E-Commerce:

Introduction to
E-Commerce

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 Meaning and Examples
Electronic commerce means the buying and
selling of products and services through
computer networks.
E-commerce is used everywhere in everyday life.
It ranges from credit card authorization,
travel reservations, wire fund transfers
across the globe, retailing, electronic
banking etc.
By 2003, total U.S. e-commerce sales to
consumers were estimated to have reached
$108 billion, or 6% of consumer retail
spending. Some of the model success stories
of e-commerce are the e-companies,
bookseller Amazon.com; auction network
eBay; and Priceline.com, etc.
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 Some Definitions of E-commerce:
A few definitions of e-commerce quoted according to a
United Nations report of Electronic Commerce and
Development are:
1. “Electronic commerce is the carrying out of business
activities that lead to an exchange of value across
telecommunication networks.”
2. “Electronic commerce, defined simply, is the
commercial transaction of services in an electronic
format.”
3. “Electronic commerce is about doing business
electronically. It is based on the electronic
processing and transmission of data, including text,
sound and video. It encompasses many diverse
activities including electronic trading of goods and
services, …. traditional activities ...and new
activities ...” (European Commission).
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 E-business helps in achieving the
following goals:
1. Reach new markets.
2. Create new products or services.
3. Build customer loyalty.
4. Enrich human capital.
5. Make the best use of existing and
emerging technologies.
6. Achieve market leadership and
competitive advantage.
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 Main Reasons for the Spread of E-commerce:
1. Digital convergence, i.e., meaning that due to
digital revolution almost all digital devices
can communicate with one another.
2. Today’s e-commerce is available to anyone,
anywhere in the world, anytime 24/7 (24
hours a day, 7 days a week).
3. Helps in changes within organizations.
4. People have a widespread access to IT and
PCs.
5. E-commerce helps in reducing operating costs
and increasing profit margins due to global
operations.
6. Demand for customized products and services
increasing.
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 ADVANTAGES AND LIMITATIONS OF E-COMMERCE
Advantages:
E-commerce has several advantages:

1. Lower Cost: Using the Internet is cost effective.

2. Economy: E-commerce is economical as there is no
rental of physical store space, insurance, or
infrastructure investment.
3. Higher Margins: E-commerce means higher margins.
For example, the cost of processing a conventional
airline ticket is $8 but as per an estimate processing
the same ticket (called e-ticket) over the Web costs
$1.
4. Better Customer Service: E-commerce means better
and quicker customer service.

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5. Quick Comparison Shopping: Automated online
shopping assistants called hopbots scour Net stores
and find deals on everything from apple-sauce to
printer ribbons.
6. Productivity Gains: E-commerce means productivity
gains. For example, the IBM, which incorporated the
Web into every practice, figured the total cost
savings in 1999 alone was close to $1 billion.
7. Teamwork: E-commerce helps people work together.
E-mail is one example of how people collaborate to
exchange information and work on solutions.
8. Knowledge Markets: E-commerce helps create
knowledge markets. Small groups inside big firms
can act as think tanks to look for new trends and
products.

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9. Convenience, and Control: Online stores are
always open, no traffic jams, no crowds, and
customers do not have to carry heavy
shopping bags.
10. Swapping Goods and Services: Offering
goods or services through barter is gaining in
popularity through sites like WebSwap,
BarterTrust.com, and Ubarter. The barter
house keeps a modest commission to
expedite the exchange.
11. Customization: With information about
consumer tastes and preferences, digital
products can be easily customized and
matched to individual needs. These are easy
to reorganize, revise, or edit.
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Limitations of E-commerce:
In spite of numerous advantages and benefits,
there are still problems and drawbacks to
consider before plunging into the Web
business such as:
1. Security: Security continues to be a problem
for online businesses. In a 2000 Economist
article, 95 percent of Americans expressed
reluctance to give out their credit card
numbers via the Internet.
2. System and Data Integrity: Data protection
and the integrity of the system that handles
the data are serious concerns. Danger of
Computer viruses and hackers still there.
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3. System Adjustability: If the company expects 2
million customers and 6 million show up, problems
are there and even loss of customers.
4. E-Commerce is Tough Competition: Small retailers
cannot compete with e-commerce giants on price or
product offering.
5. Consumer Search Is Not Efficient or Cost-Effective:
Buyers often do not trade directly with traders but
new types of intermediaries are essential to e-
commerce. All these intermediaries add to
transaction costs.
6. Fulfillment Problems: Too many unexpected orders
may face fulfillment problems. This shakes customer
confidence in ability of e-commerce to deliver.
7. Customer Relations Problems: With lots of unhappy
customers, there is greater pressure on e-business
to meet or exceed customer expectations on service.
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8. Products People Won’t Buy Online: In some
items the customer wants to sit on (like
furniture), feel the texture of the fabric, etc.
9. Corporate Vulnerability: Web farming: The
idea of extracting business intelligence from
the competition’s Web pages is called Web
farming which is also a danger.
10. Lack of Trained Manpower for Handling E-
Commerce: There is a shortage of e-literate
people in the workplace. Few managers have
e-commerce skills, Internet experience, and
foresight.
11. High Risk of Internet Start-Up: Unlike
established normal companies, Internet
start-ups are still on a shaky wicket.
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