Chapter 1: Overview of E-commerce

 E-commerce, or electronic commerce, refers to the buying and selling of goods and services over
the internet. It encompasses a wide range of online business activities, including retail shopping,
auctions, and payment processing.
 E-commerce continues to evolve, driven by technological advancements, changing consumer
behaviors, and emerging market trends.
 E-Commerce or Electronics Commerce is a methodology of modern business, which addresses the
need of business organizations, vendors and customers to reduce costs and improve the quality of
goods and services while increasing the speed of delivery.
 E-commerce 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
Types of E-Commerce
1. Business-to-Consumer (B2C): Transactions between businesses and individual consumers. This
is the most common form, with examples like Amazon, eBay, and online retailers.
2. Business-to-Business (B2B): Transactions between businesses. Companies sell products or
services to other companies, often in bulk. Examples include Alibaba and various wholesale
distributors.
3. Consumer-to-Consumer (C2C): Transactions between individual consumers, often facilitated
by third-party platforms. eBay, Craigslist, and Facebook Marketplace are examples.
4. Consumer-to-Business (C2B): Individuals sell products or services to businesses. Examples
include freelance platforms like Upwork or Fiverr.
5. Government-to-Business (G2B): Transactions between government entities and businesses,
often involving procurement and regulatory compliance.

6. Mobile Commerce (m-commerce): Shopping and transactions conducted through mobile

devices, such as smartphones and tablets.

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Key Components of E-Commerce

1. Online Storefront: A website or app where products or services are displayed for consumers to
browse and purchase.

2. Payment Processing: Systems that facilitate online payments, such as credit card processing,
digital wallets (e.g., PayPal, Apple Pay), and cryptocurrency transactions.

3. Supply Chain Management: The management of the flow of goods and services, including
inventory, warehousing, and logistics.

4. Marketing and Advertising: Strategies used to attract and retain customers, including SEO
(search engine optimization), social media marketing, and email campaigns.

5. Customer Service: Support provided to customers before, during, and after the purchase, often
through chatbots, email, or phone support.

Advantages of E-Commerce

 Convenience: Shopping can be done 24/7 from anywhere with an internet connection.

 Wider Reach: Businesses can reach a global audience, expanding their customer base beyond
local markets.

 Lower Operational Costs: E-commerce often requires less overhead than traditional brick-and-
mortar stores.

 Personalization: Data analytics allows businesses to tailor marketing and recommendations to

individual customer preferences.

Challenges of E-Commerce

 Security Concerns: Risks related to data breaches and fraud can deter customers from shopping
online.

 Logistics and Fulfillment: Managing inventory, shipping, and returns can be complex.

 Competition: The low barrier to entry leads to high competition, making it essential for
businesses to differentiate themselves.

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  Changing Regulations: E-commerce is subject to various laws and regulations that can change,
affecting operations.

Trends in E-Commerce

 Social Commerce: Selling through social media platforms like Instagram and TikTok.

 Augmented Reality (AR): Enhancing the shopping experience by allowing customers to

visualize products in their environment.

 Subscription Services: Offering products or services on a recurring basis, like streaming

services or monthly product boxes.

 Sustainability: Growing consumer demand for eco-friendly products and practices.

Electronic concept of Commerce

 The Internet has emerged as the major worldwide distribution channel for goods, services,
and managerial and professional jobs.
 This is profoundly changing economics, markets and industry structure, products and services
and their flow, consumer segmentation, consumer values, consumer behaviour, jobs, and labour
markets
 E-commerce is a very diverse and interdisciplinary topic, with issues ranging from e-technology,
addressed by computer experts, to consumer behaviour, addressed by behavioral scientists and
marketing research experts.
 The field of e-commerce is broad. There are many applications of EC, such as home banking,
shopping in electronic malls, buying stocks, finding a job, conducting an auction, collaborating
electronically with business partners around the globe, and providing customer service.

History of E-Commerce
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 It is difficult to pinpoint just when e-commerce began. There were several precursors to e-
commerce. In the late 1970s, a pharmaceutical firm named Baxter Healthcare initiated a
primitive form of B2B e-commerce by using a telephone-based modem that permitted hospitals to
reorder supplies from Baxter. This system was later expanded during the 1980s into a PC- based
remote order entry system and was widely copied throughout the United States long before the
Internet became a commercial environment.
 E-commerce applications began in the early 1970s with such innovations as the electronic transfer
of funds. However, the applications were limited to large corporations and a few daring small
businesses. Then came electronic data interchange (EDI), which added other kinds of transaction
processing and extended participation to all industries. Since the commercialization of the Internet
and the introduction of the Web in the early 1990s, E. C applications have rapidly expanded.
 The implementation of various E C applications depends on four major support categories (i.e.
people, public policy, and marketing/advertising and supply chain logistics.)

Activity 1.1: Elaborate the difference b/n traditional commerce and e-commerce.

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1.1. E-Commerce: Doing Commerce on the Internet
1.1.1 Definition of “E-Commerce”?

 Electronic commerce (e-commerce) is often thought simply to refer to buying and selling
using the Internet; people immediately think of consumer retail purchases from companies
such as Amazon.
 But e-commerce involves much more than electronically mediated financial transactions
between organizations and customers. E-commerce should be considered an electronically
mediated transaction between an organization and any third party it deals with. By this
definition, non-financial transactions such as customer requests for further information would
also be considered to be part of e-commerce.
 Some of the definitions of e-commerce often heard and found in publications and the media
are:
 Electronic Commerce (EC) is where business transactions take place via
telecommunications networks, especially the Internet.
 Electronic commerce describes the buying and selling of products, services, and information
via computer networks including the Internet.
 Electronic commerce is about doing business
electronically.
 E-commerce, e-commerce, or electronic commerce is defined as the conduct of a financial
transaction by electronic means.

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 Differences between Electronic Commerce and traditional commerce

 The key differences between electronic commerce (e-commerce) and traditional commerce
stem from how business transactions are conducted, the nature of customer interaction, and the
supporting infrastructure. Here’s a comparison across various dimensions:

1. Mode of Interaction

 E-commerce: Transactions are conducted over the internet, and businesses interact with
customers through websites, apps, or online platforms. All processes, from browsing
products to payments, are digital.

 Traditional Commerce: Transactions occur in physical locations (brick-and-mortar

stores), where customers visit the store to interact with products and sales personnel.

2. Geographical Reach

 E-commerce: Global reach is possible, allowing businesses to sell to customers in different

regions and countries without geographical limitations.

 Traditional Commerce: Typically limited to a specific geographic area where the physical
store is located, although some businesses expand through franchises or multiple outlets.

3. Operating Hours

 E-commerce: Available 24/7, enabling customers to shop at any time, regardless of the
business’s location.

 Traditional Commerce: Limited to specific hours of operation, often constrained by

business hours, local laws, and workforce availability.

4. Customer Experience

 E-commerce: Interaction is virtual, with customers relying on product descriptions, images,

and customer reviews. There is no direct physical inspection of products before purchase.

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  Traditional Commerce: Customers can physically inspect, touch, or try products before
purchasing. Human interaction with sales personnel can enhance the experience.

5. Cost Structure

 E-commerce: Generally lower overhead costs since businesses do not need to maintain
physical stores. However, there are costs associated with website maintenance, digital
marketing, logistics, and warehousing.

 Traditional Commerce: Higher operational costs due to expenses related to renting

physical spaces, utilities, staffing, and maintaining the storefront.

6. Marketing and Advertising

 E-commerce: Heavily reliant on digital marketing strategies such as SEO, social media
marketing, email campaigns, and targeted online ads.

 Traditional Commerce: Primarily uses traditional media, including print ads, billboards,
TV, radio, and in-store promotions, although many brick-and-mortar stores are increasingly
adopting online marketing as well.

7. Payment Methods

 E-commerce: Payments are typically processed through online payment gateways like
credit cards, PayPal, digital wallets (e.g., Apple Pay, Google Pay), or even
cryptocurrencies.

 Traditional Commerce: Payments are made in person using cash, credit cards, debit cards,
checks, or mobile payment systems at point-of-sale terminals.

8. Product Delivery

 E-commerce: Products are delivered to the customer’s location via courier or shipping
services, and customers may have to wait for the items to arrive. Digital goods (e.g.,
software, music) can be delivered instantly.

 Traditional Commerce: Customers receive the product immediately upon purchase, unless
it’s a custom order or out of stock.
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9. Customer Support

 E-commerce: Support is often provided digitally through email, chatbots, online help
centers, or virtual agents. Some websites offer video support or call centers.

 Traditional Commerce: Face-to-face interaction is the primary means of support, with

sales staff or customer service representatives assisting customers in real time.

10. Inventory and Logistics

 E-commerce: Inventory is often managed through warehouses, fulfillment centers, or

dropshipping models. Effective logistics and delivery systems are crucial to ensure timely
fulfillment.

 Traditional Commerce: Inventory is stored within or near the physical store, and
restocking involves in-store logistics.

11. Return and Exchange Policy

 E-commerce: Returns or exchanges typically require shipping products back to the seller,
which can be time-consuming and may involve additional shipping costs.

 Traditional Commerce: Returns or exchanges are often easier as customers can directly
visit the store and resolve issues instantly.

12. Data Collection and Personalization

 E-commerce: Data collection is highly automated, allowing businesses to track customer

behavior, preferences, and purchases, often leading to personalized recommendations and
marketing efforts.

 Traditional Commerce: Data collection is less automated and often requires customer
surveys, loyalty programs, or observation, making personalization more challenging and
less precise.

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13. Security and Fraud Risks

 E-commerce: Online transactions are subject to risks like hacking, identity theft, and fraud,
though secure payment gateways and encryption can mitigate these risks.

 Traditional Commerce: While physical stores can face theft and robbery risks, traditional
commerce is generally less prone to online fraud or data breaches.

14. Environmental Impact

 E-commerce: Can have lower environmental costs due to less reliance on physical
infrastructure, but shipping and packaging waste can be a concern.

 Traditional Commerce: Higher energy consumption for operating stores, lighting, heating,
and maintaining physical locations, but less packaging waste as customers typically take
goods directly.

Summary of Key Differences

Aspect E-Commerce Traditional Commerce
Interaction Virtual/online Face-to-face/physical
Geographical Reach Global Local or regional
Operating Hours 24/7 Limited business hours
Cost Structure Lower operational costs Higher operational costs
Customer No physical product inspection Physical product interaction
Experience
Payment Methods Digital/online payments Cash, credit card, in-person payments
Delivery Shipping required Immediate product availability
 Both e-commerce and traditional commerce have their strengths and weaknesses, and
businesses often adopt hybrid models to combine the advantages of both worlds.

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- The major difference is the way information is exchanged and processed:
Traditional commerce:

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  face-to-face, telephone lines, or mail systems
 Manual processing of traditional business transactions
 individual involved in all stages of business transactions
 Unavailability of a uniform platform, as traditional commerce, depends heavily on personal
communication.
 It is difficult to establish and maintain standard practices in traditional commerce.
 Heavy dependency on information exchange from person to person.
E-Commerce:
• using Internet or other network communication technology
• automated processing of business transactions
• individual involved in all stages of transactions
• E-commerce websites provide the user a platform where all the information is available at one
place.
• A uniform strategy can be easily established and maintained in e-commerce.
• Information sharing is made easy via electronic communication channels making a little
dependency on person to person information exchange.

Activity 1.2:
Elaborate these synonyms terms of EC: e-commerce, e-business, e-marketing and internet
marketing AND identify which one is broad in scope.

E-Business Vs E-commerce

E-commerce: is more specific than e-business. E-business involves the use of electronic
platforms- intranets, extranets and the Internet to conduct a company’s business. Internet and
other technologies now help companies carry on their business faster, more accurately and over
a range of time and space. They have created intranets to help employees communicate with
each other and access information found on the company’s computers. They have set up
extranets with major suppliers and distributors to assist with information exchange, orders,
transactions and payments. Companies such as Cisco, Microsoft and Oracle run almost entirely
as e-business, in which memos, invoices, engineering drawings, sales and marketing information
–virtually everything-happens over the Internet instead of on paper.

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E-business: includes all electronic–based information exchanges within or between companies
and customers. In contrast, e-commerce involves buying and selling processes supported by
electronic means, primarily the Internet. E-markets are market-spaces rather than physical
marketplaces. Sellers use e-markets to offer their products and services online. Buyers use them
to search for information, identify what they want, and place orders using a credit or other
means of electronic payment. Is the online transaction of business, featuring linked computer
systems of the vendor, host, and buyer. Electronic transactions involve the transfer of ownership
or rights to use a good or service.

Unique Features of E-Commerce

Each of the dimensions of e-commerce technology and their business significance are listed in
Table
1.1 deserves a brief exploration, as well as a comparison to both traditional commerce and other
forms of technology-enabled commerce.
Table: 1.1
Seven Unique Features of E-Commerce Technology
E-commerce Technology Dimension Business Significance
Ubiquity: available just about Available everywhere
everywhere, at all times. It liberates the Ubiquity lowers transaction costs
market from being restricted to a physical for the consumer/buyer.
space and makes it possible to shop from Cognitive Energy – mental effort
your desktop, at home, at work, or even needed to complete a task.
from your car, using mobile commerce. Ubiquity reduces cognitive
energy.
Humans tend to seek options that
require the minimum cognitive
energy.
Consider the mental effort needed
to buy your book online vs.
hunting for it at various
bookstores.
Global Reach: E-commerce technology “Marketspace” includes
permits commercial transactions to cross potentially billions of consumers
cultural and national boundaries far more and millions of businesses
conveniently and cost-effectively than is true in worldwide.
traditional commerce. It is accessed by anyone Easy to understand how this
from any demographic group; age, income, feature can benefit businesses
race, gender, religion, etc. and consumers
Universal standards: standards that are  Universal standards can greatly
shared by all nations around the world. influence market entry costs.
o E-commerce is made possible through How so?
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 hardware (Internet) and software/content  Consider the cost of bringing
(World Wide Web) goods to a market
o The Internet – In its infancy, the architects  Consider the cost of setting up a
developed standards that are now globally virtual, web-based store, vs. a
recognized (TCP/IP) real brick-mortar store.
o The World Wide Web – Standards are  Price discovery –
becoming #1 priority (XML, HTML, etc.) can the consumer/buyer find
prices easily, with minimal
cognitive energy?
 Since e-commerce is built on
standard technology (XML,
HTML), it’s integrated,
aggregate, and summarize
information.
 Standardization
 Low Entry Cost
 More completion. Standardization
 Info.Integration
 More price discovery opportunities.
More competition + price discovery
opportunity = lower consumer prices

 Richness: Video, audio, and text messages Video, audio, and text marketing
are possible. messages are integrated into a single
marketing message and consuming
experience.
 Interactivity—the technology works Consumers are engaged in a dialogue
through interaction with the user. that dynamically adjusts the experience
– TV is a passive activity. Engaging to the individual, and makes the
consumer/user is a powerful feature. consumer a co-participant in the process
of delivering goods to the market.
 Information density—the technology o The e-commerce technology reduces
reduces information costs and raises information collection,
quality. storage, processing and
communication costs.
Simultaneously, these technologies
increase greatly the currency,
accuracy and timeliness of
information- making information
more useful and important than ever
.Due to these technologies prices
and costs become more transparent.
 Price transparency refers to the
ease with which consumers can
find out the variety of prices in the
market. Cost transparency refers

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 to the ability of consumers to
discover the actual costs
merchants pay for products.
 How does the technology
reduce costs?
 How does it raise quality?
o Consider the old way to share
information, i.e., paper, mail, voice
communication, etc
 Personalization/Customization—the Personalization of marketing messages
technology allows personalized messages and customization of products and
to be delivered to individuals as well as services are based on individual
groups. characteristics.

1.2 Scope of e-Commerce

The UK government also used a broad definition when explaining the scope of e-commerce to
industry:
E-commerce is the exchange of information across electronic networks, at any stage in the
supply chain, whether within an organization, between businesses, between businesses and
consumers, or between the public and private sectors, whether paid or unpaid.(Cabinet
Office,
1999
These definitions show that electronic commerce is not solely restricted to the actual buying and
selling of products, but also includes pre-sale and post-sale activities across the supply chain. E-
commerce is facilitated by a range of digital technologies that enable electronic communications.
These technologies include Internet communications through websites and e-mail as well as
other digital media such as wireless or mobile and media for delivering digital television such as
cable and satellite. Electronic commerce systems rely on the resources of the Internet, intranets,
extranets, and other computer networks. Electronic commerce can include:
Interactive marketing, ordering, payment, and customer support processes at e-commerce
sites on the World Wide Web
Extranet access to inventory databases by customers and suppliers
Intranet access to customer relationship management systems by sales and
customer service reps
Customer collaboration in product development via Internet newsgroups and E-mail
exchanges
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1.3 Key Drivers of E-Commerce

It is important to identify the key drivers of e-commerce to allow a comparison between different
countries. It is often claimed that e-commerce is more advanced in the USA than in Europe.
These key drivers can be measured by several criteria that can highlight the stages of
advancement of e-commerce in each of the respective countries. The criteria that can determine
the level of advancement of e-commerce are summarized and categorized as:
Technological factors – The degree of advancement of the telecommunications
infrastructure which provides access to new technology for businesses and consumers.
Political factors – including the role of government in creating government legislation,
initiatives and funding to support the use and development of e-commerce and
information technology.
Social factors – incorporating the level and advancement in IT education and training
which will enable both potential buyers and the workforce to understand and use the new
technology.
Economic factors – including the general wealth and commercial health of the nation
and the elements that contribute to it.

Activity 1.2
List some organizational Societal and consumer benefits of E-commerce (EC)

1.4 Benefits of E-commerce

Some advantages that can be achieved from e-commerce include:

1. Being able to conduct business 24 x 7 x 365: E-commerce systems can operate all day
every day. Your physical storefront does not need to be open for customers and suppliers to
be doing business with you electronically.
2. Access the global marketplace: The Internet spans the world, and it is possible to do
business with any business or person who is connected to the Internet. Simple local
businesses such as specialist record stores can market and sell their offerings internationally
using e-commerce. This global opportunity is assisted by the fact that, unlike

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 traditional communications methods, users are not charged according to the distance over
which they are communicating.
3. Speed: Electronic communications allow messages to traverse the world almost
instantaneously. There is no need to wait weeks for a catalogue to arrive by post: that
communication delay is not a part of the Internet/e-commerce world.
4. Market space: The market in which web-based businesses operate in the global market. It
may not be evident to them, but many businesses are already facing international competition
from web-enabled businesses.
5. Opportunity to reduce costs: The Internet makes it very easy to 'shop around' for products
and services that may be cheaper or more effective than we might otherwise settle for. It is
sometimes possible to, through some online research, identify original manufacturers for
some goods - thereby bypassing wholesalers and achieving a cheaper price.
6. Computer platform-independent: 'Many, if not most, computers have the ability to
communicate via the Internet independent of operating systems and hardware. Customers are
not limited by existing hardware systems' (Gascoyne & Ozcubukcu, 1997:87).
7. Efficient applications development environment: - 'In many respects, applications can be
more efficiently developed and distributed because they can be built without regard to the
customer's or the business partner's technology platform. Application updates do not have to
be manually installed on computers. Rather, Internet-related technologies provide this
capability inherently through the automatic deployment of software updates (Gascoyne &
Ozcubukcu, 1997:87).
8. Allowing customer self-service and 'customer outsourcing': People can interact with
businesses at any hour of the day that it is convenient to them, and because these interactions
are initiated by customers, the customers also provide a lot of the data for the transaction that
may otherwise need to be entered by business staff. This means that some of the work and
costs are effectively shifted to customers; this is referred to as 'customer outsourcing'.
9. Stepping beyond borders to a global view: Using aspects of e-commerce technology can
mean your business can source and use products and services provided by other businesses in
other countries. This seems obvious enough to say, but people do not always consider the
implications of e-commerce. For example, in many ways, it can be easier and cheaper to host
and operate some e-commerce activities outside Australia.

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Disadvantages of E-commerce

Some disadvantages and constraints of e-commerce include the following.

1. Time for delivery of physical products: It is possible to visit a local music store and walk
out with a compact disc or a bookstore and leave with a book. E-commerce is often used to
buy goods that are not available locally from businesses all over the world, meaning that
physical goods need to be delivered, which takes time and costs money. In some cases, there
are ways around this, for example, with electronic files of music or books being accessed
across the Internet, but then these are not physical goods.
2. Physical product, supplier & delivery uncertainty: When you walk out of a shop with an
item, it's yours. You have it; you know what it is, where it is and how it looks. In some
respects, e-commerce purchases are made on trust. This is because, firstly, not having had
physical access to the product, a purchase is made on an expectation of what that product is
and its condition. Secondly, because supplying businesses can be conducted across the world,
it can be uncertain whether or not they are legitimate businesses and are not just going to take
your money. It's pretty hard to knock on their door to complain or seek legal recourse!
Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever
arrive.
3. Perishable goods: Forget about ordering a single gelato ice cream from a shop in Rome!
Though specialized or refrigerated transport can be used, goods bought and sold via the
Internet tend to be durable and non-perishable: they need to survive the trip from the supplier
to the purchasing business or consumer. This shifts the bias for perishable and/or non-durable
goods back towards traditional supply chain arrangements, or towards relatively more local
e-commerce-based purchases, sales and distribution. In contrast, durable goods can be traded
from almost anyone to almost anyone else, sparking competition for lower prices. In some
cases, this leads to disintermediation in which intermediary people and businesses are
bypassed by consumers and by other businesses that are seeking to purchase more directly
from manufacturers.
4. Limited and selected sensory information: The Internet is an effective conduit for visual
and auditory information: seeing pictures, hearing sounds and reading text. However it does
not allow full scope for our senses: we can see pictures of the flowers, but not smell their

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 fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick
up and inspect something, we choose what we look at and how we look at it. This is not the case on the
Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had
chosen for us to see but not the things we might look for if we were able to see it in person. And,
taking into account our other senses, we can't test the car to hear the sound of the engine as it changes
gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does
not convey the richness of experiences of the world. This lack of sensory information means that
people are often much more comfortable buying via the Internet generic goods - things that they have
seen or experienced before and about which there is little ambiguity, rather than unique or complex
things.
5. Returning goods: Returning goods online can be an area of difficulty. The uncertainties
surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the
goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be
left with nothing? How long will it take? Contrast this with the offline experience of returning goods
to a shop.
6. Privacy, security, payment, identity, and contract: Many issues arise - privacy of information,
security of that information and payment details, whether or not payment details (eg credit card
details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal
jurisdiction apply.
7. Defined services & the unexpected: E-commerce is an effective means for managing the
transaction of known and established services, that is, things that are every day. It is not suitable for
dealing with the new or unexpected. For example, a transport company used to dealing with simple
packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be
wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to
investigate and resolve.
8. Personal service: Although some human interaction can be facilitated via the web, e-commerce cannot
provide the richness of interaction provided by personal service. For most businesses, e-commerce
methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This
also means that feedback about how people react to product and service offerings also tends to be
more granular or perhaps lost using e-commerce approaches. If your only feedback is that people
are (or are not) buying your

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 products or services online, this is inadequate for evaluating how to change or improve
your e-commerce strategies and/or product and service offerings.
9. Size and number of transactions: E-commerce is most often conducted using credit card
facilities for payments, and as a result, very small and very large transactions tend not to be
conducted online. The size of transactions is also impacted by the economics of transporting
physical goods. For example, any benefits or conveniences of buying a box of pens online
from a US-based business tend to be eclipsed by the cost of having to pay for them to be
delivered to you in Australia.

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