Electronic commerce, which is also commonly known as e-commerce or electric-commerce, is essentially the process of buying and selling of services or products over electronic systems like the Internet and various other computers, or any technology networks. The amount of business being done electronically has grown tremendously with the spread of the Internet.
Day-to-day examples of a wide variety of commerce conducted electronically, drawing and spurring on innovations in supply chain management, electronic funds transfer, online transaction processing, Internet marketing, inventory management, Electronic Data Interchange (EDI) systems, and automated data collection systems.
E-commerce includes conducting, managing and executing business transactions using modern technology.
The transactions of e-commerce are related to commercial activities between various organizations and individuals who are engaged in processing and transmission of data including text, sound and visual images.
E-commerce also refers to the exchanges of business ideas and information using electronic medium i.e., electronic mail, electronic fund transfer and other network based technology. It is not a manual process or paper transition but it is an electronic process which help the organizations and individuals to move forward and to change the technologies with ease.
Electronic commerce deals generally in the sales aspect of e-business. It sometimes also consists of the exchange of data in order to facilitate the financing and payment aspects of the business transactions.
Contemporary electronic commerce inculcates everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce.
On the consumer level, electronic commerce is mostly conducted on the World Wide Web. An individual can go online to purchase anything from books, grocery to expensive items like real estate. Another example will be online banking like online bill payments, buying stocks, transferring funds from one account to another, and initiating wire payment to another country. All these activities can be done with a few keystrokes on the keyboard.
On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce these days.
The use of electronic commerce has drastically changed over the last 30 years. Originally, e-commerce meant the facilitation of the commercial transactions electronically, i.e., use of technology such as Electronic Funds Transfer (EFT) and Electronic Data Interchange (EDI). Both of these were introduced in late 1970s, allowing businesses to transfer commercial documents like invoices and purchase orders. Moreover, the acceptance and growth of automated teller machines (ATM) and credit cards and telephone banking are also forms of electronic commerce. It was from 1990s onwards, electronic commerce started to include Enterprise Resource Planning Systems (ERPS), data mining and data warehousing.
Perhaps started from the Telephone Exchange Office, the earliest example of many-to-many electronic commerce in physical goods was the Boston Computer Exchange, a marketplace that used computers launched in 1982. The first online information marketplace, including online consulting, was likely the American Information Exchange, another pre-Internet online system introduced in 1991.
E-commerce addresses the needs of traders, organizations, consumers and society. It reduces the cost of transactions while improving the quality of goods and services and also increasing the speed of services delivery.
E-commerce is nothing but an exchange of goods and services for value on internet.
The Internet Tax Freedom Act, 1998, narrowly defines e-commerce as "any transition conducted over the internet or through internet access, comprising the sale, lease, license, offer or delivery of property, goods or services or information whether or not for consideration and includes the provision for internet access".
Therefore, any transition conducted over the internet by organization or an individual is called an e-commerce. It is also not necessary that the transaction conducted over internet is for some consideration or of free of cost. The essential element is that only the transaction should be conducted over internet.
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their Parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.
The World Trade Organization is one of the largest organizations doing import and export business. With the development of technology and electronic world, Ministerial declaration on e-commerce defines it as "the production, distribution, marketing, sales or delivery of goods and services by electronic means."
According to World Trade Organization (WTO), the six main instruments of e-commerce are Telephone, Fax, Television, Electronic Payments, Money Transfer Systems, Electronic Data Interchange and Internet.
The Business Process Re-engineering is to create effective and efficient business process for better quality. The thrust of business process re-engineering is in managing the existing resources in optimum manner so that there is no wastage of resource. E-commerce is an example of business process
re-engineering, that is, to create effective and efficient business for better quality at lower cost.
Online approaches to perform traditional functions are:-
1.Payment and Funds transfers.
2.Order entry and processing e.g., in SMS form.
3.Invoicing i.e., through computer e.g., E-mails.
4.Inventory management - It means using software's i.e., the Bar code which has price, batch number of product, package, etc.
5.Electronic catalogues - every website is electronic catalogues e.g., customer care.
6.Point of sale data gathering - online sale is done by presenting online questionnaires or radio frequency, call centres, etc.
7.Advertising - online advertising of product is also an approach ofe-commerce.
8.Marketing and customer support function - marketing through online medium or getting responses from customer is also an online approach.
In the year 1984, a person named as Michael Dell got a revolutionary idea in a hostel room. His idea was to sell PCs over the phone, rather than build a costly sales team or pay a middleman a distribution fee. In 1988, with great prices and quick delivery, Dell sales hit $159 million. This model enables 30% gross margins and makes it easy for Dell to undercut rivals who enjoy 40% plus margin. They immediately went public and made an initial public offering and raised $ 30 million. In the year 1995, the company reached new efficiency heights. Dell achieved the build-to-order system and providing services to customer from the level from 40 to 17 days. In the year 1997, Dell started its assault on the server business with models costing one-third as compared to rivals and jumped on the Net. By the month of April, it was doing $1 million in sales daily online. Starting with 30 people it now needs 700 people to man the phones. In 1999, Dell sales increased to $ 18 billion keeping its inventory to record low levels. In 2001, Dell became the No. 1 PC seller, with a 13% world-wide share. The profits were in $ 361 million. In 2002, Dell consolidated its position over its nearest competitor HP by becoming the world's most widely distributed PC seller. Till 2003, as No. 1 PC seller in the world, Dell's company, currently holds 15% of the market share.
· Rapidly growing sector B2B (business to business sector).
· Low growth in B2C (business to customer sector).
· Stagnating C2C (customer to customer sector).
· Improving C2B (customer to business sector).
· Non-business e-commerce.
· Intra-business e-commerce.
It involves the independent or dependent business entities. It is a deal maker, negotiator between these two entities. This is the case when two commercial organizations conduct some kind of commercial transaction using internet as an interface. e.g., Maruti Udyog - the biggest seller in world get ancillary parts from other business entities and assemble them.
This is the case when business entity being on one side hosts a site full of products and services for the customer. It is a retail version of e-commerce. It has web based shops. It makes shopping convenient for general people. Common examples of such sites are eBay, alibaba etc.
This is the case when two or more customers involve with a business entity merely providing a web based interface to facilitate the customer to customer transaction. A very common example is amazon.com, where you get to see customer reviews which facilitate other customers about a specific product. It also includes customer to customer auctions. It is in realm of resale or rental. It creates market of second hand goods.
It is known as customer chaser or offering customers deals and packages at negotiable prices to customers. It is also known as "reverse auction". It is a business modal which is adopted by airlines, hospitably. It includes only barraging power. This category includes individuals who sell products or services to organizations, as well as individuals who seek sellers, interact with them and conclude a transaction.
An increased number of non-business institutions such as academic institutions, to-for-profit organizations, religious organizations, social organizations, and government agencies are using various types of e-commerce to reduce their expenses (e.g., improve purchasing) or to improve their operations and customer service.
In this category, we include all internal organizational activities, usually performed on intranets that involve exchange of goods, services or information. Activities can range from selling corporate products to employees to online training and cost reduction activities.
1. Electronic commerce expands the marketplace to national and international markets. With minimal capital outlay, a company can easily and quickly locate more customers, the best suppliers, and the most suitable business partners world-wide. A great example could be of the Boeing Corporation which reported a savings of 20 per cent. after a request for a proposal to manufacture a sub-system was posted on the Internet. A small vendor in Hungary answered the request and won the electronic bid. Not only was the sub-system cheaper, but it was delivered quickly.
2. Electronic commerce decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information. For example, by introducing an electronic procurement system, companies can cut the administrative costs of purchasing by as much as 85 per cent. Another example is benefit payments. For the U.S. Federal Government, the cost of issuing a paper check is $430. The cost of electronic payment is $20.
3. Ability for creating highly specialized businesses. For example, stuffed toys which could be purchased only in pet shops or departmental and discounted stores in the physical world, are sold now on a specialized www.dogtoys.com, www.cattoys.com.
4. Electronic commerce allows reduced inventories and overhead by facilitating "pull"-type supply chain management. In a pull-type system, the process starts from customer orders and uses just-in-time manufacturing.
5. The pull-type processing enables expensive customization of products and services, which provides competitive advantage to its implementers. A classic example is Dell Computer Corporation.
6. Electronic commerce reduces the time between the outlay of capital and the receipt of products and services.
7. Electronic commerce initiates business processes re-engineering projects. By changing processes, productivity of sales people, knowledge workers, and administrators can increase by 100 per cent. or more.
8. Electronic commerce lowers telecommunications cost-the Internet is much cheaper than VANs.
9. Other benefits include improved image, improved customer service, newfound business partners, simplified processes, compressed cycle and delivery time, increased productivity, eliminating paper, expediting access to information, reduced transportation costs, and increased flexibility.
The benefits of E-commerce to consumers are as follows:
1.Electronic commerce enables customers to shop or do other transactions 24 hours a day, all year round, from almost any location.
2.Electronic commerce provides customers with more choices providing customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.
3.In some cases, especially with digitized products, electronic-commerce allows quick delivery.
4.Customers can receive relevant and detailed information in seconds, rather than days or weeks.
5.Electronic commerce makes it possible to participate in virtual auctions.
6.Electronic commerce allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences.
7.Electronic commerce facilitates competition, which results in substantial discounts.
The benefits of E-commerce to society are as follows:
1.Electronic commerce enables more individuals to work at home and to do less travelling for shopping, resulting in less traffic on the roads and lower air pollution.
2.Electronic commerce allows some merchandise to be sold at lower prices, so, less affluent people can buy more and increase their standard of living.
3.Electronic commerce enables people in Third World countries and rural areas to enjoy products and services that are otherwise not available to them.
4.This includes opportunities to learn professions and earn college degrees.
5.Electronic commerce facilitates delivery of public services, such as health care, education, and distribution of government social services at a reduced cost and/or improved quality. Health-care services, for example, can reach patients in rural areas.
The limitations of E-commerce can be grouped into technical and non-technical categories.
1.Technical Limitations of E-commerce.
2.Non-technical Limitations.
The technical limitations of E-commerce are as follows:
1.There is a lack of system security, reliability, standards, and some communication protocols.
2.There is insufficient telecommunication bandwidth.
3.The software development tools are still evolving and changing rapidly.
4.It is difficult to integrate the Internet and E-commerce software with some existing applications and databases.
5.Vendors may need special Web servers and other infrastructures, in addition to the network servers.
6.Some E-commerce software might not fit with some hardware, or may be incompatible with some operating systems or other components.
7.As time passes, these limitations will lessen or be overcome. Appropriate planning can definitely minimize their impact.
Of the many non-technical limitations that slow the spread of E-commerce, the following are the major ones:
1.Cost and justification: The cost of developing E-commerce in-house can be very high, and mistakes due to lack of experience may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system, one must deal with some intangible benefits (such as improved customer service and the value of advertisement), which are difficult to quantify.
2.Security and privacy: These issues are especially important in the B2C area, especially security issues which are perceived to be more serious than they really are when appropriate encryption is used. Privacy measures are constantly improved. Yet the customers perceive these issues as very important, and, the E-commerce industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, very secure.
3.Lack of trust and user resistance: Customers do not trust an unknown faceless seller (sometimes they do not trust even known ones), paperless transactions, and electronic money. So switching from physical to virtual stores may be difficult.
4.Other limiting factors: Lack of touch and feel online. Some customers like to touch items such as clothes and like to know exactly what they are buying.
5.Many legal issues are as yet unresolved, and government regulations and standards are not refined enough for many circumstances.
6.Electronic commerce, as a discipline, is still evolving and changing rapidly. Many people are looking for a stable area before they enter into it.
7.There are not enough support services. For example, copyright clearance centers for E-commerce transactions do not exist, and high-quality evaluators, or qualified E-commerce tax experts, are rare.
8.In most applications, there are not yet enough sellers and buyers for profitable EC operations.
9.Accessibility to the Internet is still expensive and or inconvenient for many potential customers. (With Web TV, cell telephone access, kiosks, and constant media attention, the critical mass will eventually develop.)
Despite these limitations, rapid progress in E-commerce is taking place. For example, the number of people in the United States who buy and sell stocks electronically increased from 3,00,000 at the beginning of 1996 to about 10 million at the end of 1999. As experience accumulates and technology improves, the ratio of E-commerce benefits to costs will increase, resulting in a greater rate of E-commerce adoption. The potential benefits and convincing reasons may not be enough to start E-commerce activities.
· E-commerce has better information technology infrastructure.
· There is a wider acceptance of online payment system.
· There is also a legal recognition to E-commerce practices.
· There is an adoption of security standard by the industry.
· All the companies have moved to low value transactions on the net.
· It is not a new phenomenon. It is a business option that cannot be ignored in 'wired' or 'wireless' world.
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