e-Commerce

Dibyesh Giri
MCA-V Sem
SIOM, Pune

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

The exchange or buying and selling of

commodities; esp. the exchange of
merchandise, on a large scale, between
different places or communities; extended trade
or traffic.

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What is E-Commerce
E-commerce is a general term for any type of
business, or commercial transaction that involves
the transfer of information across the Internet. This
covers a range of different types of businesses from
consumer-based retail sites, like Amazon.com,
through auction and music sites like eBay or
MP3.com, to business exchanges trading goods or
services between corporations. [WHYTE]

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What is E-Commerce Contd.
 In summary, e-commerce is the
 use of electronic communication to do business
 Specifically, the transfer of information
(transactions), over the Internet
 Some people use the term e-business to
refer to all the categories of e-commerce
 E.g. IBM defines e-business as:
 The transformation of key business processes
through the use of internet technologies
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Business Processes Well-
suited to Particular Type of
Commerce
 E-commerce
 Sale/purchase of books & CDs, travel services,
investments and insurance services
 Online delivery of software
 Online shipment tracking

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Business Processes Well-
suited to Particular Type of
Commerce

 E-commerce + Traditional
 Sale/purchase of automobiles and residential real
estate (e.g. do research online then buy from a
dealer or real estate agent)
 Online banking
 Roommate matching service

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Advantages of E-commerce
 Increases sales, decreases cost
 Allows small businesses to have global customer base
 Reduced cost through electronic sales enquires, price
quotes and order taking
 Provides purchasing opportunities for buyers
(businesses can identify new suppliers and
partners)
 Increase speed and accuracy for exchanged
information, thus reducing cost

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 Advantages of E-commerce
Contd.
 Business can be transacted 24hrs a day
 The level of detail of purchase information is
selected by user
 Digital products can be delivered instantly
 Tax refunds, public retirement and welfare support
costs less when distributed over the Internet
 Allows products and services to be available in
remote areas, e.g. remote learning

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Disadvantages of E-commerce
 Inabilityto sell some products (e.g. high cost
jewelry and perishable foods, although
supermarkets like www.Tesco.com delivers
to your home)
 The newness and evolution of the current
technology
 Many products require a large number of
people to purchase to be viable
 High capital investment

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Disadvantages of E-commerce
Contd.
 Difficulty in integrating current databases and
transaction processing systems into e-commerce
solutions
 Cultural and legal obstacles
 Transmission of credit card details
 Some consumers resistant to change
 Laws are unclear
 Shipping profile: Products with a low value-to-weight
ratio that can not be efficiently packed and shipped
are unsuitable (use traditional commerce)

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The 1st Wave of E-commerce
 The 1st wave was from the
mid 1990s to 2003
 Dot-com boom (over $100
billion in investment): Rapid
growth from mid-1990s to
2000
 Dot-com bust: in 2000
 Gloom years: 2000 –2003
(over $200 billion in
investment)

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Characteristics of the 1st Wave
 It was primarily a U.S. phenomenon
 Web pages were in English
 Internet technologies were slow and inexpensive
(e.g. dial-up lines)
 Bar codes and scanners used to track parts (B2B
and Business processes)
 Email, tool for unstructured communication
 On-line advertising main revenue source

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The 2nd Wave of E-commerce

 Beginning in 2003 e-
commerce has shown
signs of new life
 Companies like
Amazon.com (books), and
eBay.com (auctions) who
survived the downturn
were beginning to show
profits
 Continuous growth of B2C
sales: 20-30% each year
since 2000
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Characteristics of the 2nd Wave
 International scope where sellers do business
in many countries and languages
 Faster, cheaper connections (x20 faster),
broadband at home (although more
expensive)
 Radio frequency ID devices and smart cards
 Fingerprint readers and retina scanners
(biometric technologies) used for tracking
 Email, integral part of marketing

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Characteristics of the 2nd Wave
 E-commerce integral part of marketing and
customer contact strategy
 Some categories of on-line advertising, e.g.
employment services (job want ads) have replaced
traditional advertising outlets
 Problems
 Language conversions
 Currency conversions

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E-commerce Categories
 Thereare five general e-commerce
categories:
 Business to Consumer (or B2C) e-commerce
 Business to Business (or B2B) e-commerce
(sometimes called e-procurement)
 Business processes that support buying and
selling activities
 Consumer-to-consumer (or C2C) e-commerce
 Business-to-government (or B2G) e-commerce
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B2C e-commerce
 Description
 Businesses sell products or services to individual
customers (consumers)
 Example
 Walmart.com sells merchandise to consumers
through its Web site
 Web site
 www.walmart.com

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B2B E-commerce
 Description
 Businesses sell products or services to other
businesses
 Example
 Grainger.com sells industrial supplies to large and
small businesses through its Web site
 Web site
 www.grainger.com

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Business Processes
 Description
 Businesses and other organisations maintain and use
information to identify and evaluate customers, suppliers
and employees (and to support buying, selling hiring,
planning and other activities). More and more this
information is being shared
 Example
 Dell Computer uses secure internet connections to share
current sales and forecasts with suppliers who use it to
plan their production, therefore they deliver the right
quantities of components at the right time

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C2C e-commerce
 Description
 Participants in an online marketplace can buy and sell
goods with each other
 Example
 Consumers and businesses trade with each other on
eBay.com
 Web site
 www.ebay.com

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B2G e-commerce
 Description
 Business sell goods or services to governments
and government agencies
 Example
 Cal-Buy portal for businesses that want to sell
online to the State of California
 Web site
 www.pd.dgs.ca.gov/calbuy/default.htm

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E-commerce Categories
Example
 You are a computer manufacturing company who
performs the following activities on the Internet:
 Sells computers to individuals (B2C)
 Purchases parts (e.g. hard drives, power supplies etc.)
from a supplier (B2B)
 Hires staff, manage customer accounts, advertise, etc.
(Business processes)
 Sells computers to the Government to be used in schools
(B2G)
 On eBay.com individuals buy and sell this brand of
computers (C2C)

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Relative Sizes of E-commerce
Categories

Business processes B2B

B2C

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Relative Sizes of E-commerce
Categories

Year B2C Sales B2B Sales

($ Billions) ($ Billions)
2005 150 4100

2004 130 2800

2003 100 1600

2000 50 60
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Payment Systems
 Credit cards
 Debit cards
 Charge cards
 Other payment
methods
 Paypal
 Metered payments

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Payment Systems: The Basics
 Payment systems are still evolving
 Electronic payments are far cheaper than
mailing paper checks
 Cost of billing a person by mail ranges from
US$1 to US$1.50
 Billing a person electronically cost about
US$0.50
 Replacing paper bills also saves on trees

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Primary Payment Methods
 There are currently four primary payment methods:
 Cash
 Checks
 Credit cards (most popular method online)
 Accounts for more than 85% worldwide consumer
transactions
 Debit cards
 In the US electronic transfer is also a growing
payment method

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Payment Cards
 The main categories of payment cards are:
 Credit cards (e.g. Visa)
 Spending limit based on credit history
 Interest is charged on outstanding balances not paid
off within a given time
 Accepted worldwide
 User protection facilitated by a 30-day period that a
purchase may be disputed
 Merchant account (that accepts credit card payments)
required by the business

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

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Payment Cards Contd.
 Some vendors provide single-use-cards
which are valid for a single transaction
 A unique card number is issued
 This helps with card details security
 Eg. MINT & OXYGEN

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Payment Cards Contd.
 Advantages of Payment Cards
 In the US card holder’s liability is limited to US$50
when used fraudulently
 Accepted worldwide
 Currency conversion handled by card issuer
 Ease of use, no special hardware required

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Payment Cards Contd.
 Disadvantages of Payment Cards
 Service companies charge merchants per-
transaction and monthly processing fees
 Price of goods for the consumer might be slightly
higher as a result
 A limit is placed on the minimum amount allowed to
spend (e.g. 5 pounds in the UK)

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Payment Acceptances and
Processing
 The merchant authenticates the payment card to
ensure it is valid and not stolen
 The merchant checks with the payment card issuer
to ensure that credit or funds are available and puts
a hold on the credit line or the funds needed to
cover the charge
 Settlement occurs, usually a few days after the
purchase, which means that funds travel between
banks and are placed into the merchant’s account

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Payment Acceptance Process in E-Commerce site using Merchant AC

Critical Issues in E-Commerce
 Security

 Tax effect

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Security Issue
 45%of the first time buyer on the net drops
the entire transaction at last moment, when it
comes to entering CC No.
 Reason for his worry
 If someone picks of his CC No. after he gives it?
 Which is original company? Abc.com or
Abcinfo.com
 Who will bear the loss? (e.g. Tempering of
customer Order data or What if goods r
perishable)
 What if buyer denies ownership of Goods?
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Technique to secure transactions
 Cryptography

 Third Party Authentication

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CRYPTOGRPHY
 Means “Use of Secret Code”
 Used to make data transfer on the net secure
and protect it from unauthorized user.
 Data is encrypted with a piece of code called
“KEY”.
 KEY is essential set of characters. [56 bit]

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Management of Communication Key
ASYMETRIC KEY Encryption method

Sends request for PUBLIC KEY of B

B Sends PUBLIC KEY

A encrypts Message using this public key and

sends encrypted message to B

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THIRD PARTY AUTHENTICATION

 Ensures two way authentication

 Ensures that the person making the payment
has legal right to make that particular
payment & also that the site receiving the
payment has the legal right to receive that
payment
 Two Competing Algorithms use by TPA are
 SSL [ Secured Socket Level]
 SET [Secured Electronic Transaction]
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SSL [Secured Socket Layer]
 Ensure genuineness of Website & Ensure
the User Authentication ID.
 Once the parties are involved, it creates a
secure pipe for further communication.
 Uses both e-commerce transaction as well as
secure pipe of further communication.
 Minimum in cost.

 Best suited for B2C

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SET [Secured Electronic Transaction]
 Secured Transaction is prompted jointly by
IBM & Visa card.
 Used strictly for E-commerce Transaction.

 SET is rigorous and hence secured.

 High Setup cost.[ $50,000]

 Feasible for B2B.

 “SETlite” is new version of SET.

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 Tax Effects
 Two types of good delivery methods after
customer put an order via e-commerce
transaction.
1. Mail/Courier
2. Online Itself (Download)
“If payment & delivery is done online, NO Tax for
buyer.”
e.g. Buying Win Vista online & Download it online.
“Tax is payable, when a transaction involves
identifiable party (Physical Location)”
e.g.. If Buyer wants delivery of DVD in his postal address from US.
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GOOD DAY!!!!!
EVERYONE

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