What is E-Commerce: Meaning, Concept, Applications, Uses & Limitations

E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform and redefine relationships for value recreation between or among organizations and between organizations and individuals.

Thus, E-Commerce is a distribution system through which the distributor safely transforms his business relations and distribution by using information technology and network computing. The web marketing/E-Commerce system is a hybrid version of internets and intranets, which can be understood as an extension of the E-Mail facility.

“E-commerce refers to commercial transactions, in which an order is placed electronically and goods or services are delivered in tangible or electronic form”. — The International Fiscal Association.

Learn about:- 1. Introduction to E-Commerce 2. Meaning of E-Commerce 3. Definitions 4. Concept 5. Steps 6. Areas 7. Aspects 8. Applications 9. Uses 10. Examples

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11. E-Commerce Transactions 12. Resources 13. Opportunities 14. Benefits 15. Limitations 16. E-Commerce in India 17. Wider Influence and the Future of E-Commerce.

What is E-Commerce: Meaning, Definitions, Concept, Types, Steps, Applications and Transactions

What is E-Commerce – Introduction

With rapid growth and penetration of the Internet and globalization of market, the retail sector has become an increasingly competitive and dynamic business environment. Business and marketing activities have undergone a paradigm shift after the invention and proliferation of Internet technologies, and the Internet/web technology started revolutionizing commerce, marketing, retailing, shopping, and advertising/promotional activities.

There are two key infrastructure elements that enabled the growth of e-tailing:

1. Penetration of devices through which to access the Internet

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2. Proliferation of technology enabling Internet access

This proliferation of Internet access and usage has changed the manner in which such Internet-habituated consumers pick up trends, form opinions, learn about new things, and consume merchandise. In the context of Indian e-tailing scenario, one of the key reasons why such trends emerged is India’s demographic features.

India is predominantly young with a median age of 26 years. This will continue to be the case for the next 10 years. With the projected median age of 29 years in 2020, by 2020, 40% of India would have been born after the launch of the Internet and mobile phones in the country.

Thus, for a sizeable population of Indians, access to the Internet and the use of mobile phones will be a norm to which they will not have to make transition to, unlike previous generations. Thus for these young consumers, spending time on the Internet will be as normal as watching television is for today’s consumers.

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In today’s era of globalization, companies are using the Internet technology to reach out to their valued customers and providing them with a point of contact 24/7. E-commerce and e-marketing are the two important terms in the new Internet-based business domain. E-commerce can be defined as a way of conducting business by companies and customers performing electronic transactions through the Internet.

E-marketing (also known as Internet marketing, web marketing, and online marketing, etc.) can be defined as the promotion of products or services through the Internet, whereas e-tailing can be defined as selling products and services by a retailer using the Internet. E-tailing is also defined as retailing conducted online.

Electronic business encompasses the entire online process of developing, marketing, selling, delivering, servicing, and paying for products and services. E-commerce commonly known as ecommerce or e-commerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Usually e-business and e-commerce are used interchangeably.

The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. There are numerous examples of e-commerce such as electronic funds transfer, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.

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Modern electronic commerce typically uses the World Wide Web (www) at least at some point in the transaction’s lifecycle, although it can encompass a wider range of technologies such as data warehousing and mining as well.

Earlier a large percentage of all electronic commerce was conducted mainly for trading virtual items such as access to premium content on a website, but now most electronic commerce involves the transportation of physical items in some way Online retailing is one big outcome of e-commerce. Online retailers are also sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web.

What is E-Commerce – Meaning

Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. E-commerce is associated with buying and selling over the Internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network.

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Marketing on the web is an altogether new way of interacting with people and doing business with them. Marketing on the web is alternatively referred to as online marketing, E-marketing or Internet marketing. Marketing on web is a part of electronic commerce, or e-commerce or e-business.

In web marketing all business is conducted by means of computer network. Advances in telecommunications and computer technologies in recent years have made computer network as integral part of the economic infrastructure. More and more companies are facilitating transactions on web. In other words, the fast growth of information technology (I.T.) has brought about some wonderful changes in commercial processes.

The whole nature of business and the distribution network of products and services are changing very rapidly. Anew channel of distribution has entered the field of marketing which has been given the name of “Web Marketing”. Marketing experts believe that those businesses which are not benefiting from I.T. are getting left behind. Web marketing is one such modern theory which would help business managers in developing a comprehensive outlook and in understanding the changing environment so that the rules of business can be redefined and reframed.

From the view of marketing the whole world will now be a market and the manufacturer or distributor of any country will be able to sell his product to the consumer of any country. From the marketing point of view geographical boundaries will cease to exist. A competitive spirit which has never been seen before will be created and new, creative and more consumer oriented policies will have to be followed.

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What is Web Marketing/E-Commerce?

E-Commerce is the platform for future business. It is the computer technology for doing business through the electronic medium. Some people believe that web marketing/E-Commerce is nothing more than creating a website, while the reality is that E-Commerce is a global, informative and present distribution system through which goods can be sold to every customer who wants to buy through this system.

In web marketing/E-Commerce distribution companies, firms or people put the lists of products/services available on the internet and these are sent to the customers. Money transfer does not take place. Only the electronic exchange of business documents like delivery time table, price quotations, invoice or bills takes place and are received by the distributor and the customer at their respective destinations.

This system of information and document exchange is called ‘Electronic Data Interchange’ (EDI). Because of this electronic chain there is no need to use the process based on papers. The web marketing process can be understood by this example. Suppose a person wants to buy a camera then he will fill a copy of the order on the Credit Card Number imprint and will transmit it to the concerned distributor in an encrypted format.

The distributor will receive the order and decrypt it. Keeping in mind the quantity or price of the order he will check whether the customer has enough funds in his bank account. He will charge from the bank account and send the camera. Thus, the whole work of distribution is done in little time through the electronic medium. If the order is made to a local distributor then it will be made available in a few hours-and it will take a few days if the order is made to a foreign distributor.

What is E-Commerce – Definitions

E-commerce means carrying out business activities through the Internet—a system, where both offers of sale and their acceptance— are made electronically.

“E-commerce means consumer and business transactions conducted over a network using computers and telecommunications”. — Department of Treasury, USA

In short, E-commerce refers to business transactions done on the internet.

The term ‘marketing’ is defined as trading of goods, services, information or anything else of value between two parties. This definition is straight forward and easy to understand. If ‘e’ for electronic is added to this definition, the definition of e-commerce/web marketing could be derived as ‘trading of goods and services, information or anything else of value between the two parties over the Internet.

Kotler and Armstrong:

“E-commerce involves buying and selling processes supported by electronics means primarily the Internet.”

Cisco Investor Site:

‘When a person or business uses the Internet as part of their business model’ is called e-commerce. This may include selling products online, maintaining a business blog or delivering products electronically.

In other words E-marketing refers to any form of business transaction in which the buyers and sellers interact electronically using telecommunication networks rather than through physical contact or exchange. It is a new way of conducting, managing and exciting business transactions using computer and telecommunication network.

According to the editor-in-chief of International Journal of Electronic Commerce, Vladimir Zwass, “Electronic commerce is sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks”.

The US Economic Census defines e-commerce (electronic commerce) as:

“Any business transaction whose price or essential terms were negotiated over an online system such as an Internet, Extranet, Electronic Data Interchange network, or electronic mail system. It does not include transactions negotiated via facsimile machine or switched telephone network, or payments made online for transactions whose terms were negotiated offline”.

It is sometimes called “e-business”. It is a very new form of economic activity. In the past ten years it has grown in excess of 50 per cent per annum but it is still much smaller than traditional “bricks and mortar” trading in conventional buildings. E-commerce typically uses desktop computers but it can also use Personal Digital Assistants (PDAs) and pagers that distribute information such as stock market prices. The latest Web-enabled cell-phones which can perform most of their functions will also be important tools.

What is E-Commerce – Concept of E-Commerce (With it’s Objectives)

In simple words, E-commerce (Electronic Commerce) means the process of carrying out business transactions through internet. It involves buying and selling products and services through electronic means.

According to the International Fiscal Association, ‘e-commerce’ means “commercial transactions in which an order is placed electronically and goods or services are delivered in tangible or electronic form”. The European Union website defines, e-commerce as a general concept covering any form of business transactions or information exchange that is made by using information and communication technology.

E-commerce includes any form of computerised buying and selling, it refers to paperless exchange of business information. It makes use of electronic data interchange, electronic mail, electronic bulletin boards; electronic funds transfer and so on. Thus, e-commerce includes all forms of business transactions which are carried out through electronic processing and transmission of data.

Generally, e-commerce and e-business are used synonymously. E-business involves not only buying and selling but also servicing customers. It is more comprehensive than e-commerce. Under e- business, business operations are integrated with e-commerce to improve performance and create value for all stakeholders.

With the help of e-business, an organisation can achieve the following objectives:

(i) Create new products and services

(ii) Access new markets

(iii) Build customer loyalty

(iv) Make optimum use of technology

(v) Enrich human capital

(vi) Gain competitive advantage.

What is E-Commerce – Process of E-Commerce Involves the Following 5 Steps

E-commerce process involves the following steps:

Step # 1. Seller:

Seller is a person/organization which offers products/services to another party which is willing to buy these. Products may be of any type though at present only some standardised products are available through e-commerce. These products have fixed price tag and no bargaining is allowed. Services may include those items which can be provided on-line, for example, downloading data or software.

Step # 2. Seller Website:

For operating e-commerce, the seller must design a website which provides information to customers and accepts order from them. The information contained in website is about products/services being offered, their price, mode of shipment, mode of payment, and other relevant terms and conditions. The website should be designed in such a way that it appeals to the customers and offers simplicity for customers to operate. The website is created on Internet which has a very wide reach.

Step # 3. Customer:

Customer is a person/organization which makes use of e-commerce for buying products/services. After receiving the information from various websites, a customer analyses it to arrive at a decision from which seller he would buy. Based on this decision, he places a buy order to the concerned seller’s website. Since seller and customer are unknown to each other, the seller’s website also specifies which additional information besides the product information, the customer should supply in order to accept his order and execute it.

This additional information is closely linked to mode of payment. The payment mode may be credit card, debit card, or customer bank account, though most of the e-commerce transactions are credit card based. If credit card is used for making payment, the customer has to provide information about his credit card and the limit of credit amount.

On receiving the information about products to be bought and credit card, the seller computer communicates the credit card information immediately to acquiring bank (seller’s bank, authorised to collect payment) through the payment application. The acquiring bank works with card issuer to execute transaction. This process is known as authorisation. After this process is over, the seller computer confirms the acceptance of the order to the customer computer.

Step # 4. Shipment:

Product/service shipment may either take physical form or electronic form. In physical form which is used for shipment of a moveable physical object, the seller delivers the products through a mode of transport mutually agreed between seller and customer. In electronic shipment which is mostly used in providing services like data transfer, software transfer, medical prescription, etc., the information is downloaded on the customer computer.

Step # 5. Payment:

The most practiced mode of payment in e-commerce is credit card. Payment through a credit card involves a number of intermediaries—seller’s bank, customer’s bank, and card issuer and its bank. If all these banks are the same, there is not much problem. However, in case of these banks being different entities, the services of a clearing bank are also required.

The usual payment process through a credit card proceeds in the following manner:

(a) At the time of authorisation, the card issuer’s bank blocks the amount equivalent to purchase amount.

(b) After the confirmation of product/service shipment from the seller, the amount is debited to the cardholder’s account and advice is sent to the seller’s bank, and the bank receives the amount through inter-bank settlement process. On receiving the amount, the bank sends advice to the seller.

(c) Credit card issuer’s bank sends advice to customer’s bank to transfer the requisite amount as agreed between card issuer and cardholder.

The whole process of receiving payment is known as settlement process. While authorisation process takes only few seconds or sometimes even a fraction of a second, settlement process may take several days, depending on the policies and procedures followed in completing the settlement process.

What is E-Commerce – Benefits of E-Commerce for Producers and Consumers

Benefits of E-commerce could be analysed into the following two categories:

1. Benefits for producers

2. Benefits for consumers.

1. Benefits for Producers:

(a) World-wide reach – Those businessmen, who get linked with E-commerce, get world-wide recognition. They can reach out to every human being who has an access to the Internet.

(b) Display of products – The business firms can display their products on the Internet. A business firm can launch its new products through the medium of E-commerce.

(c) Production according to consumers’ needs – With electronic interaction, producers/suppliers can gather detailed information about the needs of individual customers and tailor their products and services to those individual needs.

(d) Elimination of middleman – Through E-commerce, the manufacturer can establish a direct link with the customers. This leads to saving in the cost of distribution.

(e) Less personnel costs – Because of E-commerce, a single computer can do the job of many employees quickly and correctly. Thus E- commerce results in less number of employees and the business expenses on staff decrease considerably.

(f) Entertainment to attract customers – E-commerce website can provide entertainment to customers through providing access to various games, sports, music etc. Thus more customers can be attracted by business firms through E-commerce.

2. Benefits for Consumers:

(a) Global choice – A consumer can get the benefit of global market. In other words, he can purchase required products and services from suppliers of all nations.

(b) Customer convenience – A website is open round the clock. It can take orders and receive payments at any time convenient to the consumer.

(c) Products and services available in remote areas – E-commerce has made it possible that things are made available even in those areas, where there are no markets around.

(d) Easy distribution process – Many types of information and services can be delivered to the consumers on the computer through E-commerce. This simplifies the distribution process for the consumer.

What is E-Commerce – Main Areas of E-Commerce

The earliest developments in e-commerce tended to involve trading between two business organisations (B2B) because most computers were then owned by organisations. The recent expansion has been business organisations selling directly to retail customers. This is called B2C trading. The classic example of business to customers trading is Amazon(dot)com – the Seattle-based company that started Web trading in 1995.

Amazon has been so successful that it has expanded its range of products to include clothing, electronics, toys and hardware. Indeed, Amazon now sells the B2C systems it developed to companies such as the Borders Group, Toys ‘R’ Us and Target. Amazon’s example attracted competitors such as Wal-Mart into retail e-commerce (e-tailing). Other early adopters were in the travel industry.

Firms such as Expedia (American), Lastminute (British) and eDreams (Spanish-Italian) were well established before the turn of the millennium. E-booking is another sector where e- commerce has flourished. Tickets for many theatre, film or sporting events can be purchased over the Internet and this method is now rivalling traditional methods. For example, in 2004, 43 per cent of ticket sales for the Edinburgh Festival were via websites.

In one day the National Theatre in London issued e-tickets worth £270 000 for the play The History Boys. Another major user of e-commerce is the recruitment industry. Perhaps the best-known recruitment website is the “Monster” board that operates on a global basis. Most countries have similar websites.

In Australia, for example, the government offers a website jobsearch(dot)gov(dot)au while the private sector offers sites such as seek(dot)com(dot)au. E-commerce has also been used for less savoury transactions – especially unauthorised pharmaceutical sales and pornography. In 2003 Americans spent $700 million buying cut-price Viagra and prescription drugs from across the border in Canada. In the same year over $2 billion was spent in the USA on e-porn!

What is E-Commerce – Important Aspects

The industry structure supporting e-commerce is very complex and only three aspects can be covered here. They are domain names, aspects of B2B and aspects of B2C.

1. Domain Names:

Domain names are a vital part of the Internet. They allow search engines to locate the websites. A domain name has several parts separated by dots. For example, much of the information in this article was obtained from an organisation, Business Link (a part of the Department of Trade and Industry) which has the domain name www(dot)businesslink(dot)gov(dot)uk.

Similarly, the Institution of Engineers in Singapore has the domain name of www(dot)ies(dot)org(dot)sg. The names of Internet sites could be quite similar and a great deal of confusion would arise if they were mixed up. Consequently, somebody, somewhere must ensure that each website has a unique name.

The most general parts domain names are the generic top-level domains (gTLDs). They indicate the type of sponsoring organisation. Typical examples of gTLDS are (dot)net, (dot)com, (dot)org (dot)gov and (dot)info. They are handled by the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN appoints organisations (usually American organisations!) that check there is no duplication and then issue an Internet address (Internet Protocol) which allows users to access the web address. For example the (dot)com domain and the (dot)net domain are administered by VeriSign.

There are also country code top level domains such as (dot)au,(dot)ie, (dot)hk, (dot)nz, (dot)sg, (dot)uk and (dot)za. The official (dot)uk domain name registry is managed by an organisation called Nominet. Nominet manages second level domains such as (dot)co(dot)uk; (dot)org(dot)uk; (dot)net(dot)uk and (dot)ac(dot)uk. The third part of a domain name, such as “manchester” is the name of an individual site. So the address of the University of Manchester is www(dot)manchester(dot)ac(dot)uk while the address of McGraw-Hill in the UK is www(dot)mcgraw-hill(dot)co(dot)uk.

2. B2B E-Commerce:

While B2B trading shares many characteristics with B2C (business to consumer) trading, there are notable differences. In many areas of B2B trading a website is less important. Customers know their suppliers. Therefore they are much less likely to use a search engine to locate the domain addresses. They are also less likely to be impressed by clever, eyecatching designs that may take time to download. B2B customers are more likely to be attracted by a straightforward system that functions effectively.

In many cases, there is an even closer link between customer and supplier in B2B trades. There is a growing tendency for orders to be generated automatically and sent to the supplier’s own computing system. These advantages produce considerable cost savings which either improve profits or enable them to offer lower prices. One disadvantage of integrated supply systems is that an extra burden can be placed upon suppliers, who are forced to adopt in its customers’ systems. For example, all suppliers to Wal-Mart must conform to its computerised ordering system.

Argos, the world’s biggest catalogue distributor, maintains tight control of its supply chain. It recently introduced a “track and trace” system for high-value goods. A “tote” (i.e. a bag) of, say, jewellery is given a Radio Frequency Identification (RFID) tag and a barcode label. Radio sensors at various stages of the production and transport system automatically log the movement of each consignment. In addition, hand-held sensors can track goods at other points.

Tracking information is stored on Argos’s database. This allows Argos to locate valuable assets precisely and ensure that products are available when needed by customers. These systems require sophisticated supply-chain management programs. A specialised sector of the computer industry, including firms such as i2 and Manugistics, has developed to provide such systems.

3. B2C E-Commerce:

Business to Consumer e-trade depends heavily on an organisation’s website and the ease with which it can be located and navigated. One, costly, way of aiding location is to sponsor links on search engines such as Google. A more subtle approach is to include key words likely to be detected by search engines. The design of the website is crucial. It must be distinctive, yet convey an appropriate image. It must offer relevant information that can be reached with only three clicks of a computer mouse. Simplifying the buying process is a major challenge for B2C commerce.

What is E-Commerce – Applications

E-commerce can be applied in four types of business situations which are as follows:

1. Business to Business (B2B) Applications – In this case, business transactions take place between different business firms. Business to business transaction accounts for a major part of total e-commerce.

An example of business – to – business category would be a company that uses a network for ordering from its suppliers, receiving invoices and making payments. Maruti Udyog, Telco, Bajaj Auto, Thermax, Kinetic and many other companies use B2B commerce.

2. Business to Consumer (B2C) Applications – This category comprises commercial transactions between business firms and their customers. Companies sell products and services on line to customers. For example, Amul.com sells Amul products online. The business-to-consumer category largely relates to electronic retailing. This category has expanded greatly with the advent of World Wide Web. There are now shopping malls all over the internet offering all kinds of consumer goods – from cakes to computers and motor cars.

3. Business to Administration (B2A) Applications – It covers all transactions between companies and government organizations. For example, in the USA the details of forthcoming government procurements are publicized over the internet and companies can respond electronically. Companies can now file e-returns in India.

4. Consumer-to-Administration (C2A) Applications – This category is in its infancy. However in the wake of growth of both the business-consumer and business-administration categories, governments are extending electronic interaction to such areas as welfare payments and self-assessed tax returns.

Applications can be broadly classified into two categories based on the extent, scope, and functionality of e-commerce model:

1. Business to business (B2B) and

2. Business to consumer (B2C).

1. Business to Business:

Business to business, commonly known as B2B, involves electronic transactions for business activity between two or more business organizations. This type of e-commerce model is becoming increasingly important as most business organizations are reengineering their business processes in which other organizations may play vital role. For example, more and more organizations are sharing information of their common interest among themselves. B2B enables the business partners to exchange information among themselves in an automated way without the human interaction.

2. Business to Consumer:

Business to consumer, commonly known as B2C, involves bringing business and consumers closer to each other and creating a unique marketplace where products and services can be bought and sold.

What is E-Commerce – Uses of E-Commerce (With 2 Main Factors)

E-commerce first emerged in the USA but was quickly adopted by European countries – especially the UK and Germany. At the time of writing the UK was Europe’s largest e-commerce economy and had already overtaken the USA in pioneering some developments. Tesco, for example is the world’s largest online grocer. In 2003 online trade was worth £39.5 billion in the UK.

America’s Department of Commerce calculates that online retail sales in the USA in 2003 exceeded $55 billion. These figures need to be seen in context – they amounted to only 2-3 percent of all trade- the vast majority of commerce still takes place in the old “bricks and mortar premises”. However, e-commerce is growing very rapidly. E-tailers such as KarstadtQuelle (Germany) and Tesco (UK) have experienced annual growth rates in excess of 25 per cent.

This large increase has been the result of two main factors:

(a) More people are making purchases using the Internet. In 2003 it was estimated that about 40 per cent of Europeans who had access to the Internet had made purchases on line, whereas, in 2000 the proportion was about 20 per cent.

(b) E-buyers are purchasing a wider range of goods. In the early days, buyers used the Internet to buy standard products such as CDs and books. As consumer confidence in e-commerce has grown, they are prepared to purchase more complex products.

What is E-Commerce – Examples

i. Online shopping- Buying and selling goods on the internet.

ii. Electronic payments- Making payments to service providers using payment gateways.

iii. Online auctions- Through online auctions, buyers and sellers are able to discover the price of any product and conclude deals.

iv. Internet banking- Today it is possible for you to perform the entire gamut of banking operations without visiting a physical bank branch. Interfacing of websites with bank accounts, and by extension credit cards, was the biggest driver of e-commerce.

v. Online ticketing- Air tickets, movie tickets, train tickets, play tickets, tickets to sporting events, and just about any kind of tickets can be booked online. Online ticketing does away with the need to queue up at ticket counters.

What is E-Commerce – E-Commerce Transactions: Methods, Threats and Precautions

Methods Can be Used to Ensure Security and Safety of E-Commerce Transactions:

The following methods can be used to ensure security and safety of e-commerce transactions:

(i) Cyber Crime Cells – Government may set up special crime cells to look into the cases of hacking and take necessary action against the hackers.

(ii) Encryption – Encryption means converting the message into a code so that unauthorised persons may not understand it. Only the sender and the receiver of the message know the coding and encoding rules. Another alternative to maintain secrecy of e- commerce message is the private key. The private key is meant to decode the message in such a way that only the recipient of the message knows it.

(iii) Digital Signatures – Under this method, a coded digital certificate is issued for each message by a certification authority. The purpose is to check the identity of the sender. Whenever a message is received, the hash function is checked to ensure that the contents of the message have not been altered. Digitised signature is accepted as a legal proof of the transaction under law of some countries.

(iv) Third Party Involvement – In order to ensure that parties to a transaction do not disown the transaction, a copy of the transaction is sent to a third party this is acceptable to the parties to the transaction. The copy with the third party will be helpful in settling any dispute that may arise between contracting parties.

Threats to E-Commerce Transactions:

E-commerce transactions face the following threats and risks:

1. Hacking – Hacking means unauthorized entry into a website. Hackers may intercept messages sent on Internet. They may misuse information to their own advantage. They may even modify information to harm both the parties.

2. Brand hijacking -Through Internet, powerful new brands can be created almost overnight, which can quickly overshadow well-established old brands created through radio, T.V. and other media over a long period with considerable expenditure of money and efforts. This phenomenon in technical language is called brand hijacking, which involves severe loss of goodwill to the owner of old established brands.

3. Impersonation – Hackers may pretend to be customers themselves. They thus make use of stolen credit cards of real customers.

4. Fraudulent trading – A business firm operating a website may indulge in undesirable practices. It may operate a fake website, take money from customers and may not supply the product.

5. Viruses – Some viruses destroy all the information stored in a computer. Others also hamper the functioning of E-commerce. They cause huge loss of revenue and time.

6. Other cybercrimes – Embezzlement, hack mail, threats to life and property are examples of other computer crimes.

Precautions in E-commerce Transactions:

(i) Establish true identity of the sender to avoid fraud in business transactions.

(ii) Ensure secrecy of message

(iii) Ensure that the message is tamper-proof

(iv) Hold sender and receiver of the message responsible for the message.

What is E-Commerce – Resources Required for Successful Implementation of E-Commerce

The resources required for successful implementation of e-commerce are given below:

(i) Well Designed Website:

A business enterprise must develop a comprehensive website to communicate effectively with its customers and business partners. The website should provide detailed information about the firm’s products and services. Data should be supported with suitable pictures, graphs, etc. customers will gain access to the company’s website through their computers linked to any network.

(ii) Adequate Computer Hardware:

The business firm must procure and install computers with necessary speed, memory and modes to handle the expected volume of business. It should provide the necessary Internet Service Provider (ISP) and Application Service Provider (ASP), Server and Portals, and e-mail facilities.

(iii) Effective Telecommunication System:

E-commerce requires an effective telecommunication system in the form of telephone lines, optic fibre cables, and Internet technology to handle the traffic on the internet. E-commerce cannot be successful if telephone lines are getting frequently disconnected and it is difficult to access the Internet. This problem, called ‘Digital divide’, must be bridged to make e-commerce available to common man. The cost of hardware and the price of using the Internet must be within the reach of low and middle income groups.

(iv) Technically Qualified and Responsive Workforce:

A well-trained work force i.e. capable of working easily with the internet and computer networks is essential for e-commerce. The staff must also be trained to handle sales inquiries, processing orders and ensuring prompt delivery. There should be proper coordination between receipt of order, delivery of goods and receipt of payment so as to minimise errors.

(v) Reliable Payment System:

A fool proof system of receiving payment for the goods sold must be developed. Adequate information should be made available to enable the customers to calculate the amount to be paid. An inbuilt system of refunds, in case excess amount is received should be created. Business firms must make arrangements with banks and credit card agencies to facilitate electronic receipts and payments of money.

What is E-Commerce – Opportunities

E-commerce offers tremendous opportunities to business firms for expanding their sales and business relationships.

Some of these opportunities are given below:

(i) Growing Use – More and more people are making use of the internet. People will gradually prefer to do shopping online through the internet. Millions of people around the world exchange information and conduct transactions through e-commerce. The number is increasing day by day.

(ii) Huge Potential – E-commerce offers tremendous scope for growth. It is very cost effective. Buying online can reduce costs by ninety percent. Internet in India is growing at about 250 percent every year. Introduction of broadband and improved connectivity will boost the growth of e-commerce.

(iii) Trust Building – E-commerce website provides a forum for interaction between business firms as well as between business and customers. Buyers and sellers get website easily and secrecy of information exchanged is assured.

(iv) Value Creator – E-commerce helps business enterprises to multiply their market values. With the help of e-commerce, business concerns acquire knowledge and information and improve their intellectual capital. In fact, e-commerce has created several new businesses, markets and business opportunities. Business firms can strengthen relationships with customers due to quick and inexpensive communication.

What is E-Commerce – 11 Main Advantages

The main advantages of E-commerce are as follows:

(i) Global Market – E-commerce enables business firms to reach out to customers all over the world who have access to internet. The whole world becomes, therefore, a potential market for business enterprises.

(ii) Round the Clock Working – A website is open all 24 hours. It can take orders, keep an eye on delivery of goods and receive payments at any time. A business firm can provide desired information about its products and services to customers. It can also display three dimensional images of its products on the internet.

(iii) Customized Products and Services – Internet provides high speed communications with different parts of the world. Business enterprises can thus develop products to suit preferences of people residing in different countries. For example, in India, manufactures of silk sarees can develop silk garments for Chinese and Japanese customers. Businessmen can even invite customers to design products and services of their choice and thereby earn their loyalty.

(iv) Reduced Costs – With the help of e-commerce, business firms can substantially reduce the costs of business transactions. E-commerce can help reduce advertising costs, expenses involved in exchange of information, costs involved in carrying the goods for display. The number of customers’ service representatives can be reduced by providing information on website.

(v) Wide Choice – For the customers, the whole world becomes a shop. They can look and evaluate the same product at different websites and make the best choice. There are no limitations of inventory and space.

(vi) Customer Convenience – Customers can shop sitting at home or office. They do not need to stand in a queue to talk to salesmen or to read catalogues and price lists. They can access the internet and buy at any time according to their convenience. Payments can also be made online.

(vii) Direct Contacts – Business firms can establish direct contacts with the customers by eliminating middlemen. They can focus on specific customer groups.

(viii) Sales Promotion – E-commerce can be used for sales promotion. Catalogues and new product launch can be transmitted to customers through the internet. Paperless exchange of information helps to save time and money.

(ix) Customer Satisfaction – E-commerce allows quick response and redressal to customer complaints. This helps to increase customer satisfaction.

(x) Less Investment – Business firms can get quick supplies from the vendors. They need not maintain huge inventories; therefore, less capital is blocked in inventory.

(xi) Security – There are in built security measures in e-commerce. Devices to prevent unauthorised use of data and information, password, encoding encryptography, cipher, etc. are some of these measures.

What is E-Commerce – 5 Major Limitations

The E-Commerce is still quite young sector, with resulting challenges. Development in different parts of the world may be quite different; the necessary common practices are not yet all there. Developing countries stand to benefit, but large parts of the world still seem hopelessly left out.

Limitation # 1. Cultural Issues:

Automated business processes require a cultural change in the way business is conducted and services offered. People typically resist change, especially if they are not sure about the outcome. Not all people know E-Commerce well and the effects of E- Commerce are so many that there is space for resistance.

There is lack of trust and unknown sellers hinder buying, people do not yet sufficiently trust paperless, faceless transactions and some like to feel and touch products. There are security and privacy concerns and the media has continuously news about fraud or possible fraud in the Internet.

Because of all this suspicion critical mass of sellers and buyers are still missing in many cases. Also many legal and public policy issues, including taxation, are as yet unresolved. National and international government regulations sometimes get in the way. There is lack of mature measurement methodology to measure benefits of e-Business.

Limitation # 2. Outdated Legacy Systems:

Outdated legacy systems have often probed to be a barrier to implementing E-Commerce even where an enterprise itself is willing to make the change. The necessary modifications to systems would be too costly and take a long time. This has inhibited transition to advanced technologies.

Limitation # 3. High Costs:

Especially for the SME’s, the cost of automating business operations as well as the cost to a new mindset is perceived to be high. Investing in the latest systems and hiring highly skilled personnel, analysts, researchers and business experts is too expensive.

When E- Commerce can be implemented by buying necessary functions as services and without major own investments the barriers are smaller, but the service markets are not yet that developed in many countries. Also lack of qualified personnel may further raise costs.

Limitation # 4. Technological Issues:

The E-Commerce technology is still developing very fast and that creates, besides possibilities, a lot of challenges. There are too many standards; universally accepted standards are too few.

Application development tools are still evolving and there are difficulties in integrating the internet and E-Commerce software with existing applications and databases.

Also the telecommunication bandwidth may be insufficient, especially in mobile e- Business. In networked E-Commerce interoperability is essential, but because of missing universal standards, too few common practices in E-Commerce and the will to use technology also as a competitive edge the true interoperability is missing.

Limitation # 5. Financial Issues:

There are also financial issues. It may still be difficult to obtain venture capital due to so many dot-com failures. There are also so many free services on the net that in many cases it is challenging to design a profitable business model. People are not used to pay for those services.

What is E-Commerce – E-Commerce in India

Years later with the second wave of e-commerce in India surging, Indian internet-driven companies seem to have learnt from their experiences and have evolved in their approach to online business models. Not many old companies of the 1999 era remain in 2010, but those who exist have set high standards and benchmarks for the new crop of startups.

With Make My trip’s IPO success recently, suddenly there seems to be lot of momentum and interest from everyone (including VCs) in this area. We never had any doubts whether e-commerce will happen in India or not, it is only a matter of time. This could well be that inflexion point everyone is waiting for.

With that said, the next question is what are the categories best suited for e-commerce? It is anybody’s guess to say books, music, and videos followed by electronics. Following that will be apparel, footwear, sports goods, fashion, accessories like bags, glasses, watches, etc.

For these other categories, each one comes with its own challenges. Slowly we see companies getting innovative with the help of technology to address some of these challenges. US-based Zappos is a good example for footwear category. In Indian context, one common factor that runs across any category is the “tier-2 story” for the lack of accessibility on some of these products (traditional organized retail store expansion could take some more time in tier-2 cities).

Limited access to branded products, convenience, price point in some cases, access to right product information, easy comparison of products, etc. will help in overcoming the touch and feel factor. Did you ever imagine a customer ordering a complete golf set worth Rs.90,000+ online?

Would you put your bets on someone ordering a Rs. 10,000 tennis racquet without touching it? Someone buying expensive branded shoe without strutting about in a store at least 10 times to feel the fit and comfort? Or an English willow cricket bat worth Rs. 5,000+ without feeling it? Well, these things are happening and happening frequently in e-commerce and we have many more such stories to tell.

Having said that, there are quite a few challenges that are yet to be addressed. Things that come to our mind immediately are logistics and product delivery delays, payment gateways costs, and the vendor readiness for systems integration etc. Entire eco-system for e-commerce needs to mature to deliver the level of customer service that is required to influence the purchasing behaviour of the consumers.

In addition to this, broadband penetration and access to computers still needs to improve in tier-2 and tier-3 cities. Roll-out of 3G services could give that leap for e-commerce in India.

It is no secret that e-commerce model is capital intensive and the gestation period for e-commerce company to gain economies of scale could be little longer. We strongly feel that availability of capital plays a very important role in building the technology, customer service, product inventory and robust back end infrastructure.

So, what does this all mean? E-commerce is here to stay and it could only grow further. If India’s GDP were to grow at high single digit percentage, we could make a safe assumption that e-commerce could only grow, pace of the growth could be dependent on some systemic improvements.

Internet Usage Statistics for India:

Internet Usage and Penetration in India – 51 mn ‘active’ internet users in India, 40 mn urban and 11 mn rural. Reaches 10% Indian households and 4.4% Indians. 2/3rd households have ‘multiple’ users in them. 97% are regular users and 79% use daily. High base of ‘daily users’ and increased base of ‘online buyers’ indicates growth in ‘depth’. 1 in 4 access it on mobile phones, though most of them are ‘dual’ users (PC + Mobile).

‘Dual’ users’ access internet on their mobiles habitually – 2 out of 3 access ‘daily’ and 1 in 3 uses it for more than an hour daily. Almost all ‘dual’ users have GPRS enabled phones and most have activated GPRS service on them.

‘WAP enabled’ data services and ‘GPRS activated’ direct browsing are the most popular mode of mobile internet usage. ‘Poor speed’ and ‘affordability’ are the biggest perceptual barriers in higher adoption of mobile internet usage among existing net users.

Rural user base up at 20%; Growth relatively more in ‘South’, making it the most ‘net-savvy’ region Growth relatively more in the ‘smaller’ urban areas (below 5 lakh population) – they now account for half of all urban internet users. ‘Home’ continues to be the largest ‘single’ place of access. ‘Home’ and ‘transit’ user base show increase. ‘Connectivity’ problems are the biggest irritants, starting with ‘speed’ – half of all broadband users claim ‘below 256 kbps’ speeds.

Over half of internet users are ’employed’, half of whom are ‘corporate employees’, 2/3rd of those employed are ‘head’ of the household (rest 1 in 3 being the ‘other earning members’ ‘of ‘multi-income’ families) ’25-35 years’ forms the ‘single’ largest age group among internet users.

Their ‘average’ claimed monthly family income is ‘3 times’ the national average. At least 2 times higher ownership levels for the more ‘evolved’ modern day assets, female user-ship ‘inching’ upwards, ‘housewives’ as a user base starts emerging.

Internet is the ‘dominant medium’ in 2/3rd internet users’ lives. Among offline media, they read ‘newspapers’ more, but are ‘heavier users’ of TV. Internet ‘surfing’ is the favorite ‘indoor entertainment’ for most of them, and they perceive it as a source of ‘learning’ and ‘entertainment’. ‘Listening to music’, ‘cinema’ and ‘gaming’ are their biggest hobbies. ‘Money’ is the biggest motivation driving their lives. They give highest importance to ‘functionality’, then to brand image.

Proportion of online ‘window’ shoppers fell significantly in the last year; However, this drop is due to significant decline in the ‘searchers only’ base, ‘online buyers’ base actually increased by 2.5 million (33% growth), 40% online shoppers ‘bought’ online (+18% points over last year) – indicates that mere ‘window shoppers’ are giving way to the ‘serious’ buying-intending shoppers Net users make good ‘marketing audience’ – 3/4th of them have ‘responded’ to some kind of ‘marketing stimulus’ when online.

What is E-Commerce – Wider Influence and the Future of E-Commerce

E-commerce is changing consumer behaviour. A substantial proportion of customers research products on-line before visiting a bricks and mortar outlet to make the actual purchase. In the USA, one in five customers of electrical goods research products on-line and will know the exact price. Seventy-five per cent of Americans research car purchases on line before buying from a traditional dealer.

Customers are better informed and more able to negotiate a keen price. They routinely compare prices in their local stores with on-line prices. They may even compare domestic prices with those abroad and then use a Web-based service to import them at a lower price.

The process can work the other way around. Consumers frequently visit a bricks and mortar store to see and touch a product before returning home to buy on-line. This may mean that some shops become little more than showrooms. Both trends signify a decoupling of product information and the actual purchase itself. They also encourage consumers to be less loyal.

Some e-tailers, especially catalogue retailers, have adopted a strategy of using multiple channels by allowing customers to complete different parts of a transaction in different ways. Argos is a superb example. It has used its well-developed competencies at distance selling and knowing its market to allow customers to, say, check prices and availability online and have goods delivered to the customer’s home.

Other excellent e-tailers include Amazon(USA), Laredoute(dot)fr, Alaplage(dot)fr, Screwfix(dot)co(dot)uk and Otto(dot)de. This list is interesting since, with the exception of Amazon, none are traditional(dot)com companies that caused all the early razzmatazz. The largest group are catalogue retailers (Argos, Laredoute, Screwfix and Otto). They already had relevant skills, brand strength, distribution systems and customer service departments.

Traditional organisations such as Tesco(dot)com, Fnac(dot)fr and Bahn(dot)de are also having success with e-commerce. It would seem that in the longer run success in e-commerce requires an evolutionary approach by large stable companies with experienced management rather than innovative start-ups by young caviare-eating and champagne-drinking entrepreneurs.

Of course, globalisation and e-commerce are only two of current commercial issues. An excellent introduction to the issues involved in the management of technology can be readily obtained from Broers’s (2005) Reith Lectures on “The Triumph of Technology”.