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An Introduction to E-Commerce
What is e-commerce?
What are the advantages
and disadvantages of e-
commerce?
What were the 1
st
and 2
nd

waves of e-commerce
characterised by?
What are the categories
of e-commerce?

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What is Commerce
Traditional commerce may be defined as:
From Webster's Revised Unabridged
Dictionary
Commerce : \Com"merce\, noun.

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.
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What is E-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.
[WHYTE]
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What is E-Commerce Contd.
In summary, e-commerce is the
use of electronic communication to do business
Specifically, the transfer of information (transactions), over
the Internet
Some people use the term e-business to refer to
all the categories of e-commerce
E.g. IBM defines e-business as:
The transformation of key business processes through the
use of internet technologies

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Business Processes Well-suited
to Particular Type of Commerce
E-commerce
Sale/purchase of books & CDs, travel
services, investments and insurance services
Online delivery of software
Online shipment tracking
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Business Processes Well-suited
to Particular Type of Commerce
E-commerce + Traditional
Sale/purchase of automobiles and residential
real estate (e.g. do research online then buy
from a dealer or real estate agent)
Online banking
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Business Processes Well-suited
to Particular Type of Commerce
Traditional
Sale/purchase of impulse items for immediate
use, high fashion jewelry and antiques
(personal inspection required; prefer to touch,
smell or examine closely)
Small denomination purchases and sales
(since there is not yet a standard for
transferring small amounts of money)
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Advantages of E-commerce
Increases sales, decreases cost
Allows small businesses to have global customer
base
Reduced cost through electronic sales enquires, price
quotes and order taking
Provides purchasing opportunities for buyers
(businesses can identify new suppliers and
partners)
Increase speed and accuracy for exchanged
information, thus reducing cost
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Advantages of E-commerce Contd.
Business can be transacted 24hrs a day
The level of detail of purchase information is
selected by user
Digital products can be delivered instantly
Tax refunds, public retirement and welfare
support costs less when distributed over the
Internet
Allows products and services to be available in
remote areas, e.g. remote learning
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Disadvantages of E-commerce
Inability to sell some products (e.g. high cost
jewelry and perishable foods, although
supermarkets like www.Tesco.com delivers to
your home)
The newness and evolution of the current
technology
Many products require a large number of people
to purchase to be viable
High capital investment

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Disadvantages of E-commerce
Contd.
Difficulty in integrating current databases and
transaction processing systems into e-commerce
solutions
Cultural and legal obstacles
Transmission of credit card details
Some consumers resistant to change
Laws are unclear
Shipping profile: Products with a low value-to-
weight ratio that can not be efficiently packed and
shipped are unsuitable (use traditional commerce)
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The 1
st
Wave of E-commerce
The 1
st
wave was from
the mid 1990s to 2003
Dot-com boom (over
$100 billion in
investment): Rapid
growth from mid-1990s
to 2000
Dot-com bust: in 2000
Gloom years: 2000
2003 (over $200 billion
in investment)
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Characteristics of the 1
st
Wave
It was primarily a U.S. phenomenon
Web pages were in English
Internet technologies were slow and inexpensive
(e.g. dial-up lines)
Bar codes and scanners used to track parts (B2B
and Business processes)
Email, tool for unstructured communication
On-line advertising main revenue source
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The 2
nd
Wave of E-commerce
Beginning in 2003 e-
commerce has shown
signs of new life
Companies like
Amazon.com (books),
and eBay.com (auctions)
who survived the
downturn were beginning
to show profits
Continuous growth of
B2C sales: 20-30% each
year since 2000
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Characteristics of the 2
nd
Wave
International scope where sellers do business in
many countries and languages
Faster, cheaper connections (x20 faster),
broadband at home (although more expensive)
Radio frequency ID devices and smart cards
Fingerprint readers and retina scanners (biometric
technologies) used for tracking
Email, integral part of marketing
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Characteristics of the 2
nd
Wave
E-commerce integral part of marketing and
customer contact strategy
Some categories of on-line advertising, e.g.
employment services (job want ads) have
replaced traditional advertising outlets
Problems
Language conversions
Currency conversions

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E-commerce Categories
There are five general e-commerce categories:
Business to Consumer (or B2C) e-commerce
Business to Business (or B2B) e-commerce
(sometimes called e-procurement)
Business processes that support buying and selling
activities
Consumer-to-consumer (or C2C) e-commerce
Business-to-government (or B2G) e-commerce

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B2C e-commerce
Description
Businesses sell products or services to
individual customers (consumers)
Example
Walmart.com sells merchandise to consumers
through its Web site
Web site
www.walmart.com
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B2B E-commerce
Description
Businesses sell products or services to other
businesses
Example
Grainger.com sells industrial supplies to large
and small businesses through its Web site
Web site
www.grainger.com
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Business Processes
Description
Businesses and other organisations maintain and use
information to identify and evaluate customers,
suppliers and employees (and to support buying,
selling hiring, planning and other activities). More
and more this information is being shared
Example
Dell Computer uses secure internet connections to
share current sales and forecasts with suppliers who
use it to plan their production, therefore they deliver
the right quantities of components at the right time
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C2C e-commerce
Description
Participants in an online marketplace can buy and sell
goods with each other
Example
Consumers and businesses trade with each other on
eBay.com
Web site
www.ebay.com

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B2G e-commerce
Description
Business sell goods or services to
governments and government agencies
Example
Cal-Buy portal for businesses that want to sell
online to the State of California
Web site
www.pd.dgs.ca.gov/calbuy/default.htm
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E-commerce Categories Example
You are a computer manufacturing company who
performs the following activities on the Internet:
Sells computers to individuals (B2C)
Purchases parts (e.g. hard drives, power supplies etc.)
from a supplier (B2B)
Hires staff, manage customer accounts, advertise, etc.
(Business processes)
Sells computers to the Government to be used in
schools (B2G)
On eBay.com individuals buy and sell this brand of
computers (C2C)
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Business processes
Relative Sizes of E-commerce
Categories
B2C
B2B
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Relative Sizes of E-commerce
Categories
Year B2C Sales
($ Billions)
B2B Sales
($ Billions)
2005 150 4100
2004 130 2800
2003 100 1600
2000 50 60
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An Introduction to Marketing
What is marketing?
Marketing strategies
Market segmentation
Web advertising
Email marketing
Affiliate marketing
Viral marketing
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What is Marketing?
This is the process of
planning and
executing the
conception, pricing,
promotion and
distribution of ideas,
goods and services to
satisfy customers.

Source: cfdccariboo.com/glossary.htm

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Marketing 101
Marketing is more than sales; it is those set
of activities that
Grabs a potential customer
Encourages them to buy your product
Actually gets them to purchase your product
Makes them a repeat customer
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Marketing Strategies
Marketing strategies may come in two
forms
Product-based marketing strategy
Customer-based marketing strategy
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Product-based Marketing
Strategy
When a customer is likely to buy or think
about products in categories, a product-
based marketing strategy is appropriate:
An example is an office supplier store were a
customer may be looking for an office desk;
the customer immediately thinks about the
product category office furniture
See http://www.officedepot.com/
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Customer-based Marketing
Strategies
Due to the great flexibility of Web sites (as
opposed to traditional mass media) they
can offer products and services that are
targeted towards specific type of customers
First the customer types must be identified
A Web site on its home page might allow the user
to select the required customer type
These approach is more common on B2B
sites than B2C sites
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Market Segmentation
Market segmentation is the identification
and targeting of specific portions of a
market
Demographic characteristics are usually
used to create market segments
E.g. age, gender, martial status, income level
and geographic location
Ring tones on Cell phones target market might be
younger people between the ages of 10-20
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Web Market Segmentation
The design of the site can immediate
appeal to different market segments, for
example
For the young fashion-conscious buyer you
may have a site with a wide variety of
typefaces, bold graphics and bright colour
product photos
For the older more established buyer you may
have a more muted conservative style
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Web Advertising
Advertising is about communication
Communication may be between a
company and
Its current customers
Potential customers
Or former customers that the company is
trying to regain

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Banner Advertising
Most Web advertising uses banner ads
A small rectangular object normally at the top
of the Web page which displays stationary or
moving graphics
These ads are created using animated GIFs,
or objects created in Shockwave, Java or
Flash)
These ads must be attention grabbing
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Banner Advertising
Web ads have been standardised by an
organisation called the Interactive
Advertising Bureau (IAB) which is
responsible for
Creating banner size standards (e.g. 728x90,
160x600, 300x250, or 180x150)
Encourage effective Internet advertising
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Other Web Ad Formats
The pop-up ad is an ad that appears in its own
window when the user opens or closes a page
The pop-behind ad is a pop-up ad that is behind
the existing browser window
Ad-blocking software prevents these ads from
displaying
Rich media ads (active ads) generate graphics that
float over the Web page
These ads are attention grabbing, but intrusive
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E-Mail Marketing
E-mail may well be one of the greatest tools
created for communication in the 20
th
century
Some of the ways that email has been used for
marketing are:
Permission marketing is the sending of emails to
people who request further information on a product
or service (for example)
Combining content (e.g. articles or news stories that
are of interest to the target market) with advertising
messages

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Affiliate Marketing
In affiliate marketing a Companys Web
site includes product or services offered for
sale by another company in exchange for a
commission
The affiliates site benefits from the selling
sites brand in exchange for the referral
Amazon.com has over 800,000 affiliate sites


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Viral Marketing
Viral Marketers rely on non-customers being told
about products or services by existing customers
The number of customers increase the way a
virus increases
An example of a viral marketing campaign is
Blue Mountain Arts
When an electronic greeting card is sent to a person,
a link to Blue Mountain is included. The person
receiving the card would then click on the link to
read the card, and is likely to search for and send a
card themselves
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Legal Issues
Jurisdiction
Contracts
Terms of service
Intellectual property

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E-Commerce and the Law
Brick and mortar and Web business are
governed by the same legal requirements
However, for Web businesses two
additional factors exist:
Traditional boundaries no longer apply
With increased speed and efficiency of
modern communication violations of the law
are identified and acted on much quicker
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Borders and Jurisdiction
Businesses contained
within a given
(traditional) boundary
is govern by the laws
defined within the
boundary
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Borders and Jurisdiction Contd.
Crossing a boundary is usually
characterised by passport or document
control
This typically includes a change in
language and culture and as a result a
change in law

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Jurisdiction and the Internet
Since traditional geographic boundaries do not
exist on the Internet, enforcing jurisdiction is
difficult
E.g. a Swedish e-commerce company may have a
.com (therefore not clear that it is Swedish) Website
in English which is hosted in Canada, but maintained
by people in Australia
If a Mexican citizen buys a product from the
company and is dissatisfied, who does he file a suit
with?
Physical-border law and jurisdiction does not help
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Jurisdiction in International
Commerce
Jurisdiction across international borders is
governed by treaties
Companies should hire an attorney if they
want to engage in international commerce
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Contracts in E-commerce
A contract comprises of
three parts:
An offer
An acceptance
Consideration
A contract is formed
when one party accepts
the offer of another party
An implied contract is
when two parties act as if
a contract exist, even
though it does not
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Contracts on the Web
Although case law is limited, one must
assume that it is a legally binding contract
acceptance if a user
Clicks a button on a Web page
Entered information on a Web form
Downloads a file from a Web site
Also, ordinary signatures are replaced by
digital signatures (to reduce forgeries)
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Terms of Service
Sometimes called Conditions of Use or User
agreement
These are rules Web sites visitors must follow
The purpose is to limit the owners liability for
what might be done with the information
In most cases the visitor is held to the terms, even
if they did not read the text or click an accept
button; the visitor is bound by simply using the
site
E.g. see Amazon.com Conditions of Use
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Intellectual Property
This is a general term
which includes all
tangible and intangible
products of the mind
Intellectual property
includes copyrights,
patents, trademarks and
service marks (similar to
trademarks, used to
identify services
provided)
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Copyright
The right granted by a government to the author
or creator of a literary or artistic work
Includes books, music and computer software
A copyright gives sole and exclusive rights to
print, publish or sell
In the US works are copyrighted for the persons
lifetime plus 70 years
For corporations, copyright is for 95 years from the
date of publication or 120 years from the date of
creation, whichever is earlier
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Copyright Contd.
In the US
In the past the creator had to register material
for it to be copyrighted
Registration however is no longer required
A work that does not include the words
copyright that was created after 1977 is
copyrighted automatically unless released in
the public domain
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Copyright Contd.
Most Web pages are protected by copyright
because graphics, words etc. are arranged
in such a way to make original work
The problem with a Web server is that it
sends a copy of a Web page to the client
Is this copy legal?

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Copyright Contd.
US copyright law includes an exception
from infringement for fair use of
copyrighted works
This includes copying for the purpose of
criticism, comment, news, reporting,
teaching, scholarship or research
The term fair use may be difficult to interpret
To avoid charges of plagiarism a citation to
the original work should be included
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Copyright Contd.
Napster provided a network of millions with
copies of music in MP3 format
Napster was sued by music recording companies
Napster argued that it only provided the machinery
(VCR manufacturers do a simpler thing, i.e. provide
VCRs that can copy)
The US District and Federal Appellate Court held
that Napster was guilty of vicarious copyright
infringement; an entity is guilty of this if 1) it is
capable of supervising the activity and 2) it benefited
financially from it

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Copyright Contd.
Napster was held liable (although it did not
transfer copies of copyrighted materials) because
it:
Failed to monitor its network, although it could have
done
It profited by selling advertising
Napster agreed to pay $26 million in damages,
filed bankruptcy in 2002 and was bought out by
Roxio who now offers legal music downloads
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Data Privacy
Web sites should include a statement specifying
how any personal information collected is used
This gives the user the confidence that their
personal information will not be sold to other
vendors or organisations
Also, the user should be provided with a secure
method of entering this information (e.g. some
type of cryptography should be used)
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Payment Systems
Credit cards
Debit cards
Charge cards
Other payment
methods
Paypal
Metered payments
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Payment Systems: The Basics
Payment systems are still evolving
Electronic payments are far cheaper than
mailing paper checks
Cost of billing a person by mail ranges
from US$1 to US$1.50
Billing a person electronically cost about
US$0.50
Replacing paper bills also saves on trees
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Primary Payment Methods
There are currently four primary payment
methods:
Cash
Checks
Credit cards (most popular method online)
Accounts for more than 85% worldwide consumer
transactions
Debit cards
In the US electronic transfer is also a growing
payment method
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Payment Cards
The main categories of payment cards are:
Credit cards (e.g. Visa)
Spending limit based on credit history
Interest is charged on outstanding balances not
paid off within a given time
Accepted worldwide
User protection facilitated by a 30-day period that
a purchase may be disputed
Merchant account (that accepts credit card
payments) required by the business

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Payment Cards Contd.
Debit cards
The sale amount is removed from users account
and transfers to the sellers account
Limited by funds in account plus overdraft (if
present)
Charge cards (e.g. American Express)
Has no spending limit
The amount due on the card is due at the end of
the billing period
They do not accumulate interest payments

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Payment Cards Contd.
Some vendors provide single-use-cards
which are valid for a single transaction
A unique card number is issued
This helps with card details security
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Payment Cards Contd.
Advantages of Payment Cards
In the US card holders liability is limited to
US$50 when used fraudulently
Accepted worldwide
Currency conversion handled by card issuer
Ease of use, no special hardware required



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Payment Cards Contd.
Disadvantages of Payment Cards
Service companies charge merchants per-
transaction and monthly processing fees
Price of goods for the consumer might be
slightly higher as a result
A limit is placed on the minimum amount allowed
to spend (e.g. 5 pounds in the UK)
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Payment Acceptances and
Processing
The merchant authenticates the payment card to
ensure it is valid and not stolen
The merchant checks with the payment card
issuer to ensure that credit or funds are available
and puts a hold on the credit line or the funds
needed to cover the charge
Settlement occurs, usually a few days after the
purchase, which means that funds travel between
banks and are placed into the merchants account
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Other Payment Methods
For other payment methods read the following
presentations (or any other Payment System
presentation):
PayPal
http://scitec.uwichill.edu.bb/cmp/online/comp3210/pr
esentations/DanaBabb.ppt
Metered Payments
http://scitec.uwichill.edu.bb/cmp/online/comp3210/pr
esentations/LeeHarvey.ppt
E-Wallets
http://scitec.uwichill.edu.bb/cmp/online/comp3210/pr
esentations/ShawnHolder.ppt

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References
[Sch2004] Schneider, Gary, P., Electronic
Commerce: The second wave, Thomson
Course Technology, Fifth Annual Edition,
2004