e-Commerce

Dibyesh Giri MCA-V Sem SIOM, Pune

1

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 Wellsuited 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 Wellsuited 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

8

Disadvantages of E-commerce
 Inability

to 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 ecommerce 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

15

E-commerce Categories
 There
 

are 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) Walmart.com sells merchandise to consumers through its Web site

 Example

 Web

site

www.walmart.com
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B2B E-commerce
 Description

Businesses sell products or services to other businesses Grainger.com sells industrial supplies to large and small businesses through its Web site

 Example

 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 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

Example

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C2C e-commerce

Description

Participants in an online marketplace can buy and sell goods with each other Consumers and businesses trade with each other on eBay.com www.ebay.com

Example

Web site

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B2G e-commerce
 Description

Business sell goods or services to governments and government agencies Cal-Buy portal for businesses that want to sell online to the State of California

 Example

 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 B2C

B2B

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Relative Sizes of E-commerce Categories
Year 2005 2004 2003 2000 B2C Sales ($ Billions) 150 130 100 50 B2B Sales ($ Billions) 4100 2800 1600 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) 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

Charge cards (e.g. American Express)
  

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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 pertransaction 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)”
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e.g.. If Buyer wants delivery of DVD in his postal address from US.

GOOD DAY!!!!! EVERYONE

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