Electronic Commerce

Overview

Electronic Commerce (EC or e-commerce) is defined as the conduct of commerce in goods and services, with the assistance of telecommunications and telecommunications-based tools.

"E - Commerce" is often used in a much broader sense, to mean essentially the same as 'electronic business', (EB). This includes for example, buying and selling products with digital cash via Electronic Data Interchange (EDI)".

Examples of EB that are not EC include registration and licensing processes, student enrolment, and court administration.

"E-Commerce encompasses many areas of which:

  • 'electronic catalogues' refers to means whereby sellers can communicate their offerings to potential buyers;
  • 'electronic data interchange (EDI)' refers to a particular family of standards for expressing the structured data that represent EC transactions; and
  • 'electronic auctions' for a particular set of mechanisms for setting prices."

E-Commerce Concepts

Business to Business Electronic Commerce (B2B EC)

B2B EC is the use of private networks on the Internet to automate business transactions between companies. The EDI has been the primary standard that has been used. It has typically been applied through the use of a Value Added Network (VAN) in which companies are able to do business on line after obtaining the membership to a particular VAN.

The implementation costs for the technologies required excluded small businesses until the emergence of the Web EDI that, through the use of web technologies, allows them to join in.

Business to Consumer Electronic Commerce (B2C EC)

B2C EC is a new retail sale model: the web market. It enhances the previously used business models by offering:

  • A global audience
  • Unlimited product selection
  • Portal sites that refer consumers to the actual purchasing site
  • Focused marketing that can be quickly tailored to consumer

The E-business Process

E-business is the transformation of key business processes through the use of the Internet technologies. Large and small companies are equally using the web to communicate with their partners, to connect with their back-end data systems, and to complete transactions.

According to industry estimates nearly $4 billion will be spent world wide through on-line transactions this year.

The web merges the standards, simplicity and connectivity of the Internet with core processes that are the foundation of business. The EC process includes:

  • Electronic presentation of goods and services
  • Online order taking and bill presentment
  • Automated customer account inquiries
  • Online payment and transaction handling

Here are some of the ways a company can implement an EC strategy with e-business in mind:

  • Develop a dynamic, database-driven online catalogue
  • Provide for on-line ordering by securely integrating the front-end presentation with an order entry system
  • Move static billing statement data to an interactive Web-based presentment server
  • Accept electronic payment methods (credit cards, EFT, etc) for full transaction shopping or bill payment.

Some of the EC Tools

Electronic Commerce Server

It can be best defined as a web software that runs some of the main functions of an on-line storefront such as product display, on-line ordering, and inventory management. The software works in conjunction with on-line systems to process payments.

The first commerce servers were developed by IBM, Netscape and Open Market. Sine then companies as iCat, Inex, Microsoft, Connect, Oracle and Viaweb have developed commerce servers also.

A good example of commerce server could be "Microsoft Site Server Commerce Edition" that is best suited for B2C applications. In conjunction with "Microsoft Internet Information Server", it uses dynamic web pages through ASP and CGI to connect to the back end database through Open Database Connectivity and "Microsoft SQL server".

EC Payment Systems

The three emerging payment methods are processes that use debit/credit card models, electronic funds (a digital cheque), and the digital cash.

  • Browser plug-ins known as electronic wallets present vendors with identification, credit card information and digital funds, and are freely made available to users through browser vendors and merchant sites.
  • Digital Cash, is a payment system that simply transfers digital representations of funds from one computer to another. Like serial numbers on real dollar bills, the digital cash numbers are unique identifiers carrying a given value, while each one is issued by a participating bank and represents a specified sum of real money. One of its key features is that the real cash, it is anonymous and reusable. (As opposed to the credit cards)

EC Payment Processors

"EC Payment Processors are applications that provide credit card transaction validations, verification as well as encrypted security. They are usually integrated into the back-end applications, with a direct link to the card authorisation network".

Payment Processor vendors include: Cyberash, CyberSource, IBM, IC Verify and Verifone.

EC Standards

Although several standards have been applied to the various industries that are involved with the EC, it remains to be seenwhether a multi-vendor global protocol will be embraced.

Some of the standards that are in use include but are not limited to:

  • Secure Electronic Transaction(SET) - wideliy adopted by credit card companies as Visa, Master Card, American Express and Novus-Discover
  • Bank Internet Payment Systems (BPIS) is the joined effort being adopted by the major US banks, government agencies and high technology firms.

Government Regulations of Electronic Commerce

Governments are in disagreement over many and various issues of Internet regulation, but the one aspect that seems to bring unity in discussion is that of taxation.

"The US and the European Union have forget a limited agreement based upon a Proposed Electronic Commerce Framework that establishes the following:

  • Tariffs and Taxation
  • Electronic Payment Systems
  • Uniform Commercial Code
  • Intellectual Property Protection"
BEING SUCCESSFUL IN E-COMMERCE

The past few years have ushered in enormous changes in the way companies are doing business, selling goods and services, and communicating with their suppliers and buyers. The large brick-and-mortar companies are rethinking their business models in order to compete in the new marketplace. Small electronic communities enter the market with innovative ways to sell their goods and services. This is a time of remarkable opportunity for those businesses that harness the power of the new market. namely electronic commerce. Those companies that underestimate its power may be left behind, as other companies flourish in the new environment. Electronic commerce will play a major role in the way small, medium, and large companies conduct business either with their consumers, other businesses or both. It is critical to understand the e-commerce market early in the game and to understand how e-commerce changes yom business model. Now is the time to reconsider the way you are doing business and how you should approach the new global electronic community. Your competitor is thinking about this very thing.

Now is also the time for entrepreneurs and smaller businesses to compete on the same playing field as larger corporations. In the electronic community, a lack of real estate is not an obstacle. A lack of vast resources, such as employees and capital, is not an obstacle. Your ideas, innovation, and drive carry your ideas forward. Most of the top-selling e-commerce companies are less than five years old. Your focus remains on generating the right idea at the right time. Think of a time that you did something right. What was the result? What was the reward? The inherent beauty of electronic commerce is that when you do one thing right, you get paid over and over. The objective of this chapter is to provide you with the foundation required to understand e-commerce and how your business fits into the current marketplace. Emphasis is placed on business models, direct selling models, and the key factors required to successfully deploy an e-commerce solution. As you read though this chapter, consider your current business model and how electronically enabling your enterprise, of whatever size, provides direct benefits to your customers and business partners.

TECHNOLOGY GROWTH RATE

Many individuals and business leaders may be thinking that "the Internet won't change my business." With the Internet's explosive growth, doubting individuals may want to think again. We have just witnessed the birth of e-commerce. Now, consider its rate of growth. Consider the not too distant future. People are accessing the Internet today primarily with a desktop computer. In the near future, that will change, especially in the consumer market. With products like Web TV becoming increasingly popular, consumers are able to sit in their living rooms and shop in three-dimensional malls, make travel plans by viewing resorts and accommodations online, and order educational videos on the topic of their choice. Of course, we will continue to use the computer to access the Internet. However, with Web TV and other less traditional means of Internet access, your business can capture audiences that generally have not grown up with computers and Internet technologies. Furthermore, as worldwide communication links and traditional Internet access grows, markets will explode.

NEW PROSPECTIVES

Selling on the Internet is not just creating a Web site and thinking "if I build it, they will come." Companies jumping on the next wave of marketing and sales via e-commerce think outside the box. Throw out the old business model and invent a new one. Those companies that have been most successful and realized the highest return on investment have approached e-commerce using specific strategies. They rethink revenue streams, reengineer the business, empower customers, provide exceptional customer service, and join the global economy. Let's take a look at these five strategies to selling online, and how your company can take advantage of new methods of doing business.

RETHINKING REVENUE STREAMS

Companies approach e-commerce from every angle. A variety of methods of selling are being used in the Internet arena. For example, companies generate revenue from direct sales, online advertising, subscriptions, and credit card processing. Companies receive percentages of every online Internet transaction. Commissions are earned for matching buyers to sellers. Goods and services are auctioned online. Companies that generate revenue from direct sales include Charles Schwab and Dell. Companies that generate revenue from online advertising include Onsale.com and Yahoo!. The Wall Street Journal and TheStreet.com use a subscription-based model. VeriFone and CyberCash (credit card verification vendors) use transaction fees as a foundation for their businesses. DigitalRiver and Beyond.com use electronic product delivery. Commissions for matching buyers to sellers compensate Realtors, as well as vendors whose sites feature clickthroughs to online stores, including Amazon.com. To start on the journey, think about new streams of revenue. As you work through the book, you will see a whole new way of doing business and increasing your markets.

REENGINEERING THE BUSINESS

The Internet promises to change your whole manufacturing process, allowing you to communicate instantly with suppliers, partners, and customers on a worldwide scale. The Internet requires an even bigger effort in business transformation, business reengineering. It is not enough simply to set up Web sites for customers and partners. To take full advantage of the Internet, companies reinvent the way they do business, changing how they distribute goods, and how they collaborate within the company and with suppliers. Reengineering projects may be complicated, especially in the area of e-commerce. Since e-commerce is not merely a technology-based effort, it requires redefining marketing, sales, services, and products. In addition, it requires interactions between suppliers, shipping companies, legal departments, governments, and banks. It requires integration with existing systems either within the organization or between two companies. Successful companies have included marketing, sales, ordering, distribution, procurement, customer support, and trading partners in reengineering efforts. In addition, they have developed solutions that provide complete and timely reference data to company decision makers for marketing, product planning, production, and the logistics planning process.