Electronic Commerce

SIT 402
Introduction
• E-Commerce simply means Electronic Commerce;
• E-commerce is the buying and selling of goods, products, or services using the internet as a medium
whereby the buyer gets to see the products online, order it and make payment through the mode
accepted by the seller.
• The seller then delivers these products to the consumer via available and accepted means.
• E-commerce is also known as internet commerce. Online stores like Amazon, Shopify, Ebay,
Olx are examples of E-commerce websites.
• E-commerce concept is a fast rising one, gaining steady popularity as there is Increased
accessibility and availability of Internet access which is making many small and medium and
even large-scale businesses to be considering e-commerce as a valid and more profitable
sales channel.
• E-commerce revenue in the U.S. was estimated to be $768 billion in 2022 and it is expected to exceed
$1.3 trillion in the next three years,
• Ecommerce is better understood with the concepts of the 5Cs
The 5C model
• Commerce which is like a market place that consist of the buyers and sellers, transaction terms
and facilities to perform business transactions. This helps create and strengthen a universal
supply chain
• Collaboration: the internet being a network of networks supports interrelationships among
businesses and individuals in a manner that is not limited by space, time, national or
organizational constraints.
• Communication: the internet technology and the world wide web provides a great interactive
medium for self-expression (as in reviews or comments of clients) and self-presentation (as a
means for businesses to showcase their products or services; a kind of marketing)
• Connection: it is likely that different businesses use different software platforms to run their
business processes, leveraging on the advantages of the internet, it is achievable to incorporate
the different software platforms of different businesses that want to collaborate.
• Computation: large scale sharing of resources is paramount to a successful business
transaction. The internet technology facilitates this to ease successful completion of business
processes.
Features of E-commerce
• Wider range of audience: with the internet as the backbone of
ecommerce, business transactions can take place across national
boundaries in a more convenient and cost-effective form.
• Universal standard: internet technology has a universal standard, its
not a different one in UK and a different one in Kenya.
• Rich content: ecommerce allows for integration of the various forms
of content, one can use video, audio, combination of two or all three.
• Ease of interaction: clients interact with businesses from the comfort
of their homes. There is no need to physically visit a store as in the
place of the traditional commerce.
Features of E-commerce Cont.
• Personalization or customization: the various technologies integrated
to the internet allows businesses to send personalized/customized
messages that can be delivered to individuals or even groups.
• Ubiquity: the internet technology is widely available and accessible
from anywhere at any time; be it at home, at work via mobile devices
like a mobile phone, ipad, and even PCs.
• Business digitalization: this involves comprehensively using the
internet and other tools of Information and Communication
Technologies to link information and cooperate seamlessly every
stakeholder of the business.
E-Commerce vs E-Business
• Despite that some individuals interchangeably use e-commerce and E-
business, both are clearly different.
• In e-commerce, ICT is used to enable the external activities and relationships
of the business with individuals, groups and other businesses.
• While e-business is the transformation of an organization’s processes to deliver
additional customer value through the application of technologies,
philosophies, and computing paradigm of the new economy.
• That is, e-commerce is a particular form of e-business. Compared to e‐
Commerce, e‐Business is a more generic term because it refers not only to
information exchanges related to buying and selling but also servicing
customers and collaborating with business partners, distributors and suppliers.
• E.g YouTube is an E-business while Amazon is an E-commerce platform
 Differences between E-Commerce and Traditional Commerce
Point of E-commerce Traditional Commerce
Difference
Cost Effective E-commerce is cost effective. The cost incurred on Cost has to be incurred for the role of
middlemen is eliminated as there is direct link between the middlemen to sell the company’s
business and the customers. . The total overhead cost products. The total overhead cost is
required to run ebusiness is comparatively less. Running an more. Running a traditional business
e-business require only a head office. Overhead cost can require a head office with several
branches to cater to the needs of
customers situated in different places

Time A lot of valuable time for both the consumers and business It takes a lot of time to complete a
is saved. A product can be ordered and the transaction can transaction.
be completed in few minutes through internet.

Convenience It provides convenience to both customers and business. It It is not so convenient method as that
provides better connectivity for its prospective and potential of E-commerce. Customers have to
customers as the website can be accessed virtually from move away from their home or work
anywhere, anytime through internet. It is not necessary to place to locate and purchase a desired
move away from their work place or home to locate and product.
purchase a desired product
Point of Difference E-commerce Traditional Commerce
Accessibility It is easy to expand the size of the market from regional to It may not be easy to expand the size of
international level. By hosting a website, a business can the market from regional to national level.
penetrate into global market. It is quite easy to attract Business organizations have to incur a lot
customers from global markets at a marginal cost. of expenses to enter international market.
Introduction of new It is easy to introduce a product on the website and get the It takes a lot of time and money to
product immediate feedback of the customers. Based on the introduce a new product and analyse the
response, the products can be redefined and modified for response of the customers. Initially, cost
a successful launch. has to be incurred to carry out pilot
surveys to understand the taste of the
customers.
Profit It helps the organization to enjoy greater profits by The cost incurred on the middlemen,
increasing sales, cutting cost and streamlining operating overhead, inventory and limited sales pulls
processes. down the profit in traditional commerce.
Physical Inspection It does not allow physical inspection of goods. It is possible to physically inspect goods
before the purchase.
Time Round the clock service is available. Business is open only for a limited time.
Method of Communication can be done in asynchronous way. Communication is done in synchronous
Communication Electronics system automatically handles when to pass way. Manual intervention is required for
communication to required person or do the transactions. each communication or transaction.
 Types of E-Commerce: (Business Models of E-
commerce)
• Business to Business (B2B): only the companies are doing business
with each other. Here, the final consumers are not involved.
• Therefore, the online transactions that are carried out in a business to
business ecommerce transaction involve parties like the manufacturers,
wholesalers, retailers etc.
• B2B e-commerce is simply the electronic exchange of products, services or
information between businesses rather than between businesses and
consumers as expected.
• Business to Customer (B2C): here, the business sells directly to
customers. The customers can browse the website, see reviews and
order directly from the business.
• After the order, the good is shipped directly to them (the customers).
Some of the most popular business to customer websites are; Amazon,
Jumia and Kilmall.
Types of E-Commerce Cont.
• Customer to Customer (C2C): for this model, the consumers are in direct contact with
one another and they can buy or sell freely without any middleman.
• This model enables the consumers to buy and sell used goods like furniture, mobile
phones or electrical appliances. Examples of websites that use this model are: OLX
now known as Jiji.
• Consumer to consumer ecommerce presents a means for consumers to set their rules for the
business transaction, they set their prices as well and the buying party checks for themselves if
the set prices and rules are favorable before making a deal with the selling party.
• Consumer to Business (C2B): this model is the inverse of business to consumer
because here, as the name implies, it’s the consumers that sell to the business.
• Freelancers and businesses that buy from them are a perfect example for this model of
E- Commerce. Here, individuals (that is, consumers) create value (could be goods or
services) that businesses consume.
Types of E-Commerce Cont.
• Business to administration: also known a s business to government which usually involve
exchange of data between businesses and the government via the internet, an example is
when a business wants to advertise its product or service at the government level.
• Business to administration type of ecommerce includes different services like legal documents, social
security, fiscal measures and the likes.
• Consumer to administration: also known as consumer to government entails electronic
transaction between individuals (consumer) and the government.
• When an individual makes a request or a query from the government, it works on the
model of consumer to administration type of ecommerce.
• It creates a way that is easy for communication between governments and individuals.
• Examples include payment of health services, distance learning, information dissemination and so on.
• M-Commerce (mobile commerce): is the buying and selling of goods and services through
wireless technology-i.e., handheld devices such as cellular telephones and personal digital
assistants (PDAs).
Scope of E-commerce
• The market place is flooded with several ecommerce options for shoppers to choose from.
• Cash on delivery (COD): This is where customers pay for the products once they are delivered.
It is ideal where credit card penetration is much lower than other developed markets and
where e-commerce companies are still working hard to build trust among shoppers,
introducing cash on delivery has been one of the key factors for the success of the segment.
• Delivering experiences: E-commerce needs to focus on customer experience to build trust and
confidence.
• Customer experience encompasses every interaction of a customer from placing an order to
interacting with customer service team, to the actual delivery experience.
• Providing a great delivery experience is one of the core aspects to delighting customers.
• This not only mean faster deliveries but also consistency and reliability. The more faith the customer has in
your delivery service, the more likely he is to buy again.
• Besides, it builds a good brand image and word-of mouth publicity
Cont.
• E-Tailing: E-tailing encompasses buying consumer items like apparels, electronic
devices, home and kitchen appliances, jewelry, online. Competition is intense
due to low entry barrier of this segment.
• Online Financial Services: The financial services segment includes applying for
insurance, paying online bills, and premiums and online transactions for
financial services.
• The costs of these insurance policies are lesser with premiums being 40%-60% cheaper.
This is a win-win situation for both the insurance provider and the customers.
• Classifieds: Deals with online advertising. it is in a very promising stage and has
lot of scope for growth. Online advertising is lot cheaper than conventional
methods and unlike the latter, it is not constrained to a geographic location.
• The growth is mainly fueled by services like online job (60% of the segment), online
matrimony, B2C classifieds and B2B classifieds.
Technical challenges
• ICT systems which remain paramount in these systems have to be effective not only within
the boundaries of an organization, rather synergize with ICT systems of other organizations.
• This synergy rests on user-centered design (UCD) interfaces.
• Therefore, the issues and problems under this technical challenges are the responses to the
following questions:
• How heterogeneous are the involved ICT systems allowed to be?
• Is the present IT infrastructure, in developing countries and Kenya in particular, fit for e-commerce?
• How to protect the ICT system to prevent its destruction, damage, or manipulation?
• Are the present ICT systems for e-commerce secure?
• Are payment procedures and modules secure enough?
• How guaranteed is the protection of personal data of involved people, especially customer data?
• How updated are the available technical support?
• Having realized that e-commerce depends on people, are the IT personnel qualified enough?
Economic challenges
• E-Commerce is primarily a concept of management and organization. It is not solely
a matter of technology. Some of the lingering issues confronting e-commerce and e-
business development under guise economic perspectives are highlighted below.
• Are the business protocols and procedures acceptably standardized among the actors?
• Is the participation open to all? Who makes and how the decision of participation is made?
• How to adopt or change the business model?
• What might happen after e-sales channel is opened?
• Will traditional sales channel suffer from it?
• How can we measure the success of our e-commerce activities?
• Will costs be compensated through revenues?
• How do we build relationship with customers, suppliers, and other business partners to realize
the merits of e-commerce?
• How to redesign the business processes – in terms of employees change?