Chapter-1

1.1 Electronic Commerce:

Electronic commerce, commonly known as E-commerce is trading in products or services

using computer networks, such as the Internet.

Electronic commerce draws on technologies such as mobile commerce, electronic funds

transfer, supply chain management, Internet marketing, online transaction processing,
electronic data interchange (EDI), inventory management systems, and automated data
collection systems.

Modern electronic commerce typically uses the World Wide Web for at least one part of
the transaction's life cycle, although it may also use other technologies such as e-mail.

Definition of E-commerce:

Sharing business information, maintaining business relationships and conducting business

transactions using computers connected to telecommunication network is called E-Commerce.

1.2 E-Commerce Categories:

1. Electronic Markets

Present a range of offerings available in a market segment so that the purchaser can

compare the prices of the offerings and make a purchase decision.

Example: Airline Booking System

2. Electronic Data Interchange (EDI)

• It provides a standardized system

• Coding trade transactions

• Communicated from one computer to another without the need for printed orders and

invoices & delays & errors in paper handling

• It is used by organizations that a make a large no. of regular transactions Example:

EDI is used in the large market chains for transactions with their suppliers

3. Internet Commerce

• It is use to advertise & make sales of wide range of goods & services.
• This application is for both business to business & business to consumer transactions.
 Example: The purchase of goods that are then delivered by post or the booking of
tickets that can be picked up by the clients when they arrive at the event.

1.3 Advantages Of E-commerce:

Buying/selling a variety of goods and services from one's home or business

Anywhere, anytime transaction

Can look for lowest cost for specific goods or service

Businesses can reach out to worldwide clients - can establish business partnerships

Order processing cost reduced

Electronic funds transfer faster

Supply chain management is simpler, faster, and cheaper using ecommerce

- Can order from several vendors and monitor supplies.

- Production schedule and inventory of an organization can be inspected by

cooperating supplier who can in-turn schedule their work

1.4 Disadvantages Of E-commerce:

Electronic data interchange using EDI is expensive for small businesses

Security of internet is not very good - viruses, hacker attacks can

paralise e-commerce

Privacy of e-transactions is not guaranteed

 E-commerce de-personalizes shopping

1.4 Advantages of E-Commerce to Customers

• Reduced Prices:- Costs of products are reduced since the stages along the value chain are
decreased. For instance, intermediaries can be eliminated by the company directly selling to the
customers instead of distributing through a retail store.
• 24-Hour Access:- Online businesses never sleep as opposed to brick and mortar businesses.
E-Commerce allows people to carry out businesses without the barriers of time.
• Global Marketplace:- Consumers can stop anywhere in the world. Currently according to
World Trade Organization (WTO) there are no custom duties put on products bought and traded
globally electronically. This also provides wide selection of products and services to consumers.
• More Choices:- Provides consumers with more choices. For e.g. before making any
purchase, customer can study about all the major brands and features of any item. It also
provides consumers with less expensive products and services by allowing them to shop in many
places.

Advantages of E-Commerce to Businesses

• Increased potential market share:- The internet enables businesses to have access to
international markets thereby increasing their market share. Companies can also achieve greater
economies of scale.
• Low cost Advertising:- Advertising on the internet costs less than advertising on print or
television depending on the extent of advertisement.Advertising on the internet itself is less
costly since there is less cost associated with it in terms of printing and limited television spots.
• Low barriers to Entries:- Anyone can start up a company on the internet. Start-up costs are a
lot lower for companies since there is less need for money for capital.
• Strategic Benefits:- The Strategic benefits of making a business e-commerce enabled is that
it helps reduce the delivery time, labour cost and the cost incurred in document preparation, data
entry, error detection etc.
Disadvantages of E-Commerce
• Hidden Costs:- Although buying online is convenient, the cost of this convenience is not
always clear at the front end. For e.g. on-line purchases are often accompanied by high shipping
and re-stocking fees, a lack of warranty coverage and unacceptable delivery times. In fact, too
many e-commerce companies have developed a reputation of overcharging for shipping and
handling.
• Lack of Security:- One of the main roadblocks to the wide acceptance of e-commerce by
businesses and consumers alike is the perceived lack of adequate security for on-line
transactions.
For e.g. Consumers are growing increasingly worried about providing credit card information
over the Internet.
During the past few years, the press has been filled with reports about hackers breaking into e-
business and stealing credit card information.
• Lack of Privacy:- Customers also worry about the privacy implications of data gathered by
organizations of all types and sizes. Even at the simplest data level, sales information is stored in
databases connected to web servers, thus exposing the information to cyber criminals. Because
data gathering on the web is so easy, databases routinely contain information about customer
purchasing habits, credit information and so on. In many cases, companies sell customer
database information to marketing companies. In turn, the marketing companies engage in
massive e-mail campaigns to attract new customers. It doesn’t take long for the customer’s email
box to be filled with unwanted email (also known as Spam).
• Network Unreliability:- Although the Internet is designed to overcome the single point of
failure problem, there have been several well-publicized incidents of network failures during the
past few years.
Network reliability problems may be generated by such factors as:-
Ø Equipment failure in the network connection provider.
Ø Accidental problems caused by nature-such as lightning, floods, earthquakes that affect
communication lines.
Ø Long response time due to increased network traffic or inadequate bandwidth.
• Low Service Levels:- Another common complaint about doing business online is the low
level of customer service that online companies tend to provide. Although technology has
automated business transactions to a large extent, there remains a real need for the human touch.
Therefore e-commerce websites must provide:-
Ø A pleasant and problem free pre-ordering and ordering experience. The website design is an
important interface.
Ø Readily available easily used feedback options.
Ø Quick complaint resolution.
Ø Timely and low-cost shipping delivery to customers.

1.5 Threats of E-commerce:

Hackers attempting to steal customer information or disrupt the

site A server containing customer information is stolen.

Imposters can mirror your ecommerce site to steal customer money

Authorised administrators/users of an ecommerce website downloading hidden active

content that attacks the ecommerce system.

A disaffected employee disrupting the ecommerce system.

It is also worth considering where potential threats to your ecommerce site might come
from, as identifying potential threats will help you to protect your site. Consider:

Who may want to access your ecommerce site to cause disruption or steal data; for example
competitors, ex-employees, etc.

What level of expertise a potential hacker may possess; if you are a small company that
would not be likely to be considered a target for hackers then expensive, complex security
may not be needed.

1.6 Features of E-Commerce:

Ubiquity

Internet/Web technology is The marketplace is extended beyond traditional available

everywhere: at work, at home, and boundaries and is removed from a temporal and
elsewhere via mobile devices, anytime. geographic location. ―Marketspace‖ is created;
shopping can take place anywhere. Customer convenience is enhanced, and shopping costs
are reduced.

Global reach

The technology reaches Commerce is enabled across cultural and across national
boundaries, around the earth. national boundaries seamlessly and without modification.
―Market space includes potentially billions of consumers and millions of businesses
worldwide.
 Universal standards

There is one set of There is one set of technical media standards technology standards,
namely Internet across the globe.
Richness

Video, audio, and text messages Video, audio, and text marketing messages are are
possible. integrated into a single marketing message and consuming experience.
Interactivity

The technology works Consumers are engaged in a dialog that through interaction with the
user. dynamically adjusts the experience to the individual, and makes the consumer a co-
participant in the process of delivering goods to the market.
Information density

The technology Information processing, storage, and reduces information costs and raises
quality. communication costs drop dramatically, while currency, accuracy, and timeliness
improve greatly. Information becomes plentiful, cheap, and accurate.
Personalization/Customization

The Personalization of marketing messages and technology allows personalized messages

to customization of products and services are be delivered to individuals as well as groups.
based on individual characteristics.

1.7 Business models of e-commerce:

There are mainly 4 types of business models based on transaction party.

Business-to-Consumer/Customer (B2C)

In a Business-to-Consumer E-commerce environment, companies sell their online goods to

consumers who are the end users of their products or services. Usually, B2C E-commerce web
shops have an open access for any visitor, meaning that there is no need for a person to login in
order to make any product related inquiry.
Business-to-Business (B2B)

In a Business-to-Business E-commerce environment, companies sell their online goods to other

companies without being engaged in sales to consumers. In most B2B E-commerce
environments entering the web shop will require a log in. B2B web shop usually contains
customer-specific pricing, customer-specific assortments and customer-specific discounts.

Consumer/Customer-to-Business (C2B)

In a Consumer-to-Business E-commerce environment, consumers usually post their products or

services online on which companies can post their bids. A consumer reviews the bids and selects
the company that meets his price expectations.
Consumer-to-Consumer (C2C)

In a Consumer-to-Consumer E-commerce environment consumers sell their online

goods to other consumers. A well-known example is eBay.

1.8 E-Governance:

E-governance is the application of information and communication technology (ICT) for

delivering government services, exchange of information communication transactions,
integration of various stand-alone systems and services between government-to-customer
(G2C), government-to-business (G2B), government-to-government (G2G) as well as back
office processes and interactions within the entire government framework.

Through e-governance, government services will be made available to citizens in a

convenient, efficient and transparent manner. The three main target groups that can be
distinguished in governance concepts are government, citizens and businesses/interest
groups. In e-governance there are no distinct boundaries.

Business - to - Government (B2G)

B2G model is a variant of B2B model. Such websites are used by government to trade and
exchange information with various business organizations. Such websites are accredited by
the government and provide a medium to businesses to submit application forms to the
government.
Government - to - Business (G2B)

Government uses B2G model website to approach business organizations. Such websites
support auctions, tenders and application submission functionalities.

Government - to - Citizen (G2C)

Government uses G2C model website to approach citizen in general. Such websites
support auctions of vehicles, machinery or any other material. Such website also provides
services like registration for birth, marriage or death certificates. Main objectives of G2C
website are to reduce average time for fulfilling people requests for various government
services.