Electronic commerce (E-commerce)

 

In this chapter we will cover the following topics

Electronic Commerce (Commerce)

Introduction to the eCommerce.

Benefit of eCommerce

How does it work?

Future of ecommerce Industry

eCommerce in our day to day life

A Brief Introduction to E-Commerce

While eCommerce is a way of business now, it is actually a relatively recent development. Today, we buy everything from clothing to automobiles on the Internet. The technology and processes that were put in place to facilitate this evolved over a period of several decades. The invention and growing popularity of the Internet made the idea of eCommerce possible, but it took years of advancements and the inventions of many people to make it a reality

The original concept behind eCommerce did not involve everyday people buying and selling things over the Internet. It was originally developed as a way to facilitate business transactions. Electronic Data Interchange, or EDI, was one of the forerunners of eCommerce today and was developed in the early 1970's. Developed to allow business to electronically exchange things like purchase orders and invoices, EDI allowed the practice of just in time' delivery to flourish Successfully practiced by industries like the auto industry in Detroit, EDI streamlined the ordering, shipping and payment process by removing the need for faxed transmissions or telephone calls

Also developed in the early 1970's was electronic Fund Transfers or EFT. These allowed payments to be processed online. This was a necessary step in the evolution of eCommerce, as we know it today: Again, originally intended to be used on a business-to-business playing field, EFT allowed eCommerce to develop into the gigantic economic player it has become.

Actual online shopping didn't come into being until 1979. It was invented in Great Britain by Michael Aldrich. Jane Snowball, a resident of Gateshead, England has the honour of being the first person to make an online purchase.... ever. These early transactions in the 80's relied heavily on the Aldrich model and dial-up capabilities of the current Internet service. Large automotive companies like Peugeot, Ford, Nissan and General Motors used this system extensively, but it was slow and cumbersome.

Over the next few years, several more key inventions made the real boom of eCommerce possible. Data warehousing and mining were important to the process, but even more important was a little invention called the World Wide Web -an Internet browser. Invented in 1990 by Tim Berners-Lee, this system made the Internet accessible to the common man, not just the academician. In 1991, eCommerce became possible over the web, but didn't truly gain popularity

until many of the security issues and modem speeds significantly improved. Other features that followed include Instant package tracking, access to product reviews and integrated customer service

Over the years, everything from make-up and diet pills to adult magazines and high definition televisions have been added to the Internet market and it continues to grow,

Several large carry out restaurants, like Pizza Hut, have added on-line ordering to their process. E-Commerce has grown so much that the sales figures for 2008 were somewhere in the area of $204 billion. Deep discounts, international payment systems, free delivery and more make shopping online one of the most popular and economical systems available.

Purchasers go online, more often than not, to purchase products and services as their first stop in the process; even If they eventually will go to a brick and mortar location to actually buy it or pick it up. It's about control, efficiency and making the best informed decision possible. Ecommerce is now main stream; it is more unusual for a site to not have a shopping cart for consumer durables and non-durables. Business to Business online transactions are the most common way to transact business now. The future for eCommerce is bright as more become comfortable with security and become excited through new innovations that will make choosing products online even easier by becoming less virtual.

Shopping on the internet is certainly a popular past time, an efficient time-saver, and a great way to comparison shop on virtually any kind of item you're interested in. The history of e-commerce as most people think of it has a short but interesting timeline.

Most people don't realize that e-commerce and its underlying technology have been around for about forty years.

Here we are discussing a brief history of e-commerce since starting with its conception and rapid development and finishing with a brief description of e-commerce's advantages and its early pioneers.

THE EARLY YEARS

The term e-commerce was originally conceived to describe the process of conducting business transactions electronically using technology from the Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These technologies, which first appeared in the late 1970's, allowed for the exchange of information and the execution of electronic transactions between businesses, typically in the form of electronic purchase orders and invoices. EDI and EFT were the enabling technologies that laid the groundwork for what we now know as e-commerce. The Boston Computer Exchange, a marketplace for used computer equipment started in 1982, was one of the first known examples of e-commerce. Throughout the 1980's, the proliferation of credit cards, ATM machines and telephone banking was the next step in the evolution of electronic commerce. Starting in the early 90's, e-commerce would also include things such as enterprise resource planning (ERP), data warehousing and data mining.

It wasn't until 1994 that e-commerce (as we know it today) really began to accelerate with the introduction of security protocols and high speed internet connections such as DSL, allowing for much faster connection speeds and faster online transaction capability.

Industry "experts" predicted explosive growth in e-commerce related businesses.

E-COMMERCE BEGINS TO EMERGE

In response to these expert opinions, between 1998 and 2000, a substantial number of businesses in Western Europe and the United States built out their first rudimentary e-commerce websites.

The definition of e-commerce began to change in 2000 though, the year of the dot-com collapse when thousands of internet businesses folded. Despite the epic collapse, many of the worlds' most established traditional brick-and-mortar businesses were emboldened with the promise of e-commerce and the prospect of serving a global customer base electronically. The very next year, business to business transactions online became one of the largest forms of e-commerce with over $700 billion dollars in sales.

Many of the dot-com collapses "first-mover" failures served their offline competitors very well, providing evidence of what not to do in building a viable online business. For example, Webvan, which was one of the more infamous dot-com failures, trail blazed the path for Albertsons and Safeway, two of the largest national supermarket chains, who each have developed their own successful online grocery delivery businesses.

E-COMMERCE PIONEERS

The birth of companies such as eBay and Amazon (launched in 1994) really began to lead the way in e-commerce. Both eBay and Amazon were among the first to establish prominent e-commerce brands. The most prominent e-commerce categories today are computers, books, office supplies, music, and a variety of electronics.

Amazon.com, Inc., founded by Jeff Bezos, was the original e-commerce pioneer and certainly the most recognizable. In the beginning, Amazon's business model required massive investment in warehousing, delivery and fulfilment capability and took years for Amazon to gain profitability. But finally in 2003, almost 10 years after launching the company, Amazon.com realized its first annual profit.

Amazon began as just an online bookstore but over the years has extended its offering to a wide variety of product categories, including electronics, software, music, DVD's, CD's, video games, MP3's, clothing, shoes, health and beauty products and even household goods. Bezos, was responsible for naming the company "Amazon" after the world's largest river and it enjoys a truly global presence with stand alone websites in six other countries, including the United Kingdom, Canada, France, Germany, Japan and China.

Amazon.com was also the original pioneer in affiliate marketing, allowing other websites to earn sales commissions for referring Amazon products to their customers. Today, Amazon generates anywhere between 30 to 40% of its total sales revenue from affiliates or third party merchants who list and sell their products on Amazon's web site. Today, the Amazon moniker certainly applies as it is one of the most recognized and most profitable e-commerce businesses on the planet. In 1999, Jeff Bezos was honoured with Time Magazine's "Person of the Year" award, immortalizing him forever as probably the single most recognizable figure in the entire e-commerce community.

Amazon and fellow e-commerce industry giant Dell remain two of the largest internet retailers in the world, among other offline industry giants such as Staples, Office Depot, and Hewlett Packard. Dell.com is another one of the most recognizable e-commerce brands online. Dell.com's website was launched in 1994 with a single static web page and their online presence quickly grew. In 1997, Dell announced a single-day sales record of a million dollars on its website. In fact, roughly half of Dell's total profits come directly from their website alone. With no offline retail outlets to speak of, Dell is another e-commerce pioneer that many businesses have tried to model themselves after by selling products almost exclusively online.

E-COMMERCE ADVANTAGES

E-commerce businesses have numerous advantages over offline retail locations and catalogue operators. Consumers browsing online stores can easily search to find exactly what they are looking for while shopping and can easily comparison shop with just a few clicks of the mouse. Even the smallest online retail sites can sell products and turn a profit with a very simple online presence. Web tracking technology allows e-commerce sites to closely track customer preferences and deliver highly individualized marketing to their entire customer base.

As the popularity of e-commerce businesses continues to grow, the technology will only continue to improve, maling it even easier to open and operate a virtual online store with or without a brick-and-mortar presence. While e-commerce is still relatively new found territory, it certainly offers plenty of opportunity for entrepreneurs of all types.

In fact, sales data shows that from 1999 until 2008 e-commerce sales have raised steadily and now account for nearly 4% of total sales worldwide.

ABOUT ELECTRONIC COMMERCE

E-Commerce or Electronics Commerce is a methodology of modern business which addresses the need of business organizations, vendors and customers to reduce cost and improve the quality of goods and services while increasing the speed of delivery. E-commerce refers to paperless exchange of business information using following ways.

Electronic Data Exchange (EDI)

Electronic Mail (e-mail)

Electronic Bulletin Boards

Electronic Fund Transfer (EFT)

Other Network-based technologies (EFT)

FEATURES OF ELECTRONIC COMMERCE

E-Commerce provides following features

Non-Cash Payment: E-Commerce enables use of credit cards, debit cards, smart cards, electronic fund transfer via bank's website and other modes of electronics payment.

24x7 Service availability: E-commerce automates business of enterprises and services provided by them to customers are available anytime, anywhere. Here 24x7 refers to 24 hours of each seven days of a week.

Advertising/Marketing: E-commerce increases the reach of advertising of products and services of businesses. It helps in better marketing management of products/services.

Improved Sales: Using E-Commerce, orders for the products can be generated any time, anywhere without any human intervention. By this way, dependencies to buy a product reduce at large and sales increases.

Support: E-Commerce provides various ways to provide pre sales and post sales assistance to provide better services to customers.

Inventory Management: Using E-Commerce, inventory management of products becomes automated. Reports get generated instantly when required. Product inventory management becomes very efficient and easy to maintain.

Communication improvement: E-Commerce provides ways for faster, efficient, reliable communication with customers and partners.

Traditional Commerce vis E-Commerce

E-COMMERCE ADVANTAGES 

E-Commerce (Electronic Commerce) refers to buying and selling goods or services online using computers, mobile devices, and the internet.

It has transformed the way businesses operate by integrating computer systems, digital payments, and online marketplaces.

 Simple Meaning:

“E-Commerce allows businesses to sell products and services to customers online, anytime and anywhere.”

Advantages of E-Commerce

E-Commerce offers multiple advantages to businesses, customers, and even employees.

1. Global Reach

Businesses can sell products worldwide

Customers can access products from any country

Computerized systems track international orders

2. Cost-Effective

Reduces rent, utilities, and staffing costs

Digital transactions save money on paperwork and manual processes

Automated inventory and billing reduces errors

3. 24/7 Availability

Online stores are open all day, every day

Customers can shop anytime using apps or websites

Computerized systems handle orders and payments automatically

4. Easy Inventory Management

Integration with inventory software

Stock levels updated automatically

Alerts for low stock or high demand items

5. Personalized Customer Experience

Analyze customer data using software

Provide personalized recommendations

Send promotional emails and offers automatically

6. Faster Transactions

Payments processed through online gateways

Orders automatically updated in accounting and stock software

Quicker delivery and tracking system

7. Marketing and Analytics

Track sales and traffic through analytics tools

Target customers with digital marketing

Improve ROI using computerized marketing platforms

8. Eco-Friendly

Less paperwork and fewer physical stores

Reduced transportation for offline shopping

Helps in digital sustainability

E-Commerce in Computerized Systems

Modern e-commerce relies heavily on computer systems and software:

Inventory Management – Keeps track of stock automatically

Order Processing – Handles thousands of orders efficiently

Payment Gateways – Secure online transactions

Customer Relationship Management (CRM) – Tracks customer interactions

Analytics and Reporting – Monitor sales, trends, and profits

Example: Shopify, WooCommerce, Amazon Seller Central, and Flipkart Seller Panel all use computerized systems to manage e-commerce operations effectively.

Advantages for Businesses

Expand market without physical stores

Reduce manual errors in accounting and stock

Improve customer satisfaction and loyalty

Get real-time reports for better decisions

Enhance brand visibility online

Advantages for Customers

Buy products anytime, anywhere

Access global products

Compare prices and read reviews

Receive home delivery

Use digital wallets and payment gateways safely

Advantages to Organizations

Using E-Commerce, organization can expand their market to national and international markets with minimum capital Investment. An organization can easily locate more customers, best suppliers and suitable business partners across the globe.

E-Commerce helps organization to reduce the cost to create process, distribute, retrieve and manage the paper based information by digitizing the Information.

E-commerce improves the brand image of the company.

E-commerce helps organization to provide better customer services.

E-Commerce helps to simplify the business processes and make them faster and efficient.

E-Commerce reduces paper work a lot

E-Commerce increased the productivity of the organization. It supports "pull" type supply management. In "pull" type supply management, a business process starts when a request comes from a customer and it uses just-in-time manufacturing way.

Advantages to Customers

24x7 support. Customer can do transactions for the product or enquiry about any product/services provided by a company anytime, anywhere from any location. Here 24x7 refers to 24 hours of each seven days of a

week. E-Commerce application provides user more options and quicker delivery of products.

E-Commerce application provides user more options to compare and select the cheaper and better option.

A customer can put review comments about a product and can see what others are buying or see the review comments of other customers before making a final buy.

E-Commerce provides option of virtual auctions.

Readily available information. A customer can see the relevant detailed information within seconds rather than waiting for days or weeks.

E-Commerce increases competition among the organizations and as result organizations provides substantial discounts to customers.

Advantages to Society

Customers need not to travel to shop a product thus less traffic on road and low air pollution.

E-Commerce helps reducing cost of products so less affluent people can also afford the products.

E-Commerce has enabled access to services and products to rural areas as well which are otherwise not available to them.

E-Commerce helps government to deliver public services like health care, education, social services at reduced cost and in improved way.

E-COMMERCE DISADVANTAGES

Technical Disadvantages 

There can be lack of system security, reliability or standards owing to poor implementation of e-Commerce.

Software development industry is still evolving and keeps changing rapidly.

In many countries, network bandwidth might cause an issue as there is insufficient telecommunication bandwidth available.

Special types of web server or other software might be required by the vendor setting the e-commerce environment apart from network servers.

Sometimes, it becomes difficult to integrate E-Commerce software or website with the existing application or databases.

There could be software/hardware compatibility issue as some E-Commerce software may be incompatible with some operating system or any other component.

Non-Technical Disadvantages

Initial cost: The cost of creating/building E-Commerce application in-house may be very high. There could be delay in launching the E-Commerce application due to mistakes, lack of experience.

User resistance: User may not trust the site being unknown faceless seller. Such mistrust makes it difficult to make user switch from physical stones to online/virtual stores

*Security/Privacy: Difficult to ensure security or privacy on online transactions.

Lack of touch or feel of products during online shopping.

E-Commerce applications are still evolving and changing rapidly.

Internet access is still not cheaper and is inconvenient to use for many potential customers like one living in remote villages.

E-COMMERCE AND E BUSINESS

While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals).

In e-business, on the other hand, ICT is used to enhance one's business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. A more comprehensive definition of e-business is: "The transformation of an organization's processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy."

Three primary processes are enhanced in e-business:

1. Production processes, which include procurement, ordering and replenishment of stocks; processing of payments, electronic links with suppliers, and production control processes, among others;

2 Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers' purchase orders and payments, and customer support, among others; and

3. Internal management processes, which include employee services, training, internal information-sharing. video-conferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of Internal business information are likewise made more efficient.

We think that it is important to make a distinction between e-commerce and e-business because we believe they refer to different phenomena. For purposes of this text, we will use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm. For the most part, in our view, e-business does not include commercial transactions involving an exchange of value across organizational boundaries.

For example, a company's online inventory control mechanisms are a component of e-business, but such internal processes do not directly generate revenue for the firm from outside businesses or consumers, as e-commerce, by definition, does. It is true, however, that a firm's e-business infrastructure can also support e-commerce exchanges. And e-commerce and e-business systems can and do blur together at the business firm boundary, at the point where Internal business systems link up with suppliers, for instance. E-business applications turn into e-commerce precisely when an exchange of value occurs.

Difference between E-Commerce and E-Business

E-commerce primarily involves transactions that cross firm boundaries. E-business primarily concerns the application of digital technologies to business processes within the firm.

Before the development of e-commerce, the process of marketing and selling goods was a mass-marketing and sales-force-driven process. Consumers were viewed as passive targets of advertising "campaigns" and branding blitzes Intended to influence consumers' long-term product perceptions and immediate purchasing behaviour. Selling was conducted in well-insulated "channels. Consumers were considered to be trapped by geographical and social boundaries, unable to search widely for the best price and quality. Information about prices, costs, and fees could be hidden from the consumer, creating profitable "information asymmetries" for the selling firm. Information asymmetry refers to any disparity in relevant market information among parties in a transaction.

E-commerce has challenged much of this traditional business thinking. The table below lists seven unique features of e-commerce technology that both challenge traditional business thinking and explain why we have a high interest in e-commerce.

SEVEN UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY

E-COMMERCE TECHNOLOGY DIMENSION

Ubiquity Internet/Web technology is available everywhere: at work, at home, and elsewhere via mobile devices, anytime.

Global Reach-The technology reaches across national boundaries, around the earth.

Universal Standards-There is one set of technology standards, namely Internet standards.

Richness-Video, audio, and text messages are possible.

Interactivity-The technology works through interaction with the user.

Information Density-The technology reduces information costs and raises quality.

Personalization/Customization-The technology allows personalized messages to be delivered to individuals as well as groups.

BUSINESS SIGNIFICANCE

The marketplace is extended beyond traditional boundaries and is removed from a temporal and geographic location. "Market-space" is created; shopping can take place anywhere.

Customer convenience is enhanced, and shopping costs are reduced.

Commerce is enabled across cultural and national boundaries seamlessly and without modification. "Market-space" includes potentially billions of consumers and millions of businesses worldwide. Commerce is enabled across cultural and national boundaries seamlessly and without modification. "Market-space" includes potentially billions of consumers and millions of businesses worldwide.

There is one set of technical media standards across the globe.

Video, audio, and text marketing messages are integrated into a single marketing message and consuming experience.

Consumers are engaged in a dialog that dynamically adjusts the experience to the individual, and makes the consumer a co-participant in the process of delivering goods to the market.

Information processing, storage, and communication costs drop dramatically, while currency, accuracy, and timeliness improve greatly. Information becomes plentiful, cheap, and accurate.

Personalization of marketing messages and customization of products and services are based on individual charac-teristics.

SEVEN UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY

Each of the dimensions of e-commerce technology and their business significance mentioned in table above is required to be explained, and the comparison to both traditional commerce and other forms of technology-enabled commerce.

Ubiquity

In traditional commerce, a marketplace is a physical place you visit in order to transact

For example, television, and radio are typically focussed to motivating the consumer to go shop to make a purchase E-commerce is ubiquitous, meaning that is it available just everywhere, every time. 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 commerce. The result is called a market-space-a market-place beyond physical boundaries. From a consumer point of view, ubiquity reduces transaction costs-the costs of participating in a market. To transact, it is no longer necessary to spend time and money travelling 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. When given a choice, humans will choose the path requiring the least effort-the most convenient path

Global Reach

E-commerce technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than in traditional commerce. As a result, the potential market size for e-commerce merchants is roughly equal to the size of the world's online population (over 400 million in 2001, and growing rapidly. The total number of users or customers an e-commerce business can obtain is a measure of its reach.

In contrast, most traditional commerce is local or regional-it involves local merchants or national merchants with local outlets. Television and radio stations, and newspapers, for instance, are primarily local and regional institutions with limited but powerful national networks that can attract a national audience. In contrast to e-commerce technology, these older commerce technologies do not easily cross national boundaries to a global audience.

Universal Standards

One strikingly unusual feature of 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 or even cities. For instance, television and radio standards differ around the world, as cell telephone technology. The universal technical standards of 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 And by creating a single, one-world market-space, where prices and product descriptions can be inexpensively displayed for all to see, price discovery becomes simpler, faster, and more accurate, With e-commerce technologies, it is possible for the first time in history to easily find all the suppliers, prices, and delivery terms of a specific product anywhere in the world. Although this is not necessarily realistic today for all or many products, it has a huge potential that will be exploited in the future.

Richness

Information richness refers to the complexity and content of a message. Traditional markets, national sales forces, and small retail stores have great richness. They are able to provide personal, face-to-face service using aural and visual cues when making a sale. The richness of traditional markets makes them a powerful selling or commercial environment. 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

Interactivity

Unlike any of the commercial technologies of the twentieth century, with the possible exception of the telephone, e-commerce technologies are interactive, meaning they allow for two-way communication between merchant and consumer. Television, for instance, cannot ask the viewer any questions, enter into a conversation with a viewer, or request customer information be entered into a form. In contrast, all of these activities are possible on an e-commerce Web site. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience, but on a much more massive, global scale

Information Density

The Internet and the Web 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 increase greatly the currency, accuracy, and timeliness of information-making information more useful and important than ever. As a result, Information becomes more plentiful, cheaper, and of higher quality.

A number of business consequences result from the growth in information density.

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. But there are advantages for merchants as well. Online merchants can discover much more about consumers; this allows merchants to segment the market into groups willing to pay different prices, and permits them to engage in price discrimination-selling the same goods, or nearly the same goods, to different targeted groups at different prices. For instance, an online merchant can discover a consumer's avid interest in expensive exotic vacations, and then pitch expensive exotic vacation plans to that consumer at a premium price-knowing this person is willing to pay extra for an exotic vacation, while pitching the same vacation plan at a lower price to more price-sensitive consumers.

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. The technology also permits customization-changing the delivered product or service based on a user's preferences or prior behaviour. Given the interactive nature of e-commerce technology, a great deal of 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 behaviour can be stored and used by online merchants. The result is a level of personalization and customization unthinkable with existing commerce technologies

For instance, you may be able to shape what you see on television by selecting a channel, but you cannot change the contents of the channel you have chosen. In contrast, the Wall Street Journal Online allows you to select the type of news stories you want to see first, and to be alerted when certain events happen.

WHY E-COMMERCE

To reiterate, the answer is simply that e-commerce technologies and the digital markets that result-promise to bring about some very fundamental, unprecedented shifts in commerce. One of these shifts, for instance, appears to be a very large reduction in information asymmetry among all market participants (consumers and merchants). In the past, merchants and manufacturers were able to prevent consumers from learning about their costs, their price discrimination strategies, and their profits from sales. This becomes more difficult with e-commerce, and the entire marketplace potentially becomes very price competitive.

On the other hand, the unique dimensions of e-commerce technologies also 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 use this information more effectively than was ever true in the past. Potentially, online merchants could use this new information to develop new information asymmetries, 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. To complicate matters further, these same technologies make it possible for merchants to know more about other merchants than was ever true in the past. This presents the possibility that merchants might collude on prices rather than compete and drive overall average prices up. This strategy works especially well when there are just a few suppliers.

TYPES OF E- COMMERCE

There are a variety of different types of e-commerce and many different ways to characterize these types.

For the most part, we distinguish different types of e-commerce by the nature of the market relationship-who is selling to whom. The exceptions are P2P and m-commerce, which are technology-based distinctions.

The major different types of e-commerce are

Business-to-Business (B2B)

Business-to-Consumer (B2C)

Business-to-Government (B2G)

Consumer-to-Consumer (C2C)

Peer-to-Peer (P2P)

Mobile commerce (m-commerce).

B2B e-commerce

B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses. About 80% of e-commerce is of this type, and most experts predict that

B2B ecommerce will continue to grow faster than the B2C segment.

The B2B market has two primary components: e-frastructure and e-markets. E-frastructure is the architecture of B2B, primarily consisting of the following:

Logistics-transportation, warehousing and distribution (e.g., Procter and Gamble);

Application service providers- deployment, hosting and management of packaged software from a central facility (eg.. Oracle and Linkshare);

Outsourcing of functions in the process of e-commerce, such as Web-hosting, security and customer care solutions (e.g., outsourcing providers such as eShare, NetSales, IXL Enterprises and Universal Access);

Auction solutions software for the operation and maintenance of real-time auctions in the Internet (eg., Moai Technologies and OpenSite Technologies);

Content management software for the facilitation of Web site content management and delivery (eg.. Interwoven and ProcureNet); and

Web-based commerce enablers (e.g., Commerce One, a browser-based, XML-enabled purchasing automation software).

E-markets are simply defined as Web sites where buyers and sellers interact with each other and conduct transactions.

The more common B2B examples and best practice models are IBM, Hewlett Packard (HP), Cisco and Dell. Cisco, for instance, receives over 90% of its product orders over the Internet.

Most B2B applications are in the areas of supplier management (especially purchase order processing), inventory management (ie, managing order-ship-bill cycles), distribution management (especially in the transmission of shipping documents), channel management (Le, information dissemination on changes in operational conditions), and payment management (e.g., electronic payment systems or EPS).

eMarketer projects an increase in the share of B2B e-commerce in total global ecommerce from 79.2% in 2000 to 87% in 2004 and a consequent decrease in the share of B2C e-commerce from 20.8% in 2000 to only 13% in 2004.

B2C e-commerce

Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network.

It is the second largest and the earliest form of e-commerce. Its origins can be traced to online retailing (or e-tailing). Thus, the more common B2C business models are the online retailing companies such as Amazon.com, Drugstore. com, Beyond.com, Barnes and Noble and ToysRus. Other B2C examples involving information goods are E-Trade and Travelocity. The more common applications of this type of e-commerce are in the areas of purchasing products and information, and personal finance management, which pertain to the management of personal investments and finances with the use of online banking tools (e.g., Quicken)

eMarketer estimates that worldwide B2C e-commerce revenues will increase from US$59.7 billion in 2000 to US$428.1 billion by 2004. Online retailing transactions make up a significant share of this market. eMarketer also estimates that in the Asia-Pacific region, B2C revenues, while registering a modest figure compared to B2B, nonetheless went up to $8.2 billion by the end of 2001, with that figure doubling at the end of 2002-at total worldwide B2C sales below 10%

B2C e-commerce reduces transactions costs (particularly search costs) by increasing consumer access to information and allowing consumers to find the most competitive price for a product or service. B2C e-commerce also reduces market entry barriers since the cost of putting up and maintaining a Web site is much cheaper than installing a "brick-and-mortar structure for a firm. In the case of information goods, B2C e-commerce is even more attractive because It saves firms from factoring in the additional cost of a physical distribution network. Moreover, for countries with a growing and robust Internet population, delivering information goods becomes increasingly feasible

B2G e-commerce

Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations. This kind of e-commerce has two features: first, the public sector assumes a pilot/leading role in establishing e-commerce, and second, it is assumed that the public sector has the greatest need for making its procurement system more effective.

A web-based purchasing policy increases the transparency of the procurement process (and reduces the risk of irregularities). To date, however, the size of the B2G ecommerce market as a component of total e-commerce is Insignificant, as government e-procurement systems remain undeveloped

C2C e-commerce

Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers. It perhaps has the greatest potential for developing new markets.

This type of e-commerce comes in at least three forms:

Auctions facilitated at a portal, such as eBay, which allows online real-time bidding on items being sold in the Web; peer-to-peer systems, such as the Napster model (a protocol for sharing files between users used by chat forums similar to IRC) and other file exchange and later money exchange models, and Classified ads at portal sites such as Excite Classifieds and eWanted (an interactive, online marketplace where buyers and sellers can negotiate and which features "Buyer Leads & Want Ads").

Consumer-to-business (C2B) transactions involve reverse auctions, which empower the consumer to drive transactions. A concrete example of this when competing airlines gives a traveller best travel and ticket offers in response to the traveller's post that she wants to fly from New York to San Francisco.

There is little information on the relative size of global C2C e-commerce. However, C2C figures of popular C2C sites such as eBay and Napster indicate that this market is quite large. These sites produce millions of dollars in sales every day.

e-commerce 

M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology-i.e.. handheld devices such as cellular telephones and personal digital assistants (PDAs), Japan is seen as a global leader in m-commerce

As content delivery over wireless devices becomes faster, more secure, and scalable, some believe that m-commerce will surpass wire line e-commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users.

Industries affected by m-commerce include:

Financial services, including mobile banking (when customers use their handheld devices to access their accounts and pay their bills), as well as brokerage services (in which stock quotes can be displayed and trading conducted from the same handheld device):

Telecommunications, in which service changes, bill payment and account reviews can all be conducted from the same handheld device;

Service/retail, as consumers are given the ability to place and pay for orders on-the-fly, and

Information services, which include the delivery of entertainment, financial news, sports figures and traffic updates to a single mobile device.

Forrester Research predicts US$3.4 billion sales closed using PDA and cell phones by 2005.

P2P

Peer-to-peer technology enables Internet users to share files and computer resources directly without having to go through a central Web server. In peer-to-peer's purest form, no intermediary is required. For instance, Gnutella is a peer-to-peer freeware software application that permits users to directly exchange musical tracks, typically without any charge. Since 1999, entrepreneurs and venture capitalists have attempted to adapt various aspects of peer-to-peer technology into Peer-to-Peer (P2P) e-commerce.

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