Chapter 1

INTRODUCTION TO E-COMMERCE
BINOD BIDARI
Ideas are expensive to make, but cheap to copy.
Ideas are becoming even cheaper to copy and
distribute as digital technology and the Internet
reduce the marginal cost of reproduction and
distribution towards zero. IP
 Outline of course
Unit 1: Unit 5 :
Introduction to E-Commerce Electronic Payment System
Unit 2: Unit 6:
The Network Infrastructure for E- Internet (online) Marketing Basics
Commerce
Unit 7:
Unit 3:
E-environment
Electronic Data Interchange (EDI)
Unit 4:
Network Security
 Content
 E -Commerce Vs Traditional Commerce,
 E-Commerce Terminologies and Fundamentals,
 E-Commerce Framework,
 Elements of E-Commerce Application, Benefits and
Limitation of E-Commerce, m-commerce
 Types of ecommerce: B2B, B2C, C2C.
 Definition of Traditional Commerce
Traditional Commerce or Commerce is a part of business, which encompasses all those
activities that facilitate exchange.
Two kinds of activities are included in commerce, i.e. trade and auxiliaries to trade.
The term trade refers to the buying and selling of goods and services for cash or kind and
auxiliaries to trade, implies all those activities like banking, insurance, transportation,
advertisement, insurance, packaging, and so on, that helps in the successful completion of
exchange between parties.
Commerce encompasses all those activities that simplify the exchange of goods and services,
from manufacturer to the final consumer.
When the goods are produced, it does not reach to the customer directly rather it has to pass
from various activities, which are included under commerce.
Its main function is to satisfy the wants of consumers by making goods available to them, at
the right time and place.
 e-commerce
 e-Commerce or electronic commerce refers to the exchange of goods and services,
funds or information, between businesses and consumers using the electronic
network, i.e. internet or online social network.
 e-Commerce means trading and providing assistance to trading activities, through the
use of the electronic medium, i.e. all the activities like purchasing, selling, ordering and
paying are performed over the internet,
 More formally, we focus on digitally enabled commercial transactions between and
among organizations and individuals.
 Digitally enabled transactions include all transactions mediated by digital technology.
For the most part, this means transactions that occur over the Internet, the Web,
and/or via mobile apps.
 Electronic Commerce (e-commerce) is electronic business. It’s using the power of
computers, the Internet and shared software to send and receive product specifications and
drawings; bids, purchase orders and invoices; and any other type of data that needs to be
communicated to customers, suppliers, employees or the public.
 In other words e-commerce includes purchases of goods, services and other financial
transactions in which the interactive process is mediated by information or digital
technology at both locationally separate, ends of the interchange. Here 'transactions'
include both specification of goods and service required and commitment to buy.
 ‘Electronic business’ is a broader term, referring to how technology can benefit all internal
business processes and interactions with third parties. This includes buy-side and sell-side
e-commerce and the internal value chain.
 E-commerce should be considered as all electronically mediated transactions between an
organization and any third party it deals with. By this definition, non-financial transactions
such as customer requests for further information would also be considered to be part of e-
commerce.
 Kalakota and Whinston (1997) refer to a range of different perspectives for e-commerce:
1. A communications perspective – the delivery of information, products or services or payment by electronic
means.
2. A business process perspective – the application of technology towards the automation of business
transactions and workflows.
3. A service perspective – enabling cost cutting at the same time as increasing the speed and quality of service
delivery.
4. An online perspective – the buying and selling of products and information online

The UK government also used a broad definition when explaining the scope of e-commerce
to industry:
 E-commerce is the exchange of information across electronic networks, at any stage in the supply chain,
whether within an organization, between businesses, between businesses and consumers, or between the
public and private sector, whether paid or unpaid. (Cabinet Office)
 These definitions show that electronic commerce is not solely restricted to the actual buying and
selling of products , but also includes pre-sale and post-sale activities across the supply chain.
Age of Knowledge , The phrases “knowledge is power”
and “content is king” are often used in reference to
business conducted on the Internet.
 Case
To encourage discussion of what is understood by ‘e-commerce’ and ‘e-business’ and their significance to managers.
Activity
Read the extract below and then answer the questions which follow. Although this is now a dated example, it is still useful as a historic
document showing the different aspects of e-business that a business must address. In one of his last AGM speeches
for General Electric (Welch, 2001), Jack Welch made these comments about GE’s adoption of e-business.
Like the Amazons of the world, we started out with what we call ‘e-Sell’, primarily distributing our products on the Internet. Moving our
traditional customers to the Web for much more efficient transactions has been very successful. And in 2000 we sold $8 billion in goods and
services online, a number that’ll grow to $20 billion this year, making this year-old institution one of the biggest, if not the biggest, e-Business
company in the world. On what we call the ‘e-Buy’ side, we followed the same path, adopting many of the dot.com ideas on auctions, having a
global network of Six Sigma suppliers. The concept of reverse auctions was right in the GE sweet spot and we wasted no time in spreading the
new technology across our businesses. We now run global auctions
daily – $6 billion worth last year, $12 billion this year, generating over $600 million in savings for the company in 2001. But the biggest
breakthrough of all was what we call ‘e-Make’ and that didn’t come from the dot.coms. They had little infrastructure and few processes. e-
Make came from learning what the Internet could do for internal processes and seeing the enormous advantage Digitization can give a big old
company that actually makes things, particularly one with Six Sigma methodology already deeply entrenched in its veins. By digitizing our
processes from customer service to travel and living, we’ll take over a billion dollars of cost out of our operations this year alone. Last year I
told you I believed e-Business was neither ‘old economy’ nor ‘new economy’, but simply new technology. I’m more sure of that today. If we
needed confirmation that this technology was made for us, we got it. GE was named last year ‘e-Business of the Year’ by Internet Week
magazine and awarded the same title last week by WORTH magazine. Digitization is, in fact, a game changer for GE. And, with competition
cutting back because of the economy, this is the time for GE to widen the digital gap, to further improve our competitive position. We will do
that by increasing our spending on information technology by 10% to 15% this year despite the weak economy.
Questions
1 Identify the different components of e-business described in this speech and assess their relative impact on the organization.
2 Where do other ‘e’ terms such as e-CRM, e-marketing, e-logistics, e-procurement, e-tail and e-government fit within this description?
Comparison Chart
Basis for Comparison Traditional Commerce e-Commerce
Traditional commerce is a branch of business which focuses
on the exchange of products and services, and includes all e-Commerce means carryng out commercial transactions
Meaning
those activities which encourages exchange, in some way or exchange of information, electronically on the internet.
or the other.

Processing of Transactions Manual Automatic

Accessibility Limited Time 24×7×365

Physical inspection Goods can be inspected physically before purchase. Goods cannot be inspected physically before purchase.

Customer interaction Face-to-face Screen-to-face

Scope of business Limited to particular area. Worldwide reach

Information exchange No uniform platform for exchange of information. Provides a uniform platform for information exchange.

Resource focus Supply side Demand side

Business Relationship Linear End-to-end

Marketing One way marketing One-to-one marketing

Payment Cash, cheque, credit card, etc. Credit card, fund transfer etc.

Delivery of goods Instantly Takes time

Features of E-commerce
 These unique dimensions of e-
commerce technologies suggest many
new possibilities for marketing and
selling—a powerful set of interactive,
personalized, and rich messages are
available for delivery to segmented,
targeted audiences.
 E-commerce technologies make it
possible for merchants to know much
more about consumers and to be able to
use this information more effectively
than was ever true in the past
 Ubiquity
 E-commerce, in contrast, is characterized by its ubiquity : it is available just about
everywhere, at all times. It liberates the market from being restricted to a physical space
and makes it possible to shop from your desktop, at home, at work, or even from your car,
using mobile e-commerce.
 This result is called a market space —a marketplace extended beyond traditional
boundaries and removed from a temporal and geographic location.
 From a consumer point of view, ubiquity reduces transaction costs—the costs of
participating in a market.
 To transact, it is no longer necessary that you spend time and money traveling to a market.
At a broader level, the ubiquity of e-commerce lowers the cognitive energy required to
transact in a market space.
 Cognitive energy refers to the mental effort required to complete a task. Humans generally
seek to reduce cognitive energy outlays.
 Global reach
 E-commerce technology permits commercial transactions to cross cultural, regional, and
national boundaries far more conveniently and cost-effectively than is true in traditional
commerce.
 More realistically, the Internet makes it much easier for start-up online merchants
within a single country to achieve a national audience than was ever possible in the
past. The total number of users or customers an e-commerce business can obtain is a
measure of its reach.
Universal standards
e-commerce technologies is that the technical standards of the Internet, and therefore the
technical standards for conducting e-commerce, are universal standards —they are shared by all
nations around the world. In contrast, most traditional commerce technologies differ from one
nation to the next. For instance, television and radio standards differ around the world, as does
cell phone technology.
The universal technical standards of the Internet and e-commerce greatly lower market entry
costs —the cost merchants must pay just to bring their goods to market. At the same time, for
consumers, universal standards reduce search costs —the effort required to find suitable products
 Richness
 Information richness refers to the complexity and content of a message.
 Prior to the development of the Web, there was a trade-off between richness and reach:
the larger the audience reached, the less rich the message.
 The Internet has the potential for offering considerably more information richness than
traditional media such as printing presses, radio, and television because it is interactive
and can adjust the message to individual users.
 Chatting with an online sales person, for instance, comes very close to the customer
experience in a small retail shop.
 The richness enabled by the Internet allows retail and service merchants to market and sell
“complex” goods and services that heretofore required a face-to-face presentation by a
sales force to a much larger audience.
 Interactivity
 The technology works through interaction with the users.
 E-commerce technologies allow for interactivity , meaning they enable two-way
communication between merchant and consumer and among consumers.
 Traditional television, for instance, cannot ask viewers questions or enter into
conversations with them, or request that customer information be entered into a form.
 In contrast, all of these activities are possible on an e-commerce site and are now
common place with smartphones, social networks, and Twitter.
 Interactivity allows an online merchant to engage a consumer in ways similar to a face-
to-face experience
 Information density
 E-commerce technologies vastly increase information density —the total amount and
quality of information available to all market participants, consumers, and merchants
alike.
 E-commerce technologies reduce information collection, storage, processing, and
communication costs. At the same time, these technologies greatly increase the currency,
accuracy, and timeliness of information—making information more useful and important
than ever.
 As a result, information becomes more plentiful, less expensive, and of higher quality.
 In e-commerce markets, prices and costs become more transparent. Price transparency
refers to the ease with which consumers can find out the variety of prices in a market; cost
transparency refers to the ability of consumers to discover the actual costs merchants pay
for products
 Personalization/customization
 E-commerce technologies permit personalization: merchants can target their marketing messages to
specific individuals by adjusting the message to a person’s name, interests, and past purchases.
 Today this is achieved in a few milliseconds and followed by an advertisement based on the consumer’s
profile.
 The technology also permits customization changing the delivered product or service based on a user’s
preferences or prior behavior.
 Given the interactive nature of e-commerce technology, much information about the consumer can be
gathered in the marketplace at the moment of purchase.
 With the increase in information density, a great deal of information about the consumer’s past
purchases and behavior can be stored and used by online merchants.
 The result is a level of personalization and customization unthinkable with traditional commerce
technologies.
 Personalization and customization allow firms to precisely identify market segments and adjust their
messages accordingly.
 Social technology: user content generation
and social networking
 E-commerce technologies have evolved to be much more social by allowing users to
create and share content with a worldwide community.
 Using these forms of communication, users are able to create new social networks and
strengthen existing ones.
 The Internet and e-commerce technologies have the potential to invert this standard
media model by giving users the power to create and distribute content on a large scale,
and permit users to program their own content consumption.
 The Internet provides a unique, many-to-many model of mass communication.
E-Commerce Terminologies and
Fundamentals
Internet
E-business
E-market
portal
e-catalogue
E-auction
e-shop
e-mails
 E-COMMERCE FRAMEWORK
E-Commerce applications will be built on the existing technology infrastructure - a
myriad of computers, communication networks, and communication software forming
the nascent Information Superhighway.
The technology infrastructure of the Internet is both an enabler and a driver of change.
An infrastructure is defined as “the foundation of a system.”
In this case, the technological foundation of the Internet, simply put, enables the
running of the e-commerce enterprises.
The hardware backbone of computers, routers, servers, fiber optics, cables, modems,
and other network technologies provides half of the technology equation.
The other half includes the soft-ware and communications standards that run on top of
the hardware, including the core protocols for the Web. Understanding technology
infrastructure—and there-fore understanding what is and is not achievable—is essential
to formulating a company’s vision and strategy.
The framework for e-Commerce consists of three parts as shown in below figure.
The first part consists of a variety of electronic commerce applications including both
inter- and intra-organizational and electronic market examples such as Supply Chain
Management, Video-on-Demand, Procurement and purchasing, On-line marketing and
advertising, Home shopping etc.
The second part of the building blocks of the infrastructure consists of:
Common business services, for facilitating the buying and selling process.
Messaging and information distribution, as a means of sending and retrieving
information ( ex-EDI, e-mail, P2P file transfer)
Multi-media content and network publishing, for creating a product and a means to
communicate about it.
Information Superhighway infrastructure consisting of telecommunication, cable
operator, ISPs , Wireless technologies and Internet.
The third part consists of the public policy and technical standards
necessary to support the applications and the infrastructure.
Public policies govern issues like universal access, privacy, and
information pricing. The public policy infrastructure affects not only
the specific business but also direct and indirect competitors. It should
take into consideration of:
◦ Cost of accessing information
◦ Regulation to protect consumers from fraud and protect their right to privacy.
◦ Policies of global information traffic to detect information pirating and obscene sites.
◦ Technical Standards governs issues like technology for communication and as
well as for Internet
ELEMENTS OF E-COMMERCE APPLICATIONS
Internet
Internet is termed by some people as the world of largest democracy
with no government. It has no state head to control it.
Why do people want to get connected to Internet? May be because of
the freedom it provides.
The internet is a rare example of a large democracy with no head of state,
no official censors, no bosses, no board of directors. Nobody controls the
Internet and in principle, any computer can speak to any other computer,
as long as it obeys the technical rules of the TCP/IP protocol.
This freedom of Internet helped it to move out of its original base in
military and research institutions, into elementary and high schools,
colleges, public libraries, commercial sectors even into the shop of a
vegetable vendor.
[ E-banks
[ E-trade
[ E-consulting
[ E-engineer
[ E-learning
[ E-mail
[ E-marketing
[ E-transactions
Virtual Markets

goods,
Needed, measure services,
price offer deadline and
circumstances

buyers seller

mediators
buyers seller
Goods Goods
A B
buyers seller
finished orders orders

Virtual connections to other

markets
Assignment

Business Model of Amazon and Flipkart by Roll

No 3, 7, 12, 15
The $2 billion food startup you've never
heard of- Deliveroo
Launched in 2013, the online food delivery service has emerged as
one of the most successful tech brands overseas. It's currently
available in more than 200 cities across Europe, the Middle East, Asia
and Australia.
"I was the first Deliveroo rider," co-founder Will Shu, 38, told
CNNMoney. "I did that job for a whole year -- every single day."
Deliveroo employs 35,000 delivery people -- many of which work
about 12 non-consecutive hours a week.
THE BENEFITS OF E-COMMERCE
The global nature of the technology, low cost, opportunity to reach
hundreds of millions of people, interactive nature, variety of
possibilities, and resourcefulness and growth of the supporting
infrastructure (especially the web) result in many potential benefits
to organisations, individuals, and society
Benefits to Organization
Benefits to consumer
Benefits to society
 Benefits to Organization
• Electronic commerce expands the market lace to national and international market with
minimal capital outlay, a company can easily and quickly locate more customers, the best
suppliers, and the most suitable business partners worldwide.
• 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 purchasing administrative costs by as much
as 85 percent.
• Ability for creating highly specialized businesses. For example, dog toys which can be
purchased only in pet shops or department and discounts stores in the physical world are
sold now in a specialized www.dogtoys.com (also see www.cattoys.com).
• 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.
• The pull-type processing enables expensive customization of products and services
which provides competitive advantage to its implementers.
 Benefits to Organization
• Electronic commerce reduces the time between the outlay of capital and the receipt of
products and services.
• Electronic commerce initiates business processes reengineering projects By changing
processes, productivity of salespeople, knowledge workers, and administrators can
increase by 100 percent or more.
• Electronic commerce lowers telecommunication cost the internet is much cheaper than
value added networks.
• Other benefits include improved image, improved customer service, new found
business partners, simplified processes, compressed cycle and delivery time, increased
productivity, eliminating paper, expediting access to information, reduced transportation
costs, and increased flexibility.
 Benefits to Consumers
Electronic commerce enables customers to shop or do other transactions 24 hours a day, all
year round, from almost any location.
 Electronic commerce provides customer with more choices; they can select from many
vendors and from many more products.
 Electronic commerce frequently provides customers with less expensive products and
services by allowing them to shop in many places and conduct quick comparisons.
 In some cases, especially with digitized products, E-Commerce allows quick delivery.
Customers can receive relevant and detailed information in seconds, rather than days or
weeks.
 Electronic commerce makes it possible to participate ate in virtual auctions.
 Electronic commerce allow customers to interact with other customers in electronic
communities and exchange ideas as well as compare experiences.
 E-commerce facilitates competition, which results in substantial discounts.
 Benefits to Society
Electronic commerce enables more individuals to work at home and to do less traveling
for shopping, resulting in less traffic on the roads and lower air pollution.
Electronic commerce allows some merchandise to be sold at lowest prices, so less
affluent people can buy more and increase their standard of living.
Electronic commerce enables people in third world countries and rural areas to enjoy
products and services that otherwise are not available to them.
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, e.g., can reach patients in rural areas.
THE LIMITATIONS OF E-COMMERCE
The limitations of E-Commerce can be grouped into two categories which are:
• Technical limitations
• Non-technical limitations
 Technical Limitations of E-COMMERCE
There is a lack of system security, reliability, standards and communication protocols.
There is insufficient telecommunication bandwidth.
The software e development tools are still evolving and changing rapidly.
It is difficult to integrate the Internet and E-Commerce software with some existing
applications and databases.
 Vendors may need special Web servers and other infrastructures in addition to the
network servers.
Some E-Commerce software might not fit with some hardware or may be incompatible with
some operating systems or other components.
As time passes, these limitations will lessen or be overcome; appropriate planning can
minimize their impact
 Non-technical limitations
 Lack of awareness  No emphasis of commercial exploration
 Lack of infrastructure  No Encouragement from business
community
 Lack if confidence
 Preferring Foreign sites
 Credit Cards Frauds
 cyber competition
 Absence of Tax laws
 difficulty of reengineering
 Cyber Laws
 Internet for small business
 Stock Dilemma
 Blocking and censorship
 Lack of true Strength
 Infant stages
 Lack of skills and expertise
 Internet outrage
 Absence of cyber brand imange
 Inadequate Government role
Types of E-commerce
We distinguish different types of e-commerce by the nature of the market
relationship—who is selling to whom. Social, mobile, and local e-
commerce can be looked at as subsets of these types of e-commerce.
 Business to business e-commerce (B2B)
 Business to consumers e-commerce (B2C)
 Consumers to consumers e-commerce (C2C}
 Consumer to business e-commerce (C2B)
 M-commerce
 Business Business

Government

Consumer
Consumer
 Business to business e-commerce (B2B)
 E-business is the process of conducting business on the Internet. Its scope includes not only buying and
selling but also services, fulfilling the needs of customers and collaborating with business partners.
 Business to business e-commerce is smart business.
 A wholesaler may sell products to the retailer. There are advanced e-commerce software which support
multi tier pricing. This helps to set up online stores to offer preferred pricing to some vendors and
shared price to others.
 This includes internet-enabled initiatives of an enterprise to form commercial linkages with another
enterprise, dealer, warehouse or manufacturer.
 In a B2B transaction, the interaction is between businesses. For example, a website that is catching for
the steel industry might have facility for buyers and sellers to list their requirements and post their
products.
 There are two primary business models used within the B2B arena: Net marketplaces, which include e-
distributors, e-procurement companies, exchanges and industry consortia, and private industrial
networks.
 eg : dell.com , shop2gether.com, Go2Paper.com
Advantages of B2B e-commerce
 Direct Interaction with customers
 Focused sale promotion
 Building customer loyalty
Scalability
 Savings in distribution costs
 business-to-consumer (b2c) e-commerce
 The most commonly discussed type of e-commerce is business-to-consumer (B2C) e-
commerce, in which online businesses attempt to reach individual consumers.
 B2C commerce includes purchases of retail goods, travel services, and online content.
 B2C e-commerce involves selling of goods and services to consumers or end users. It
allows them to browse the product catalogue, select products or services and complete
the order online.
 B2C model includes retail sales often called e-retail ( or e-tail )and other online
purchases such as airline tickets, entertainment veneue tickets, hotel rooms and shares
of stock.
 B2C is the most popular form of e-commerce, wherein the individuals are directly
involved in B2C e-commerce, and businesses use the internet for offering their products
or services 24 hours a day through global access.
 eg- amazon.com, flipkart.in, sastodeal.com, darraz.com.np, excite.com etc
Why one should opt for B2C
 Inexpensive costs, big opportunities
Globalization
Reduced operational costs
 Customer convenience
 Knowledge Management
How does B2C works
Customer identifies a need

Searches for the product or services to satisfy the need

Selects a vender and negotiates a price

Receives the product or services (delivery logistics, inspection and acceptance )

Makes a payment or select the COD

Gets service and warranty claims
Consumer-to-consumer (C2C) e-
commerce
Consumer-to-consumer (C2C) e-commerce provides a way for consumers to sell to each other,
with the help of an online market maker.
With C2C model, consumers sell directly to other consumers via online classified ads and
auctions, or by selling personal services or expertise online. Ex : ebay.com or tradeonline.com,
hamrobazar.com.np
Given that in 2013, eBay is likely to generate around $75 billion in gross merchandise volume
around the world, it is probably safe to estimate that the size of the global C2C market in 2013 is
more than $90 billion (eBay, 2013).
In C2C e-commerce, the consumer prepares the product for market, places the product for
auction or sale, and relies on the market maker to provide catalog, search engine, and
transaction-clearing capabilities so that products can be easily displayed, discovered, and paid
for.
Consumer-to-Business E-commerce
 Consumer-to-Business E-commerce (C2B) E-commerce, by empowering the
customer, has been strategically redefining business.
 An example of C2B model of e-commerce is the site Price line.Com, which
allows prospective airline travellers, tourists in need of hotel reservations etc.
to visit its websites and indicate their preferred price for travel between any
two cities.
 If an airline is willing to issue a ticket on the customers offered price, the
consumer can then travel to the mentioned destination at his terms.
 Mobile(M) e-commerce
Mobile(M) e-commerce, or m-commerce, refers to the use of mobile devices to enable
online transactions.
M-commerce involves the use of cellular and wireless networks to connect laptops,
smartphones such as the iPhone, Android, and BlackBerry, and tablet computers such as
the iPad to the Internet.
Once connected, mobile consumers can conduct transactions, including stock trades, in-
store price comparisons, banking, travel reservations, and more.
It is also known as Next -generation e-commerce .
M-commerce enables users to access the internet without needing to find a place to plug
in .
The industries affected by m-commerce include :
Financial Services
Telecommunications
Services / Retails
Information services
Advantages of M-commerce
 Context-specific services
 Time - Critical Situations
Spontaneous Decisions and Needs
 Efficiency increase
Limitation of M-commerce
 Bandwidths
 Screen size
 Less powerful processors
Cost of wireless connection
Applications of M-commerce
 Mobile Banking
 Mobile Entertainment
 Mobile Information services
 Mobile Marketing
 Mobile Shopping
 Mobile ticketing
E-Commerce Vs E-business
E-Commerce Vs E-business
 Assignment -1
1. What is e-commerce ?'
2. Differentiate between e-commerce and traditional commerce
3. Explain the types of e-commerce.
4. Explain the unique feature of e-commerce .
5. List the common term Terminologies and explain in detail
6. Explain the benefits of e-commerce
7. Explain the non technical limitation of e-commerce
8. Differentiate between e-commerce and e-business.
9. Differentiate between b2b and b2c.
10.Explain M-commerce in detail
Submit on Coming Monday