E- COMMERCE

INTRODUCTION
Electronic Commerce (E-Commerce) is a general concept covering any form of business transaction or information exchange
executed using information and communication technologies. There are three categories of e-commerce as follows:

Electronic Markets
It is virtual representation of physical market. An electronic market is the use of information and technology to present a
range of offerings available in the market segment so that buyer can compare the prices and the other attributes of the
offerings and make a purchase decision.

Electronic Data Interchange (EDI)

EDI provides a standardized system for coding trade transactions so that they can be communicated directly from one
computer system to another without need for printed orders and invoices and the delays and errors implicit in paper
handling. EDI allows paperless transaction. EDI is used by organizations that make a large number of regular transactions.
EDI standard are decided by ANSI (American National Standard Institute)

Internet Commerce
Information and communications technologies can also be used to advertise and make one-off sales of a wide range of
goods and services.

DEFINITION
A fairly broad definition of Electronic Commerce is given below:
"Electronic commerce is the process of doing business electronically. It involves the automation of a variety of business-to-
business and business-to-consumer transactions through reliable and secure connections."

FEATURES
1. Ubiquity
Ubiquity means found everywhere. E-commerce is available just about everywhere. With E-commerce it is possible to
shop from desktop, at office, at home, even when you are traveling. There is no need to visit the physical market place.
2. Global Reach
E-commerce technology permits commercial transactions to cross the national boundaries and it can reach to any corner
of the glob.
3. Universal Standards
One unusual feature of e-commerce technologies is that the technical standards of the Internet are universal standards-
they are shared by all nations around the world.
4. Richness
It refers to richness in providing information to the consumer. Information about a product is provided to the consumer
by using Audio/video.
5. Interactivity
E-commerce allows two way communications between merchant and consumer. Communication can be with E-mail or
on line chatting etc.
6. Information Density
Internet is making information more useful and important than ever. Information becomes more plentiful, less expensive
and of higher quality.
7. Personalisation
Merchants can target their marketing messages to specific individuals by adjusting the message to a person's name,
interest and past purchases.
8. Social Networking
Merchant can allow the user to create and share contents in the form of text, videos, music or photos with worldwide
community. Using these forms of communication, users are able to create new social networks and strengthen existing
ones.

ADVANTAGES
1. Overcome Geographical Limitations
If you have a physical store, you are limited by the geographical area that you can service. With an e-commerce website,
the whole world is your playground.
2. Gain New Customers With Search Engine Visibility
Physical retail is driven by branding and relationships. In addition to these two drivers, online retail is also driven by traffic
from search engines. It is not unusual for customers to follow a link in search engine results, and land up on an e-
commerce website that they have never heard of.
3. Lower Costs
One of the most tangible positives of e-commerce is the lowered cost. A part of these lowered costs could be passed on
to customers in the form of discounted prices. Advertising cost, shop cost, Online purchase cost, Investment cost can be
reduced with e-commerce and therefore the cost of the product is less.
4. Locate the Product Quicker
It is no longer about pushing a shopping cart to the correct passageway or exploration for the desired product. On an
e-commerce website, customers can click through intuitive navigation or use a search box to immediately narrow down
their product search. Some websites remember customer preferences and shopping lists to facilitate repeat purchase.
5. Eliminate Travel Time and Cost
It is not unusual for customers to travel long distances to reach their preferred physical store. E- commerce allows them to
visit the same store virtually, with a few mouse clicks.
6. Provide Comparison Shopping
E-commerce facilitates comparison shopping. There are several online services that allow customers to browse multiple e-
commerce merchants and find the best prices.
7. Enable Deals, Bargains, Coupons, and Group Buying
Though there are physical equivalents to deals, bargains, coupons, and group buying, online shopping makes it much
more convenient.
8. Provide Abundant Information
There are limitations to the amount of information that can be displayed in a physical store. E-commerce websites can
make additional information casily available to customers. Most of this information is provided by vendors, and does not
cost anything to create or maintain.
9. Remain Open All the Time
Store timings are now 24/7/365. E-commerce websites can run all the time. From the merchant's point of view, this
increases the number of orders they receive. From the customer's point of view, an "always open" store is more
convenient.
DISADVANTAGES
1. E-commerce Lacks Personal Touch
Not that all physical retailers have a personal approach, but there are several retailers who value human relationship. As a
result, shopping at those retail outlets is reassuring and refreshing. Clicking on "Buy Now." and piling up products in
virtual shopping carts, is just not the same.
2. E-commerce Delays Goods
Unless you are using a website to merely order a pizza online, e-commerce websites deliver take a lot longer to get the
goods into your hands. Even with express shipping, the earliest you get goods is "tomorrow."
An exception to this rule is in the case of digital goods, e.g. an e-book or a music file. In this case, e-commerce might
actually be faster than purchasing goods from a physical store.
3. Some Goods Cannot Be Purchased Online
Despite its many conveniences, there are goods that you cannot buy online. Most of these would be in the categories of
"perishable" or "odd-sized."
4. E-commerce Does Not Allow You to Experience the Product Before Purchase
You cannot touch the fabric of the garment you want to buy. You cannot check how the shoe feels on your feet. You
cannot "test" the perfume that you want to buy. In many cases, customers want to experience the product before
purchase. E-commerce does not allow that. If you buy a music system, you cannot play it online to check if it sounds
right? If you are purchasing a home-theatre system, you would much rather sit in the "experience center" that several
retail stores set up.
5. Anyone Can Set Up an E-commerce Website
We live in an era where online storefront providers bring you the ability to set up an e- commerce store within minutes.
But if anybody can set up a store, how do I know that the store I am purchasing from is genuine? The lowered barriers to
entry might be a great attraction to the aspiring e-commerce entrepreneur. But for the buyer, reliability can be an issue.
This could lead customers to restrict their online purchases to famous e-commerce websites.
6. Security
When making an online purchase, you have to provide at least your credit card information and mailing address. In many
cases, e-commerce websites are able to harvest other information about your online behavior and preferences. This could
lead to credit card fraud, or worse, identity theft.
TYPES

1. Business-to-Business (B2B)
It is a form of electronic commerce in which products or services are sold from a firm to another firm. It is performed in
much higher volumes than B2C. For Example: Intel is selling micro processors to Dell or Reebok is selling shoes to Flipkart
are the examples of B2B. Web site Examples: shop2gether.com, Quill.com.
2. Business-to-Consumer (B2C)
It is a form of electronic commerce in which products or services are sold from a firm directly to consumers. For Example:
Dell is selling a laptop to me or Flipkart is selling Reebok shoes to a customer are the examples of B2C. Web Site
Examples: amazon.com, flipkart.com
3. Consumer-to-Consumer (C2C)
It is a form of electronic commerce in which products or services are sold from one consumer to another consumer with
the help of online market maker such as the auction site eBay. For Example: Smita is buying an iPod from Anita on ebay or
I am selling a car to Mr. Ramzan on olx are the examples of C2C. Web site Examples: ebay.com, olx.in.
4. Peer-to-Peer (P2P)
It is a form of electronic commerce in which user can share files and computer resources directly without having to go
through a central Web server. For Example: I am sharing music track with my Friend or My friend is sharing a video clip
with Me are the examples of P2P.. Web site Examples: BitTorrent.com, gnutella.
BUSINESS MODELS
1. Advertising Revenue
A Web site that offers its users contents, services, and/or products also provides a forum for advertisements and receives
fees from advertisers. Web sites, those are able to attract the greatest viewer ship are able to charge higher advertising
rates. Number of people visiting a web site is known as Hits. Web site Examples: Yahoo.com, Google.com
2. Subscription Revenue
A Web site that offers its users contents or services charges a subscription fee for access to some or all of its offerings.
They may charge monthly/ annual subscription fee. The contents offered by such site, must be a high-value-added,
premium-offering that neither is readily available elsewhere nor easily replicated. Examples: Consumerreports.org,
Dalalstreet.com
3. Transaction Fee Revenue
A company receives a fee for executing a transaction. For example eBay provides an online auction marketplace and
receives a small transaction fee from the seller if the seller is successful in selling the item. Web site Examples: eBay,
sharekhan.com
4. Sales Revenue
Companies derive revenue by selling goods, information or services to customers. The percentage of people visiting the
site and buy something is known as conversion rate. Web site Examples: Amazon. Flipkart.
5. Affiliate Revenue
Sites that steer business to an "affiliate" receive a referral fee or percentage of the revenue from any resulting sales.
Web site Example: Mypoints.
MAJOR B2C MODELS
1. Portal
Portals offer users powerful Web search tools as well as an integrated package of content and services, such as news,
email, calendars, shopping, music downloads, video streaming and more, all in one place. Today they are marketed as
places where consumers will want to start their Web searching and hopefully stay a long time to read news, find
entertainment and meet other people. Portals do not sell anything directly.
Portals generate revenues primarily by charging advertisers for ad placement, collecting referral fees for steering
customers to other sites and charging for premium services.
2. E-TAILER
E-tailer is an online retail store. Customer has to connect to the Internet to check what is available with E-tailer and place
an order. Some e-tailer are divisions of existing physical stores where as the others operate only in the virtual world.
E-tailers are of two types:
Pure plays: They exist only in the virtual world; they do not have any physical store.
Example: amazon.com, flipkart.com.
Bricks and clicks: They have physical stores where they sell
directly to walk-in customers and they also have selling through internet i.e. virtual world. Example Walmart.com
The e-tail revenue model is sales revenue.
3. Content Provider
Content providers distribute information contents, such as digital video, music, photos, text and artwork, over the web.
Content providers make money by charging a subscription fee. The subscription fee can be monthly or yearly etc even it
can be micro- payment system i.e. charges will depend upon what you download.
Few content providers do not charge for their information; for example many newspapers and magazines. User can access
news and information at these sites without paying a rupee. These sites make money through advertising, referral fees
etc. However now a day "free content" is limited to headlines and text, whereas premium contents-in depth articles or
video delivery is sold for a fee.
4. Transaction Broker
Sites that process transactions for consumers and earn revenue are called as transaction broker. The largest industries
using this model are financial services, travel services and job placement services. The online transaction broker's
primary aim is savings of money and time. In addition, most transaction brokers provide timely information and opinions.
Site such as monster.com offer job searchers a national marketplace for their talents. Online stock brokers charge
commissions that are considerably less than traditional brokers, Transaction brokers make money each time a transaction
occurs.
5. Market Creator
Market creator build a digital environment in which buyers and sellers can meet, display products, search for products
and establish prices. The market opportunity for market creators is potentially vast, but only if the firm has the financial
resources and marketing plan to attract sufficient sellers and buyers. They earn their revenue by charging for
advertisement and transaction fee.
6. Service Provider
Service providers offer services online. Services offered are e-mail, photo sharing, video sharing and user generated
contents (blogs and social networking sites) are all services provided to customers. Example Google maps, Gmail, Orkut
etc. They earn their revenue mainly by charging for advertisement.
7. Community Provider
Community provider are sites that creates a digital online environment where people with similar interests can transact
(buy and sell goods); share interests, photos, and videos; communicate with like-minded people; and receive interest-
related information. Like- minded people can meet and converse much easier, without the limitations of geography and
time to hold back participation.
They earn their revenue by charging for advertisement and affiliate revenue.
SECURITY ISSUES RELATED TO E-COMMERCE
1. Integrity
Interigity refers to the ability to ensure that information being displayed on a Web site or transmitted or received over the
Internet has not been changed in any way by an unauthorized party.
2. Non-denial (Non-repudation)
Non-denial refers to the ability to ensure that e-commerce participants do not deny their online actions.
3. Authenticity
Authenticity refers to the ability to identify the identity of a person or entity with whom you are dealing on the Internet.
4. Confidentialilty (Secrecy)
Confidentialilty refers to the ability to ensure that messages and data are available only to those who are authorized to
view them.
5. Privacy
Privacy refers to the ability to control the use of information a customer has provided about him/her self. The
information should not be misused.
6. Availability
Availability refers to the ability to ensure that an e-commerce site continues to be function as intended. E-commerce
security is designed to protect these six dimensions. When any one of them is compromised, it is a security issue.
ENCRYPTION
• To overcome some of the security issues faced by e-commerce encryption is required.
• Encryption is a process of transforming plain text or data into cipher text. for
• Encryption is performed with the help of a key (cipher). A key (cipher) is any method transforming plain text to cipher text.
• Cipher text means the text that has been encrypted and thus can not be read by anyone other than the sender and the
receiver.
• Encryption is performed by the sender before sending the message on Internet. Encryption can provide four of the six key
dimensions of e-commerce security:
• Message integrity - provides assurance that the message has not been altered.
1. Non-denial - prevents the user from denying he/she sent the message.
2. Authentication - provides verification of the identity of the person (or computer) sending the message.
3. Confidentiality - gives assurance that the message was not read by others.

DECRYPTION
• Decryption is process of transforming cipher text into plain text or data.
• Decryption is performed with the help of a key (cipher). A key (cipher) is any method for transforming cipher text to plain
text.
• Decryption is performed by the receiver after receiving the cipher text from the sender.
• Without decryption the receiver cannot read the message.
• Encryption key and decryption key may be same (Symmetric) or it may be different (Asymmetric).
Symmetric Key Encryption
• In symmetric key encryption, both the sender and receiver use the same key to encrypt and decrypt the message.
• It is also known as secret key encryption.
• This encryption method was used extensively during World War II.
• Generally in computer, symmetric key encryption is not used but asymmetric (public) key encryption is used.
• Encryption can be done by substitution or transposition.
• In substitution method every character is replaced by another character whereas in transposition the characters are
rearranged.

Public Key Encryption (Asymmetric)

• In this method, two mathematically related digital keys are used: a receiver's public key and receiver's private key.
• The private key is kept secret by the owner and the public key is widely circulated.
• Encryption is done by sender using receiver’s public key.
• Decryption is done by receiver with the help of private key.
• However, once a public key is used to encrypt a messages, that same key can not be used to decrypt a meesage.
• It is one way irresible mathematically function.
• In public key encryption we can be quite sure that the message was not read by a third party (message confidentiality),
but there is no authentication of the sender. This means the sender could deny that the message is send by him/her.
• Public Key Encryption takes care of only Message Integrity & Message confidentialilty.
• Public key encryption lacks authenticity, that is there is no guarentee that the sender really is the sender. Because of
authenticity even denial also comes into picture.
Secure Sockets Layer (SSL)

• SSL is a security protocol used to provide secure communication between a client and server over the internet.
• The most common form of securing channels is through the Secure Sockets Layer of TCP/IP.
• It uses a process called SSL handshake to establish a secure connection between the client and server.
• SSL was widely used for securing online transactions, such as online banking, e-commerce, and email
communication.
• In SSL URL will change from HTTP to HTTPS.
• A secure communication can be used only with HTTP and it can not be used with non-HTTP messages. Basically, HTTPS
tires to make HTTP more secure.
• Encryption is based on session key. Session key is unique and it is different for each session.
• The SSL protocol provides data encryption, server authentication, optional client authentication and message integrity
for TCP/IP connections.
• SSL provides only server side authentication; client side authentication is optional. In SSL the consumer can order goods
or download information products and then claim the transaction never occurred.
• However, SSL has been replaced by Transport Layer Security (TLS), which is a more secure and modern protocol.

Secure Electronic Transaction (SET)

• Secure electronic transaction (SET) is a protocol developed by Visa and MasterCard to facilitate secure payment
transactions over the internet.
• SET provides a standard method for ensuring the security and confidentiality of electronic payment transactions between
customers, merchants, and banks.
• The SET protocol uses a combination of encryption, digital signatures, and certificates to ensure the authenticity and
integrity of the payment transaction.
• When a customer initiates a payment, the SET protocol establishes a secure channel between the customer's browser
and the merchant's server. The customer then enters their payment information, which is encrypted and sent to the
merchant's server.
• The merchant's server then verifies the customer's payment information and sends it to the payment gateway, which
forwards it to the bank for approval. The bank verifies the transaction and sends an authorization message back to the
payment gateway, which then sends it to the merchant's server. The merchant's server then completes the payment
transaction and sends a confirmation message to the customer's browser.
• SET has several advantages over other payment protocols, including improved security and reduced fraud. It also provides
a higher level of privacy for customers since their payment information is encrypted and cannot be intercepted by
unauthorized parties.
• While SET was widely used in the early days of e-commerce, it has since been replaced by newer payment protocols, such
as Secure Sockets Layer (SSL) and Transport Layer Security (TLS), which provide similar levels of security and are more
widely supported by web browsers and payment gateways.
PAYMENT SYSTEM

Digital Cash
• It is also called as e-cash.
• It is the very first form of alternative payment systems developed by e-commerce.
• In these schemes, consumer will deposit money in a bank; bank will issue digital tokens for various
denominations of cash and then consumer can spend these at merchants' sites.

Online Stored Value

• Permits consumers to make instant, online payments to merchants and other individuals based on value stored
in an online account.
• PayPal
• For this you have to open an account with PayPal and deposit some amount in it.
• When you make a payment using PayPal, you have to e-mail the payment to merchant's PayPal account.
• PayPal will transfer the amount from your account to merchants account.
• Issues with PayPal include its high cost, and lack of consumer protections.

Smart Cards:
• It is another kind of stored value system based on credit-card-sized plastic cards with embedded chips that
store personal information that can be used to support e-commerce payments.
• Smart card can hold 100 times more data than a credit card.
• Smart cards also require a password.
• In foreign countries it is used at highway toll payment system.

Digital Accumulating Balance Payment

• These systems allow users to make micro-payments and purchases on the Web, accumulating a debit balance
for which they are billed at the end of the month.
• Consumers are expected to pay the entire balance by cheque or credit card or cash.
• This is suitable for purchasing single music track, book, games, ring tones etc.

Digital Cheque Payment System

• It is similar to normal cheque payment system of the banks
• To authorize payment, a user must type his full name, address and last four digits of social security number.
• This information is checked against various databases, for fraud, bad cheque etc.
• A digital cheque is produced after verification and it is delivered to the merchant.
• Digital cheque is not so successful in e-commerce till today.
MOBILE COMMERCE (M-COMMERCE)

• M-commerce refers to the buying and selling of goods and services through mobile devices, such as smartphones and
tablets.
• M-commerce helps the users to access the Internet easily through cell phones and PDAs.
• It enables customers to make purchases on-the-go, from anywhere, at any time, and using their mobile devices.
• Now-a-days cell phones are equipped with Micro browser, Bluetooth technology. E-mail capabilities.
• M-commerce includes various types of transactions, such as mobile banking, mobile payments, mobile ticketing, and
mobile marketing.
• Mobile devices are increasingly becoming the preferred mode of accessing the internet, and thus, m-commerce is rapidly
growing in popularity.
• The technology behind m-commerce is based on Wireless Application Protocol (WAP).
• To enable m-commerce, businesses need to have mobile-friendly websites, mobile apps, and mobile payment gateways
that are secure and easy to use.
• IBM and other companies are experimenting with speech recognition software as a way to ensure security for M-
commerce transactions.
• Wireless Markup Language (WML) is used to create Web pages that can be displayed on small format Web-enabled
devices such as cell phones etc.

PHISHING

• Phishing is the act of attempting to acquire information such as usernames, passwords, and credit card details (and
sometimes, indirectly, money) by masked as a trustworthy entity in an electronic communication.
• Communications is done as if it is from popular social web sites, auction sites, banks, online payment processors or IT
administrators are commonly used to lure the unsuspecting public.
• Phishing is typically carried out by email and it often directs users to enter details at a fake website whose look and feel
are almost identical to the legitimate one.
• Phishing emails may contain links to websites that are infected with malware.
• Phishing is used to deceive users.
• Phishing can be prevented by legislation, user training, public awareness, and technical security measures.