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BBA-VI Semester

BBA N 606
Fundamental of
E-Commerce

UNIT I NOTES
Unit I: E-Commerce: Introduction, meaning and concept; Needs and advantages of
e-commerce; Traditional commerce; Types of E-Commerce, Basic requirements of
ECommerce.

What Is Electronic Commerce?


E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or the
transmitting of funds or data, over an electronic network, primarily the internet. These business
transactions occur either as business-to-business, business-to-consumer, consumer-to-consumer
or consumer-to-business. The terms e-commerce and e-business are often used interchangeably.
The term e-tail is also sometimes used in reference to transactional processes for online
shopping.

Definition:

E-Commerce or Electronics Commerce is a methodology of modern business, which addresses the


requirements of business organizations. It can be broadly defined as the process of buying or selling of
goods or services using an electronic medium such as the Internet.

Electronic commerce is the process by which businesses and consumers buy and sell goods and
services through an electronic medium.

Electronic commerce emerged in the early 1990s, and its use has increased at a rapid rate. Today,
the majority of companies have an online presence. In fact, having the ability to conduct business
through the Internet has become a necessity. Everything from food and clothes to entertainment
and furniture can be purchased online.

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

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

Have you ever purchased a pair of shoes over the Internet? Or, maybe you've used your
computer to sell an old phone? If so, you've taken part in electronic commerce. Also known
as e-commerce.

Two familiar examples of electronic commerce companies are eBay and Amazon. Both of these
companies allow consumers to purchase a variety of goods and services online from businesses
and other consumers, while eBay also hosts online auctions. Consumers on these sites typically
have numerous payment options, as well as choices for how their products are delivered.
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. Ecommerce refers to the paperless
exchange of business information using the following ways −

 Electronic Data Exchange (EDI)


 Electronic Mail (e-mail)
 Electronic Bulletin Boards
 Electronic Fund Transfer (EFT)
 Other Network-based technologies

Features
E-Commerce provides the following features −

 Non-Cash Payment − E-Commerce enables the use of credit cards, debit cards, smart
cards, electronic fund transfer via bank's website, and other modes of electronics
payment.
 24x7 Service availability − E-commerce automates the business of enterprises and the
way they provide services to their customers. It is available anytime, anywhere.
 Advertising / Marketing − E-commerce increases the reach of advertising of products
and services of businesses. It helps in better marketing management of products/services.
 Improved Sales − Using e-commerce, orders for the products can be generated anytime,
anywhere without any human intervention. It gives a big boost to existing sales volumes.
 Support − E-commerce provides various ways to provide pre-sales and post-sales
assistance to provide better services to customers.
 Inventory Management − E-commerce automates inventory management. Reports get
generated instantly when required. Product inventory management becomes very efficient
and easy to maintain.
 Communication improvement − E-commerce provides ways for faster, efficient,
reliable communication with customers and partners.

Need of E-Commerce:
At present, E-Commerce is the most vast and popular business sector. Its an online buying and
selling process so its needs are as simple as the business means. Customer reaching, High sales,
Products quality and on time delivery are some of the needs of any E-commerce business. And
when we talk about its objectives so basically its objectives are for fulfilling its needs.

Objectives of E-Commerce:

1. High reachability - The main objective and at the same time need is traction on your
web store. Of,course if you are selling products online what you require are customers. If
you are getting good reachability then your business will definitely grow. Therefore one
of the objective is high reachability.
2. High Conversions- if people are coming on your web store and purchasing something
then it will calculate as conversions and from the number of people who are buying stuff
from your web store we can calculate the conversion rate.

3. Customer satisfaction - Customer is the main part of any E-commerce business so its
very important to make your customer happy and satisfied. By providing quality and
desirable products, on time delivery, 24*7 customer support, and timely sale & best deal
offers you can make your customer happy. It is one of the main objectives of E-
commerce.

4. Social popularity - Unless and until you are not famous and popular among people you
cannot establish your brand. social presence with Omni channel & Digital marketing is
essential for any E-commerce business.

E-Commerce - Business Models

E-commerce business models can generally be categorized into the following categories.

 Business - to - Business (B2B)


 Business - to - Consumer (B2C)
 Consumer - to - Consumer (C2C)
 Consumer - to - Business (C2B)
 Business - to - Government (B2G)
 Government - to - Business (G2B)
 Government - to - Citizen (G2C)

Business - to - Business
A website following the B2B business model sells its products to an intermediate buyer who then
sells the product to the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, sells the endproduct to the final
customer who comes to buy the product at one of its retail outlets.
Business - to - Consumer
A website following the B2C business model sells its products directly to a customer. A
customer can view the products shown on the website. The customer can choose a product and
order the same. The website will then send a notification to the business organization via email
and the organization will dispatch the product/goods to the customer.

Consumer - to - Consumer
A website following the C2C business model helps consumers to sell their assets like residential
property, cars, motorcycles, etc., or rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services. Another consumer may opt to buy
the product of the first customer by viewing the post/advertisement on the website.

Consumer - to - Business
In this model, a consumer approaches a website showing multiple business organizations for a
particular service. The consumer places an estimate of amount he/she wants to spend for a
particular service. For example, the comparison of interest rates of personal loan/car loan
provided by various banks via websites. A business organization who fulfills the consumer's
requirement within the specified budget, approaches the customer and provides its services.
Business - to - Government
B2G model is a variant of B2B model. Such websites are used by governments 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
Governments use B2G model websites to approach business organizations. Such websites
support auctions, tenders, and application submission functionalities.

Government - to - Citizen
Governments use G2C model websites 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. The main objective of G2C websites is to
reduce the average time for fulfilling citizen’s requests for various government services.

Advantages and Disadvantages of Electronic commerce


Advantages - Electronic commerce can allow consumers to access their favorite store at any
time, day or night. This benefits both buyers, who might not be able to visit a store during typical
business hours, and sellers, who can peddle their products around the clock.

Advantages of Electronic commerce:

1. Enhances convenience: Customers can make orders for goods at their own convenience and
from the comfort of their homes without having to travel to the business premise. Orders are also
delivered to them at their most ideal locations. It’s the best shopping option for people who are
always busy.

2. Allows for product and price comparison: Again, when making purchases, customers want
to get the best deals. This business model allows for product and price comparison by consumers
so that the best products are bought at the fairest prices. They can also enjoy extra benefits like
discounts, coupons, items on sale and also get the best deals.

3. Easy fund-raising for start-ups ventures: So many people have the desire to venture into
business but lack sufficient funds to set up shop. Leasing a physical store can be quite expensive.
E-commerce makes it easier for start-ups to do business and grow.

4. Efficient: E-commerce has the advantage of being efficient. Resources are used efficiently
since most of the business services are automated. Business owners sometimes spend a lot of
resources meeting business needs and this eats into profits. E-commerce thrives on efficiency.

5. Customer reach: It’s easier to reach many customers on the internet. Using social media links
and good search engine optimization strategies, an online business can increase brand awareness
and grow its customer base. It also has the advantage of being able to connect buyers and sellers
from all corners of the globe.

6. Prompt payments: Payments are fast since online stores use electronic or mobile transactions
payment methods. The mobile wallet system for merchant accounts drive up sales and increase
revenue generation.

7. Ability to sell different products: The flexibility of conducting business over the internet
makes it possible for entrepreneurs to display and sell several products and also cater to a wider
demographic.

E -Commerce advantages can also be broadly classified in three major categories −

 Advantages to Organizations
 Advantages to Consumers
 Advantages to Society
Advantages to Organizations
 Using e-commerce, organizations can expand their market to national and international
markets with minimum capital investment. An organization can easily locate more
customers, best suppliers, and suitable business partners across the globe.
 E-commerce helps organizations to reduce the cost to create process, distribute, retrieve
and manage the paper based information by digitizing the information.
 E-commerce improves the brand image of the company.
 E-commerce helps organization to provide better customer services.
 E-commerce helps to simplify the business processes and makes them faster and
efficient.
 E-commerce reduces the paper work.
 E-commerce increases the productivity of organizations. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request
comes from a customer and it uses just-in-time manufacturing way.
Advantages to Customers
 It provides 24x7 support. Customers can enquire about a product or service and place
orders anytime, anywhere from any location.
 E-commerce application provides users with more options and quicker delivery of
products.
 E-commerce application provides users with more options to compare and select the
cheaper and better options.
 A customer can put review comments about a product and can see what others are
buying, or see the review comments of other customers before making a final purchase.
 E-commerce provides options of virtual auctions.
 It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
 E-Commerce increases the competition among organizations and as a result,
organizations provides substantial discounts to customers.

Advantages to Society
 Customers need not travel to shop a product, thus less traffic on road and low air
pollution.
 E-commerce helps in reducing the cost of products, so less affluent people can also afford
the products.
 E-commerce has enabled rural areas to access services and products, which are otherwise
not available to them.
 E-commerce helps the government to deliver public services such as healthcare,
education, social services at a reduced cost and in an improved manner.

Disadvantages of Electronic commerce:

1. Poor quality products: You don’t physically see and inspect whatever you are paying for
before it’s delivered. Customers, therefore, run the risk of falling victim to false marketing and
buying poor quality products from the virtual shop.

2. Impulsive purchases: Online stores display a large number of products and due to the
convenience of shopping, customers can find themselves making bad financial decisions through
impulsive purchases.

3. Internet scammers: The internet is a good thing but some people have decided to use it for
all the wrong reasons. Scammers have made this type of business model unattractive for some
consumers.
4. Lack of after sales support: As a result of lack of physical premises, customers find it hard to
access after sales support. It can take up to several days before any help is accorded to a
customer in need.

5. Fast changing business environment: Technology evolves so fast. Some entrepreneurs find
it hard to keep up and lose a lot of business in the process. This may make business growth
unattainable.

6. Loss of personal touch: Business is all about relationships. This business model erodes the
personal touch between a customer and the business owner. Cultivating loyalty can thus be a
problem since there are many such businesses that provide different options.

7. Delivery of goods can get delayed: It takes time before the goods ordered for are delivered.
Sometimes the delivery delays and this inconveniences the customer. This is different from
physical business premises where customers walk out with the products bought.

Further, many critics of electronic commerce, however, have argued that this mode of buying
and selling has been endangering the livelihoods of traditional market sellers and shop owners
who prefer to sell face to face.

Conclusion:

Throughout the world, e-commerce (i.e. electronic commerce, or buying and selling over the
web) is becoming more and more popular. Sites such as ebay and Amazon marketplace allow
everyday people to sell their belongings to each other for a little extra cash. Businesses,
moreover, are increasingly providing online shops where customers can make purchases over the
web and have their items delivered to them.

Technology is certainly a good thing because it has made communication and access to
information much easier. It has turned the world into a global village and created a wonderful
platform for entrepreneurs who want to expand their enterprises. E-commerce is a business
model for the modern world and with the adoption of the right strategies, it can turn a small
business into an empire.

Types of E-Commerce
There are several types of electronic commerce.

1. Business to consumer :The most common is business to consumer in which a business


sells products or services directly to consumers over the Internet. An example of a
business to consumer e-commerce transaction would be an individual purchasing a pair
of sneakers through Nike's website.
In B2C model, a business website is a place where all the transactions take place directly
between a business organization and a consumer.

In the B2C model, a consumer goes to the website, selects a catalog, orders the catalog, and an
email is sent to the business organization. After receiving the order, goods are dispatched to the
customer. Following are the key features of the B2C model −

 Heavy advertising required to attract customers.


 High investments in terms of hardware/software.
 Support or good customer care service.

Consumer Shopping Procedure


Following are the steps used in B2C e-commerce −

A consumer −

 determines the requirement.


 searches available items on the website meeting the requirment.
 compares similar items for price, delivery date or any other terms.
 places the order.
 pays the bill.
 receives the delivered item and review/inspect them.
 consults the vendor to get after service support or returns the product if not satisfied with
the delivered product.

Disintermediation and Re-intermediation


In traditional commerce, there are intermediating agents like wholesalers, distributors, and
retailers between the manufacturer and the consumer. In B2C websites, a manufacturer can sell
its products directly to potential consumers. This process of removal of business layers
responsible for intermediary functions is called disintermediation.

Nowadays, new electronic intermediary breeds such as e-mall and product selection agents are
emerging. This process of shifting of business layers responsible for intermediary functions from
traditional to electronic mediums is called re-intermediation.
2. Business to business:Another type of electronic commerce is business to business,
where companies sell products or services to other companies over the Internet. An
example would be the company GoDaddy, which sells domain names, websites, and
hosting services to other businesses.

A website following the B2B business model sells its products to an intermediate buyer who then
sells the products to the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, it sells the endproduct to the final
customer who comes to buy the product at the wholesaler's retail outlet.
B2B identifies both the seller as well as the buyer as business entities. B2B covers a large
number of applications, which enables business to form relationships with their distributors, re-
sellers, suppliers, etc. Following are the leading items in B2B eCommerce.

 Electronics
 Shipping and Warehousing
 Motor Vehicles
 Petrochemicals
 Paper
 Office products
 Food
 Agriculture

Key Technologies
Following are the key technologies used in B2B e-commerce −

 Electronic Data Interchange (EDI) − EDI is an inter-organizational exchange of


business documents in a structured and machine processable format.
 Internet − Internet represents the World Wide Web or the network of networks
connecting computers across the world.
 Intranet − Intranet represents a dedicated network of computers within a single
organization.
 Extranet − Extranet represents a network where the outside business partners, suppliers,
or customers can have a limited access to a portion of enterprise intranet/network.
 Back-End Information System Integration − Back-end information systems are
database management systems used to manage the business data.

Architectural Models
Following are the architectural models in B2B e-commerce −

 Supplier Oriented marketplace − In this type of model, a common marketplace


provided by supplier is used by both individual customers as well as business users. A
supplier offers an e-stores for sales promotion.
 Buyer Oriented marketplace − In this type of model, buyer has his/her own market
place or e-market. He invites suppliers to bid on product's catalog. A Buyer company
opens a bidding site.
 Intermediary Oriented marketplace − In this type of model, an intermediary company
runs a market place where business buyers and sellers can transact with each other.

3. Consumer to business: electronic commerce involves consumers selling products or


services to businesses. You've taken part in this form of e-commerce if you've ever
completed a paid online survey where you've given your opinion about a product.
4. Consumer to consumer: Finally, there is consumer to consumer e-commerce, which is
where consumers sell products to other consumers. An example would be one consumer
selling something that he or she no longer needs or wants to another consumer via a site
like eBay or Amazon.

Traditional Commerce
Definition of Traditional Commerce

Traditional commerce refers to the practice of selling products and services within a
single industry and in some cases, within a specific geographical area. Traditional
commerce relies on operating business hours during a specific period of time and
requires housing inventory or occupying a retail store.

Businesses deemed as traditional commerce handle advertising, inventory shipping and creation
of products and services in-house with a staff of employees in close proximity. Traditional
commerce does not typically share information with competitors whereas e-commerce prices,
specials and inventory are ready available online for consumers and competitors.

Traditional commerce often relies on face to face interaction with consumers and thrives based
on word of mouth, networking and customer referrals for new and repeat business. Personal
interaction is a key component of businesses experience success with traditional commerce.
Many businesses network within the community, establish rapport with city leaders and
chambers of commerce and sponsor local events and sports teams to develop a relationship with
the community to draw in business.

Traditional Commerce or Commerce is a part of business, which encompasses all those activities
that facilitate exchange. Two kinds of activities are included in commerce, i.e. trade and
auxiliaries to trade. The term trade refers to the buying and selling of goods and services for cash
or kind and auxiliaries to trade, implies all those activities like banking, insurance,
transportation, advertisement, insurance, packaging, and so on, that helps in the successful
completion of exchange between parties.

In finer terms, commerce encompasses all those activities that simplify the exchange of goods
and services, from manufacturer to the final consumer. When the goods are produced, it does not
reach to the customer directly rather it has to pass from various activities, which are included
under commerce. Its main function is to satisfy the wants of consumers by making goods
available to them, at the right time and place.

Differences Between Traditional Commerce and e-


Commerce
The following points are noteworthy so far as the difference between traditional commerce and
e-commerce is concerned:
1. A part of business, that focuses on the exchange of products and services, and includes all
those activities which encourage exchange, in some way or the other, is called traditional
commerce. e-Commerce means carrying out commercial transactions or exchange of
information, electronically on the internet.
2. In traditional commerce, the transactions are processed manually whereas, in the case of
e-commerce, there is automatic processing of transactions.
3. In traditional commerce, the exchange of goods and services, for money can take place,
only during working hours. On the other hand, in e-commerce, the buying and selling of
goods can occur anytime.
4. One of the major drawbacks of e-commerce is that the customers cannot physically
inspect the goods before purchase, however, if customers do not like the goods after
delivery they can return it within the stipulated time. Conversely, in traditional commerce
physical inspection of goods is possible.
5. In traditional commerce, the interaction between buyers and sellers is direct, i.e. face to
face. As against this, there is indirect customer interaction, in the case of e-commerce,
because it may be possible that the customer is miles away from where they place an
order for the purchase of goods.
6. The scope of business in traditional commerce is limited to a particular area, i.e. the reach
of business is limited to the nearby places where it operates. On the contrary, the business
has worldwide reach in case of e-commerce, due to its ease of access.
7. As there is no fixed platform for information exchange in traditional commerce, the
business has to rely on the intermediaries for information fully. Unlike e-Commerce,
wherein there is a universal platform for information exchange, i.e. electronic
communication channel, which lessen the dependency on persons for information.
8. Traditional commerce is concerned with the supply side. In contrast, the resource focus
of e-commerce is the demand side.
9. In traditional commerce, the business relationship is vertical or linear, while in the case of
e-commerce there is directness in command leading to a horizontal business relationship.
10. In traditional commerce, due to standardisation, there is mass/one way marketing.
However, customization exists in e-commerce leading to one to one marketing.
11. Payment for transactions can be done by paying cash, cheque or via credit card. On the
other hand, payment in e-commerce transactions can be done through online payment
modes like credit card, fund transfer, etc.
12. The delivery of goods is immediate in traditional commerce but in the case of e-
commerce, the goods are delivered at the customer’s place, after some time, usually
within a week.

Comparison Chart

Basis for
Traditional Commerce e-Commerce
Comparison

Traditional commerce is a branch of business e-Commerce means carryng out


which focuses on the exchange of products and commercial transactions or
Meaning
services, and includes all those activities which exchange of information,
encourages exchange, in some way or the other. electronically on the internet.
Basis for
Traditional Commerce e-Commerce
Comparison
Processing of
Manual Automatic
Transactions
Accessibility Limited Time 24×7×365
Physical Goods cannot be inspected
Goods can be inspected physically before purchase.
inspection physically before purchase.
Customer
Face-to-face Screen-to-face
interaction
Scope of
Limited to particular area. Worldwide reach
business
Information Provides a uniform platform for
No uniform platform for exchange of information.
exchange information exchange.
Resource focus Supply side Demand side
Business
Linear End-to-end
Relationship
Marketing One way marketing One-to-one marketing
Payment Cash, cheque, credit card, etc. Credit card, fund transfer etc.
Delivery of
Instantly Takes time
goods
eneral Requirements for E-CommerceGGGGGuirements for E-Commerce

General Requirements for E-Commerce


This section gives a very brief overview of the requirements for e-commerce. However, it is important to
understand that all of these are not necessarily required for all levels of e-commerce. Requirements
widely vary with different kinds of e-commerce activities.

i) Telecommunication Infrastructure Requirements This mostly entails bandwidth and security. The
requirement for bandwidth varies widely from one e-commerce activity to another making it hard to
generalize. Bandwidth usually becomes crucial for service-based B2B e-commerce as opposed to
product-based one and high-traffic B2C e-commerce as opposed to low-traffic one. Two main
components of security requirements for e-commerce are type of firewall and encryption/algorithm
mechanism. This also varies widely from one e-commerce activity to the other. Ranging from protection
against unwanted disclosure of client information to guarantee of reliable electronic payment. Security
requirements are a crucial part of e-commerce.

ii) Hardware Requirements for E-commerce Hardware requirements for high-traffic sites may be
dependent on the following issues: number of transactions per second; number of hits per second; number
of queries per second; number of queries done by RDBMS per second; number of pages served per
second involving all of the above parameters. Some other factors that need to be considered when setting
up a high traffic e-commerce site include clustering i.e. use of backup servers which automatically takes
over operations in case of failure of primary ones. Low-traffic sites can be easily served from a single
machine depending on the needs of the business. Pentium II/III based Intel server running Linux can
serve hundreds of unique customers each day.

(iii) Software Requirements for E-commerce Several software are available free on the Internet that can
be used to build e-commerce exchanges. Some examples are Apache Web Server, Apache-Jserv Servlet
Engine, Linux Operating System, mySQL database, postgresql etc. Many of these open source software
may not be adequate for high-traffic sites.

(iv) Technical Skill Requirements A systems administrator must have a good knowledge of computer
hardware, must be able to maintain and upgrade hardware including hard drive, processor and
motherboard. He/she must also have the skill to install and compile Apache, mySQL and Java servlet
engine. A developer needs to be a high level programmer with a few years of experience in the industry
and must possess a clear understanding of how an e-commerce system works. Understanding how
information flows from one end of the system to another and what modifications take place in between is
essential. Specific required skills include programming skills in C, PHP and Java and knowledge on SQL
programming and data architecture.

(v) Financial Infrastructure Payment procedures are the ways in which a seller can receive payment in
return for the goods or services sold. Access to these services depends on the banking infrastructure in
location of selling and customers' locations.For full-fledged e-commerce transaction the banking
infrastructure requirements should be as follows.

Dependable telecommunication network.Use of integrated banking software for back office and front
office data processing,Use of WAN and Internet for banking operationsAvailability of Electronic fund
transfer System Availability of Electronic Clearing System,Availability of Public Key based Encryption
System,Availability of Credit Card System both for local and international payment ,Availability of
Foreign Exchange Remittance Mechanism over the Internet,Availability of Legal Infrastructure
supporting online payment mechanism Interim Solution:If local telecommunication services in a country
do not allow for direct connection of a web site to secure payment facilities, and in particular to those
offered by credit card companies, it may be possible to host a web site in a neighboring location that is
capable of providing the necessary financial connections.

(vi) Legal and Policy Framework In general, policies that ensure legal certainty, security and consumer
protection for online transactions and interactions should be enacted. These include the resolution of
issues such as transactional security, electronic contract enforceability and the authentication of
individuals and documentation. The development of such an enabling environment has involved a joint
focus of government and private sectors on: an efficient and sound financial system (including online
payments, the use of electronic currency and foreign exchange liberalization), an efficient, inexpensive
and reliable telecommunication system (including to long-distance market, competitive local exchange
carriers, and high speed lines),legal mechanisms for the enforcement of contract law, consumer protection
and defense of intellectual property rights, an efficient tax administration, and swift, transparent, and
reliable customs operations. The following factors, often influenced by national policy, should be
considered: Perceived political risk, Predictability of the legal environment, Soundness of economic and
monetary policy, Openness to foreign direct investment, Convertibility of local currency, Restrictions on
capital flows, Credit card usage, Credit card processing protocols, Access to credit, Entrepreneurial
culture, Access to startup capital, Regulations and restrictions on small business.