E-commerce

Definition
• E-commerce (electronic commerce or EC)
– is buying and selling of goods and services on
the Internet, especially the World Wide Web
– Those activities which essentially involve
monetary transactions are termed as "e-
commerce"
– is the paperless exchange of business
information using Electronic Data
Interchange (EDI) and related technologies.
 e-commerce
• Electronic Mail (E-Mail), computer
bulletin boards, facsimile machines
(faxes), Electronic Funds Transfer (EFT)
are all forms of EC.
• All EC systems replace all or key parts of
paper-based work flow with faster,
cheaper, more efficient, and more reliable
communications between machines.
 Why e-Commerce
• Ecommerce is growing so fast because of its
quickness – whereas in years gone by people
would send a cheque to the company and then
the company would cash the cheque before
dispatching the goods.
• We can now use instant transactions to transfer
money from account to account in a number of
seconds
• e-commerce can be described as the use of the
Internet and the web to transact business
• Ubiquity
– In traditional commerce, a marketplace is a physical
place we visit in order to transact. For example, television and
radio are typically directed to motivating the customer to go
someplace to make a purchase.
– E-commerce is ubiquitous, meaning that 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.
– The result is called a market space.
– From consumer point of view, ubiquity reduces
transaction costs- the cost of participating in a market.
– To transact, it is no longer necessary that you spend
time and money traveling to a market.
 Features …….

• Global Reach –
– E-commerce technology permits commercial
transactions to cross cultural and national
boundaries far more conveniently and
effectively as compared to traditional
commerce.
• Universal Standards
– the technical standards of the Internet are
shared by all the nations around the world.
• Information Density and Richness
– The Internet vastly increase information density.
– It is the total amount and quality of information available to all
market participants, consumers and merchants.
– E-commerce technologies reduce information collection,
storage, communication and processing costs.
– At the same time, these technologies increase greatly the
accuracy and timeliness of information, making information more
useful and important than ever.
• Personalization
– E-commerce technologies permit personalization.
– E-commerce technologies make it possible for merchants to
know much more about consumers and use this information
more effectively than ever before ie enhance their ability to
brand products, charge premium prices for high quality service
and segment the market into an endless number of subgroups,
each receiving a different price.
 Examples of Ecommerce
• Amazon – an online shopping
• EBay -- an online based auction room
• Tesco – Also does internet shopping
• iTunes – Buy music online
• Microsoft – Downloads, sales and
technical advice online
• McDonalds – Only advertises online
• To sell online is e-commerce but to bring and retain
customers and educate them online about the product or
service is e-business.
• An e-commerce site can be as simple as a catalog page
with a phone no, or it can range all the way to a real time
credit and processing site where customer can purchase
downloadable goods and receive them on the spot.
• e-business applications turn into e-commerce precisely
when an exchange of value occurs.
• Having a website to do it is not sufficient. But, having a
professionally built website loaded with latest
technologies to capture the attention of the visitor and
win his/her appreciation is required.
 E-Commerce technologies
Electronic
Markets
• The three e-Commerce
technologies are:
– Electronic Markets
EDI Internet
Commerce
– Electronic Data Interchange
– Internet Commerce
 Electronic markets
• The use of information and communications technology to present a
range of offerings available in a market segment and hence enable:
– the purchaser to compare the prices (and other attributes);
– make a purchase decision.

• The usual example of an electronic market is an airline booking

system.

• There is the potential for new electronic markets to be created using

Internet technologies.
 Electronic Data Interchange (EDI)
• EDI provides a standardised system for coding trade transactions so that
they can be communicated directly from one computer system to another.

• EDI removes the need for printed orders and invoices and avoids the delays
and errors implicit in paper handling.

• EDI is used by organisations that make a large number of regular

transactions. Examples are the large supermarket chains and the vehicle
assemblers which use EDI for transactions with their suppliers.
 Internet commerce
• Information and communications technologies can also be used to
advertise and make once-off sales of a wide range of goods and
services.

• for example, the purchase of books that are then delivered by post
or the booking of tickets that can be picked up by the clients when
they arrive at the event.
 The trade cycle
• Conducting a commercial transaction involves the following steps:
– Pre-Sale:
• Search - finding a supplier
• Negotiate – agreeing the terms of trade
– Execution:
• Order
• Delivery
– Settlement:
• Invoice
• Payment
– After-sales, e.g. warrantee and service
 Generic trade cycles
• The trade cycle varies depending on:
– The nature of the parties to the transaction
– The frequency of trade exchanges
– The nature of the goods or services being exchanged.

• Three generic trade cycles can be identified:

– Regular, repeat transactions between commercial trading partners
(Repeat)
– Irregular transactions between commercial trading partners (Credit)
– Irregular transactions in once-off trading relationships (commercial or
retail) (Cash)
 Generic trade cycles
Trade Cycle: Repeat Credit Cash

Search
Pre-Sale
Negotiate

Order
Execution
Deliver

Invoice
Settlement
Payment

After Sales After Sale

 Electronic markets
• Emphasis on the search phase of the trade cycle
• Typically an inter-organisational credit trade cycle

Search
Pre-Sale
Negotiate EM

Order
Execution
Deliver

Invoice
Settlement
Payment

After Sales After Sale

• Limited applications – airline seat bookings and financial

sector – the operation of the electronic market is not
necessarily in the vendor’s interests.
Electronic Data Interchange
• Used for standardised, repeat, inter-organisational transactions

Search
Pre-Sale
Negotiate

Order
Execution
Deliver EDI
Invoice
Settlement
Payment

After Sales After Sale

• Notable users of EDI are vehicle assemblers, component supplier’s,

and supermarkets (and other multiple retailers), ordering the goods to
restock their shelves.
 Internet commerce
• Used for once-off transactions – consumer or inter-
organisational transactions.
Search
Pre-Sale
Negotiate

Order
Execution
Deliver Internet

Invoice
Settlement
Payment

After Sales After Sale

• Can apply to Search, Execution / Settlement and / or After

Sales.
• Consumers pay at time of ordering – businesses may have
credit arrangements with the suppliers.
 Parties to E-commerce
Transactions
• The User
– Who plans to purchase goods or services online
• The Merchant
– Company or business house wishing to sell goods or services
• The Issuer
– It is the credit card company that issues cards to the users
• The Acquirer
– Is usually the banker of the merchant – financial institution
• The certificate Authority
– Neutral third party authority that issues certificates to the
merchant, to the issuer and in some cases, the cardholder.
Parties in E commerce Transaction

Certificate
authority

Prerequisite Certificate

Issurer Acquirer Merchant Cardholder

 Levels of E-commerce
• Business to business
– Wholesaler may sell products to the retailer
• Business to consumers
– Selling of goods /services to the end users.
– Reduces the costs associated with intermediaries, service
centers and mass marketing campaigns.
– Also known as E-tailing – process of selling of retail goods on
the Internet.
• Consumers to consumers
– Sites like buy.com, baazi.com are auction sites, one can virtually
sell and buy any goods.
• Business to employees
 E-commerce Procedure
• Filling form online
– Online form to enquire about the products or services
• Selecting Product service
– Selecting items and adding to the Shopping cards
• Web server
– Adding all the items to the web server database
• Encryption
– Cryptography provides security
• Forwarding
– Encrypted date is forwarded to the online processor, which
provides payment services.
• Eg. Net banking, net safe, credit card network etc.
• Leased Lines
 E-commerce Procedure…..
• Email Receipt
– Receipt through email, of the purchase approval and purchase
details.
• Merchant Account
– Account is necessary for accepting credit cards.
• Credit Card Processing
• Verification
– Information sent via leased lines to the credit card network is
checked for validity and funds availability and an authorization
code is written via leased lines to a secure server.
• Merchant Getting Money
• Shipment of Goods
 How to build an E-commerce
system
• Identifying business
• Selection of technology Infrastructure
• Implementation of E- business Solution
• Shopping Cart
• Selection of Language
• Selection of Currencies
• Shipping Costs
• Designing Storefront
• Data Paths
• Database
• Software
• Security
Good Customer Experience
Rules
1. Clear, concise web page wording.
2. Quick web page download time.
3. Appropriate web page width.
4. Simple web page design.
5. Few and small supporting graphics.
6. Large graphics only when good for the customer.
7. Jargon -free language.
8. A good search function.
9. Easy navigation.
 Bad Customer Experience
Rules
1. Error messages.
2. Long instructional text.
3. Fatal errors--like database error messages.
4. Irrelevant or flashy features.
5. Excessive or inaccurate search results.
6. Basic web errors--”page not found.”
 Network
• Facilitates to have external communication
with outside organsization
• File transfer or Distribution of information
quickly, efficiently
• Sharing of Resources
• Sharing information
• Communication Links
• To share hardware and software by
several users
 Topologies

Hub

Ring
Star

Bus Shared cable

Mesh
Tree Network

Interconnected
Rings
• Client/Server (C/s)
– Server : is a computer providing services to the client
connected to it via the network
• Job is to manage resources optimally among the clients
– Client : requests for some services from the server
• Netscape is a web client giving access to information on a
web server.
• Workstations are clients who request services such as data,
program files or printing from the server.
 Components of C/S
• Database server
– Deals with single database of information among many concurrent users
– Controlling database access and other security requirements
– Protecting database
– Centrally enforcing global data
• Mail Server
– Receives, sends and stores the mail received for the clients connected
to it.
• Client Application
– Front end.
– Part of the network system that users apply to interact with the available
data
• Network
– May be twisted cable, Ethernet cables , fiber optics etc.
 WAN (Wide Area Networks)
• A number of autonomous computers
located over a large remote geographical
area, each having their own
interconnections to the main network
• The point of intersection of concentration
is called the gateway
 Types of WAN
• Private network
– A network designed and developed by one
organization is a private network wherein leased
circuits ie telephone lines are used for installing WAN
– ARPANET (Advanced Research Project Agency) first
private network
• Public Networks
– They are government networks designed by the govt.
dept or agencies.
– Run by Telecommunication authorities
 Intranet
• A micro internet is known as intranet.
• Intra means within – refers to private networking
within an organization
• System with restricted audience
• Intranet has access to internet but internet has
no access to the Intranet
• There is a internal web server where substantial
information can be stored.
• Anyone on the intranet with a computer on
network can view information documents located
in the intranet server.
 Extranet
• an extension of corporate intranet connecting
internal networks of one company with the
intranets of its customers, suppliers etc.
• Intranet is designed to facilitate internal
communication, while extranets are created for
communicating business related information to a
particular vendor, distributor or customer.
• Clients in the extranet system can access real
time information about the project status, cost
and development
• Dealers visiting the extranets can order products
or service, check balances, etc.
 Internet
• It is inter-network
• Is a window to the global superhighway and to the
cyberspace.
• Is a two way communication method. – sender and the
receiver are on the same line of the system.
• Objective of the internet is to facilitate the participating
users to have mutual exchange of data – between the
computers
• The management and control of the internet is
completely decentralized and it is entirely managed by
individual and organizational volunteers.
 Features of Internet
• Computers have the capability to communicate with each
other.
• The communication function between computers
facilitates access to information residing in one computer
from another computer
• A group of computers in a net system are connected with
the help of wire, cable or the wireless and communicate
with the help of software
• It is the software which constitutes the network
• Device used is modem connected to a telephone lines
which facilitates that the two networks can communicate
with each other.
 Gateway & WWW
• Computer or the program that forward and route data between two
and more networks.
• Commonly knows as computer that transmits files or email from one
network, which is a window of a country to another window of
another country.
• The VSNL – Videsh sanchar nigam ltd is the sole overseas
communication organization of India
• It is the backbone network that operates at a very high speed and
carries the bulk of the online traffic.
• Small local or regional networks are connected to the WWW which
is a complex web of various networks.
• Uploading refers to the transferring files via ftp from your computer
to a remote host on the Net.
• Downloading is moving a file from the Internet to your computer.
 Importance of Internet
• Streamline business operations
• Reduce cost
• Reach newer markets
• Improve business cycle time
• Improve customer service levels
• Increase efficiency
• Build potential ties with business partners
scattered worldwide
 Internet Agents
• Agents are programs that intensively search the Net to give specific
results to the Net users.
• Mean programs that will enable users to do bidding automatically.
• Can find the following for the net users
– Latest news
– Download it to the computers
– Monitor internet traffic
– Report on its total usage
– Find the best deal on the product one wants to buy
– Perform important web maintenance task
– Perform jobs cooperatively
• Agents are called spiders, robots and knowbots.
• Popular search tools as Lycos, Infoseek and Altavista use spiders
 Advantages of Internet
• For operations
• For pleasure
• For business
 Applications of Internet
• Email
• Usenet, news groups
– between user groups
– Way to share information and discussions
– News groups composed fo articles posted by readers and contributors
on particular topics
– Public forum
• telnet
– Which enables the Net user to log on from computer to another
computer
– Allows the user to log onto a remote system via internet
• FTP (file transfer Protocol)
– Protocol for transferring files on the Net
– Copying files from the remote host to the main host and vice versa
• Archie
– Is a program that allows the user to search for information stored on
anonymous and large FTP sites on the Net.
– Called as search program- file can be searched by giving a keyword to
serach for
• Gopher
– Go for textual information from a huge public
database
– This is menu based information retrieval
system that allows the user to locate and
retrieve information on the Internet.
– There are list of government gopher services
available in/pub/govt
• Chatting (IRC)
 Virtual Private Network
• As the popularity of the Internet grew, businesses turned to it as a means of
extending their own networks.
• First came intranets, which are password-protected sites designed for use
only by company employees.
• many companies are creating their own VPN (virtual private network) to
accommodate the needs of remote employees and distant offices.
• Basically, a VPN is a private network that uses a public network (usually the
Internet) to connect remote sites or users together.
• Instead of using a dedicated, real-world connection such as leased line, a
VPN uses "virtual" connections routed through the Internet from the
company's private network to the remote site or employee.
• Virtual private networks help distant colleagues work together, much like
desktop sharing.
• A typical VPN might have a main LAN at the corporate headquarters of a
company, other LANs at remote offices or facilities and individual users
connecting from out in
 VPN Advantages
• VPN permit to increase the span of the corporate network and boost the
efficiency of the organization
• Permits employees who are on move or travelling employees to access the
network from any place and respond to messages faster and answer
queries quickly
• Offers email facilities, internet access and control database services to
users in remote offices
• VPN uses the Net as the transport backbone to establish secure links with
business partners
• Eliminates the use of expensive lease lines or frame relay circuits.
• Include a number of security features including encryption, authentication
and tunneling.
• Cut long distance telephone charges because a user typically dials a local
call to an ISP.
• Provide flexibility and cost savings as corporations extend their network to
include remote employees and business partners
• Save telecommunications cost by using the Net to carry traffic
 What is Inter-organizational
Commerce?
• Electronic communication between the
firm and its environment.
• Includes all forms of communication
depicted in the EC model; but restricted to
communication between a firm and its
environment.
• one-to-one; one-to-many; and many-to
many communications
 Why Inter-organizational
Commerce?
• Reduce costs
– decrease the cost of processing transactions
• Reach new markets
– reach new customers and suppliers
• Improve service
– speed up delivery of products
• Sell new products
– can compete in different product markets