Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 1

1.1. Introduction The cutting edge (border) for business today is electronic commerce (e-commerce). Broadly defined, electronic commerce is a modern business methodology that addresses the needs of organizations, merchants, and consumers to cut costs while improving the quality of goods and services and increasing the speed of service delivery. That means of electronic commerce consists of the buying, selling, marketing, and servicing of product (business) or services over computer networks. In last two decades, Information Technology (IT) has played a vital role in transforming the way of business is conducted and technology that has truly been an effective in changing the fundamental ways of doing business is none other than known as Internet. Today several business applications are being developed on the Internet because Internet allows companies to link their suppliers, buyers, reduce cycle time to market, thus enabling them to give competitive prices and operate profitability, and it has opened up an enormous opportunity of doing business transactions between such physically distant entities. Nowadays, Internet is known as the Information Superhighway in so many dimensions, and one such dimension is e-commerce. The emergence (appearance) of e-commerce over the past decade has radically transformed the economic landscape. The increased numbers of Internet connections and the overall market response have made it imperative (vital) for large and small enterprises to adopt new trade practices and standers suited to electronic transaction. E-commerce has prefix E to Commerce and E is the reason why commerce will be out one day, and e-commerce will come gushing into our lives very rapidly. This prefix does not only add electronic to commerce, but it adds, energy, effectiveness, efficiency, economy, ease, edge, entry into new markets and with a click, the entire world shrinks to a market, where business can be easily done. E-commerce is more than simply on-line shopping. It is doing commerce with the help of computers; networks and commerce enabled software. By using the Internet simple click of a computer mouse, one can easily order anything from anywhere of the world. The World Wide Web (www) has expanded the international marketplace and gives consumers unlimited choices. Market plays a very important role in commerce. If the stores are located away from the market areas, they are not likely to capture many consumers. For those reasons, the business units either locate themselves within the markets or organize themselves as markets. But the concept of market is totally different in case of e-commerce. The major difference between the real market and emarket is that, the real market exists as a physical entity and the stores are physically located within the market, whereas the e-market and the e-store exist as on some computer or server. E-commerce involves institutions (like government, merchants, manufacture, suppliers, consumers etc), processes (like

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 2

marketing, sales, payment, fulfillment, support etc) and computer networks, (like local networks, Internet, corporate and commercial networks). E-commerce are still in its infancy stage, however, the advantages of e-commerce are so high that it has already been recognized by the international business community as a methodology to boost up trade, especially international trade. 1.2. Definition Of E-Commerce Electronic commerce, defined simply, is the commercial transaction of services in an electronic format." Electronic commerce is the process of doing business electronically or over the Internet, it can be defined as marketing, buying, selling and supporting goods, and services by using Web based technologies, which allow the commerce through electronic media. Traditionally, the definition of e-commerce has focused on Electronic Data Interchange (EDI) as the primary means of conducting business electronically between companies having a pre-established contractual relationship. Recently, the definition of e-commerce has broadened to encompass business conducted over the Internet and includes individuals and companies not previously known to each other. E-commerce encompasses the entire online process of developing, marketing, selling, delivering, servicing, and paying for products and services purchased by Internet. Electronic commerce systems rely on the resources of the Internet, intranet, extranets, and other computer networks to support every step of this process. Internet shopping is open for 24 hours a day seven days a week, makes it more popular and attractive. It allows people to transcend the barriers of time and distance and take advantage of global markets and business opportunities Traditional commerce:

The exchange or buying and selling of commodities; esp. the exchange of merchandise, on a large scale, between different places or communities; extended trade or traffic.

Electronic commerce:

Electronic commerce (e-commerce) is a general term for any type of business, or commercial transaction that involves the transfer of information across the Internet. This covers a range of different types of businesses from consumer-based retail sites, like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchanges trading goods or services between corporations. Most fundamentally, e-commerce represents the realization of digital, as opposed to paper-based, commercial transactions between businesses, between a business and its consumers, or between a government and its citizens or constituent business. Electronic commerce is the use of electronic communication to do business. E-commerce is not about technology. It is not a new business. E-commerce is a method for companies to create and operate their business in new and efficient ways.

That means e-commerce is-

Business activities running over the Internet and World Wide Web platform Use of TV and toll-free telephones in business are not usually associated with ecommerce Depending on the situation, electronic data interchange (EDI) may or may not be associated with e-commerce. EDI is used for business-to-business transactions Examples of e-commerce: Buying books on Amazon.com Promoting cars on Toyota.com Participating in auctions at eBay.com Customer support at Fedex.com Industrial exchanges such as Covisint.com

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 3

According to Bajaj and Nag, E-commerce refers to the paperless exchange of business information using Electronic Data Interchange, Electronic Mail, Electronic Bulletin Boards, Electronic Funds Transfer and other network-based technologies. It is not only automates manual processes and paper transactions, but also helps organizations move to a fully electronic environment and change the way they operate. According to Organization for Economic Cooperation and Development (OECD), "Electronic commerce refers generally to all forms of transactions relating to commercial activities, including both organizations and individuals, that are based upon the processing and transmission of digitized data, including text, sound, and visual images." According to European Union, "Electronic commerce is about doing business electronically. It is based on the electronic processing and transmission of data, including text, sound, and video. It encompasses many diverse activities including electronic trading of goods and services, online delivery of digital content, electronic fund transfers, electronic share trading, electronic bills of lading, commercial auctions, collaborative design and engineering, online sourcing, public procurement, direct consumer marketing, and after-sales service. It involves both products (consumer goods, specialized medical equipment) and services (information services, financial and legal services); traditional activities (healthcare, education) and new activities (virtual malls)." A person all around the world can sit in the house and can accomplish what they desire through a few mouse clicks and taps on the keyboard. They can select their commodities through the multi-coloured catalogs. Therefore, the customers need not to face the problems in his purchases as no stocks, closing-time and flying or driving long distance. 1.3. Emerge of E-Commerce The Internets growth rate has far surpassed the growth rates of any previously introduced electronic information dissemination mediums such as radio, television etc. The Internet is a very unique infrastructure in that it is owned by no one. The origin of the Internet has been traced to an experimental networks established first in 1965 with funding from the Advanced Research Project Agency of the US Department of Defense (DoD), to enable the scientists engaged on DoD projects to communicate with one another. The Internet came on-line in 1969 as a joint project between the Defense

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 4

Advanced Research Projects Agency (DARPA) and four university host computers. These host nodes transferred data using the packet switching theory first developed by Leonard Keinrock at MIT. The same packet switching theory is still the basis of todays data transfer methods. More computer sites were added to the network, and electronic mail was introduced in 1972. Over the next decade, the National Science Foundation (NSF) became involved, and various standard setting bodies to help structure and develop the Internet were formed. Throughout the 1970s and 1980s, the network expanded as technology became more sophisticated. In the early 1980s, the commercial sector became increasingly interested in the Internet and began to funnel resources into commercial Internet uses. In 1984, the Domain Name System (DNS) was introduced, giving the world domain suffixes, such as edu, com, gov, and org, and a series of country codes. This system made the Internet much more manageable for people to use. Without it, users had to remember the Internet Protocol (IP) address of every Internet site they wanted to visit a long series of numbers, instead of a string of words. The WWW was not prototyped until 1990, when Tim Berners-Lee implemented his groundbreaking concepts and became known as its father. The WWW incorporates these of hypertext links, software portability, and network and socket programming. Hypertext links allow WWW users to easily and rapidly transport themselves to another site. Software portability allows users running previously incompatible platforms to create sites that can be interpreted and easily read by multiple platforms. The transfer of data that occurs from the use of hypertext links is enable by the network and socket programming concepts developed by Tim Berners-Lee. The Web was popularized by 1993 release of a graphical, easy-to-use browser. Throughout the 1990s, personal computer (PCs) became more powerful and less expensive, allowing millions of people to buy them for their homes and offices. Internet service providers (ISPs), such as America Online, CompuServe, and many local providers, began offering affordable dial-up connections to the Internet. The ease of use of the WWW has contributed to the Internets exponential growth rates. A popularly cited estimate of growth of the Internet is that its traffic doubles every 100 days. One of the most popular activities on the Web is shopping. It has much allure in it you can shop at your leisure, anytime, and in your pajamas. Literally anyone can have their pages built to display their specific goods and services. DSL=Digital Subscriber Line History of ecommerce dates back to the invention of the very old notion of sell and buy, electricity, cables, computers, modems, and the Internet. Ecommerce became possible in 1991 when the Internet was opened to commercial use. Since that date thousands of businesses have taken up residence at web sites.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 5

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 of 2001, the largest form of ecommerce, Business-to-Business (B2B) model, had around $700 billion in transactions. History of ecommerce is unthinkable without Amazon and Ebay which were among the first Internet companies to allow electronic transactions. Thanks to their founders we now have a handsome ecommerce sector and enjoy the buying and selling advantages of the Internet. Currently there are 5 largest and most famous worldwide Internet retailers: Amazon, Dell, Staples, Office Depot and Hewlett Packard. According to statistics, the most popular categories of products sold in the World Wide Web are music, books, computers, office supplies and other consumer electronics. Amazon.com, Inc. is one of the most famous ecommerce companies and is located in Seattle, Washington (USA). It was founded in 1994 by Jeff Bezos and was one of the first American ecommerce companies to sell products over the Internet. After the dot-com collapse Amazon lost its position as a successful business model, however, in 2003 the company made its first annual profit which was the first step to the further development. At the outset Amazon.com was considered as an online bookstore, but in time it extended a variety of goods by adding electronics, software, DVDs, video games, music CDs, MP3s, apparel, footwear, health products, etc. The original name of the company

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 6

was Cadabra.com, but shortly after it become popular in the Internet Bezos decided to rename his business Amazon after the worlds most voluminous river. In 1999 Jeff Bezos was entitled as the Person of the Year by Time Magazine in recognition of the companys success. Although the companys main headquarters is located in the USA, WA, Amazon has set up separate websites in other economically developed countries such as the United Kingdom, Canada, France, Germany, Japan, and China. The company supports and operates retail web sites for many famous businesses, including Marks & Spencer, Lacoste, the NBA, Bebe Stores, Target, etc. Amazon is one of the first ecommerce businesses to establish an affiliate marketing program, and nowadays the company gets about 40% of its sales from affiliates and third party sellers who list and sell goods on the web site. In 2008 Amazon penetrated into the cinema and is currently sponsoring the film The Stolen Child with 20th Century Fox. According to the research conducted in 2008, the domain Amazon.com attracted about 615 million customers every year. The most popular feature of the web site is the review system, i.e. the ability for visitors to submit their reviews and rate any product on a rating scale from one to five stars. Amazon.com is also well-known for its clear and userfriendly advanced search facility which enables visitors to search for keywords in the full text of many books in the database. One more company which has contributed much to the process of ecommerce development is Dell Inc., an American company located in Texas, which stands third in computer sales within the industry behind Hewlett-Packard and Acer. Launched in 1994 as a static page, Dell.com has made rapid strides, and by the end of 1997 was the first company to record a million dollars in online sales. The companys unique strategy of selling goods over the World Wide Web with no retail outlets and no middlemen has been admired by a lot of customers and imitated by a great number of ecommerce businesses. The key factor of Dells success is that Dell.com enables customers to choose and to control, i.e. visitors can browse the site and assemble PCs piece by piece choosing each single component based on their budget and requirements. According to statistics, approximately half of the companys profit comes from the web site. In 2007, Fortune magazine ranked Dell as the 34th-largest company in the Fortune 500 list and 8th on its annual Top 20 list of the most successful and admired companies in the USA in recognition of the companys business model.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 7

History of ecommerce is a history of a new, virtual world which is evolving according to the customer advantage. It is a world which we are all building together brick by brick, laying a secure foundation for the future generations.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 8

History Early development The meaning of electronic commerce has changed over the last 30 years. Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK. Online shopping was invented in the UK in 1979 by Michael Aldrich and during the 1980s it was used extensively particularly by auto manufacturers such as Ford,Peugeot-Talbot, General Motors and Nissan. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. Perhaps it is introduced from the Telephone Exchange Office, or maybe not.The earliest example of many-to-many electronic commerce in physical goods was the Boston Computer Exchange, a marketplace for used computers launched in 1982. The first online information marketplace, including online consulting, was likely the American Information Exchange, another pre-Internet online system introduced in 1991. Although the Internet became popular worldwide in 1994, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet. And by the end of 2000, a lot of European and American business companies offered their services through the World Wide Web. Since then people began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services. Timeline 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer. 1992: J.H. Snider and Terra Ziporyn publish Future Shop: How New Technologies Will Change the Way We Shop and What We Buy. St. Martin's Press. ISBN 0312063598. 1994: Netscape releases the Navigator browser in October under the code name Mozilla. Pizza Hut offers pizza ordering on its Web page. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. Adult materials also becomes commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption that made transactions secure. 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24 hour, internetonly radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 9

aggressively use Internet for commercial transactions. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb. 1998: Electronic postal stamps can be purchased and downloaded for printing from the Web. 1999: Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches. 2000: The dot-com bust. 2002: eBay acquires PayPal for $1.5 billion [1]. Niche retail companies CSN Stores and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal. 2003: Amazon.com posts first yearly profit. 2007: Business.com acquired by R.H. Donnelley for $345 million[2]. 2008: US eCommerce and Online Retail sales projected to reach $204 billion, an increase of 17 percent over 2007[3].

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 10

1.4. Infrastructure Facilities Needs for E-Commerce Sophisticated technology of the computers and value added network services are essential for the development of e-commerce network. Key technologies and procedures that are needed to e-commerce are Internet, e-mail, electronic document management, electronic data interchange, electronic fund transfer, security, credit card, workflow processing, imaging, networking and interconnectivity between them. The Internet access system requires a personal computer that is connected by telephone to the Internet or Internet access can be cable based. However, e-commerce depends on a series of underlying infrastructures as outlined below:

Network Infrastructure covers the media required for moving information, and
thus includes the Internet as well as cable television, telecommunication networks, and private corporate networks, internet and extranet etc.

Production Infrastructure focuses on a companys products (soft goods and hard

goods) and what it takes to create them. Some of the concerned items are databases, multimedia authoring, information production, manufacturing etc.

Distribution infrastructure that helps customers to get products and services like
e-mail, on-line catalogs, databases, networked communities, and shipping infrastructure.

Delivery infrastructure, that needed for delivery of goods like efficient courier
service system.

Service Infrastructure handles such processes as payments, customer support and

security; and the associated items are EDI, credit cards, digital cash, e-cash, digital signature etc. 1.5. The Process of Purchasing a Product Electronically By using e-commerce, the process of purchasing any product is quite similar to the process of purchasing a product from a physical store where buyer goes to the stores, find the product that he wishes to buy, then goes to the cashier and selects a payment instruments such as cash or credit card. The only difference between purchasing a product from a physical store and over e-commerce is that, in e-commerce, there is no question of money transaction. In e-commerce, the companies keep their catalog and order form on the Internet Web sites. Customers first browse the sites and visit the online catalog, choose the product that he wants to buy, then he fills up the electronic order form and have to send it over net to the merchants where he must have mentioned the payment instruments. Customers can make payments in any kind of e-money including credit card. In case of credit card, the customers fill the credit card name, number and address information on the screen and send the information to the merchants over the

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 11

Net. This total process takes place in no more than 5-7 seconds. Figure 1.1 indicates steps of purchasing a product through E-Commerce.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 12

Browsing the Web Sites Find the product(s) from online catalog on the merchants Web page Select item(s) to be purchased Merchants provide an order form electronically Customers fill the form and select the electronic payment instrument Send the form to the merchant electronically The merchant validates and confirms financial information through the EDI The merchant sends the confirmation of the order and payment The merchant sends the product or service through the Net or Courier The merchant requests payment from the consumers financial institute Figure1.1: Steps of purchasing a product through E-commerce Then merchant will verify and confirm the validity of the credit card and the purchasers address through Electronic Payment System (EPS) and after confirmation the merchant or seller dispatch the product to the buyers either on-line or through courier service depending on nature of products. The whole system can be hailed as the Electronic Data Interchanged (EDI). A paper-based systems eliminated by EDI which provides electronic link between companies to companies or companies to customers such as purchase orders, delivery schedules, invoices, quotations-electronically. E-commerce appears as simple operations of buying and selling goods and services over Net.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 13

1.6. Why Need Electronic Commerce E-commerce business that sell online can potentially reach billions of customers in every country of the world. Selling or purchasing over e-commerce results in savings of time, energy and costs, because the merchants provide detailed information about the products or services on the Web sites and the buyer will just click the product to get the same before his or her door within a very short period after placing purchase order through the Net. E-commerce is not just a matter of reducing costs as well as reaching out new efficiencies, performing tasks with greater speed and convenience, replacing existing commercial paper based transactions with electronic transactions and not doing any thing physically or manually that will assure long-term competitive advantages of a business. There are benefits of electronic commerce to all involved parties. A bank benefits from reduced cash handling charges, and from a new attractive service form they can provide their customers. This type of commerce also directly connects buyers and sellers, and supports digital information exchange between them. Time and space limits are decreasing. Customer behavior can be adapted to, due to interactivity in electronic commerce. It is also easy to keep information up-to-date. Retailers also benefit from reduced cash handling charges and they do not need to store large amounts of money in their store. At the end of the day they can transfer the money to the bank with one transaction. This also results in a benefit of less robbery. People tend to spend more with electronic cards than they do with "real" money. This of course to the benefit of the merchant. Consumers will notice how easily one can withdraw cash from home and how prices will go down due to reduced service and order costs. However some benefits of electronic commerce are as follows: a. Benefits of Business Enterprises In order for business to invest resources to engage in electronic commerce, the benefits must exceed the costs. So what benefits can businesses potentially gain from engaging in electronic commerce?

a.i. Entering Global Market: There is an opportunity for small and medium
business/companies, apart from the big ones to enter into global market through Internet with a minimum entry cost. Internet creates an opportunity for small and medium enterprises to make information on its products and services available to the potential customers in the worldwide market. E-commerce also helps to breaks the social and political obstacles of entering world market and business growth, especially in the developed countries.

a.ii. Benefits Over EDI: Business through electronic commerce is more beneficial than
tradition EDI commerce. The cost and installation of EDI systems is generally quite

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 14

high, and is has typically only been beneficial to large firms that have enough sales volume to justify the costs of developing their own networks or subscribing to a value-added network. On the other hand, because of the low cost of connecting to the Internet, medium and small business can now afford the connection cost. Further, because of software developments that allow web-based EDI systems to interface with traditional EDI systems, business of all sizes can now transact with one another. This vastly expands the number of potential electronic business partners, some of which may be a substantial, geographical distance away. The Internet offers a greater choice of global partners with which to conduct electronic commerce.

a.iii. Lower Procurement Processing Costs: Procurement costs can be lowered by

consolidating purchases, developing relationships with key suppliers, negotiating volume discounts, and greater integration of the manufacturing process. Procurement costs can be lowered for all companies, regardless of size, due to the increased ability to transact electronically with one another. A wider net can be cast when searching for suppliers. Options for partnering with other firms increase. For example, small and mid-size companies benefit because they are now able to conduct business with the larger firms that are casting the wider nets. The smaller firms also have the opportunity to reduce their processing costs by using integrated electronic processing systems.

a.iv. Keeping Lower Inventory: A reduction in inventory is desirable because of the

associate reduction on storage, handling, insurance and administrative costs. Internet electronic commerce can help firms to more optimally order the inventories by electronically linking suppliers and purchases together and allowing them to share updated production forecasts and projected inventory levels in order to allow both parties to collaboratively fine-tune their production and delivery schedules. Business can also use the Internet to upload unwanted inventory or sell excess capacity very quickly and with extremely low marketing costs.

a.v. Enhanced Customer Service: Customer service can be enhanced using Internet
electronic commerce by helping the customer to access information before, during, and after the sale. Before the sale is made, customers can electronically retrieve product specifications, quantity, and pricing information. During the product/service fulfillment cycle, customers can electronically check on the status of the order. Support services for customers are also enhanced by electronic services, such as electronic notification of returned items and the ability to download and print the necessary documentation and shipping costs result for both the buyer and seller.

a.vi.

Increase Sales: E-commerce is a new channel of selling goods and services over

the Net. With the help of a Web site, a company can automatically enter in to a global

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 15

market and become a global provider of goods and services. On the other hand, the smaller sellers get a chance to compete against largest competitors in almost every field. In this way, a business or company can increase sales.

a.vii. Easier Money Transaction: In e-commerce, transaction of money is easier than

traditional way of transaction, because transactions of money are processed at faster speeds, more easily and it is less expensive. There are some benefits of transaction of money electronically as follows Retailers benefits from reduce cash handling charges and they do not need to store large amount of money in their cash box, and this brings benefits retailers from robberies. A bank benefits from reduced cash handling charges, and from a new attractive service that can provide to their customers. Customers get more security by not carrying cash, which someone can steal.

a.viii. Lower Advertising Cost: Without advertising it is hard to sell products, unless
the product is an essential one and the only available in the market and e-commerce reduce advertising cost than other media like magazine, television etc. Companies can use web sites as their billboard for interactive advertisements, and reach huge an international audience. Small companies can afford this kind of advertising and can easily enter into world markets electronically.

a.ix. Reduce Distribution Cost: By using electronic commerce, distribution cost can be
minimize up to 50 to 80 percent of consumer products, because of shrinking existing distribution chains. Therefore, using of e-commerce can achieve substantial savings and the prices of a product can be reduced.

a.x. Marketing of Product More Quickly: E-commerce provides very easy way to get
in touch with the customer at worldwide market. By taking the entire product design process online-drawing partners and customers in to the process and removing the traditional communication barriers that prevent rapid product design and creationcompanies can bring products and services to market far more quickly

a.xi. Strong Customer-Business Relationship: By using e-commerce, business can

engage customers in a direct interactive relationship that result in customers getting precisely what they want and when they want and everything from purchase orders to fund transfer can be handled faster and more efficiently and even easier payment processing, resulting in stronger customer relationships with much reduced costs.

a.xii. Diminishing the Importance of the Middleman: E-commerce is capable of

eliminating intermediaries. If the vendor wants to be successful in global marketing

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 16

with Internet, he will have to figure out how to replace some of the functions that distributor used to fulfill. By eliminating distributors, the price becomes considerably less, the vendors margin will be increase, and the company becomes more efficient, producing better financial results. Therefore, by using e-commerce, a vendor can avoid extra cost of doing business.

a.xiii. Cost of Acquiring, Serving and Retaining Customers is Cheap: It is

relatively cheaper to acquire new customers over the net; because of round the clock operation and reach global customer is relatively easy on the net. Through innovative tools of push technology, it is also possible to retain customers loyalty with minimal investments.

a.xiv. An Extended Enterprise is Easy to Build: In todays world every enterprise is

a part of the connected economy; as such you need to extended your enterprise all the way to your suppliers and business partners like distributors, retailers and ultimately your end-customers. Internet provides an effective (often less expensive) way to extend your enterprise beyond the narrow confines of your own organization. Tools like enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM), can easily be deployed over the net, permitting amazing efficiency in time needed to market, customer loyalty, on-time delivery and eventually profitability. b. Benefits of Customers Businesses are not the only benefactors of Internet electronic commerce; customers may also reap benefits from using the Internet. Some benefits that customers may expect to receive are:

b.i. High Satisfaction of Customer: By e-commerce it is possible to increase satisfy

customer, because the Internet being always open, 24 hours a day, 7 days a week and 365 days a year that makes the business consequently always open and companies always keeps information up-to-date. Internet has no boundaries so a customer can shop from home, working place, or anywhere they can make a connection with Net. On the other hand, by connecting the e-commerce and shipping systems, it would be possible to ship products faster for less money. On the other hand easy to purchase, wider choice, lower price, flexibility of time, and distance to enter into buying and selling goods makes customs more satisfied.

b.ii. Shorter Time to Shopping: Nowadays, people become so busy and it is difficult
to manage time to go shopping, to deal in business transactions, to go to bank to deposit or withdrew amount from the bank, to transmit data, and to exchange views.

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 17

To make easy of these things, they are increasingly use electronic media and telecommunications-based tools.

b.iii. Choice of Vendors: Customers have an increased choice of vendors because they
are no longer geographically constrained by a reasonable walking or driving distance. Customers have a greater choice of services they can receive from global Internet companies. For example, a foreign-born resident of the U.S. may subscribe to an electronic news service from his/her home country and receive an electronic newspaper on a daily basis that is sent directly from his/her home countrys news service.

b.iv. Convenience of Shopping: The convenience of shopping at home allows

customers to shop when it is convenient for them and not during the store hours. For handicapped or ill consumers, the ability to shop from home opens up new shopping opportunities and offers greater convenience. The capability of employees to shop on-line from their office is viewed as a benefit by some and as a detriment by others, and both sides have valid points. Whether the availability to access the Internet for personal use is abused or misused by an employee depends on the employees personal characteristics and work ethic. For busy employees that work long-hours, the ability to take care of some errands may ease their tension and allow them to actually devote more time is of better quality to their tasks. For example, busy workers facing overtime may need to complete some personal errands, including grocery shopping, buying and mailing a birthday present, and retrieving some income tax forms to complete their tax return. While these errands may require a total time of two hours if done physically, they may all be conducted on the Internet in 15-20 minutes total. Thus, if employees can perform these tasks during their lunch hour, they may still have time to eat, reduce stress regarding their personal life, and feel better prepared to face the rest of the days workload.

b.v. Price Comparisons: Search engines and intelligent agents, are making the
process of sorting through information and conducting price comparisons increasingly easier. Information is buying power to consumers, and the Internet is unleashing access to vast amount of information. How will Internet vendors compete if price comparison is so easy? They are quickly learning that service and reliability are also important. Amazon.com does not just sell books and music, it provides book and music reviews, suggest other books that may be of interest based on the books being examined, and provides sound clips for many of the music titles. It also provides inventory status and expected shipping time. 1.7. Problems of E-commerce

Chapter-1: Fundamentals of Electronic Commerce

E-Commerce # 18

E-commerce becomes popular day by day but it is not perfect by itself. It still has some disadvantages. Online selling is not so easy. It needs aggressive pricing, and customer service; logistics, infrastructure investments and marketing; thus, for those looking for short-term profits, it may a big disappointment. On the other hand, e-commerce is possible only when the customers can provide his credit-card number. But there is no guarantee that it will be confidential. Disadvantages that hinder e-commerce can be listed below as: Lack of proper security. A customer cannot select of a product through personal inspection. The assessment of all leveled taxes cannot be done properly. It needs strong infrastructure and huge investments. It needs the electronic payment (credit-card, e-cash etc.) system which is now just on the swing. Difficulties in ensuring secure digital transfers via the Internet. High initial cost of introducing online payments mechanisms. It needs high awareness in the field of computers. There is no security for the reliability of the available data on the computer.