2 Limitations of E-Commerce

Most of the disadvantages of e-commerce stem from the newness and rapidly developing
pace of the underlying technologies. Some of the key disadvantages of are given below:
⮚ Return-on-investment is difficult to calculate.

⮚ Many firms have had trouble recruiting and retaining employees with the technological, design,
and business process skills needed to create an effective electronic commerce presence.
⮚ Difficulty of integrating existing databases and transaction-processing software designed for
traditional commerce into the software that enables electronic commerce.
⮚ Many businesses face cultural and legal obstacles to conducting electronic commerce

⮚ Lack of sufficient system security, reliability, standards and communication protocols.

⮚ Rapidly evolving and changing technology, so there is always a feeling of trying to ‘catch up’
and not be left behind.
⮚ Under pressure to innovate and develop business models to exploit the new opportunities which
sometimes leads to strategies detrimental to the organization. The ease with which business
models can be copied and emulated over the Internet increases that pressure and curtails longer-
term competitive advantage.
⮚ Facing increased competition from both national and international competitors often leads to
price wars and subsequent unsustainable losses for the organization.
⮚ Problems with compatibility of older and ‘newer’ technology. There are problems where older
business systems cannot communicate with web-based and Internet infrastructures, leading to
some organizations running almost two independent systems where data cannot be shared. This
often leads to having to invest in new systems or an infrastructure, which bridges the different
systems. In both cases this is both financially costly as well as disruptive to the efficient running
of organisations.
⮚ Computing equipment is needed for individuals to participate in the new ‘digital’ economy,
which means an initial capital cost to customers.
⮚ A basic technical knowledge is required of both computing equipment and navigation of the
Internet and the World Wide Web.
⮚ Cost of access to the Internet, whether dial-up or broadband tariffs.

⮚ Cost of computing equipment. Not just the initial cost of buying equipment but making sure that
the technology is updated regularly to be compatible with the changing requirement of the
Internet, websites and applications.
⮚ Lack of security and privacy of personal data. There is no real control of data that is collected
over the Web or Internet. Data protection laws are not universal and so websites hosted in
different countries may or may not have laws which protect privacy of personal data.
⮚ Physical contact and relationships are replaced by electronic processes. Customers are unable to
touch and feel goods being sold on-line or gauge voices and reactions of human beings.
⮚ A lack of trust because they are interacting with faceless computers.
 ⮚ As people become more used to interacting electronically there could be an erosion of personal
and social skills which might eventually be detrimental to the world we live in where people are
more comfortable interacting with a screen than face to face.
⮚ There is a potential danger that there will be an increase in the social divide between technical
haves and have-nots – so people who do not have technical skills become unable to secure better-
paid jobs and could form an underclass with potentially dangerous implications for social
stability.
⮚ Reliance on telecommunications infrastructure, power and IT skills, which in developing
countries nullifies the benefits when power, advanced telecommunications infrastructures and IT
skills are unavailable or scarce or underdeveloped.
⮚ As new technology states how do you dispose of all the old computers, keyboards, monitors,
speakers and other hardware or software?
⮚ Facilitates Just-In-Time manufacturing. This could potentially cripple an economy in times of
crisis as stocks are kept to a minimum and delivery patterns are based on pre-set levels of stock
which last for days rather than weeks.
1.8 The Internet and India
Before the appearance of VSNL's GIAS, Internet had been in India for many years in the
form of ERNET. However, it was not possible for many people to get access to it, as it was
meant for only the educational and research communities.
1.8.1 Educational Research Network (ERNET)
Internet in India was established as ERNET. It was a joint undertaking of the Department
of Electronics (DOE) of the Government of India, and the United Nations Development Program
(UNDP), which provides technical assistance to developing nations. ERNET is one of the most
successful operations that UNDP has funded.
1.8.2 Gateway Internet Access Service (GIAS)
On August 15th 1995, Videsh Sanchar Nigam Limited (VSNL) -- the Indian international
trunk telephone carrier company -- launched the Gateway Internet Access Service (GIAS).
Subsequently, 6 nodes were established at Mumbai, Delhi, Madras, Calcutta, Bangalore and
Pune. Each GIAS node is connected to Internet via high speed MCI circuits having a bandwidth
of approximately 10 Mbps
 Users in remote areas of India can reach GIAS service via I-NET. The Department of
Telecommunication (DOT) has a wide-spread network in India called I-NET, which has direct
connectivity to each GIAS node.
1.8.3 Timeline Chart
The timeline chart showing the development of Internet in India is given below:
1986: ERNET project starts up; email exchange using UUCP protocol established between
National Centre for Software Technology, Bombay, and IIT Bombay
1987: Email exchange between ERNET institutions in metros; TCP over X.25 established
between the ERNET gateway at NCST and internet via CWI in Amsterdam
1988: Leased lines used to connect ERNET partner institutions to ERNET gateway in Bombay
1989: LWBBS (Live Wire BBS) and BBS CiX launch online services; VSNL commissions a
Gateway Packet Switching System (GPSS) running X.25 protocol; ERNET acquires an analog
leased line operating at 9600 bps to connect ERNET gateway at NCST, Bombay, to UUNET in
the US
1990: TCP/IP implemented for communication between ERNET centres connected by leased
lines
1991: LWBBS turns into a paid subscription service and expands to other cities such as
Ahmedabad, Madras (Chennai), Pune, Calcutta (Kolkata), Baroda, Vapi
1992: Business India launches aXcess, a value-added service offering email as well as e-news,
stock quotes
1994: ERNET establishes a hub in Bangalore to provide TCP/IP-level connectivity over satellite
links to locations otherwise unreachable by dedicated circuits
1995: VSNL introduces public internet access in India via dialup services in 6 cities on August
15, 1995; India World portal launches on March 13
1996: Major newspapers such as The Times of India , The Hindu, The Indian
Express and Hindustan Times set up websites; Rediff.com launched; India’s first cyber cafe
launched in Mumbai
1997: Tamil newspaper Dinamani sets up website; Hotmail creator Sabeer Bhatia sells Hotmail
to Microsoft for $400 million; first online banking site launched by ICICI Bank; Naukri.com
launched; IndusInd also launches website; Khel.com cricket site launched
1998: Private ISPs allowed to set up internet infrastructure; LWBBS’s Pune node, JabberWocky
operated by WMI becomes the first ISP licensee; Sify becomes India’s first national ISP license
holder; first major hacking case (teenagers hack data on BARC’s servers); launch of NASSCOM
to promote IT industry by efforts of Dewang Mehta; cyber cafes start mushrooming across
Indian cities; annual India Internet World conference series starts in Pragati Maidan
1999: IndiaWorld sold to Sify for US$115 million (Rs 499 crore) triggering the dotcom boom in
India; WebDunia, India’s first and most successful Hindi portal, launched; large number of
dotcoms appear, mostly modelled as e-marketplaces but have untested revenue models and big
spends; Sify sets up hundreds of public internet kiosks under the brand name i-Way; New
Telecom Policy 1999 launched by DoT; India ISPs allowed to set up satellite international
gateways; India Info portal launched
2000: Parliament passes Information Technology Act 2000; foreign portals like Yahoo and MSN
set up Indian sites; Bazee.com launched based on the eBay model; Indya.com launched with Rs
4.5 crore campaign blitz; birth of online journalism: Tehelka.com exposes cricket betting
scandal; ITC launches e-Choupal initiative to take the internet to villages; Railtel Corporation of
India launched; NSE launches online stock trading; cable internet starts replacing dialup
connections; 2000: Rediff IPO on NASDAQ; Sulekha.com legal entity founded in Austin, Texas
2001: Subscription sites set up by thenewspapertoday.com and NaiDunia.com; Times of India
group launches 8888 mobile service; India Today group launches 2424 mobile service; first
cyber crime-related arrest (two arrested for hacking go2nextjob.com); Indian Railways launches
online ticketing site (irctc.com) which soon becomes India’s largest e-revenue earner; India’s
first cyber crime police station opens in Bangalore; Dotcom bubble bursts -- many sites close,
some go into hibernation; C-DAC announced the launch of its Multilingual Advanced News
Automation System: MANAS; GAIL India launched; Andhra Pradesh state government launches
e-procurement portal and extends public internet kiosk facility to every mandal office
2002: Malayalam Varikha.com, the website of weekly Malayalam magazine, launches paid site;
NPTEL (National Programme on Technology Enhanced Learning) initiative launched; India’s
first teleradiology company Teleradiology Solutions launched; Indian ISPs allowed to set up
submarine international gateways; Wikipedia.org adds Assamese, Punjabi, Nepali, Oriya,
Malayalam content
2003: Air Deccan launches India’s first online air ticketing site; NIXI (National Internet
Exchange of India) set up; WiFi (2.4GHz) deregulated by GoI; official representation from
India’s DoT and DIT at WSIS 2003 in Geneva; AirTel launches broadband internet access;
Wikipedia.org adds Bhojpuri, Marathi, Kannada, Hindi, Kashmiri, Tamil, Telugu, Gujarati,
Sanskrit, Sindhi content
2004: DoT declares its Broadband Policy; BSNL introduces broadband; eBay buys Bazee.com;
Monster.com buys Jobsahead.com; NIXI takes over management of the .IN Registry; ITC e-
Choupal demonstrates rural internet adoption; Google starts India office; Wikipedia.org adds
Bengali, Urdu content; Sulekha starts Hindi operations; Ebay India CEO arrested for alleged sale
of porn online, but later released -- the arrest is criticised by industry
2005: Social networking sites like Orkut make their presence felt; online registration of .IN
domains begins; Indic language user interface appears on basic cell phones
2006: Facebook makes India debut; OneIndia.in portal launched; national E-Governance Plan
launched; Naukri.com IPO in India
2007: Major media websites switch to tab-based design; Arzoo.com re-launched as a travel
portal by Sabeer Bhatia; Twitter makes its India debut; Google News launches Hindi service
2008: India sets a world record by sending 10 satellites into orbit in a single launch; Apple
iPhone debut in India; Internet Governance Forum (IGF) held in India; Google News launches in
Tamil, Malayalam, Telugu
2009: GoI puts forth the draft policy on Indian language IDNs

2010: 3G spectrum auctioned by telecom players after two-year-long process; WiMax licenses
auctioned; GoI announces National IPv6 Roadmap; TRAI releases National Broadband Plan;
MakeMyTrip lists on NASDAQ at over US$1 billion; Facebook overtakes Orkut in India
 2011: Mobile number portability launched; ICANN approves 7 Indian language Internationalised
Domain Names (IDNs) for India; iPad enters India market after its Dell and Samsung rivals;
Pearson Group takes controlling stake in e-education startup TutorVista; Indian government
launches National Knowledge Network (NKN); India internet start-ups Komli Media,
LetsBuy.com bag $21 million venture capital deals; India’s 2011 census uses social media; IIT
courses, lectures made available online

1.9 E-commerce opportunities and challenges for industries

E-Commerce is presently an essential ingredient of India’s trade facilitation policy. Since
1991, after economic reforms explicitly took place in India, the need to facilitate international
trade both through policy and procedure reforms has become the foundation stone of India’s
trade and fiscal policies. Resultantly, a technological revolution accompanied by the wide spread
use of the Internet, web technologies and their applications took place. E-Commerce has changed
and is still changing the way business is conducted around the world.
1.9.1 Opportunities:

There is a rising awareness among the businesses in India about the opportunities offered
by e-commerce. E-commerce provides a new place for connecting with consumers and
conducting transactions. Virtual stores operate round the clock.
a) Global Trade:
E-business is one of the major factors in the globalization of business. Other factors include
decreases in trade barriers, globalization of capital markets. Indian e-business has grown at a
compounded annual growth rate of 30% since FY09, and is expected to be $18 billion (around
Rs 1,116,00 crore) opportunity by FY15.
b) Virtual Businesses:
Business firms now have the ability to become virtual E-Business. Virtual business uses
electronic means to transact business as opposed to the traditional means of face to face
transaction.
 c) Lower search costs:
The Internet brings low search costs and high price lucidity. E-business has proved to be
highly cost effective for business concerns as it cuts down the cost of marketing, processing,
inventory management, customer care, etc.
d) Round the clock:
Customers can do transactions for the product or enquiry about any product/services
provided by a company anytime, anywhere from any location.
e) Greater Economic Efficiency:
Greater economic efficiency (lower cost) and more rapid exchange (high speed,
accelerated, or real-time interaction) are achieved with the help of electronic business.
The e-commerce market in India has grown by 34 percent in the last decade, was about
USD 600 million in 2011-12 and is expected to touch USD 9 billion by 2016 and USD 70 billion
by 2020. According to Forrester, the Indian e-commerce market is expected to grow at a CAGR
of over 57 percent between 2012 and 2016, which is the fastest within Asia-Pacific region.
1.9.2 Challenges:

The growth of ecommerce volumes in India is attracting the attention of players around the
world. Despite lower per-capita purchasing power, the population still makes India one of the
most attractive emerging markets for ecommerce. But India is far from being a bed of roses.
Here are the top 8 challenges that ecommerce businesses face in India.
a) Indian customers return much of the merchandise they purchase online.
Indian customers return much of the commodities they purchase online. E business in India
has many first time buyers. This means that they have not yet made up their mind about what to
expect from e-business websites. As a result, buyers sometimes fall prey to hard sell. But by the
time the product is actually delivered, they regret and return the goods. Returns are expensive for
e-business companies, as reverse logistics presents unique challenges. This becomes all the more
complex in cross border e-business.
b) Cash on delivery is the preferred payment mode.
Cash on delivery is the preferred payment mode. Low credit card access and low trust in
online transactions has led to cash on delivery being the preferred payment choice in India.
Unlike electronic payments, manual cash collection is painstaking, risky, and expensive.
c) Payment gateways have a high failure rate.
Indian payment gateways have an unusually high failure rate by global standards. E-
business companies using Indian payment gateways are losing out on business, as several
customers do not attempt making payment again after a transaction fails.
d) Internet penetration is low.
Internet penetration is low. Internet penetration in India is still a small fraction of what is
there in a number of western countries. The quality of connectivity is poor in several regions. But
both these problems are on their last legs. The day is not far when connectivity issues would not
feature in a list of challenges to e-business in India.
e) Feature phones still rule the roost.
Though the total number of mobile phone users in India is very high, a significant majority
still use feature phones, and not smart phones. As a result this consumer group is unable to make
e-business purchases on the move. Though India is still a couple of years away from the scales
tipping in favour of smart phones, the rapid downward spiral in the price of entry-level smart
phones is an encouraging indication.
f) Postal addresses are not standardized.
If an online order is placed in India, it is quite likely get a call from the logistics company
to ask about exact location. Clearly address is not enough. This is because there is little
standardization in the way postal addresses are written.
g) Logistics is a problem in thousands of Indian towns.
Given the large size of the country, there are thousands of towns that are not easily
accessible. The problem with logistics is compounded by the fact that cash on delivery is the
preferred payment option in India. International logistics providers, private Indian companies,
and the government-owned postal services are making a valiant effort to solve the logistics
problem.
 h) Overfunded competitors are driving up cost of customer acquisition.
The long-term prospects for ecommerce companies are so exciting that some investors are
willing to spend irrationally high amounts of money to acquire market share today. Naturally the
Indian consumer is spoiled for choice.

1.10 Future Scope and Growth

The growth of e commerce will be on two accounts: One is due to the changes in the
macro-economic parameters like disposable income, internet penetration, inflow of investments,
and the other due to segment specific factors.
a) Macro-economic factors
i) Personal Disposable Income will continue to rise
According to the International Monetary Fund (IMF), personal disposable income will rise;
it signals that the purchasing power of the people and their standard of living has increased. As a
result, demand for goods and services are expected to rise. With more disposable income, the
benefits of time saving offered by e-commerce will lead to growth in the sector.
ii) Number of active Internet users in India is poised to rise
Internet penetration has increased by a CAGR of 30% from 2007. There has been an
increase in internet user base and such trend is expected to continue. This will led to more
advertisement on the digital media. As advertisements increase, the trial rate and the repeat rate
for online retailing is likely to increase. This will trigger growth in both the travel and non travel
segment due to more customer acquisition.
iii) Demand for debit and credit cards will see a rise
The demand for debit and credit cards has also seen a steady rise over the last few years.
Most of the banks now provide online banking and debit card facility with every new account.
With the financial inclusion drive by the RBI, the number of bank accounts (and hence the
number of debit cards) will definitely see a rise. This coupled with rising disposable income will
invariably lead to more online transactions.
b) Segment Specific factors
In the online travel segment, growth of the tourism industry and demand of domestic travel
will have positive externalities on the e-commerce industry. With travel websites providing
additional features like hotel booking and package tours, the convenience factor offered byy
these websites will lead to growth. Additionally, internet gives users the a choice where they can
evaluate an offer, compare the prices and decide on the one that suit their demand. In the online
retail space, absence of showrooms and high cost of transportation prevents those in tier 2 cities
to access global brands thus increasing demand for online shopping.