Growth of the internet and the web
GROWTH OF THE INTERNET AND THE WEB
The technology juggernaut behind e-commerce is the Internet and the World Wide Web. Without both of these technologies, e-commerce as we know it would be impossible.
The Internet is a worldwide network of computer networks built on common standards. Created in the late 1960s to connect a small number of mainframe computers and their users, the Internet has since grown into the world's largest network, connecting about 350 million computers worldwide. The Internet links businesses, educational institutions, government agencies, and individuals together, and provides users with services such as e-mail, document transfer, newsgroups, shopping, research, instant messaging, music, videos, and news.
In 2000, there were over 70 million Internet host computers in over 245 countries, with the number growing at about a rate of 45% a year. The Internet has shown extraordinary growth patterns when compared to other electronic technologies of the past. It took radio 38 years to achieve a 30% share of United States households. It took television 17 years to achieve a 30% share. Since the invention of a graphical user interface for the World Wide Web in 1993, it has taken only seven years for the Internet/Web to achieve a 30% share of United States households.
The World Wide Web is the most popular service that runs on the Internet infrastructure. The Web is the "killer application" that made the Internet commercially interesting and extraordinarily popular. The
Web was developed in the early 1990s and hence is of much more recent vintage than the Internet. We describe the Web in some detail in Chapter 3. The Web provides access to over one billion pages or documents created in a language called HTML (Hyper Text Markup Language). These HTML pages contain information-including text, graphics, animations, and other objects-made available for public use. You can find an exceptionally wide range of information on Web pages, ranging from the entire catalogue of Sears Roebuck, to the entire collection of public records from the Securities and Exchange Commission, to the card catalogue of your local library, millions of music tracks (some of them legal), and video clips. Even entire videos are available. The Internet prior to the Web was primarily used for text communications, file transfers, and remote computing. The Web introduced far more powerful and commercially interesting, colourful multimedia capabilities of direct relevance to commerce. In essence, the Web added colour, voice, and video to the Internet, creating a communications infrastructure and information storage system that rivals television, radio, magazines, and even libraries.
TECHNOLOGY AND E-COMMERCE IN PERSPECTIVE
Although in many respects, e-commerce is new and different, it is also important to keep e-commerce in perspective. First, the Internet and the Web are just two of a long list of technologies that have greatly changed commerce in the United States and around the world. Each of these other technologies spawned business models and strategies designed to leverage the technology into commercial advantage and profit and were also accompanied by explosive early growth, characterized by thousands of entrepreneurial start-up companies, followed by painful retrenchment. and then a long-term successful exploitation of the technology by larger established firms. In the case of automobiles, for instance, in 1915, there were over 250 automobile manufacturers in the United States. By 1940, there were live. In the case of radio, in 1925, there were over two thousand radio stations across the United States, most broadcasting to local neighbourhoods and run by amateurs. By 1990, there were fewer than 500 independent stations. There is every reason to believe e-commerce will follow the same pattern with notable differences discussed throughout the text.
Second, although e-commerce has grown explosively, there is no guarantee it will continue to grow forever at these rates, and much reason to believe e-commerce growth will cap as it confronts its own fundamental limitations. For instance, B2C ecommerce is still a small part (about 1%) of the overall retail market. With current growth rates, in 2005, all of B2C e-commerce will roughly equal the annual revenue of Wal-Mart-the world's largest and most successful retailer
POTENTIAL LIMITATIONS ON THE GROWTH OF B2C E-COMMERCE
There are several limitations on B2C e-commerce that have the potential to cap its growth rate and ultimate size. The table below describes some of the limitations.
Limiting Factor
Home penetration of PCs
Expensive technology
Complex software interface
Sophisticated skill set
Persistent cultural attraction of physical markets and traditional shopping experiences
Persistent global inequality limiting access to telephones and personal computers
Comment
Currently only 48% of households have PCs and the penetration rate is not growing rapidly.
Using the Internet requires a $500 PC (minimal) and a $20/month connect charge.
Using the Web requires installation of a complex operating system and application suite that is far more difficult to operate than a television or telephone.
The skills required to make effective use of the internet and e-commerce capabilities are far more sophisticated than, say, for television or newspapers.
For many, shopping is a cultural and social event where people meet directly with merchants and other consumers. This experience cannot yet be duplicated in digital form.
Most of the world's population does not have telephone service, PCs, or cell phones.
Some of these limitations may be eradicated in the next decade. For instance, it is likely that the price of entry-level PCs will fall to $200 by the year 2005. This, coupled with enhancements in capabilities such as integration with television, access to entertainment film libraries on a pay-per-view basis, and other software enhancements, will likely raise U.S. household penetration rates to the level of cable television penetration (about 80%) by 2005. The PC operating system will also likely evolve from the current Windows platform to far simpler choice panels similar to the interface found on Palm handheld devices.
The most significant technology that can reduce barriers to Internet access is wireless Web technology. Currently about 10 million wireless Web appliances are in use in the United States (about 30 million worldwide with penetration in
Europe and Asia far ahead of the United States). By 2015, these devices are expected to be used by an estimated 115 million persons in the United States and almost 600 million worldwide, accounting for 55.4% of total Internet access in the United States and 71% worldwide.
On the other hand, some of the limitations are likely to continue to persist. For instance, it is very unlikely that the digital shopping experience can ever equal the social and cultural experience that many seek from the traditional shopping environment. Furthermore, most of the world's population will not be able to access the Internet in 2005 because of limited access to the technology and language barriers.
Components of a typical successful e-commerce transaction
E-commerce does not refer merely to a firm putting up a Web site for the purpose of selling goods to buyers over the Internet. For e-commerce to be a competitive alternative to traditional commercial transactions and for a firm to maximize the benefits of e-commerce, a number of technical as well as enabling issues have to be considered.
A typical e-commerce transaction loop Involves the following major players and corresponding requisites:
The Seller should have the following components:
A corporate Web site with e-commerce capabilities (e.g., a secure transaction server);
A corporate intranet so that orders are processed in an efficient manner, and
IT-literate employees to manage the information flows and maintain the e-commerce system.
Transaction partners include:
Banking institutions that offer transaction clearing services (eg, processing credit card payments and electronic fund transfers);
National and international freight companies to enable the movement of physical goods within, around and out of the country. For business-to-consumer transactions, the system must offer a means for cost-efficient transport of small packages (such that purchasing books over the Internet, for example, is not Prohibitively more expensive than buying from a local store); and
Authentication authority that serves as a trusted third party to ensure the integrity and security of transactions
Consumers (in a business-to-consumer transaction) who
Form a critical mass of the population with access to the Internet and disposable income enabling widespread
use of credit cards; and
Possess a mindset for purchasing goods over the Internet rather than by physically inspecting items.
Firms/Businesses (in a business-to-business transaction) that together form a critical mass of companies (especially within supply chains) with Internet access and the capability to place and take orders over the Internet.
Government, to establish:
A legal framework governing e-commerce transactions (including electronic documents, signatures, and the like); and
Legal institutions that would enforce the legal framework (Le., laws and regulations) and protect consumers and businesses from fraud, among others.
And finally, the Internet, the successful use of which depends on the following:
A robust and reliable Internet infrastructure; and
A pricing structure that doesn't penalize consumers for spending time on and buying goods over the Internet (e.g.. a flat monthly charge for both ISP access and local phone calls)
For e-commerce to grow, the above requisites and factors have to be in place. The least developed factor is an impediment to the increased uptake of e-commerce as a whole. For instance, a country with an excellent Internet Infrastructure will not have high e-commerce figures if banks do not offer support and fulfilment services to e-commerce transactions. In countries that have significant e-commerce figures, a positive feedback loop reinforces each of these factors
Relevancy of Internet to e-commerce
The Internet allows people from all over the world to get connected inexpensively and reliably. As a technical infrastructure, it is a global collection of networks, connected to share information using a common set of protocols. Also, as a vast network of people and information, the Internet is an enabler for e-commerce as it allows businesses to showcase and sell their products and services online and gives potential customers, prospects, and business partners access to information about these businesses and their products and services that would lead to purchase.
Before the Internet was utilized for commercial purposes, companies used private networks-such as the EDI or Electronic Data Interchange-to transact business with each other. That was the early form of e-commerce. However, installing and maintaining private networks was very expensive. With the Internet, e-commerce spread rapidly because of the lower costs involved and because the Internet is based on open standards.
The advantages of e-commerce for businesses
E-commerce serves as an "equalizer", It enables start-up and small-and medium-sized enterprises to reach the global market
However, this does not discount the point that without a good e-business strategy, ecommerce may in some cases discriminate against SMEs because it reveals proprietary pricing information. A sound e-business plan does not totally disregard old economy values. The dot-com bust is proof of this.
E-commerce makes "mass customization" possible. E-commerce applications in this area include easy-to-use ordering systems that allow customers to choose and order products according to their personal and unique specifications. For instance, a car manufacturing company with an e-commerce strategy allowing for online orders can have new cars built within a few days (instead of the several weeks it currently takes to build a new vehicle) based on customer's specifications. This can work more effectively if a company's manufacturing process is advanced and integrated into the ordering system.
E-commerce allows "network production." This refers to the parcelling out of the production process to contractors who are geographically dispersed but who are connected to each other via computer networks. The benefits of network production include: reduction in costs, more strategic target marketing, and the facilitation of selling add-on products, services, and new systems when they are needed. With network production, a company can assign tasks within its non-core competencies to factories all over the world that specialize in such tasks (e.g., the assembly of specific components).
Importance of e-commerce to the consumer
In C2B transactions, customers/consumers are given more influence over what and how products are made and how services are delivered, thereby broadening consumer choices. E-commerce allows for a faster and more open process, with customers having greater control.
E-commerce makes information on products and the market as a whole readily available and accessible, and increases price transparency, which enable customers to make more appropriate purchasing decisions.
Transformation in business relationships through e-commerce
E-commerce transforms old economy relationships (vertical/linear relationships) to new economy relationships characterized by end-to-end relationship management solutions (integrated or extended relationships).
Components of an e-business model
An e-business model must have:
A shared digital business infrastructure, including digital production and distribution technologies (broadband/wireless networks, content creation technologies and information management systems), which will allow business participants to create and utilize network economies of scale and scopes
A sophisticated model for operations, including integrated value chains-both supply chains and buy chains;
An e-business management model, consisting of business teams and/or partnerships, and Policy, regulatory and social systems-Le., business policies consistent with e-commerce laws, tele-working/virtual work, distance learning, incentive schemes, among others.
E-COMMERCE APPLICATIONS: ISSUES AND PROSPECTS
Various applications of e-commerce are continually affecting trends and prospects for business over the Internet, including e-banking, e-tailing and online publishing/online retailing.
A more developed and mature e-banking environment plays an important role in ecommerce by encouraging a shift from traditional modes of payment (i.e., cash, checks or any form of paper-based legal tender) to electronic alternatives (such as e-payment systems), thereby closing the e-commerce loop.
Practices for buying and paying online
The payment schemes available for online transactions are the following:
A. Traditional Payment Methods
Cash-on-delivery, Many online transactions only involve submitting purchase orders online. Payment is by cash upon the delivery of the physical goods.
Bank payments. After ordering goods online, payment is made by depositing cash into the bank account of the company from which the goods were ordered. Delivery is likewise done the conventional way.
B. Electronic Payment Methods
Innovations affecting consumers, include credit and debit cards, automated teller machines (ATMs), stored value cards, and e-banking
Innovations enabling online commerce are e-cash, e-checks, smart cards, and encrypted credit cards.
Innovations affecting companies pertain to payment mechanisms that banks provide their clients, including inter-bank transfers through automated clearing houses allowing payment by direct deposit.
Electronic Payment System and its importance
An electronic payment system (EPS) is a system of financial exchange between buyers and sellers in the online environment that is facilitated by a digital financial instrument (such as encrypted credit card numbers, electronic checks, or digital cash) backed by a bank, an intermediary, or by legal tender.
EPS plays an important role in e-commerce because it closes the e-commerce loop. The primary issue is transaction security. The absence or inadequacy of legal infrastructures governing the operation of e-payments is also a concern. Hence, banks with e-banking operations employ service agreements between themselves and their clients.
The relatively undeveloped credit card industry in many developing countries is also a barrier to e-commerce. Only a small segment of the population can buy goods and services over the Internet due to the small credit card market base.
There is also the problem of the requirement of "explicit consent" (Le, a signature) by a card owner before a transaction is considered valid-a requirement that does not exist in the U.S. and in other developed countries.
e-banking
E-banking includes familiar and relatively mature electronically-based products in developing markets, such as telephone banking, credit cards, ATMs, and direct deposit. It also includes electronic bill payments and products mostly in the developing stage, including stored-value cards (eg.. smart cards/smart money) and Internet based
stored value products.
There is a potential for increase of e-banking globally. The most common e-banking services include banking inquiry functions, bill payments, credit card payments, fund transfers, share investing, insurance, travel, electronic shopping. and other basic banking services.
e-talling
E-tailing (or electronic retailing) is the selling of retail goods on the Internet. It is the most common form of business-to-consumer (B2C) transaction.
Issues faced in engaging in e-commerce business
In general, the main issues of concern that acts as barriers to the increased uptake of information technology and
e-commerce are the following
Lack of awareness and understanding of the value of e-commerce.
Lack of ICT knowledge and skills. People play a vital role in the development of e-commerce. However, technology literacy is still very limited in most developing countries. There is a shortage of skilled workers, a key issue in moving forward with using information technology in business.
Furthermore, more often than not, the premium in design has already been captured-for example, in the textile products industry-by the branded fashion houses.
Financial costs. Cost is a crucial issue. The initial investment for the adoption of a new technology is proportionately heavier for small than for large firms. The high cost of computers and Internet access is a barrier to the uptake of e-commerce
Infrastructure. The national network/physical infrastructure of the country (if it is characterized by relatively low tele-density), a major barrier to e-commerce.
Security. Ensuring security of payments and privacy of online transactions is key to the widespread acceptance and adoption of e-commerce. While the appropriate policies are in place to facilitate e-commerce, lack of trust is still a barrier to using the Internet to make online transactions. Moreover, credit card usage in many countries is still relatively low.
Other privacy and security-related issues. While security is commonly used as the catch-all word for many different reasons why individuals and firms do not engage in extensive e-commerce and use of Internet-based technologies, there are other related reasons and unresolved issues, such as tax evasion, privacy and anonymity, fraud adjudication, and legal liability on credit cards. In many countries, cash is preferred not only for security reasons but also because of a desire for anonymity on the part of those engaged in tax evasion or those who simply do not want others to know where they are spending their money. Others worry that there is lack of legal protection against fraud (i.e., there is no provision for adjudicating fraud and there may be no legal limit on liability, say, for a lost or stolen credit card). It is necessary to distinguish these concerns from the general security concerns (i.e., transaction privacy, protection and security) since they may not be addressed by the employment of an effective encryption method (or other security measure).
THE SCOPE OF E-COMMERCE
Electronic Commerce comprises of one or more of the following:
EDI
EDI on the Internet
E-mail on the Internet
Shopping on the World Wide Web
Product sales and services on the Web
Electronic banking or funds transfer
Outsourced customer and employee care operations
Electronic Commerce
Automates the conduct of business among enterprises, their customers, suppliers and employees - anytime, anywhere
Creates interdependencies between your company's value chain and those of your suppliers and customers. Your company can create competitive advantage by optimizing and re-engineering those value chain links to the outside.
Differences between Electronic Commerce and traditional commerce
The major difference is the way information is exchanged and processed
Traditional commerce:
face-to-face, telephone lines, or mail systems
manual processing of traditional business transactions
individual involved in all stages of business transactions
E-Commerce:
using Internet or other network communication technology
automated processing of business transactions
individual involved in all stages of transactions
pulls together all activities of business transactions, marketing and advertising as well as service and customer support
Characteristics of Electronic Commerce
The tools are electronic but the application is commerce.
Commerce is not accounting or decision support or any other internally focuses function.
Commerce is externally focused on those with whom you do business.
Commerce is doing business, not reporting on it or sending messages about it.
Special characteristics of electronic commerce and Web commerce:
information exchanged and processed by a communications network and computers, as well as e-commerce software.
most transactions are processed automatically.
pulls together a gamut of business support services, such as
inter-organizational e-mail, on-line directories
trading support systems for commodities
products, and customized products
custom-built goods and services
ordering and logistic support system supports
management and statistical reporting systems
Capabilities Required for E-Commerce
Enable buyers to:
inquire about products
review product and service information
place orders, authorize payment
receive both goods and services on-line
Enable sellers to:
advertise products.
receive orders
collect payments
deliver goods electronically
provide ongoing customer support
Enable financial organizations
to serve as intermediates that accept payment authorization
make
Enable sellers to notify logistics organization
Benefits of E-Commerce
Business benefits:
Reduced costs to buyers from increased competition on-line
Reduced costs to suppliers by on-line auction
Reduced errors, time, and overhead costs information processing
Reduced inventories, and warehouse
Increased access to real-time inventory information, speed-up ordering & purchasing processing time
Easier enter into new markets in an efficient way
Easily create new markets and get new customers
Automated business processing
Cost-effective document transfer
Reduced time to complete business transactions, speed-up the delivery time
Reduced business overhead and enhance business management
Marketing benefits:
Improved market analysis, product analysis and customer analysis.
Low-cost advertising
Easy to create and maintain customer or client database Customer benefits:
Wide-scale information dissemination
Wide selection of good products and goods at the low price
Rapid inter-personal communications and information accesses
Wider access to assistance and to advice from experts and peers.
Save shopping time and money
Fast services and delivery
Business Issues in E-Commerce
Internet commerce is about business using the network effectively to achieve business goals. This includes the changes in computing, communication, business marketing, business processing and transactions.
Questions should be asked and answered
How does it fit with our strategy? Should our strategy change?
What does this mean to our competitive situation?
Do we expect return in the short term, or is this a long-term investment?
How much will it cost? What do we expect to accomplish?
How will we measure the success?
How does this affect our sales channels, our partners, our suppliers?
Concerning factors
Cost
Technology
Transition Time
Strategy
Technical Issues in E-Commerce
How to apply Internet technology to business problems?
Business model selection.
Technology selection
Protocol selection for transaction processing
Market place set-up
Security solution
Fast technological changes
Communication and network technology
Computer hardware and application software
WWW Technology, HTML, CGI, XML, SVG....
Browser technology and server technology
Multimedia technology
Information search technology
Security technology
Protocols and transaction technology
How does e-commerce work?
The majority of processes running within the e-commerce system are carried out on the World Wide Web. It is on the web where goods and services are presented through variously designed e-commerce websites to match the taste of a particular target audience. From there customers can order the desired items and pay for them in a variety of supported e-payment options such as credit cards, PayPal, etc. Certain e-commerce operations are executed via email as well. These may include sending order placement confirmations or electronic invoice notifications to the buyer's personal mailbox after a particular purchase.
Depending on the nature of the offered products and services, ecommerce operations may involve virtual and physical items. Due to the increasing use of the Internet in our daily lives, the percentage of the virtual itens distributed through ecommerce is rapidly growing. These Include services like buying admission to limited access websites or electronic versions of newspapers and magazines, online gaming, etc.
Nevertheless, the majority of e-commerce transactions are still related to the purchase and transportation of physical items.
As far as the parties involved in the online transaction process are concerned, ecommerce can be thought of as being business-to-consumer, more popular as B2C, and business-to-business, also known as B2B.
The B2C ecommerce, conducted between business entities and consumers, includes all online stores (e-shops) offering retail products and services to end customers such as flower stores, shoe stores, furniture stores, etc. The B2B commerce, on the other hand, takes place between business entities only, such as wholesalers and retailers, on not that widely popular web stores.
Setting up an ecommerce store
If you own a store, which you wish to take online, then you have to consult an e-commerce expert. Setting up a brand new ecommerce store can be quite hard and at the same time, quite easy. If you have experience in creating websites
Involving PHP and MySQL programming, then you will not have a problem to create the store from scratch. However, if you just want your store online with no additional hassle, then there is a way to do that, and it is called-e-commerce scripts.
The Impact of e-Commerce
The rapid expansion of ecommerce has made it possible for almost all big retail companies to set up their own online stores with regularly updated content. Thus, it is now easier than ever to obtain an item from the latest collection of your favourite clothes brand, or be among the finst to take advantage of a starting clearance campaign. Moreover, the ecommerce fashion is gradually 'infecting' smaller retail companies, which find it as a good chance to expand their reach to potential customers and increase the selling volumes. This trend is stimulated by the attractive low-cost ecommerce hosting services offered by different hosts on the web.
FUTURE OF E-COMMERCE INDUSTRY
The ecommerce industry is one of the fastest growing segments globally. With a staggering CAGR of 34.58% from 2009 to 2012, the Industry has expanded from INR 19249 Crore (USD 3.49 bn) to INR 47,349 Crore (USD 8.60 bn) in a matter of 3 years. This expansion can be mainly attributed to the decrease in the price of personal computers, growth in the number of active internet users and the extremely competitive Internet Service Provider (ISP) market.
The Business to Business (B2B) grew from USD 135 Mn to approximately 351 Mn from FY 2010 to 2012 (Ken) Research). In the B2B sphere, medium enterprises have the highest contribution at 48% followed by 32% and 20% of small and micro companies. Lack of awareness among the micro enterprises regarding internet technology has hampered growth. However things look promising as small enterprises has displayed the highest CAGR of 69% in the last 3 years. This is mainly because a majority of these firms are run by young entrepreneurs who have higher propensity to use internet as a platform for generating sales. Players like indiamart.com, Tradeindia.com and Alibaba. com have hogged a majority of the market share. With a 3-firm concentration ratio of 957, the B2B market is high concentrated
In the Business to Consumer (B2C) domain, the primary driver of growth is high internet penetration and increase in the number of active users. The rise of the disposable income of the middle class India has led to an increase in online spending of the goods. According to Internet and Mobile Association of India (IAMAI), as many as 19.2 million people have looked for information online, Out of these, 73% have bought either some goods or services from the internet. The number of people who shops online has doubled in mere two years and is a positive sign for the ecommerce industry.
Segmenting the e-commerce B2C market
The industry can be segmented into mainly travel and non travel sites. Online travel comprises 71% of the Digital Commerce pie. This is because of the booming urban internet savvy population who prefer to book rail and air tickets
online. The other segments mainly E-Tailing, Financial Services, Classifieds, and other online services constitutes much lesser share of the digital space.
E-Tagiling
E-tailing encompasses buying consumer items like apparels, electronic devices, home and kitchen appliances, jewellery, online. The E-talling market grew at a staggering pace of 60% in the last 3 years. This high growth is due to changing customer preferences, faith in online retail, and high convenience yield provided by online shopping. Competition is intense due to low entry barrier of this segment. However, Amazon.com, flipkart.com, snapdeal.com, jabong.com, and myntra.com are some of the major players.
The growth of e commerce will be on two accounts: One is due to the changes in the macro-economic parameters like disposable income, internet penetration, inflow of investments, and the other due to segment specific factors like
Personal Disposable Income will continue to rise
Number of active Internet users is poised to rise
Demand for debit and credit cards will see a rise
E-Commerce in our daily life
The concept of doing business has changed today due to emerging of IT. In today's competitive and technological world, only doing business is not enough. Doing business tactically, strategically and successfully is very important i.e. greater output in lower cost. This is possible only through IT. IT enables doing business in artificial/virtual space, thus saving the space rent, transportation cost thus cutting the cost of visiting the shops directly.
E-Commerce therefore helps to buy and sell goods and services online saving time, money and space. One can buy and sell products and services from anywhere in the world at any time without directly visiting the shop and retail outlets. Only required is the computer and internet
Some of the e-business includes ebay.com, Amazon.com, which is very successful in today's competitive world.
So E-Commerce has benefited everyone in today's competitive world, making our lives easier, economical, and technology friendly thus making it a part of everyone's life in day to day activities.
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