Module1 Introduction to Ecommerce

           

           E-commerce means buy and sell goods, sharing and transfer of information and services online, through public networks.it is trading in products or services  using computer network.

Example for e-commerce:
·         Online shopping

·         Electronic payment

·         Online auction

·         Internet banking

·         Online ticketing

Definition

According to WTO “e-commerce is production, distribution, marketing, sale or delivery of goods and services by electronic means”

Classification of e-commerce

Difference between traditional commerce and e-commerce

basis	Traditional commerce	e-commerce
market place	Physical market is used for transaction	Virtual/electronic market is used for transaction
relationship	Direct personal contact between buyer  and seller	Only electronic relationship
Mode of payment	Paper currency	Electronic payment (bank transfer, plastic money)
availability	Only on working hours and working days (limited availability)	24/7 availability
Time needed for completing the transaction	More time is needed	Only less time is needed
convenience	less	More convenient
cost	High	Less
Presence of middleman	Middle man essential	No middle man

E business

All functions of a business are done with the help of internet and electronic means.  It is an application of information and communication technologies in support of all the activities of business. The term’ e-business ‘was coined by IBM’s marketing and internet team in 1996.

Differences between e-commerce and e-business

e-commerce	e-business
It involves commercial transaction done over internet	It is conduct of business processes on the internet
e-commerce is a subset of e-business	It is a superset of e-commerce
e-commerce usually requires the use of just a website	It involves the use of CRM’s, ERP’s that connect different business process
It just involves buying and selling of products and services	It includes all kind of pre-sale and post-sale effort
It is more appropriate in b2c context	It is used in the context of b2b transaction
It involves mandatory use of internet	It can involve the use of internet, intranet or extranet

E-tailing

           It is the selling of retail goods on the internet. It can include b2b, b2c sales. The revenue can come from the sale of products and services, through subscription to website content or through advertising.

Features of e-commerce

Ubiquity

v  It is not restricted to a physical space

v  It is possible to shop from  our desktop

v  It reduces transaction cost

Global outlook

     v  It permits transaction to cross national boundaries

     v  Market size equals to size of world’s online population

Universal standard

     v  It uses universal standard in offering  product and services

     v  It is made possible through hardware and software/content 

     v  It make much easier to build b.s from existing technologies

Interactive

     v  Consumer/user can interact with the content

     v It allow two-way communication between merchant and consumer

Information density

v  The e-commerce technology reduces information cost

v  Raises the quality of information

v  Information provided over interact on the web content is superior satisfying consumer  need

Personalization

     v  It allow personalization

     v  Merchant can target their marketing to specific individual

     v  They can also change the products based on user’s  preference

Choice of products and services

     v  It offer wide variety of products and services

Plastic money

     v  They can use plastic money like debit card and credit card for  making payment

     v  In addition to this cash delivery are also available in a few websites

Virtual market/e-market

     v  Customer interact with the merchant through electronic means

     v  Customer can see the product in the virtual section

     v  No physical market place

Procedure of e-commerce

a.      Customer visit-customer is a person who wants to buy goods and services.  When a customer wish to buy electronically, he interact with the merchant website

b.      Setting the product- a catalog is needed to display product online. choose the product from the site. The site will display products and include details like price, colors, size, pictures etc. shopping cart is a software which help the customer to track the product they want to buy. It is temporary list if items to be purchased.

c.       Online payment- customer can make payment through online. Once the payment transaction is successful, a message indicating he payment will be displayed on the webpage.

d.      Product delivery- the product will be delivered to the customer by courier people. The expected date of delivery will be intimated at the time of purchase.

e.       Feedback-customer feedback is necessary for providing solution for their complains about the product. 

  Infrastructure of e-commerce

                                    The complex system of e-commerce requires an infrastructure to perform its specific functions. Infrastructure of e-commerce are divided into four types

Physical infrastructure layer

                       This layer of e-commerce infrastructure includes all tangible/physical components that enable e-commerce sites to run successfully. The layer include it infrastructure, space infrastructure, logistics infrastructure

Service/technology layer

                            It means technologies used in e-commerce business like WWW and e-mail. Software such as ERP, EDI etc.it provides services which are carried out conveniently using the internet infrastructure.

Product layer

This layer deals with types of product and services that are being showcased and sold and also categorization of buyers based on different criteria.

Functional/operational layer

  It deals with the real time operation of the e-commerce website. The online electronic market place is the main component of this layer.

There is other type of layer which includes application layer that includes B2B, B2C, C2C, mobile commerce, middleman service layer that includes services like secure payment using credit cards, authentication of digital signature etc.

Advantages of e-commerce

Electronic commerce is a major development in the way business is conducted. Consumer can easily search through a large database of products and services

Advantages of e-commerce are categorized into 3-

·         For the seller/business

·         For the buyer/consumer

·         In general

For the seller/business

1.      Increase sale and cost saving

§  E-commerce is over the entire earth and can offer round the clock accessibility at the convenience of the buyer, it increase sales of many products

§   It reduce their cost by eliminating middle man and also cutting  down marketing expenses

2.      Reaching global  market

§  Sellers can easily reach national and global markets through online store at low operating cost

3.      Market promotion easier for smaller firms

§  Smaller firms can reach a bigger market area all over the world at a much lower cost because of their presence over the internet

4.      Better inventory management

§  The size of the inventory can be reduced and there by the working capital can be minimized

5.      Direct selling benefits

§  Shopping is done through the firm’s online store hosted on internet. This will help the firms to establish cordial relationship with customers

6.      Customization

§  Personalized marketing messages can be directed towards prospective customers with attractive deals and offer

7.      Better customer management

§  Better care and services can be offered through the online mediums ii will create loyal customers, who make repeated visit to the size

For the buyer/customer

1.      Provides a wider range of choices

§  E-commerce endless possibilities and variants of the products could be given to the buyer which result in better customer satisfaction

2.      Global shopping

§  Customer can virtually shop from any store via internet by sitting in their home or office

3.      Convenience and comfort

§  Customer can sit and shop from their home/office or while on travel.

§  Customer convenience is the main driving force of e-commerce

4.      Attractive pricing-deals, discounts, and coupons

§  Products are offered at huge discount for limited period this has cracked new segment of customer of that shop from b2b seeking the next best deal.

5.      Provides an easy way to customize the level of detail in the information obtained

§  E-commerce sites allow the users to customize their products to suit a buyer’s pocket or needed features

6.      Innovative payment options

§  E-commerce merchant’s offer new variants of payment options like cash on delivery, credit card etc.

§  It provides an option to pay in 0 percent monthly installments.

7.      Exclusive launch of products online

§  Many international brand started introducing the product online before it is made available in stores

8.      Provide comparison shopping

§  There are several online services that allow customers to browse multiple e-commerce merchants and find in best price

§  They also called shopping aggregators

9.      Home delivery of products

§  They are competing to ensure fast delivery of goods to customer.

10.  Replacement and refund

§  If the product is not up to the expectation the buyer can sent it back within specified time limit

In general e-commerce provide so many advantages like it increase the speed and accuracy with the business can exchange information virtually without any delay, it also offer products and services in remote areas, it remain open all the time 24*7*65, reaching global customers is relatively easy on the internet, disintermediation etc.

Limitation of e-commerce

a.       Lack of system security and reliability in internet. Websites and databases being hacked by unscrupulous elements.

b.      E-commerce face completion from national/international competitors and oit leads price war.

c.       Communication infrastructure is expensive through internet. It also required technological knowledge for doing online transaction

d.      Perishable goods and some unique items are not suitable for e-commerce

e.       Most of the companies has never used any electronic means of communication with is customer as the internet is an unknown mode for them

f.       Lack of touch/feel of products during online shopping

g.      They sometimes forget how essential to build loyal relationship with customers. Without loyalty from customers, they will not survive the business.

h.      In most application there are not yet enough sellers and buyer for profitable EC operations.

Functions of e-commerce

The objective of e-commerce is to provide the customer with what they want, when, where they want it. So it performs all necessary functions of a business enterprise to sell products to its customer. The functions of e-commerce are broadly classified into three.

1.      E-marketing

·         E-marketing refers to the use of the Internet and digital media capabilities to help sell your products or services.

·         E-marketing is creating a strategy that helps businesses deliver the right messages and product/services to the right audience.

·         E-marketing joins creative and technical aspects of the Internet, including: design, development, advertising and sales. It includes the use of a website in combination with online promotional techniques such as search engine marketing (SEM), social medial marketing, interactive online ads, online directories, e-mail marketing, affiliate marketing, viral marketing and so on.

·         It consists of all activities and processes with the purpose of finding, attracting, winning and retaining customers.

2.      E-sales

·         This is a electronic function of performing buying and selling

·         It involves functions like collecting orders to deliver goods and services

·         This platform allows the shopper to perform his search, comparison and check out processes secure and hassle free.

3.      E-care

·         Customer need information, advice, problem, resolution, and order status updates.

Application of e-commerce

       E-commerce and its technology can be applied in the following core business areas for optimized resulted and better products and services at less cost

Value chain management

           Value chain integration is a core business function in which e-commerce technologies and application can be applied to maximize value of the total customer experience. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.

            The concept comes from business management and was first described and popularized by Michael Porter in his 1985 best-seller. Each and every stage of value chain adds value and therefore if you integrate the entire value chain by supplying information and processes better product will be resulted.

            Value chain model consist of primary and support activities. Primary activities are inbound logistics, operations, outbound logistics, marketing and sales, services. Support activities like procurement, technology development, infrastructure and human resources management.

Supply chain management

        A supply chain is a network of facilities and distribution options for the entire network of companies to work together to design, produce, deliver, and service products. Since its inception about 10 years ago, the field of supply chain management has become tremendously important to companies in an increasingly competitive global marketplace. On the contrary, e-commerce does not just mean trading and shopping on the Internet. It means business efficiency at all operation levels. 

     Supply Chain Management means coordinating, scheduling and controlling procurement, production, inventories and deliveries of products and services to customers. The SCM is the backbone of Ecommerce, a very critical component of E-commerce. Supply Chain Efficiency means having the right product at the right place at the right time, can save money/reduce costs, and can enhance cash utilization. There are two types of supply chain management- planning application and execution application. It include functions like supplier management, inventory management, distribution management, channel management, payment management, financial management.

       E-SCM is the e-commerce platform that helps the business to set up web based order-supply chain management system.

Direct marketing and selling

Direct marketing is a channel-agnostic form of advertising which allows businesses and nonprofit organizations to communicate straight to the customer, with advertising techniques that can include cell phone text messaging, email, interactive consumer websites, online display ads, database marketing, fliers, catalog distribution, promotional letters, targeted television commercials, response-generating newspaper/magazine advertisements, and outdoor advertising. Amongst its practitioners, it is also referred to as direct response.

Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling. Modern direct selling includes sales made through the partyplan, one-on-one demonstrations, and other personal contact arrangements as well as sales. A textbook definition is: "The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs

Corporate purchasing

It means the purchase of products and services by the business house for its operational and functional needs. It involves purchase of office supply, raw materials, consumable etc.cooperate purchasing is the best example for business 2 business.

The procurement activity for a large organization is complex.

e-procurement-     E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise.

The e-procurement value chain consists of indent management, e-Tendering, e-Auctioning, vendor management, catalogue management, Purchase Order Integration, Order Status, Ship Notice, e-invoicing, e-payment, and contract management

Financial and information services

It includes all those services offered in financial services industries and information and communication industry.

Internet banking- Internet banking is a financial joint which is set up in Internet. There is no hall, no sales department. Only through a computer which is connected to Internet can you

Enjoy every service anywhere in 24 hours .It is also called “virtual bank”

Online travel and ticketing- travel and ticketing services now depends on online platform.

Online insurance- insurance companies are offering insurance policies through their websites

Online billing and payment services-telephone bills, electricity bills, taxes, and various utility bills can be paid online with the help of various websites.

Online information distribution-internet enables organization to access the required information more easily and accurately.

Barriers in the progress of e-commerce

1.      High cost of infrastructure

Maintenance and cost of setting up of infrastructure is high for e-commerce.

2.      Lack of knowledge of internet technology

Still most of the customer is ignorant about a commerce and internet technology.

3.      Security issues

Security is less in case of e-commerce. Hackers and spies can steal credit card numbers, invoice, data base etc.

4.      Lack of qualified personnel

Small and medium sized business organization finds difficulty in case of qualified staff for e-commerce segment

5.      Cultural barriers

Doing transaction online will take some time in case for some people who reluctant to change in order to accept new technology.

References

1.      Wikipedia

2.      E-commerce and general informatics- dr. antony Thomas, prathiba publication.

3.      E- commerce and general informatics- Jacob bose and anish Thomas, prakash publication

4.      Role of e-commerce in supply chain management - NavidNikakhtar and Yang Jianzheng

5.      Finance Service in E-commerce Laichun CHAO, Kuaixian PENG, Xinrui KONG(Hangzhou Institute of Electronic Engineering)