E-Commerce

E-commerce (electronic commerce) is the

buying and selling of goods and services, or the
transmitting of funds or data, over an
electronic network, primarily the internet.
These business transactions occur either as
business-to-business (B2B), business-to-
consumer (B2C), consumer-to-consumer or
consumer-to-business. 
 When Was the First Online Transaction? 

The August 12, 1994 issue of New York Times,

appropriately titled “Internet is Open”
chronicled the sale between two friends of a
Sting CD. The Times said, “The team of young
cyberspace entrepreneurs celebrated what was
apparently the first retail transaction on the
Internet using a readily available version of
powerful data encryption software designed to
guarantee privacy.” 
 Early E-commerce Timeline
 
• 1960 – 1982: Invention and the Early Days 
• The development of the Electronic Data Interchange (EDI) in the 1960s paved
the way for electronic commerce. EDI replaced traditional mailing and faxing
of documents by allowing a digital transfer of data from one computer to
another. 
• Trading partners could transfer orders, invoices, and other business
transactions using a data format that met the ANSI ASC X12, the predominant
set of standards in North America for inter-industry electronic exchange.
Once an order is sent, it is then examined by a VAN (Value-Added
Network)and directed to the recipient’s order processing system. EDI allowed
the transfer of data seamlessly without any human intervention. 
• Michael Aldrich’s invention, the idea for which was sparked by a conversation
with his wife about their weekly supermarket shopping expedition, involved
hooking a television to their supermarket to have them deliver the groceries.
Aldrich coined his invention “teleshopping” (shopping at a distance), which
can be seen as the precursor for modern online shopping. 
• 1982 – 1990: Early Ecommerce Platforms 
• It was apparent from the beginning that these early
advancements would make B2B online shopping
commercially lucrative. B2C would not be successful until
the later widespread use of PCs and the World Wide Web.  
• In 1982, France launched Minitel, an online service that
used a Videotex terminal machine accessed through
telephone lines. The Minitel was free to telephone
subscribers and connected millions of users to a computing
network.  
• By 1997, over 7 million homes had Minitel terminals. The
Minitel system was popular before falling out of favor after
the success of the internet three years later.  
• Early 90’s: The World Wide Web Arrives  
• In 1990 Tim Berners-Lee and Robert Cailliau published a proposal to build a
“Hypertext project” called “World Wide Web.” The inspiration for this project was
modeled after the Dynatex SGML reader licensed by CERN. 
• That same year, Berners-Lee created the first web server and wrote the first web
browser. Shortly thereafter, he went on to debut the web on August 6, 1991 as a
publicly-available service on the Internet. When Berners-Lee decided he would take on
the task of marrying hypertext to the Internet, the process led him to develop URL,
HTML and HTTP. 
• In 1991, the National Science Foundation lifted its restrictions on commercial use of
the NET, causing online shopping to grow exponentially. In September 1995, the NSF
began charging a fee for registering domain names. The number of domain names
quickly grew to two million by 1993. By this time, the NSF’s role in the Internet came
to an end and a lot of the oversight shifted to the commercial sector. 
• From the beginning, there were many concerns over the safety of  online shopping.
However, the development of a security protocol, Secure Socket Layers (SSL)—an
encryption certificate created by Netscape in 1994, provided a safe means to transmit
data over the internet. Web browsers were able to identify whether a site had an
authenticated SSL and, based on that, determine whether or not a site could be
trusted. 
• Now, SSL encryption protocol is a vital part of web security, and version 3.0 has
become the standard for most web servers today. 
• Mid ‘90s to Present: Marketplaces, Payments and The Growth of Ecommerce  
• Major Marketplaces Emerge: Amazon, eBay, and Ecommerce Platforms 
• In the mid-90s, there were major advancements in the commercial use of the Internet. One
of the first ecommerce sites was Amazon, which started in 1995 as an online bookstore but
grew to become the largest online retailer in the world. Traditional brick-and-mortar
bookstores were limited to about 200,000 titles. Amazon, being an online only store without
physical limitations, was able to offer exponentially more products to the shopper. 
• Amazon’s range has expanded over the years and now includes music, video downloads,
electronics, apparel, furniture, food, and toys. The retail giant was one of the first online
retailers to add user reviews and a rating scale for their products. Product reviews are now
considered one of the most effective tactics for driving sales and building customer trust. 
• Other ecommerce marketplace success stories include eBay, an online auction site that
debuted in 1995, and Etsy, which launched in 2005 and by 2019 saw gross merchandise sales
total $4.97 billion globally. 
• The late 1990s also saw new ecommerce platform options for merchants. Miva’s first catalog-
based ecommerce product was launched in 1997, achieving wide distribution in the late
1990s. 
• In 2005, Amazon launched Amazon Prime, a membership offering free two-day shipping
within the contiguous United States on all eligible purchases for a flat annual fee. The
membership quickly became popular, putting pressure on other merchants to offer fast and
inexpensive shipping options.  
 Evolution of Online Payments Security 

• As more and more people began doing business

online, a need for secure communication and
transactions became apparent. In 2004,
the Payment Card Industry Security Standards
Council(PCI) was formed to ensure businesses were
complying with various security requirements. The
organization was created for the development,
enhancement, storage, dissemination and
implementation of security standards for protecting
customer account data.  
 The Rise of Mobile Commerce 

• Mobile commerce was first born in 1997, when two mobile device-
enabled Coca-Cola vending were installed in Finland. Mobile
commerce gained speed over the next two decades, as more users
began conducting transactions from their mobile devices and
websites evolved to provide a better user experiences. Now, mobile
sales are projected to reach 54 percent of all ecommerce sales by
2021. 
• Today, both consumers and business buyers turn to mobile devices
for product research and coupons, with engagement on social
media becoming increasingly popular. Business buyers are expecting
more consumer-focused features like personalization and responsive
design and demanding the ability to quickly locate product details,
secure pricing, and receive online help. 
 Advantages of eCommerce
• There are a number of prominent and not-so-obvious advantages for doing business on an
online platform. Understanding exactly how e-Commerce works can help individuals leverage
them to their and their businesses advantage:
• A Larger Market: E-Commerce allows individuals to reach customers all across the country
and all around the world. E-Commerce gives business owners the platform to reach people
from the comfort of their homes. The customers can make any purchase anytime and
anywhere, and significantly more individuals are getting used to shopping on their mobile
devices.
• Customer Insights Via Tracking And Analytics: Whether the businesses are sending the
visitors to their eCommerce website via PPC, SEO, ads, or a good old postcard, there is a way
of tracking the traffic and the consumers’ entire user journey for getting insights into the
keywords, marketing message, user experience, pricing strategy, and many more.
• Fast Response To The Consumer Trends And The Market Demands: Especially for the
business people who do “drop ship,” the logistics, when streamlined, allow these businesses
to respond to the market and the trends of eCommerce and demands of the consumers in a
lively manner. Business people can also create deals and promotions on the fly for attracting
customers and generate more sales.
• Lower Cost: With the advancement of the eCommerce platforms, it has become very
affordable and easy to set up and run an eCommerce business with a lower overhead.
Business people no longer need to spend a big budget on TV ads or billboards, nor think
about personnel and real estate expenses.
• More Opportunities For “Selling.”: Business people can only offer a limited amount
of information about a product in a physical store. Besides that, eCommerce
websites give them the space to include more information like reviews, demo videos,
and customer testimonials for helping increased conversion.
• Personalised Messaging: E-Commerce platforms give people in business the
opportunity to provide personalised content and product recommendations for
registering customers. These targeted communications can help in increasing
conversion by showing the most relevant content to the visitor.
• Increased Sales Along with Instant Gratification: For businesses selling digital goods,
eCommerce allows them to deliver products within seconds of placing an order. This
satisfies the needs of the consumers for instant gratification and assists increase
sales, especially for the low-cost objects that are often known as “impulse buys.”
• Ability to Scaling Up (Or Down) Quickly Also Unlimited “Shelf Space.”: The growth
of any online business is not only limited by the availability of space. Even though
logistics might become an issue as one’s business grows, it’s less of a challenge
compared to running any brick-and-mortar store. E-Commerce business owners can
choose to scale up or down their operation quickly by taking advantage of the non-
ending “shelf space,” as a response to the market trends and demands of consumers.
 Disadvantages of e-Commerce

• Running a business that is e-commerce is not always rainbows and unicorns. There are unique
challenges to this business model — learning about them will help business people navigate the
choppy waters and avoid common pitfalls.
• Lack of Personal Touch: Some customers appreciate the personal touch they offer when visiting a
physical store by interacting with the sales associates. Such personal touch is especially essential for
businesses that sell high-end products as customers will want to buy the products and have an
excellent experience during the process.
• Lack of Tactile Experience: No matter how good a video is made, customers still can’t feel and touch a
product. Not to mention, it’s never an easy task to deliver a brand experience that could often be
including the sense of touch, taste, smell, and sound via the two-dimensionality of any screen.
• Product and Price Comparison: With online shopping, customers can compare several products and
find the least price. This forces many businesses to compete on price and reduce their profit margin,
reducing the quality of products.
• Need for Access to the Internet: This is obvious, but don’t forget that the customers do need access
to the Internet before purchasing from any business! As many eCommerce platforms have the
features and functionalities which require a high-speed Internet connection for an optimal consumer
experience, there’s a chance that companies are excluding visitors who have slow internet
connections.
• Credit Card Fraud: Credit card frauds are a natural and growing problem
for online businesses. It can lead to many chargebacks, which result in the
loss of penalties, revenue, and a bad reputation.
• IT Security Issues: More and more organisations and businesses have
fallen prey to malicious hackers who have stolen information of the
customers from their databases. This could have financial and legal
implications, but it also reduces the company’s trust.
• All the Eggs in One Basket: E-Commerce businesses rely solely or heavily
on their websites. Even just some minutes of downtime or technology
glitches could be resulting in a substantial revenue loss and customer
dissatisfaction.
• Complexity in Regulations, Taxation, and Compliance: Suppose any
online business sells to its consumers in different territories. In that case,
they’ll have to stick to the regulations in their own countries or states and
their consumers’ places of residence. This could be creating a lot of
complexities in accounting, taxation and compliance.
• Q.1-Discuss roadmap of E-commerce in India.
E- business Model based on the relationship of transaction parties
• B2C : Sells products or services directly to
customers, eg amazon.com
• B2B : Sells products or services to other business,
or brings multiple buyers and sellers together in a
central market place, eg. Chemdex.com
• B2G: Business selling to local, state and federal
agencies, eg. iGov.com
• C2C : Consumers sell directly to other consumers,
eg ebay.com
• C2B : Consumers fix price on their own, which
business accept or decline. Eg Priceline.com
• E- business Model based on the relationship of
transaction types

• This business model is usually controlled by two

parameters namely Control and value Integration. Based
on this five types of transaction can be identified:
• Brokerage:
• Aggregator : Connects buyers and sellers
• Info-mediary: Provides information e.g. yahoo.com
• Community:
• Value chain: portals e.g. yahoo.com 
 Electronic Payment System
• An e-payment system is a way of making
transactions or paying for goods and services
through electronic methods. 
What are the different types of e-commerce payment systems?

• When you purchase goods and services online, you pay for them using an
electronic medium. This mode of payment, without using cash or cheque,
is called an e-commerce payment system and is also known as online or
electronic payment systems.

The growing use of internet-based banking and shopping has seen the
growth of various e-commerce payment systems and technology has
been developed to increase, improve and provide secure e-payment
transactions.

Paperless e-commerce payments have revolutionised the payment

processing by reducing paper work, transaction costs, and personnel cost.
The systems are user-friendly and consume less time than manual
processing and help businesses extend their market reach.
The different types of e-commerce payments in use today are:

• Credit Card
• The most popular form of payment for e-commerce transactions is through credit
cards. It is simple to use; the customer has to just enter their credit card number
and date of expiry in the appropriate area on the seller’s web page. To improve
the security system, increased security measures, such as the use of a card
verification number (CVN), have been introduced to on-line credit card payments.
The CVN system helps detect fraud by comparing the CVN number with the
cardholder's information
• Debit Card
• Debit cards are the second largest e-commerce payment medium in India.
Customers who want to spend online within their financial limits prefer to pay
with their Debit cards. With the debit card, the customer can only pay for
purchased goods with the money that is already there in his/her bank account as
opposed to the credit card where the amounts that the buyer spends are billed to
him/her and payments are made at the end of the billing period.
• Smart Card
• It is a plastic card embedded with a microprocessor that has the
customer’s personal information stored in it and can be loaded
with funds to make online transactions and instant payment of
bills. The money that is loaded in the smart card reduces as per the
usage by the customer and has to be reloaded from his/her bank
account.
• E-Wallet
• E-Wallet is a prepaid account that allows the customer to store
multiple credit cards, debit card and bank account numbers in a
secure environment. This eliminates the need to key in account
information every time while making payments. Once the customer
has registered and created E-Wallet profile, he/she can make
payments faster.
• Netbanking
• This is another popular way of making e-commerce payments. It is a simple way of
paying for online purchases directly from the customer’s bank. It uses a similar
method to the debit card of paying money that is already there in the customer’s
bank. Net banking does not require the user to have a card for payment purposes
but the user needs to register with his/her bank for the net banking facility. While
completing the purchase the customer just needs to put in their net banking id and
pin.
• Mobile Payment
• One of the latest ways of making online payments are through mobile phones.
Instead of using a credit card or cash, all the customer has to do is send a payment
request to his/her service provider via text message; the customer’s mobile
account or credit card is charged for the purchase. To set up the mobile payment
system, the customer just has to download a software from his/her service
provider’s website and then link the credit card or mobile billing information to the
software.
• Amazon Pay
• Another convenient, secure and quick way to pay for online purchases is through
Amazon Pay. Use your information which is already stored in your Amazon account
credentials to log in and pay at leading merchant websites and apps. Your payment
information is safely stored with Amazon and accessible on thousands of websites
and apps where you love to shop.
• Q-E-commerce Sales Life Cycle (ESLC) Model
• Q-Write short note on Electronic cash.
 Risks in Electronic Payment Systems

• Electronic payments allow you to transfer cash from

your own bank account to the bank account of the
recipient almost instantaneously. This payment
system relies heavily on the internet and is quite
popular due to the convenience it affords the user. It
would be hard to overstate the advantages of
electronic payment systems, but what about the
risks? Certainly they exist, both for financial
institutions and consumers.
 The Risk of Fraud

• Electronic payment systems are not immune to the risk

of fraud. The system uses a particularly vulnerable
protocol to establish the identity of the person
authorizing a payment. Passwords and security questions
aren’t foolproof in determining the identity of a person.
So long as the password and the answers to the security
questions are correct, the system doesn’t care who’s on
the other side. If someone gains access to your password
or the answers to your security question, they will have
gained access to your money and can steal it from you.
 The Risk of Tax Evasion

• The law requires that businesses declare their financial

transactions and provide paper records of them so that
tax compliance can be verified. The problem with
electronic systems is that they don’t fit very cleanly into
this paradigm and so they can make the process of tax
collection very frustrating for the Internal Revenue
Service. It is at the business’s discretion to disclose
payments received or made via electronic payment
systems in a fiscal period, and the IRS has no way of
knowing if it’s telling the truth or not. That makes it
pretty easy to evade taxation.
 The Risk of Payment Conflicts

• One of the idiosyncrasies of electronic payment

systems is that the payments aren’t handled by
humans but by an automated electronic system. The
system is prone to errors, particularly when it has to
handle large amounts of payments on a frequent
basis with many recipients involved. It’s important to
constantly check your pay slip after every pay period
ends in order to ensure everything makes sense.
Failure to do this may result in payment conflicts
caused by technical glitches and anomalies.
• The Risk of Impulse Buying
• Impulse buying is already a risk that you face
when you use non-electronic payment
systems. It is magnified, however, when you’re
able to buy things online at the click of a
mouse. Impulse buying can become habitual
and makes sticking to a budget almost
impossible.
 EDI
• EDI stands for Electronic Data Interchange. EDI
is an electronic way of transferring business
documents in an organization internally,
between its various departments or externally
with suppliers, customers, or any subsidiaries.
In EDI, paper documents are replaced with
electronic documents such as word
documents, spreadsheets, etc.
 EDI Documents

• Following are the few important documents

used in EDI −
• Invoices
• Purchase orders
• Shipping Requests
• Acknowledgement
• Business Correspondence letters
• Financial information letters
 Steps in an EDI System

• Following are the steps in an EDI System.

• A program generates a file that contains the processed
document.
• The document is converted into an agreed standard
format.
• The file containing the document is sent electronically
on the network.
• The trading partner receives the file.
• An acknowledgement document is generated and sent
to the originating organization.
 Advantages of an EDI System

• Following are the advantages of having an EDI system.

• Reduction in data entry errors. − Chances of errors are much less while using a
computer for data entry.
• Shorter processing life cycle − Orders can be processed as soon as they are
entered into the system. It reduces the processing time of the transfer
documents.
• Electronic form of data − It is quite easy to transfer or share the data, as it is
present in electronic format.
• Reduction in paperwork − As a lot of paper documents are replaced with
electronic documents, there is a huge reduction in paperwork.
• Cost Effective − As time is saved and orders are processed very effectively, EDI
proves to be highly cost effective.
• Standard Means of communication − EDI enforces standards on the content of
data and its format which leads to clearer communication.
 E-Commerce - Business Models

• E-commerce business models can generally be

categorized into the following categories.
• Business - to - Business (B2B)
• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
 Business - to - Business

• A website following the B2B business model sells its products

to an intermediate buyer who then sells the product to the
final customer. As an example, a wholesaler places an order
from a company's website and after receiving the
consignment, sells the endproduct to the final customer who
comes to buy the product at one of its retail outlets.
 Business - to - Consumer

• A website following the B2C business model sells its products

directly to a customer. A customer can view the products
shown on the website. The customer can choose a product
and order the same. The website will then send a notification
to the business organization via email and the organization
will dispatch the product/goods to the customer.
 Consumer - to - Consumer

• A website following the C2C business model helps consumers

to sell their assets like residential property, cars, motorcycles,
etc., or rent a room by publishing their information on the
website. Website may or may not charge the consumer for its
services. Another consumer may opt to buy the product of
the first customer by viewing the post/advertisement on the
website.
 Consumer - to - Business

• In this model, a consumer approaches a website showing

multiple business organizations for a particular service. The
consumer places an estimate of amount he/she wants to
spend for a particular service. For example, the comparison of
interest rates of personal loan/car loan provided by various
banks via websites. A business organization who fulfills the
consumer's requirement within the specified budget,
approaches the customer and provides its services.
 Business - to - Government

• B2G model is a variant of B2B model. Such

websites are used by governments to trade
and exchange information with various
business organizations. Such websites are
accredited by the government and provide a
medium to businesses to submit application
forms to the government.
 Government - to - Business

• Governments use B2G model websites to

approach business organizations. Such
websites support auctions, tenders, and
application submission functionalities.
 Government - to - Citizen

• Governments use G2C model websites to

approach citizen in general. Such websites
support auctions of vehicles, machinery, or
any other material. Such website also provides
services like registration for birth, marriage or
death certificates. The main objective of G2C
websites is to reduce the average time for
fulfilling citizen’s requests for various
govern.ment services.