2. E – Commerce
What is commerce?
Commerce is the activity of buying and selling of goods and services, especially on a large
scale. The system includes legal, economic, political, social, cultural and technological systems
that are in operation in any country.
Example: International commerce takes place between countries.
What is E-commerce?
Electronic commerce is a way of doing business over large electronic networks such as the
Internet. Also called e-commerce, electronic commerce greatly facilitates transactions between
companies and consumers (B2C), between one company and another (B2B), and between
individual consumers (C2C).
Example: Business-2-consumer e-commerce would be an online store such as Amazon.com.
Advantages of E-commerce:
1. Overcome Geographical Limitations :
If you have a physical store, you are limited by the geographical area that you can
service. With an ecommerce website, the whole world is your playground.
2. Gain New Customers with Search Engine Visibility:
Physical retail is driven by branding and relationships. In addition to these two drivers,
online retail is also driven by traffic from search engines. It is not unusual for customers
to follow a link in search engine results, and land up on an ecommerce website that they
have never heard of. This additional source of traffic can be the tipping point for some
ecommerce businesses.
3. Provide Comparison Shopping:
Ecommerce facilitates comparison shopping. There are several online services that allow
customers to browse multiple ecommerce merchants and find the best prices.
3. Disadvantages of e-commerce:
1. E-commerce lacks That Personal Touch:
All physical retailers have a personal approach. As a result, shopping at those retail outlets is
reassuring and refreshing. Clicking on "Buy Now," and piling up products in virtual shopping
carts, is just not the same for me.
2. Many Goods Cannot Be Purchased Online:
Most of these would be in the categories of "perishable" or "odd-sized." Think about it, you
cannot order a popsicle (also referred to as an ice pop or ice lolly) or a ice cream or other
product.
3. Security:
When making an online purchase, you have to provide at least your credit card information
and mailing address. In many cases, e-commerce websites are able to harvest other information
about your online behavior and preferences. This could lead to credit card fraud, or worse,
identity theft.
Why to use e-commerce.
1. Low entry cost.
2. Reduce transaction cost.
3. Access to the global market.
4. Secure market share.
History of e-commerce
At first, the term ecommerce meant the process of execution of commercial transactions
electronically with the help of the leading technologies such as Electronic Data Interchange
(EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange
business information and do electronic transactions. The ability to use these technologies
appeared in the late 1970s and allowed business companies and organizations to send
commercial documentation electronically.
Although the Internet began to advance in popularity among the general public in 1994, it took
approximately four years to develop the security protocols (for example, HTTP) and DSL which
allowed rapid access and a persistent connection to the Internet. In 2000 a great number of
business companies in the United States and Western Europe represented their services in the
World Wide Web. At this time the meaning of the word ecommerce was changed. People began
to define the term ecommerce as the process of purchasing of available goods and services over
the Internet using secure connections and electronic payment services. Although the dot-com
collapse in 2000 led to unfortunate results and many of ecommerce companies disappeared, the
"brick and mortar" retailers recognized the advantages of electronic commerce and began to add
4. such capabilities to their web sites (e.g., after the online grocery store Webvan came to ruin, two
supermarket chains, Albertsons and Safeway, began to use ecommerce to enable their customers
to buy groceries online). By the end of 2001, the largest form of ecommerce, Business-to-
Business (B2B) model, had around $700 billion in transactions.
Amazon.com, Inc. is one of the most famous ecommerce companies and is located in Seattle,
Washington (USA). It was founded in 1994 by Jeff Bezos and was one of the first American
ecommerce companies to sell products over the Internet. After the dot-com collapse Amazon lost
its position as a successful business model, however, in 2003 the company made its first annual
profit which was the first step to the further development.
According to the research conducted in 2008, the domain Amazon.com attracted about 615
million customers every year. The most popular feature of the web site is the review system, i.e.
the ability for visitors to submit their reviews and rate any product on a rating scale from one to
five stars. Amazon.com is also well-known for its clear and user-friendly advanced search
facility which enables visitors to search for keywords in the full text of many books in the
database.
Types of e-commerce:
1. B2B (Business to Business):
Companies doing business with each other such as manufacturers selling to distributors and
wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable.
E.g.:-HP deals computers and other associated accessories online but it is does not make up all
those products. So, in govern to deal those products, first step is to purchases them from unlike
businesses i.e. the producers of those products.
2. B2C (Business to Consumer):
Businesses selling to the general public typically through catalogs utilizing shopping
cart software. By dollar volume , B2B takes the prize , however B2C is really what the
average Joe has in mind with regards to ecommerce as a whole.
For example: if you want to sell goods and services to customer so that anybody can
purchase any products directly from supplier’s website.
3. C2B (Consumer to Business):
A consumer posts his project with a set budget online and within hours companies review the
consumer's requirements and bid on the project. The consumer reviews the bids and selects
5. the company that will complete the project. Elance empowers consumers around the world
by providing the meeting ground and platform for such transactions.
4. C2C (Consumer to Consumer):
There are many sites offering free classifieds, auctions, and forums where individuals can
buy and sell thanks to online payment systems like PayPal where people can send and
receive money online with ease. eBay's auction service is a great example of where person-
to-person transactions take place everyday since 1995.
5. B2E (Business to employees ) :
Business-to-employee (B2E) electronic commerce uses an intra business network which
allows companies to provide products and/or services to their employees.
List of pros in ecommerce:
1. It allows you to operate business 24/7.
In this modern world, people would want to receive what they want anytime. Now, having to
wait for hours for a certain store to open is not always convenient or desirable. On the other
hand, when customers cruising the World Wide Web in the wee hours of the morning are
interested in what you are offering on your e-commerce store, they can click the button and
buy your items, even while you are sleeping on the job.
2. It gives you access to a larger market.
This benefit is especially true for those selling niche products, where the audience is limited.
When you are running an e-commerce site, it would be easier for you to reach people who
will like your products, without having to worry that your immediate target market will be
able to keep your business running.
3. It does not require a physical store.
One of the limitations you will encounter when starting a business is location, which is
definitely true if your shop is on the wrong side of the city or in an inconvenient place,
cutting down on potential customers. But with an e-commerce website, you will not have this
kind of problem.
List of Cons of E-Commerce
1. It poses some difficulties in finding a good website.
While setting up a website is easy, setting up a good one is not. As you can see, making
sure that your customers will find your store needs optimizing your site for search
engines. Your e-commerce site will be a huge investment, and if you want your
6. customers to buy your products, you should organize it and make it fast and easy to
navigate. Unlike a brick-and-mortar store, your site is definitely not something that you
can build yourself.
2. It would be difficult to establish trust and awareness.
By owning a brick-and-mortar store, you can interact with your target market personally,
allowing you to build trust and relationships, which is not possible with e-commerce
sites. Nevertheless, you can still build trust using e-commerce stores, though it requires a
lot of effort. If you are not ready to give such, then your business would suffer.
3. It comes with fierce competition.
Unlike physical stores where you will be only competing with local businesses, e-
commerce will place you in a position where you have to compete with the whole world.
It would be more difficult to stand out and establish a reputation when your market has
limitless choices.