E-commerce is the use of electronic communication and digital information processing technology in business transactions to create, transform and redefine relationships for value creation between or among organisations and individuals.
It simply refers to the buying and selling of products, services and information via computer networks including internet.
E-commerce is concerned with system and business processes that support –
- creation of information sources
- movement of information over global networks
- effective and efficient interaction among producers, consumers, intermediaries and seller
It utilizes electronic networks to implement daily economic activities such as pricing, payments, contracting, shipping and delivery.
Features of E commerce →
- Ubiquity – It is everywhere i.e. e-commerce is not restricted to a physical place.
- Global reach – It is possible to conduct business transactions worldwide.
- Universal Standards – E-commerce makes use of Internet and World Wide Web to reach customers which has the same technical standards worldwide.
- Richness – E-commerce provides rich content in form of interactive graphics, videos, animations etc.
- Interactive –A two way communication between business and customers is possible.
- Personalisation and customization – It allows for personalization and customization of products.
- Information density – E-commerce technologies provide useful and quality information thereby reducing information costs.
Driving forces behind E commerce
The Major Driving forces behind the growth of E-commerce are
- Global Customers – Presense of customers of a product worldwide.
- Global Products – Demand for foriegn products by customers.
- Global Operations – Development of Transnational and Multinational Corporations
- Global Resources – Use of foreign raw material, labour, machines for production
- Global Collaborations – Joint ventures, Mergers, Strategic Alliances
- Global Competition – Race to capture market share in developing countries
Factors Affecting E-commerce –
Key drivers of e-commerce may be categorized in terms of 4 key business environment factors which influence the e-commerce industry. They are
1. Technological Factors –
- State of telecommunication infrastructure
- Access to new technological developments
- Bandwidth availability and Internet rates
2. Political Factors –
- Number and type of government initiatives to support use and development of modern technology
- Discouraging rules and regulations of the government
- Ability of the government to to adapt and plan for technological growth and development
3. Social Factors –
- Literacy level of the people and penetration rate of PC`s
- Number of internet users
- Willingness and ability of the people to adopt new technology
4. Economic Factors –
- Economic growth of the country
- Average income of the people
- Cost of Hardware and Software
- Cost of access to telecom infrastructure
- Commercial Structure and Innovative
Traditional Commerce Vs E-commerce
|Traditional Commerce||E – Commerce|
|Role of middleman add up to the overhead cost||It is cost effective. Total overhead cost is comparative by less|
|Less convenient. Customer has to directly visit the outlet.||Convenient due to online browsing|
|Business has to incur a lot of expenses to expand||Easy to expand the size of market|
|Role of middleman cut down the profits||Helps to increase the sales of the organisation and greater profits by cutting down costs|
|Physical inspection of goods is possible||Does not allow physical inspection of goods while purchasing|
|Business is opened for a limit time||24/7 service is available|
|It is suitable for perishable products||It is not suitable for perishable goods|
|Face to face interaction between business and customer is possible||Interaction between the business and customer is through a computer|
|It involves manual processing of business transactions, therefore there are more chances of a clerical error||Automated processing of business transactions to minimizes or eliminates human errors|
|It takes a lot of time and money to introduce a new product and get proper feedback||It is easy to introduce a new product on website and get immediate feed back|
|Limited reach||Global reach|
Issues in implementing E Commerce
|Macro Environment Issues (external to an org.)||Micro Environment Issues (internal or within)|
|Poor Internet infrastructure||Passive attitude of Top management towards use of new technology|
|Poor Technology infrastructure||Inter-Operability of existing systems with mordern technologies|
|Poor Commercial infrastructure||Lack of Skilled personnel|
|Poor Security infrastructure||Lack of a Successful Business Model|
Advantages of E commerce
Advantages to business –
- Increased potential market share and global reach
- It is easy to expand market with minimal capital outlay
- It enables a business to procure material and services from other companies
- It shortens or even eliminates marketing distribution channels, making products cheaper and vendor’s profit higher
- It enables customization of products
- Low cost advertising cost and entry barriers
- It allows lower inventories and other cost savings like cost of creating, processing, distributing, storing and retrieving paper based information
- No 24 hour time constraint
- It is easier to launch a new product online
Advantages to Consumers –
- It enables 24/7 access
- It saves time, money and effort
- It provides more choices i.e. wide range of products and services
- Price and Product comparisons are available online
- Improved buying experience and delivery processing
- It provides a global market place
- It enables personalization and customization of products and services
- Customer enjoy benefits of a competitive environment
A typical E-Commerce Model –
|Marketing & Research||Online Surveys, Search Engines, Social Media, Private Browsers, Feedback forms, Planning and forecasting|
|Information Exchange||Banner Ads, Interactive Ads, Website, E-catalogue|
|Order Placement||Online order processing, Browsing, Customized orders|
|Payment & Delivery||Electronic payment system, online delivery, physical shipments and delivery processing|
|Customer Service||E-CRM, Telephone support, FAQ sheets, Online support, Live chat, After sale service|
Business Applications of E commerce –
|Real Estate||Online Banking|
|E- Procurement||Import & Export|
|Online diagnosis and Treatment||Hotels & Tourism|
|Online Education & Training||Advertising & Promotion|
E-commerce Models –
|B2B – Business to Business||Oracle, Alibaba, Qualcomm|
|B2C – Business to Consumer||Intel, Dell, Snapdeal|
|C2C – Consumer to Consumer||OLX, Quikr, Ebay|