Chapter # 1

Introduction
to E-Commerce
Introduction to E-Commerce Chapter 1

INTRODUCTION TO E-COMMERCE:

Electronic Commerce (e-commerce) is defined as the conduct of commerce in goods and

services, with the assistance of telecommunications and telecommunications-based tools such as
the Internet.

E-commerce is often used in a much broader sense, to mean essentially the same as electronic
business (EB). This includes for example, buying and selling products with digital cash via
Electronic Data Interchange (EDI).

Examples of Electronic Business that are not E-commerce include registration and licensing
processes, student enrolment, and court administration.

E-commerce encompasses many areas, which include electronic catalogues that refers to means
whereby sellers can communicate their offerings to potential buyers. Also, electronic data
interchange (EDI) that refers to a particular family of standards for expressing the structured data
that represent E-commerce transactions; and electronic auctions which is a particular set of
mechanisms that help in the setting of prices.

E-commerce can be understood as a system designed as an online storefront that manages orders
and inventory, processing transactions, where people can buy and sell goods and services,
including sports, computers, hobbies, antiques, electronics, books, music, automobiles, holidays
and much more, all around the world. The goods and services available through E-commerce can
be finished goods as well as raw materials for the manufacture of other goods or services that are
provided for the same reason.

As a system, E-commerce built its own tools that would help its users set themselves in a new
specific context where they now find new ways of communicating, buying, selling, and
interacting in the market. This has been true to the point that new terminology, rules, and
conditions have been created; even the interaction between customers and sellers is different and
the notions of trust and confidence between them have been changed.
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With appearance of e-commerce new market and business concepts arose in the worlds
economy, such as Business to Business Electronic Commerce (B2B EC), that is the use of
private networks on the Internet to automate business transactions between companies.

The electronic data interchange (EDI) has been the primary standard that has been used. It has
typically been applied through the use of a Value Added Network (VAN) in which companies
are able to do business on line after obtaining the membership to a particular Value Added
Network (VAN).

The implementation costs for the technologies required excluded small businesses until the
emergence of the Web electronic data interchange (EDI) that, through the use of web
technologies, allows them to join in.

The Business to Consumer Electronic Commerce (B2C EC), which is a new retail sale model:
the web market. It enhances the previously used business models by offering a global audience,
unlimited product selection, portal sites that refer consumers to the actual purchasing site and it
focuses in marketing that can be quickly tailored to consumer.

The E-business can also be understood as a process, because it is the transformation of key
business processes through the use of the Internet technologies. Where large and small
companies are equally using the web to communicate with their partners, to connect with their
back-end data systems, and to complete transactions.

The web merges the standards, simplicity and connectivity of the Internet with core processes
that are the foundation of business.

The E- commerce process includes some basic selling catches such as:
Electronic presentation of goods and services
Online order taking and bill presentment
Automated customer account inquiries
Online payment and transaction handling
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Many companies have succeeded because they have used the E-business as a strategy,
developing a dynamic database-driven online catalogue, providing on-line ordering by securely
integrating the front-end presentation with an order entry system, moving static billing statement
data to an interactive Web-based presentment server and accepting electronic payment methods
for full transaction shopping or bill payment.

E-commerce is known to use some tools such as electronic commerce service and a particular
payment system, to make its use easier for customers and to secure transactions.

The Electronic Commerce Server can be best defined as a web software that runs some of the
main functions of an on-line storefront such as product display, on-line ordering, and inventory
management. The software works in conjunction with on-line systems to process payments.

A good example of commerce server could be Microsoft Site Server Commerce Edition that is
best suited for B2C applications.

The Payment System is based in three methods that are processes that use debit or credit card
models, electronic funds (a digital cheque), and the digital cash.

Browser plug-ins known as electronic wallets present vendors with identification, credit card
information and digital funds, and are freely made available to users through browser vendors
and merchant sites.

Digital Cash is a payment system that simply transfers digital representations of funds from one
computer to another. Like serial numbers on real dollar bills, the digital cash numbers are unique
identifiers carrying a given value, while each one is issued by a participating bank and represents
a specified sum of real money. One of its key features is that the real cash, it is anonymous and
reusable.

E-commerce is subject to regulations and standards, some of the standards that are in use include
but are not limited to Secure Electronic Transaction (SET), that have been widely adopted by
credit card companies as Visa, Master Card, American Express and Novus-Discover; and Bank
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Internet Payment Systems (BPIS), that is the joined effort being adopted by the major US banks,
government agencies and high technology firms.

This way of doing business offers benefits to its users that have been made possible by the birth
of the Internet. The E-commerce is based in a new concept that as been said previously, has
changed the way people buy, sell and interact in a business setting. It has created new criteria in
which a much more informed decision is made by the customer. This makes the sellers
responsible for informing in a suitable way now that the businesses are made totally consumer
oriented, being based on a model of perceived customer value in a business-to-consumer setting.
Where the customer value included in the model are valence of on-line shopping experience,
perceived product quality, perceived risk, and product price.

The online shopping and selling experiences changed in a way that it became less time
consuming and much less of a hassle for the customers, as well as for sellers who do not have to
incur in many costs as they did before, such as the cost of a selling force, extensive paper work,
and eventually the cost of installing or refurbishing a selling point.

As a benefit for both sellers and consumers, E-commerce is an optimal way to bring a product
and the opportunity to make a deal with it close to the consumer.

Something else that can be considered as a value added to the value chain of products sold
through E-commerce is that it is not the selling of the product in its self, but the selling of a good
service, which means that without seeing what you are buying you know or assume that you can
be confident of what you are buying and who you are buying it from. Trying to do on an Internet
based transaction would not be safe if this service was not reliable. By this it is said that an
important valued asset of E-commerce is the reliability on the service.

As consumers have on hand information available about each of the products including the
quality, the dimensions, the uses, and special features, they expect to receive the products just as
it was advertised, so the standards of quality are expected to be strongly enforced by the
manufacturers.
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Also very important becomes the easier way of comparing one product with the other and one
price with the other, which makes competition stronger and more price oriented, just with a click
and in minutes you can browse through the web pages of different manufacturers or providers of
the same kind of products and compare quality, services and prices.

The advantages that E-commerce provides for consumers and for sellers can be seen from
different scopes, depending on each industry and in some cases depending even on each
individual. In the mass consumption product industry for example E-commerce has been used to
sell from manufacturers to retailers and from retailers to final consumers. This two are different
processes because since the first one is a bigger more complex transaction, there is a greater risk
for the customer and for the seller.

Some companies, like the case of Pinturas Every, a paint factory located in Bogot Colombia, do
their online business only with the customers they have known for a while by doing solid
transactions. The reason for this as expressed by the companys general manager is that in the
developing countries the risk of loosing one business is too high and many people do not have
the conscience of doing good in the new way of doing business. When Pinturas Every began
doing online business they received a lot of orders that did not have a real recipient. This kind of
fraud caused big losses in terms not only of money but also in time and effort for the company.
Even having these kinds of problems, the use of telecommunications and specially the use of the
Internet has been a very important tool for companies in developing countries to expand their
frontiers. Pinturas Every for example is now on the World Wide Web and has been doing
business in countries such as Ecuador, Peru, Venezuela and Costa Rica. Now more than thirty
percent of the total sales of the company are due to exports whereas about seven years before
exports only accounted for five percent of the total sales, which was almost not worth the effort.
Other than increasing the amount of sales, the internet was also important for the company
because it allowed the customers to provide important information on time. Information such as
delivery delays and any type of claims and feedback is now received on a daily basis opposed to
years before when that information had to be collected by the sales representative each time the
customer was visited.
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Not only has the way of communicating with the customers changed for the company. The
internal scanning has been made easier because the different selling points of the company are
better and faster interrelated. The general manager has the ability to communicate decisions
made in the companys headquarters to employees around the country and the world in seconds
and even has personal contact with his employees at much lower cost than before.

For companies in the industry of Pinturas every and operating in developing countries E-
commerce has been a very helpful tool, but it also has limits. It is important to know that in such
countries the availability of technology is limited. Mostly the high middle and the upper classes
are the ones that have access to such things as Internet and telecommunications. Taking into
account that only one out of every eleven Colombians has a phone line. This lack of resources
makes online retailing a luxury for consumers and limits the range for the sellers because it
changes the target that retailers have to focus on. For these reasons companies like the one
described do not to get to the final consumer through E-commerce as easy as do companies in
other conditions in other parts of the world.

Opposed to this companies that have E-commerce as a very important tool but that also have
some limitations to its use, we can find another category of companies that rely totally on
technology like the internet to do business. Companies that fall into this category are Ebay,
Deremate.com and Amazon, to name a few. These kinds of companies offer unique benefits to
its users that have been made possible by the birth of the Internet. It allows efficient person-to-
person trading possibilities in an auction format on the Web. These companies are seen as
communities because they try to build sites providing their users with a common interaction
ground free from interference. These communities have rules that its members enforce.
The goal in companies of this type is to help build large communities all over the world. Places
beyond frontiers where users can get to know other users from their own country, from a
different city or neighborhood, even from other countries, thereby creating powerful trading
marketplaces as well as unique places to build friendships with people who have similar
interests.
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Sites like these are very important because they have changed the concept of selling and buying
by making it a much more informal process. Here it is not the manufacturer or retailer of
products offering their uniqueness or their service. What becomes important in these kinds of
businesses is that consumers can find exactly what they want even if it is no longer made and
sellers can offer whatever they want as long as they follow the set rules. Prices are found to be a
very important factor in the auctioning system because they are not as rigid as in normal
business. The seller offers his or her product and sets a probable price, then the buyer or different
buyers offer the amount of money they are willing to pay for that product and if the seller feels
that the offer is good enough the deal is made even if it was not what was expected at first. The
auctioning company makes profit from the commissions of each transaction that are pre-
established.

Also important in these way of doing business is that there is a high involvement of trust both
from buyers and sellers for the company and for each other because in these cases the negotiation
is not done with a company that is backed up by a good will, its done with an individual that
most of the times you hardly know. This is why companies that do business through the Internet
have to be aware of the possibilities of insurance they have.

Traditional and E-commerce businesses use the Internet to advertise goods and services and
communicate with customers, vendors and employees. Both types of business have used the
Internet to deliver some goods, such as music and software, and services, such as banking and
entertainment. The Internet technology that provides these opportunities also exposes its users to
liabilities in the form of infringement, malfunctions and viruses, to name a few.

Insurers say that E-commerce diverges from traditional commerce in two significant ways. First,
due to the wide use of the Internet, the number of suits involving an E-commerce transaction can
be expected to be many times greater than a similar traditional transaction. Second, novel issues
of international law and multi-jurisdictional claims will drive up the costs of defending and
indemnifying the insured.
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By analyzing the previous points it can be clearly stated that technology and its advances have
brought new ways of doing business, mostly facilitating the way in which transactions are made
and reducing the problems that were incurred in because of distances and communication costs.
Important advances in telecommunications have made the world smaller and the markets bigger.
E-commerce as one of these advances has been taken as an advantage by many companies
around the world that have expanded its market, increased the levels of their sales and improved
the way to communicate with their customers, suppliers and employees. Also using E-commerce
as their pillar companies have been created to make the greatest use out of the new technologies
and make profits out of the service of providing platforms for people to interact and do
transactions through the Web.

HISTORY:

At first, the term ecommerce meant the process of execution of commercial transactions
electronically with the help of the leading technologies such as Electronic Data Interchange
(EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange
business information and do electronic transactions. The ability to use these technologies
appeared in the late 1970s and allowed business companies and organizations to send
commercial documentation electronically. Although the Internet began to advance in popularity
among the general public in 1994, it took approximately four years to develop the security
protocols (for example, HTTP) and DSL which allowed rapid access and a persistent connection
to the Internet. In 2000 a great number of business companies in the United States and Western
Europe represented their services in the World Wide Web. At this time the meaning of the word
ecommerce was changed. People began to define the term ecommerce as the process of
purchasing of available goods and services over the Internet using secure connections and
electronic payment services. Although the dot-com collapse in 2000 led to unfortunate results
and many of ecommerce companies disappeared, the "brick and mortar" retailers recognized the
advantages of electronic commerce and began to add such capabilities to their web sites (e.g.,
after the online grocery store Webvan came to ruin, two supermarket chains, Albertsons and
Safeway, began to use ecommerce to enable their customers to buy groceries online). By the end
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of 2001, the largest form of ecommerce, Business-to-Business (B2B) model, had around $700
billion in transactions.

E-COMMERCE CLASSIFICATION:

A common classification of EC is by the nature of transaction:

o Business-to-Business (B2B): electronic market transactions that take

place between organizations.
o Business-to-Consumer (B2C): retailing transactions with individual
shoppers typical shopper at Amazon.com is a consumer.
o Consumer-to-Consumer (C2C): consumer sells directly to consumers,
examples -individuals selling in classified ads, auction sites allowing individuals
to put up items for auction e.g, e-bay
o Consumer-to-Business (C2B): individuals who sell products or services
to organizations and those who seek sellers and conclude a transaction.
o Intra Business (organizational) EC: all internal organizational
activities involving exchange of goods, services or information, selling corporate
products to employees, online training and cost reduction activities
o Non-Business EC: academic institutions, not-for-profit organizations,
religious/social organizations and government agencies using EC to improve their
operations, customer service and reduce expense

What are the benefits of application?

No special configuration or changes are need on user's PCs.

Lower costs
Centralized data is secure and easy to backup.
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Updates can be made quickly and easily.

Information is accessible to a wide audience anywhere in the world.
Available 24 hours a day, 7 days a week.
Everybody has a browser - familiar interface encourages use

GOALS & OBJECTIVES OF THE SYSTEM:

Business Goals & Objectives:

Speedy transactions of shop items and cash.
No credit system, payment at the time.

User Goals & Objectives:

In the daily life user face difficulties to purchase several kinds of things from the market.
Here we will provide the facility to the user to view some of our products.
So it is easy for the user to view the products from home saves a lot of time.
Many payment options.
Free home delivery.

SCOPE OF THE PROJECT:

Web based applications can dramatically lower costs due to reduced support and maintenance,
lower requirements on the end user system and simplified architecture.
The system identifies the primary data, functions and behaviors that characterize the product.
The following of the system scope is as :
Admin can view all categories listing of assignments.
Search panel is provided to search the material and the samples
The totally system is centralized and also use anywhere within organization.

FEATURES OF THE SYSTEM:

Supports MYSQL database for records and samples of different Products.

Can save the products and their categories.
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Using the MYSQL module the application can handle very large databases.
Works with PHP.
Ability to add more Products
Ability to show all Products and the categories
Ease of use

SUMMARY:

In this chapter I describe about followings:

What is E-Commerce?
How it came in to world?
What are Objectives and Goals?
What is the scope of Web-Based Application?
What are the features of E-Commerce system?