E-commerce an Introduction In the broadest sense, electronic commerce (e-commerce), is the buying and selling of products and services over the Internet. It has included the handling of purchase transactions and funds transfers over computer networks. According to the Forrester Research Study Sizing Intercompany Commerce, total U.S business-to-business Internet trade in 1998 is $7.7 billion, compared to a total global e-commerce of $21.8 billion, dramatically increasing from $2.5 billion in 1997. By the year 2002, according to the report, there will be $328 billion worth of e-commerce. Electronic Commerce (e-commerce) Electronic commerce is the ability to perform transactions involving the exchange or use of goods or services between two or more parties using electronic tools and techniques Some main technologies have made e-commerce viable – WWW, Electronic Data Interchange (EDI), Electronic Funds Transfer (EFT) and E-mail.
EDI is the inter-organisational, computer-to-computer exchange of business documentation in a standard, machine-processable format. EFT was designed to optimise electronic payments with electronically provided remittance information. Electronic commerce provides the capability of buying and selling products and information via telephone lines, computer networks, and other electronic means. The Internet, the largest network of computer networks, is the medium usually favoured for electronic commerce because it allows an organisation to cut service costs while increasing the speed of service delivery. Electronic commerce is considered a primary means by which organisations may expand rapidly into high growth emerging markets of the world.
This is possible because, firstly as trans-national companies become skilled in their use of the Internet, they will be able to pursue global electronic commerce more efficiently, saving important advertising, communication, and administrative costs. Secondly, the Internet can increase responsiveness by notifying individual customers when new products in their areas of interest become available and by creating customised products and services. Thirdly and finally, trans-national companies using the Internet can increase their knowledge about consumer habits, be able to define trends, and turn consumer statistics into long-term customer relationships. Electronic Commerce Activities Electronic commerce endeavours to improve the execution of business transactions over various networks. Transactions are exchanges that occur when one economic entity sells a product or service to another entity.
A transaction takes place when a product or service is transferred across a technologically separable interface that links a consumer (buyer) with a producer (seller). When the buyer/seller transactions occur in the electronic marketplace, information is accessed, absorbed, arranged, and sold in different ways. There are four main categories where business transactions take place Business to Business (B2B), Business to Customer (B2C), Business to Administration and Consumer to Administration. An example in the B2B category would be a company that uses a network for ordering from its suppliers, receiving invoices and making payments. This category of electronic commerce has been well established for several years. The B2C category largely equates to electronic retailing. This category has expanded greatly with the advent of the World Wide Web. There are now shopping malls all over the Internet offering all manners of consumer goods, from cakes and wine to computers and motor cars.
The business administration category covers all transactions between companies and government organisations. For example, in the USA the details of forthcoming government procurements are publicised over the Internet and companies can respond electronically. Currently this category is in its infancy, but it could expand quite rapidly as governments use their own operations to promote awareness and growth of electronic commerce. In addition to public procurement, administrations may also offer the option of electronic interchange for such transactions as VAT returns and the payment of corporate taxes. The consumer administration category is just emerging, in the wake of a growth of both the business consumer and business administration categories; governments may extend electronic interaction to such areas as welfare payments and self-assessed tax returns.
B2B e-commerce was born out of an attempt to solve an administrative problem. It developed a new computer standard to handle these needs, which became known as EDI, Electronic Data Interchange. Today its descendant, XML, a lighter, simpler data interchange standard is used by B2B sites. Simple e-commerce sites first appeared in 1992. The early e-commerce sites were virtual catalogues, simply listing products for sale. Ordering was off-line, through e-mail, phone or fax.
By 1996 the technology had advanced greatly to produce virtual stores with shopping carts, client accounts and, with the development of protocols such as Secure Socket Layer (SSL), enabled customers to order and pay for their purchase on-line directly by credit card. E-commerce quickly became popular with consumers and suppliers. For customers, it was fast, easy and efficient, allowing them to compare products, price and service before purchase. For suppliers, it allowed them to reach an unlimited international audience, 24 hours a day, 7 days a week at reduced costs. Today e-commerce is widely used and growing fast.
B2B is the largest, fastest growing and most profitable market. According to IDC, this year, it is expected to account for two thirds of world wide e-commerce. B2C is also expected to grow, boosted by Broadband (high-speed) Internet access to more on-line households. Future advances include digital money and e-wallets, and personal agents that help users find what they are looking for. Sites can work with fulfilment centres providing customers with excellent service and suppliers with information, and can support the newest trend for human interaction in e-commerce customer service.
The Internet is creating unprecedented and seeming infinite opportunities for both customers and businesses. Yet it one of its major problems is that it is changing so fast that both parties are overwhelmed by the speed of change and the sheer number of choices available to them. In addition web businesses win by following rules quite different than those which traditional businesses may follow. E-commerce appears to be exempt from the kinds of constraints that have limited companies historically. An e-commerce environment handled in a proper manner, with the right customisation of products and services, in innovative ways, can lead to win-win situations. The customers can get the right product at the right time and for the right price, companies can set new standards in efficiency and profitability. E-commerce activities can be broken down into the following areas: – Searching and Advertising Businesses list their products or services on their WebPages.
Potential users browsing electronic catalogues on a network. Software agents searching on behalf of one or more users. Users specify the product or services required with electronic requests. Negotiating Buyers and sellers may elect to negotiate the terms of a transaction, such as the terms of exchange and payment. These terms may cover right to copy, copyright or license agreements, usage rights, distribution right, refund policies, and terms or payment. Ordering The buyer issues a contractual agreement of the terms of exchange, or usage, and payment.
This contractual agreement is generally issued as an order, which sets forth the price and other terms of the transaction. The order may be verbal, in writing, or electronic. This agreement can be confirmed electronically through cryptographic techniques such as digital signatures. Billing A bill can be sent to the buyer, either before delivery of the product or service, with the delivery, or after the delivery. The bill generally includes remittance information-who, where and how to pay, which can be obtained by having the user complete order or request forms. Payment and Settlement The buyer sends some form of electronic payment, Visa card or some other form of credit card.
This could be some form of contract or obligation, such as authenticated payment instructions, or the actual transfer of value, such as digital cash. It is usually sent along with some remittance information to the seller. This payment may occur for a single item, or on a usage basis, or with a single payment for multiple items or usage. Settlement occurs when the payment and remittance information are analysed by the seller or the seller’s agent and accepted as valid and then an actual transfer of funds is accomplished. Production Electronic commerce does not completely address collaborative design and manufacturing activities, although they do share many of the same sorts of activities. Collaborative design and manufacturing could decompose to hundreds of speciality firms that meet, negotiate and contract with each other over the network, which they would then use to purchase, sell, distribute, and assemble the various components that make up a product or service. Companies such as Dell Computers are now offering a facility whereby the customer can design their end product, in this case a personnel computer, over the Internet. Distribution and Receipt Either before, after, or concurrent with payment, the seller arranges for delivery of the purchased product or service to the buyer, and the buyer provides the seller with proof of receipt of delivery.
Policies regarding customer satisfaction and return should be negotiated prior to this activity, and made part of the contract between buyer and seller. Accounting This activity is particularly important to corporate customers and suppliers. Both buyer and seller must reconcile all electronic transactions in the accounts receivable and accounts payable, inventory information, and accounting systems. Account and management information system records must also be updated. This activity can involve third parties, if the transacting businesses outsource their accounting services. Customer Service Customer service activities may include: – Providing the buyer with timely information as to the progress of the transaction. Handling customer requirements when transactions go awry such as resolving any mistakes, disputes, or complaints concerning product quality, delivery, or payment, and providing expert advice and assistance in the use of the products and services.
Information and Knowledge Processing A final key activity in electronic commerce is the collection, management, analysis, and interpretation of the various data to make more intelligent and effective transaction-related decisions. E-commerce is made possible through the expanded technologies of the Internet, the World Wide Web, and Value Added Networks. The Internet is a world-wide collection of computer networks, co-operating with each other to exchange data using a common software standard. Through telephone wires and satellite links, Internet users can share information in a variety of forms. The size, scope and design of the Internet allow users to connect easily through ordinary personal computers and local phone numbers. The exchange electronic mail (E-mail) with friends and colleagues with accounts on the Internet, post information for others to access, and update it frequently, access multimedia information that includes sound, photographic images and even video, and access diverse perspectives from around the world.
An additional attribute of the Internet is that it lacks a central authority, in other words, there is no Internet, Inc. that controls the Internet. Beyond the various governing boards that work to establish policies and standards, few rules and answers to no single organisation bind the Internet. The History of the Internet Many people think that the Internet is a recent innovation, when in fact the essence of it has been around for over a quarter century. The Internet began as ARPAnet, a U.S.
Department of Defence project to create a nation-wide computer network that would continue to function even if a large portion of it were destroyed in a nuclear war or natural disaster. During the next two decades, primarily academic institutions, scientists and the government for research and communications used the network that evolved. The appeal of the Internet to these bodies was obvious, as it allowed disparate institutions to connect to each others computing systems and databases, as well as share data via E-mail. The nature of the Internet changed abruptly in 1992, when the U.S. government began pulling out of network management, and commercial entities offered Internet access to the general public for the first time.
This change in focus marked the beginning of the Internet’s astonishing expansion. The Internet explosion coincides with the advent of increasingly powerful yet reasonably priced personal computers with easy-to-use graphical operating systems. The result has been an attraction of recent computer converts to the network, and new possibilities for exploiting a wealth of multimedia capabilities. Impact of electronic commerce Electronic commerce is not some futuristic dream. It is happening now, with many well-established success stories. It is happening world-wide, while the USA, Japan and Europe are leading the way, electronic commerce is essentially global in both concept and realisation.
It is happening fast and with the maturing of EDI and the rapid growth of Internet and the World Wide Web, it is accelerating. The impact of electronic commerce will be pervasive, both on companies and on society as a whole. For those companies that fully exploit it’s potential, electronic commerce offers the possibility of breakpoint changes. Changes that so radically alter customer expectations that they re-define the market or create entirely new markets. All other companies, including those that try to ignore the new technologies, will then be impacted by these changes in markets and customer expectations.
Equally, individual members of society will be presented with entirely new ways of purchasing goods, accessing information and services, and interacting with branches of government. Choice will be greatly extended, and restrictions of geography and time eliminated. The overall impact on lifestyle could well be comparab …