e retailing

 Commerce is a division of trade or
production which deals with the
exchange of goods and services from
producer to final consumer
 It comprises the trading of something of
economic value such as goods, services,
information, or money between two or
more entities.

 Electronic commerce or e-commerce refers to
a wide range of online business activities for
products and services.
 It may be defined as “any form of business
transaction in which the parties interact
electronically rather than by physical
exchanges or direct physical contact.”

 E-commerce is usually associated with buying
and selling over the Internet, or
 Conducting any transaction involving the
transfer of ownership or rights to use goods
or services through a computer-mediated
network.

E-commerce is the use of electronic
communications and digital information
processing technology in business
transactions to create, transform, and
redefine relationships for value creation
between or among organizations, and
between organizations and individuals

 A consumer uses Web browser to connect to the
home page of a merchant's Web site on the
Internet.
 The consumer browses the catalog of products
featured on the site and selects items to
purchase. The selected items are placed in the
electronic equivalent of a shopping cart.
 When the consumer is ready to complete the
purchase of selected items, she provides a bill-to
and ship-to address for purchase and delivery

 When the merchant's Web server receives this
information, it computes the total cost of the
order--including tax, shipping, and handling
charges--and then displays the total to the
customer.
 The customer can now provide payment
information, such as a credit card number,
and then submit the order.

 When the credit card number is validated and
the order is completed at the Commerce
Server site, the merchant's site displays a
receipt confirming the customer's purchase.
 The Commerce Server site then forwards the
order to a Processing Network for payment
processing and fulfillment.

 1970s: Electronic Funds Transfer (EFT)
◦ Used by the banking industry to exchange
account information over secured networks
 Late 1970s and early 1980s: Electronic Data
Interchange (EDI) for e-commerce within
companies
◦ Used by businesses to transmit data from one
business to another

 1990s: the World Wide Web on the Internet
provides easy-to-use technology for
information publishing and dissemination
◦ Cheaper to do business (economies of scale)
◦ Enable diverse business activities (economies of
scope)

 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.

“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.”

 The Internet economy is a broader concept
which includes e-commerce and e-business.

 The word commerce is the basic concept for
electronic commerce, pertaining to buying
and selling of goods .
 ‘commercial’ denotes business practice and
activities intended to make profits.
 Electronic commerce, like any other business,
deals with the exchange of money for soft or
hard goods and services.

Kalakota and Whintons in 1997 defined the
term E-commerce from different
perspectives-
• Communication
• Business Process
• Service
• Online

According to this perspective, E-commerce is
the delivery of information, product/services
or payments over telecommunication
channels, computer networks or any other
electronic mode of communication.

 Business Process Perspective: This says that
E-commerce is the application of technology
towards the automation of business
transactions and work flow.
 Service Perspective: E-commerce is defined as
a tool that addresses the desire of firms,
consumers and management to cut service
cost while improving the quality of
goods/services and increasing the speed of
service delivery.


 E-commerce provides the capability of buying
and selling products and information on the
internet and other online services.

 Electronic Commerce means better business
communication and data interchange .
 A business will always have the information it
needs faster, easier and more completely
 It helps to maintain greater control, at work,
home or while traveling, communicate with
any business partner or firm, anywhere
instantly

 E-commerce help business by improving
responsiveness to market conditions and
customer preferences.
 Every business must know how important
timing is to marketing and selling products.
Timing is important to cater to the demands
of customers.

 If distributors, dealers and sales force do not
get the right information at the right time,
there will be a financial crisis as well as losing
valuable customers.

 E-commerce network enables a company to
implement marketing programmes with
greater precision such as :
• Pre-empt competitiveness with a change in
marketing tactics before they can react.
• Improve responsiveness by revising price
change and marketing programmes as and
when required.

 Factors like delays and ineffectiveness in
reporting systems cripples effectiveness.
 Responsive, timely information flows from
sound management systems.

 Electronic commerce improves delivery and
distribution both within and outside
organisations.
 The benefits are:
• Stored lists of key recipients facilitate
distribution.
• Electronic delivery time.

 Marketing studies reveal that most sales people
spend nearly 75 per cent of their time on the
roads, relying heavily on telephone calls for
contact with their head officers and customers.
 Telephone tag makes an endless frustrating
game out of tracking down leads and following
up to authenticate sales calls. In addition,
misplaced or undelivered information results in
low sales records.

 Phone tag is a phenomenon in which two parties
attempt to contact each other by telephone, but
neither is able to get a hold of the other for a
conversation.
 Both parties may leave a message on
the answering machine or voicemail of the other,
and request a call back.
 This continues for a period of time, often with
the two parties exchanging attempts to have a
real-time conversation.
 The name derives from the playground
game tag, where players chase one another in
turn.

Benefits of electronic business are:
• Eliminating telephone tag.
• Sending and receiving message at
convenience.
• Linking sales team members together,
including international representatives, and
• Closing sales without delays.

 Electronic commerce can increase the
efficiency and effectiveness of public relation
programs, broadcast press releases, financial
updates and other corporate communications
 Copy reviews and approvals are expedited by
circulating instant messages to key internal
and external contacts.

 Appointment confirmations, requests for
information, follow-up reports and electronic
data interchange can be effected with greater
efficiency using instant messages.

 Executive management meetings, seminars,
workshops, symposia and conventions take a
great deal of time and effort to manage.
 Arrangements must be coordinated among a
variety of diverse groups in different
locations.
 e.g., hotels, speakers, exhibitors, attendees,
the media etc.

 Reports and surveys need to be distributed
before and or after, the event.
 In an electronic business environment,
video-conferences, document conference,
computer-based conference, which offer
companies the flexibility of both electronic
and paper distribution, can make these jobs
easier and more effective.

Dimension of E-commerce
Technology
Significance in Business
Ubiquity (the state or capacity
of being everywhere, especially
at the same time)
Internet/Web technology is
available every where: at work,
at home, and elsewhere via
mobile devices, anytime.
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.

Technology
Global Reach
The technology reaches
across national boundaries,
around the earth.
Commerce is enabled
across cultural and national
boundaries seamlessly and
without modification.
“Marketspace” includes
potentially billions of
consumers and millions of
businesses worldwide.

Dimension of E-
commerce Technology
Universal Standards
There is one set of
technology standards,
namely internet standards.
There is one set of
technical media standards
across the globe.

Dimension of E-
commerce Technology
Richness
Video, audio, and text
messages are possible.
Video, audio, and text
marketing messages are
integrated into a single
marketing message and
consuming experience.

Technology
Interactivity
The technology works
through interaction with
the users.
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.

Technology
Information Density
The technology reduces
information costs and raises
quality.
Information processing,
storage, and communication
costs drop dramatically, while
currency, accuracy, and
timeliness, improve greatly.
Information becomes plentiful,
cheap, and accurate.

Technology
Personalization /
Customization
The technology allows
personalized messages to
be delivered to individuals
as well as groups.
Personalization of
marketing messages and
customization of products
and services are based on
individual characteristics.

 Benefits to Organizations
 Benefits to Consumers
 Benefits to Society

 Electronic commerce expands the market
base to national and international market
with minimal capital outlay.
 A company can easily and quickly locate more
customers, the best suppliers, and the most
suitable business partners worldwide.

 Electronic commerce decreases the cost of
creating, processing, distributing, storing,
and retrieving paper-based information.
 For example, by introducing an electronic
procurement system, companies can cut the
purchasing administrative costs.

 Ability for creating highly specialized
businesses.
 For example, dog toys which can be
purchased only in pet shops or department
and discounts stores in the physical world are
sold now in a specialized www.dogtoys.com
and www.cattoys.com).

• Electronic commerce allows reduced inventories
and overhead by facilitating “pull” type supply
chain management.
In a pull-type system the process starts from
customer orders and uses just-in-time
manufacturing.
The pull-type processing enables expensive
customization of products and services which
provides competitive advantage to its
implementers.

 Electronic commerce reduces the time
between the outlay of capital and the receipt
of products and services.
 Electronic commerce initiates business
processes reengineering projects by changing
processes, productivity of salespeople,
knowledge workers, and administrators can
increase by 100 percent or more.


 Electronic commerce lowers
telecommunication cost -the internet is much
cheaper than value added networks.

•
Other benefits include –
improved image, improved customer service,
new found business partners, simplified
processes, compressed cycle and delivery
time, increased productivity, eliminating
paper, expediting access to information,
reduced transportation costs, and increased
flexibility.

 • Electronic commerce enables customers to
shop or do other transactions 24 hours a day,
all year round, from almost any location.
 • Electronic commerce provides customer
with more choices; they can select from many
vendors and from many more products.

 Electronic commerce frequently provides
customers with less expensive products and
services by allowing them to shop in many
places and conduct quick comparisons.
 In some cases, especially with digitized
products, E-Commerce allows quick delivery.

 Customers can receive relevant and detailed
information in seconds, rather than days or
weeks.
 E-commerce facilitates competition, which
results in substantial discounts

 • Electronic commerce makes it possible to
participate in virtual auctions.
 • Electronic commerce allow customers to
interact with other customers in electronic
communities and exchange ideas as well as
compare experiences.

 Electronic commerce enables more
individuals to work at home and
 to do less traveling for shopping,
 resulting in less traffic on the roads and lower
air pollution.

• Electronic commerce allows some
merchandise to be sold at lowest prices, so
less affluent people can buy more and
increase their standard of living.
• Electronic commerce enables people in third
world countries and rural areas to enjoy
products and services that otherwise are not
available to them.

 Electronic commerce facilitates delivery of
public services, such as health care,
education, and distribution of government
social services at a reduced cost and/or
improved quality.

 Technical limitations and
 Non-technical limitations

 There is a lack of system security, reliability,
standards and communication protocols.
 There is insufficient telecommunication
bandwidth.
 The software e development tools are still
evolving and changing rapidly.
 It is difficult to integrate the Internet and E-
Commerce software with some existing
applications and databases.

 • Vendors may need special Web servers and
other infrastructures in addition to the
network servers.
 • Some E-Commerce software might not fit
with some hardware or may be incompatible
with some operating systems or other
components.

As time passes, these limitations will lessen
or be overcome; appropriate planning can
minimize their impact.

 Lack of Awareness
 Lack of Infrastructure
 Skeptic Attitude
 Credit Cards Frauds
 Lack of Confidence
 Absence of Cyber Laws
 Absence of Tax Laws

 Lack of True Strength
 Lack of Skills and Expertise
 Internet Outage
 Absence of Cyber Brand Image
 Inadequate Government Role

 No Encouragement from Business Community
 Preferring Foreign Sites
 Inactive Indian Software Houses
 No Emphasis on Commercial Exploration

 Cyber Competition
 Difficulty of Reengineering
 Internet for Small Business
 Blocking and Censorship
 Infant Stages

Lack of Awareness
Most of the business people
-Do not understand the significance and
implications of the electronic business
medium
-Are unsure of the quality and delivery
schedule, physical delivery of goods and
mode of payment.
-Are not aware of the technology and its
potential benefits

The single most important challenge today
pertains to increasing awareness of the
benefits of e-commerce to potential
customers, educate the market and the
customers will themselves opt for these
services.

Lack of Infrastructure
 E-commerce infrastructure development is at its
infancy stage in India.
 High cost of infrastructure development for e-
business also includes the cost of leased lines.
 The infrastructure, if made available as required,
will ensure that the investment in e- commerce
starts flowing in because the business is
happening and infrastructure will grow.
 To improve the country's wide infrastructure,
major players must come forward to contribute
their pie of technology.

Lack of Confidence
 The people in India still show hesitancy in
buying through the Net.
 Lack of quality products, timely delivery of
products
 lack of solutions security
 People do not understand this new way of
buying and selling products, i.e. the services
in a digital environment which are available
online.

Skeptic Attitude
Shoppers are still skeptical about safety and
have not been quick to trust sending personal
information such as credit card numbers or
address over the Net.

 Lack of adequate imagination and
understanding of what web-based
technologies can do to markets and
competition.
 The old business habits are demanding and
controlling the business.
 The risk-averse attitude of the people is
conspicuous and
 Waiting for others to lead is another attitude.

Credit Cards Frauds
 All credit cards related transactions are
approved offline and given the high incidence
of frauds, the banks are extremely wary of
approving them.
 Security needs to be extended to customers
to gain their loyalty including substantial
business.

Absence of Tax Laws
 E-commerce over the Net has effectively
eliminated national borders.
 There is no fixed physical location for the
internet.

 It is difficult to monitor or prevent
transmissions of information or electronic
cash across the Net.
 Neither the users, administrators nor
intermediaries have any control on the type of
information, either transactions or cybercash
traveling through their networks.

 There is no emphasis on national boundaries,
and messages travel across the boundaries of
several countries globally.
 So, it means no difference, whether the
information or electronic money sought to be
transmitted are within one jurisdiction or
between several.

 A person's location and identity is necessary
for tax purposes.
 Since these two are difficult, the anonymity
on the Net would pose a big problem for
taxations.

Electronic commerce eliminates intermediaries
or middlemen who could have served as
leverage points for collection of tax and also
as information sources for transactions
entered by the customers.

 In addition to technology problems, certain
legal hurdles may also be encountered with
reference to international taxation laws.
 The difficulties in defining service incomes as
distinguished from sale of products, income
or royalties.
So, it is desirable that the Net be turned as a
potential free trade zone.

Cyber Laws
 Lack of comprehensive cyber laws so as to
ensure safety and protection.
 Security aspects of online transactions
without proper government directives and the
existing policy machinery contribute to cyber
criminality

 Separate cyber laws and amendments are also
required to many existing laws like
Companies Act, Evidence Act, Copyright Act,
Bankers Book Evidence Act, Indian Penal
Code, Contract Act etc.
 Documents through the computers should be
made acceptable in a court of law
 Government to enact cyber laws including
electronic fund transfer, and amendments of
official Secrets Act.

Stock Dilemma
 Advertised products or services are out of
stock
 No options of feedback and suggestions are
also reasons for annoyance.
 Many online consumers want more detailed
information on their purchases but it is not
available.

Lack of True Strength
 The presence on the web alone will not
always ensure successful e-commerce.
 Having a website or dot com is no longer a
novelty and merely setting up a website will
not help companies in increasing the volume
of business.
 They must accept the true strength of this
new electronic medium of business and its
potential for improving efficiency in
extending services to the consumers.

 Lack of Skills and Expertise
 The use of the Net for trade requires a
complex introduction of servers, browser
software and knowledge of web design,
hosting, promotion and many more skills
 Lack of skilled and trained personnel impedes
the growth of implementation of IT related e-
commerce.

 It requires understanding many new things.
Many Indian businesses are therefore not
prepared to approach electronic commerce.
 For many business houses commerce over
internet may not work.

Internet Outage
 Failures in networks and the Net itself .
 Reliability is a major issue in net business
that needs to be attended.
 The IT industry is not yet attempting to
improve network reliability to prevent these
outages.
 There are also reported evidences of
enforcing new censorship regimes to prevent
cyber crimes.

Absence of Cyber Brand Image
 Advertising an the Net tends to focus on e-
commerce rather than on brands found in the
real world.
 This would prove to be a deterrent in
ensuring consumer loyalty.

 Though the already existing name is known
and trusted, the issue is how to extend it into
the new cyber reality.
 A concern should be to preserve the old
values of trust and dependability of the
brand, and at the same time, keep it upon on
the Net.

Inadequate Government Role
Key domestic roles for the government to play
are the-
 Spreading awareness, imparting education, of
the benefits of e-commerce,
 Enacting new cyber laws, amendments to
existing commercial laws,
 Developing strong, communication
infrastructure

No Emphasis on Commercial Exploration
 E-commerce is not so popular and widespread in
India rapidly because of several bottlenecks like
content migration.
 Most of the PC users surf the Net for information
rather than potential commercial transactions.
 This means that the market for this migrated
content is very large.
 Many owners use the Net for learning, education,
games and entertainment.
 To convince e-consumers, e-merchants will have
to do a lot of education.

No Encouragement from Business Community
It is the business community that sustains e-
commerce and greatly influences the thinking
and adoption process of various segments of
the society to move forward in the field of
information technology.
It motivates the people who share the courage
and conviction to move the new business
paradigm.

Preferring Foreign Sites
 Online shoppers in India do not prefer Indian
websites to a large extent and prefer US and
other foreign websites.
 There are many reasons for this as they
provide better selection, prices, stock, quality
products, shipping, payment process
security, customer service and wide variety of
sites among other things.

 Software houses particularly in India are not
devoted to ensuring strong expertise in the
supply chain and distribution management
solutions
 The hardware and software makers are yet to
work out strategies to ensure e-business
privacy and security solutions to Net users in
India.

 Cyber Competition
 cyber competition is perhaps more fierce due
to low entry barriers.
 Cyber competition needs improvement in
better contents, faster delivery of services
and online support

 Difficulty of Reengineering
 It is not just about having a website or about
sticking a web address on conventional
advertising or transferring a few people to a
new division and designation.
 It is about breaking free and creating new
web services to satisfy the existing
customers.

 Internet for Small Business
 E-commerce is still being dominated by large
corporations. Small and medium sized
business houses have to take advantage of
everything on the Net. Online shopping is
clearly catching on with consumers and
retailers need to keep pace with growing
demands.


 Blocking and Censorship
 People worldwide are under virtual slavery.
 It has been reported in some media that many
countries are blocking their citizens from accessing
the Net, either partially or wholly.
 Censorship is enforced by some countries by
stopping either a total ban on the Net or controlling
the access traffic or installing filters blocking access
to websites.
 Indian citizens enjoy unprecedented degree of
freedom of speech and therefore may constitute a
threat to the government.
 Development in any field may prove detrimental if it
does not appreciate the code of ethics.

 Infant Stages
 Electronic commerce is still in its infant stage. Indian commerce
is establishing itself in the area of internet business
 The IT function has not grown beyond the marketing department
and credit cards, merchant accounts, digital signatures and
prompt payment
 The e-commerce role is more about harnessing technological
resources to deliver profits to the Net users.
 Only a few Indian big houses have gone online to explore the
potentials of e-commerce.
 E-commerce has yet to take off in India, because Indian
consumers are wary of leaving their credit card numbers on the
Net.
 They eye the neighborhood shopkeeper with suspicion and drive
a hard bargain.
 So, e-commerce websites are losing thousands of customers.

Consumer
oriented
E- commerce

Physical outlets
 1.Malls/Stand-alone stores
 2.Generalized stores/Specialized stores
 4.Company owned/Franchise stores

 Non Store Retailing
 1. Direct mailing
 2. Telemarketing
 3.Door-to-door sales
 4.Vending machines
 5. E-Retail

 Generalized e-stores where a store sells
several product lines under a single
management.
Example J C penny and Wal-mart
 Specialized e-stores
The internet has allowed a new kind of
specialization to emerge-
 specialization in product line
 specialization in particular classes of
customers and sellers

Example
 lastminute.com, which allows last minute
purchases of travel tickets, gift, and
entertainment to be matched against last
minute sellers of the same items.
 Here, we see specialization not in a product
line but in a class of purchasers and a class of
sellers.

 E-malls essentially provide a web-hosting
service for individual store much in the way
that mall provide a hosting service in the
sense of a physical location for a brick and
mortar store.
 Examples of these e-malls are Yahoo! Store,
GEOShops, and CNET Stores

 The e-broker does not sell directly to a
customer but brings the customer in touch
with a particular supplier, so that a given set
of criteria specified by the customer is
satisfied.

 For example, the customer may want to buy
goods at the cheapest price and so the e-
broker would then do a search to find the
supplier that would provide the cheapest
goods.
 Or,
 a customer may want to find a particular
kind of goods and the e-broker sets about
determining which supplier would provide
those goods.

Convenience-
 Saving of time – Shopping any Where, anytime
 Saving of effort- physical travel
 Saving of effort- access to Search engines
Better information
 Customer reviews of different products as
well as reviews by the business itself.

Competitive pricing.
 Lowered costs to the retailer because he does
not have to maintain a physical showroom, he
does not have to hire several shop assistants,
and these savings can be passed on to
customers in the form of reduced prices.
 2.Secondly, competitive pricing pressure that
arises from the fact that the customer is now
able to look at prices at several sites.

 Customization
The customer can actually specify the features
of the products that he would like and thus in
some cases it is possible that the retailer may
allow a customized product to be delivered.
Example of this is on the Dell site. The
computer site allows shoppers to custom
specify their own computer software and
hardware configurations

 Global reach
 Better customer service
 Lowered capital cost
 Mass customization
 Targeted marketing
 More value-added services –
better information, add-on services to basic
services, or add-on options to products that
he is selling.

 1.Size
 2. Number of outlets.
 3. Visibility
 4. Location
 5. Store atmosphere
 6.Store layout
 7. Price
 8. Variety of goods
 9. Profit margins
 10. Turnover

Size
 no matter how large the company is your e-
store presentation is still-limited to the size
of the computer screen, which may be, 15
inches.
Number of outlets
 You need only one web set up
 The number of outlets are replaced by the
number of links from other important sites to
your web site.

Visibility,
 People find information on the Internet:
through the use of search engines.
 Therefore, it is very important to register the
web or e-store with the most common or the
most widely used search engines, such LS-
Lycos, Alta Vista, and Yahoo.
 link your web site with other well-known
websites that have similar interests, or major
portals such as Yahoo, which link back to
your e-store.

Location
Geographic boundaries do not exist. A local
e-store and a foreign e-store are both just
“one click” away.

Store atmosphere
The “look and feel” of web site should match
with the company’s image as well as the
market position it seeks to address.
 if you are selling very up-market clothes such
as Gucci and Armani, your web site for these
stores should have a sophisticated look and
feel about it.
 On the other hand, if you are selling other
kinds of goods, you could choose to have a
slightly jazzier image on your web site

 Store layouts
 The front page plays a similar role for the e-
store that the window display plays for the
traditional store.
 Layout of the store should facilitates the
customer’s interests.
 Layout should be made dynamic and be
determined by the customer’s interests.
 The customer’s interests could be obtained
from data mining his previous purchases at
the e-store.

 Price
 Customer can easily carry out comparison
pricing between your e-store and other e-
stores not just in immediate neighborhood
but all around the world.
 Some e-brokers provide agents or services
that carry out comparison pricing;
 e-retailer should set up a competitive pricing
structure

 Variety of goods
 Consider very carefully whether you are
setting up a specialized e-store or an e-
department store.
 If you are setting up a specialized e-store,
then you need to gain access to the specific
target group of customers you are interested
in .

 Profit margin and turnover
 Generally profit margins per item tend to be
lower with e-retailing due to competitive
pricing, and so turnover must be higher.

 1. Specialized e-store
 2. Generalized e-store
 3. E-mall
 4. Direct selling by the manufacturer
 5. Supplementary distribution channel
 6. E-broker
 7. E-services

Kinds of specialization
 Traditional specialization along product lines
and
 Specialization by function

 One particular product line, say books,
flowers, CDs, clothes,

 May also choose to position itself in a
particular part of the product line, e.g. Men’s
clothing;
 it could choose to position itself at the very
expensive end of the market selling brand
names _ Gucci and Armani.
 Alternatively it could do more mass
marketing by selling non - brand names at a
much lower price, or it could go in to
discount selling

 lastminute.com sell gifts, travel tickets, and
other items for last minute shoppers who
want to purchase these items at a very short
notice.
 when one purchases an item at a very short
notice (e.g. travel), he often pays a premium,
which is an extra amount for the convenience
of booking the travel at the last minute.

On the other hand, sellers, like airline
companies, have empty seats at the last
minute which they are unable to fill.
So,lastminute.com bring together travelers
who want to book at the last minute and an
airline which has got spare capacity at the
last minute, and allow the former to buy from
the latter at the last minute.
In this situation, the purchaser may get his
airline ticket at a reduced price.

 This is a win-win situation for both the
purchaser and the seller.
 This is a unique kind of specialization. It is
very difficult to do unless one utilizes the
internet to carry out this kind of
specialization.

 Generalized e-stores sell a large number of
product lines rather than confining
themselves to just one or a very few product
lines.

 In an e-mall ,cyber space is rented out to cyber
e-stores that wish to sell their goods.
 Several product lines can be present. in a single
e-mall.
 However, unlike the generalized e-store which is
under a single unified management, in an e-mall,
each store is under its own management
 E-mall management is responsible only for
creating the cyber sites that can be rented and
can support services and marketing of the mall

 E-Mall provides a web hosting service.
 Several e-malls also provide software tools,
which can be utilized by a prospective e-
store to create and maintain its e-store.
 The advantage for an e-store is that it is
grouped together with other stores in a well-
known e-mall site and, therefore, is likely to
pick up visitors to the mall.

 Manufacturers with well-known brand name
products have chosen to use the internet to
carry out direct selling via the internet.
 Ford utilizes the internet to achieve direct
selling but uses its dealer network to
facilitate distribution and delivery.
 Other examples are Cisco systems and Dell
computers

 This approach permits mass customization-
product is not made until order is received
(Book: Build to Order) to meet customer
preferences.
 This direct selling by the manufacturer has an
important disintermediation effect leading to
reduced costs to the end customer and increased
profitability to the manufacturer
 This approach can be used by manufacturers of
well-known brands of products
 Manufacturer must have a thorough
understanding of customer preferences.

 A broker is an intermediary who may take an
order from a customer and pass it on to a
supplier.
 May put a customer with specific
requirements in touch with a supplier who
can meet those requirements
 May provide a service to a customer, such as
a comparison between goods, with respect to
particular criteria such as price, quality, etc.

There are different models for electronic brokers-
 1. Brokers that provide a registration service with
directory search facilities, e-payment facilities,
and security-related facilities.
 Any business can register with such an e-broker
(e.g.anewshop.com).
 2. Brokers that meet a certain requirement such
as a fixed price (e.g.Priceline.com).
 3.Brokers that provide comparison shopping
between products (e.g. mySimon.com or
bestbooksbuy.com).

 1. The provision of an on-line catalog, which
allows one to browse through different
categories of goods. Thus, it is dynamic and
linked with order process.
 2. The provision of a search engine, which is
a very important feature that does not exist in
traditional retailing.
 3. The provision of a shopping cart, which
allows convenient goods selection. An ability
to provide an automatic price update.

 4. Personalization of store layouts,
promotions, deals, and marketing.
 5. The ability to distribute digital goods
directly.
 6. An on-line customer salesperson, “who”
can help customers to navigate through the
site.

 7. An order status checking facility, which is a
useful feature before submission.
 8. The use of Forums (collaborative
purchasing circles) to create a customer
community and thus increase “stickiness.”

 Web-Enabled Services
 Matchmaking Services
 Information-Selling on the Web
 E-Entertainment
 Auctions and Other Specialized Services

 Previously provided by humans in branches
and/or office agencies, e-services:
 They include:
◦ Banking
◦ Stock Trading
◦ Education
Advantages
◦ save time and effort for the user
◦ bring convenience and improve the quality of
service.
◦ reduce cost for the consumer

 An individual or business specifies his/her
requirements in relation to the service.
 E-commerce site then does a search over its
own databases or over the Internet (using
mobile agents)
 The information is then returned to the e-
service provider site
 They include:
◦ Jobs and Employment sites
◦ e-Travel
◦ e-Insurance
◦ e-Loans

 Sell information content of one sort or
another.
 Provide some information free.
 Make money on the transactions
 This group includes e-commerce sites that:
◦ Do Online Publishing such as web based
newspapers
◦ Consultancy advice
◦ Specialized financial or other information


 To achieve the best possible price for items
which sellers wish to sell
 Seller puts up the items for sale but does not
give a fixed price for it.
 The item is then subject to a series of bids until
a bid is acceptable and the item is sold.
 The whole process is conducted by somebody
called an auctioneer.

Forward auction
 Increasing bid auctions on the Internet
 The seller puts up an item for sale and
specifies an acceptable minimum price
 The item is then posted on the auction site
together with the minimum price
 The bidding is kept open for a specified period
 During this period, potential buyers bid for the
item
 The latest high bid is displayed.

Reverse auction:
 the seller puts up an item for sale at a high
price
 price of this item is progressively reduced
until a potential buyer accepts the bid
 items are then deemed to have been sold to
the buyer.

◦ Use of a liquidation broker to sell excess items.
 the liquidation broker is essentially a third party
auction site that does the auctioning for you
◦ Use of your own web site to auction items.
◦ Use of the auction facility on a Virtual Market site
 These approaches will be increasingly used
by business particularly if they are dealing
with perishable commodities

Electronic
data
Interchange
(EDI)

Electronic data interchange (EDI) is an
electronic communication method that
provides standards for exchanging data via
any electronic means

 By adhering to the same standard, two
different companies, even in two different
countries, can electronically exchange
documents (such as purchase orders,
invoices, shipping notices, and many others).

 EDI has existed for more than 30 years, and
there are many EDI standards (including X12,
EDIFACT, ODETTE, etc.), some of which
address the needs of specific industries or
regions.

 The benefit of electronic trading is well
documented. Here are the top five reasons
why businesses adopt EDI-

 1. Remove document re-keying
 By removing the manual keying of key
business documents such as Orders, Invoices,
Acknowledgments and Dispatch Notes your
company can benefit significantly by::
 Reduced labour costs
 Elimination of human keying errors
 Faster document processing
 Instant document retrieval
 Remove reliance on the postal service

 2. Eliminate Paper
 Paper-based trading relationships have some
inherent disadvantages when compared with
their electronic trading equivalents:
 Stationery and printer consumable costs
 Document storage costs
 Lost documents
 Postage costs

 3. Reduce lead times and stockholding
 Electronic trading documents can be
delivered far more quickly than their paper
counterparts, thus the turnaround time from
order to delivery can be reduced.
 By using EDI for forecasting and planning,
companies are able to get forward warning of
likely orders and to plan their production and
stock levels accordingly.

 3. Reduce lead times and stockholding Contd.
 Companies receiving advanced shipping
notes or acknowledgments know in advance
what is actually going to be delivered, and are
made aware of shortages so alternate
supplies can be sourced.
 Integrating electronic documents means they
can be processed much faster, again reducing
lead times and speeding up payments.

 4. Increase quality of the trading relationship
 Electronic trading documents when printed are
much easier to read than copies faxed or
generated on multi-part stationery by impact
printers.
 Accurate documents help ensure accurate
supplies.
 Batches of electronic documents are usually
sequentially numbered, therefore missing
documents can easily be identified, not causing
companies to wade through piles of paper.

 5. Competitive Edge
 Because electronic data interchange
(EDI) makes you attractive to deal with from
your customers' point of view, and you are in
their eyes cheaper and more efficient to deal
with than a competitor trading on paper, your
costs will be lower because you will require
less manpower to process orders, deliveries
or payments.

 EDI replaces postal mail, fax and email.
 While email is also an electronic approach,
the documents exchanged via email must still
be handled by people rather than computers.
 Having people involved slows down the
processing of the documents and also
introduces errors.

 EDI documents can flow straight through to
the appropriate application on the receiver’s
computer (e.g., the Order Management
System) and processing can begin
immediately.

 Business documents
 Standard format
 Business partners
 EDI messaging security

 Business documents – These are any of the
documents that are typically exchanged
between businesses. The most common
documents exchanged via EDI are purchase
orders, invoices and advance ship notices. But
there are many, many others such as bill of
lading, customs documents, inventory
documents, shipping status documents and
payment documents.

 Standard format– Because EDI documents must be
processed by computers rather than humans, a
standard format must be used so that the computer
will be able to read and understand the documents.
 A standard format describes what each piece of
information is and in what format (e.g., integer,
decimal, mmddyy).
 Without a standard format, each company would send
documents using its company-specific format and,
much as an English-speaking person probably
doesn’t understand Japanese, the receiver’s computer
system doesn’t understand the company-specific
format of the sender’s format.

 There are several EDI standards in use today,
including ANSI, EDIFACT, TRADACOMS and ebXML.
 And, for each standard there are many different
versions, e.g., ANSI 5010 or EDIFACT version D12,
Release A.
 When two businesses decide to exchange EDI
documents, they must agree on the specific EDI
standard and version.
 Businesses also use an EDI translator – either as in-
house software or via an EDI service provider – to
translate the EDI format so the data can be used by
their internal applications and thus enable straight
through processing of documents.

 Business partners – The exchange of EDI
documents is typically between two different
companies, referred to as business partners
or trading partners.
 For example, Company A may buy goods
from Company B. Company A sends orders to
Company B. Company A and Company B are
business partners.

 EDI messaging security
 The basic security objectives -authentication
and integrity, non repudiation, access
control, availability, audit, and accountability

 Electronic payment is a financial exchange
that takes place online between buyers and
sellers.
 The content of this exchange is usually some
form of digital financial instrument(such as
encrypted credit card numbers, electronic
checks, or digital cash) that is backed by a
bank or an intermediary, or by legal tender

 Three factors are stimulating interest among
financial institutions in electronic payments:
 Decreasing technology costs,
 Reduced operational and processing costs,
and
 Increasing online commerce

 Banks and retailers want to wean customers
away from paper transactions because the
processing overhead is both labor intensive
and costly.
 Some types of electronic payment systems
are as follows-

 Early wire transfer services enabled an
individual to deliver currency to a clerk at one
location, who then instructed a clerk at an-
other location to disburse funds to a party at
that second location who was able to identify
himself as the intended recipient.
Ex Western Union

 During the 1960s and early 1970s, private
networking technology has enabled the
development of alternative electronic funds
transfer (EFT) systems.
Electronic funds transfer systems have
shortened the time of payment instruction
transfer between banks,

Paper Cash remains the dominant form of
payment for three reasons:
 lack of consumer trust in the banking system;
 Inefficient clearing and settlement of noncash
transactions; and
 Negative real interest rates on bank deposits.
Electronic or digital cash combines
computerized convenience with security and
privacy that improve on paper cash.

 Cash is negotiable, meaning that it can be
given or traded to someone else.
 Cash is legal tender, meaning that the payee
is obligated to take it.
 Cash is a bearer instrument, meaning that
possession is proof of ownership.
 Cash can be held and used by anyone, even
those without a bank account.
 Finally, cash places no risk on the part of the
acceptor; the medium is always good.

 Credit and debit cards cannot be given away
because, technically, they are identification
cards owned by the issuer and restricted to
one user.
 Credit and debit cards are not legal tender,
given that merchants ‘have the right to refuse
to accept them.
 Credit and debit cards are not bearer
instruments;-their usage requires an account
relationship and authorization system.

 Checks require either personal knowledge of
the payer, or a check guarantee system.
 A real electronic payment method needs to
do more than recreate the convenience
offered by credit and debit cards;
 It needs to create form of digital cash that
has properties of cash.

Digital cash must have the following four
properties:
 Monetary value,
 Interoperability,
 Retrievability, and
 Security (KALA96].

 Digital cash must have a monetary value
 It must be backed by cash (currency), Bank-
authorized credit, or a bank-certified
cashier’s check.
 When digital cash created by one bank is
accepted by others, reconciliation must occur
without any problems.
 Without proper bank certification, digital cash
carries the risk that when deposited, it might
be returned for insufficient funds.

 Digital cash must be interoperable, or
exchangeable as payment for other digital
cash, paper cash, goods or services, lines of
credit, deposits in banking accounts, bank
notes or obligations, electronic benefits
transfers, and the like.

 Remote storage and retrieval (such as via a
telephone or personal communications
device) would allow users to exchange digital
cash(withdraw from and deposit into banking
accounts) from home or office or while
traveling.

 As it might be easy to create and store
counterfeit cash in a computer, it is
preferable to store cash on an unalterable
dedicated device.
 This device should have a suitable inter-face
to facilitate personal authentication using
passwords or other means,
 Digital cash should not be easy to copy or
tamper with while it is being exchanged.

 It should be possible to prevent or detect
duplication and double-spending of digital cash.
 Double spending, the electronic equivalent of
bouncing a check, is a particularly tricky issue.
For in-stance, a consumer could use the same
digital cash simultaneously to buy items in Japan,
India, and England. It is particularly difficult to
prevent double-spending if multiple banks are
involved in the transactions.
 For this reason, most systems rely on post-fact
detection and punishment.

 Electronic checks are modeled on paper
checks, except that they are initiated
electronically, use digital signatures for
signing and endorsing, and require the use of
digital certificates to authenticate the payer,
the payer’s bank, and bank account.

 Electronic checks are delivered either by
direct transmission using telephone lines, or
by public networks such as the Internet.
 Electronic check payments (deposits) are
gathered by banks and cleared through
existing banking channels, such as
automated clearing houses (ACH) networks.

 By retaining the basic characteristics and
flexibility of paper checks while enhancing
the functionality, electronic checks can be
easily understood and readily adopted
 Electronic checks are well suited for clearing
micro payments; the

 conventional cryptography of electronic checks
makes them easier to process than systems
based on public-key cryptography(like digital
cash).
 The payee and the payee’s and payer’s banks can
authenticate checks through the use of public-
key certificates.
 Digital signatures can also be validated
automatically.
 Electronic checks can serve corporate markets.
Firms can use electronic checks to complete
payments over the networks in amore cost-
effective manner than present alternatives.

 Credit card-based payments can be divided
into three categories
 :Payments using plain credit card details:
 Payments using encrypted credit card details
 Payments using third-party verification:

 Exchange of unencrypted credit cards over a
public network such as telephone lines or the
Internet.
 The low level of security inherent in the design of
the Internet makes this method problematic (any
hacker can read a credit card number, and there
are programs that scan the Internet traffic for
credit card numbers and send the numbers to
their programmers).
 Authentication is also a significant problem, and
the vendor is usually responsible for ensuring
that the person using the credit card is its owner.

To make a credit card transaction truly secure and non refutable,
the following sequence of steps must occur before actual goods,
services, or funds flow:
 1. A customer presents his or her credit card information (along
with an authentic signature or other information such as
mother's maiden name) securely to the merchant.
 2. The merchant validates the customer’s identity as the owner
of the credit card account.
 3. The merchant relays the credit card charge information and
digital signature to his or her bank or online credit card
processor.
 4. The bank or processing party relays the information to the
customer’s bank for authorization approval.
 5. The customer’s bank returns the credit card data, charge
 authentication, and authorization to the merchant.

 One solution to security and verification
problems is the introduction of a third party
to collect and approve payments from one
client to another-Payment gateways.

Ethical, Social,
and Political
Issues in E-
commerce

 Privacy: The moral right of individuals to be
left alone, free from surveillance or
interference from other individuals or
organizations
 Information privacy: Includes both the claim
that certain information should not be
collected at all, as well as the claim of
individuals to control the use of whatever
information is collected about them

 Ethical issue : Under what conditions should
we invade privacy of others
 Social issue: Development of “expectations of
privacy” and privacy norms
 Political issue: Development of statutes that
govern relations between record keepers and
individuals

 Personally identifiable information (PII): Data
that can be used to identify, locate, or contact
an individual

 Anonymous information: Demographic and
behavioral information that does not include
any personal identifiers
Almost all e-commerce companies collect PII
and use cookies to track click stream
behavior

 Profiling: Creation of digital images that
characterize online individual and group
behavior

 Anonymous profiles: Identify people as
belonging to highly specific and targeted
groups

 Personal profiles: Add personal identifiers

Advertising networks can:
 Track both consumer behavior and browsing
behavior on the Web
 Dynamically adjust what the user sees on
screen
 Build and refresh high-resolution data images
or behavior profiles of consumers

 May be explicitly granted or derived from
constitutions (U.S., Canada, Germany)
 May also be found in common law (U.S,
England)

 How e-commerce can take place.
 It defines actually how e-commerce is
implemented,
 How online trading or business can be done.
 It defines important components that should
be present to do some transaction.

The important components of this framework
are:
 Network Infrastructure
 Multimedia Contents And Network Publishing
 Messaging And Information Distribution
Infrastructure
 Common Business Services Infrastructure
 Public Policy And Technical Standards

 Network Infrastructure, also called as
“INFORMATION SUPERHIGHWAY” is the path
through which actual information flows and
moves between sender and receiver.

 Information Superhighway consists of-
 telecommunication companies that provide
telephone lines.
 Cable TV systems that provide coaxial cables
and direct broadcast satellite networks.
 Wireless companies that provide mobile
radio and satellite networks.
 Computer networks include private networks
and public data networks like the Internet.

 All these modes of communication are
interconnected.
 They are connected with routers, switches,
bridges, gateways etc which are devices to
connect similar and different network.
 All the information flow on these lines and
through these devices and reach the desired
destinations.

 The most prevalent architecture that enables
networking publishing is the World Wide Web.
 The web allows small businesses and
individuals to develop content in the form of
Hypertext Markup Language (HTML) and
publish it on a web server.
 Web provides a means to create product
information (content) and a means to publish
it in a distribution center( network server).

 The information content transferred over the
network consists of text, numbers, pictures,
audio and video.
 But the network does not differentiate among
content as everything is digital, that is,
combinations of zero’s and one’s.

 Once contents has been created and stored
on a server, messaging and information
distribution methods carry that content
across the network.
 Messaging vehicle is called middleware
software.
 Messaging and information distribution
include translators that interpret and
transforms data formats.

 This infrastructure includes the different
methods for facilitating online buying and
selling processes.

 In online commerce, the buyers sends an
electronic payment as well as some
remittance information to the seller.
 Settlement occurs when the payment and
remittance information are authenticated by
the seller and accepted as valid.

In order to enable online payment for
information and ensure its safe delivery, the
payment services infrastructure needs to
develop methods that ensure security of
contents traveling on the network–
 Encryption (making contents indecipherable
except for the intended recipient) and
 Authentication (making sure that customers
are who they say they are) –

 Public policy related to e-commerce
encompasses such issues as universal access,
privacy and information pricing.
 Technical Standards dictate the specifics of
information publishing tools, user interfaces
and transport. Standards are essential to
ensure compatibility across the entire
network of world.

 By following all these components trade can
be done efficiently on the network. There are
many applications of e-commerce which work
on this framework-
 Online Shopping • Home Banking • Supply
Chain Management • Video On Demand •
Online Marketing and Advertising and many
more.

 Security of transaction in online business is done
by encryption and decryption of data.
 The goal of encryption is to make it impossible
for a hacker who obtains the cipher text that is
encrypted information as it passes on the
network to recover the original message.
 Encryption is the mutation of information in any
form (text, video, and graphics) into a form
readable only with a decryption key. A “key” is a
very large number, a string of Zeros and Ones.

There are two methods of doing Encryption:-
1. Secret Key Algorithm
2. Public Key Algorithm

 It is also known as Symmetric Encryption.
 In this same set of keys are used by both sender
and receiver.
 The sender and receiver decide the key before
transmission of data. This key is kept secret. It is
known only to the sender and receiver not
anyone else.
 The sender encode the data with secret key and
send it, when it is received by the receiver, the
receiver decode the data using same set of key.
This technique is working in DES algorithm.

 It is known as Asymmetric Encryption
algorithm.
 In this every user in online trading is given
two sets of keys.
 One is called Private Key and other is called
Public Key.
 Public Key of each user is known to everyone
on the internet. Private key is known to its
owner only.

 Now suppose A want to send data to B using
Public Key Algorithm. The public keys of both
A and B is known to everyone.
 A send its data by encoding it with B public
key.
 When it reaches to its destination, that data
will be decoded by B using its private key.
 Suppose if data is hacked by hacker on the
way, he would not be able to decode that
data because that data would be unlock by B
private key which hacker don’t have.

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