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E-commerce is short for electronic commerce.

It is similar to traditional commerce system which involves

the activities of selling and buying, but it perform these operations using any electronic medium like, TV,
fax, radio or internet. Today internet has captured all the e-trade demand with its comparatively greater
features, so here we will consider only internet as an e-commerce source.

Categories of E-commerce
There are two basic categories of e-commerce:
Business-to-Business (B2B)
Business-to-Consumer (B2C)

Business-to-Business (B2B)
E-commerce plays an important role in enhancing and transforming relationships between and
among businesses.

Some B2B applications are:
Supplier Management: Electronic applications in this area aid in expediting business partnerships
through the reduction of purchase order (PO) processing costs and cycle times, and by maximizing
the number of POs processed with fewer people.
Inventory Management: Electronic applications make the order-ship bill cycle shorter. For instance, if
most of a business's partners are linked electronically, any information sent by mail can be
transmitted instantly. Businesses can easily keep track of their documents to make sure that they
were received. Such a system improves auditing capabilities, and helps reduce inventory levels,
improve inventory turns, and eliminate out-of-stock occurrences.
Distribution Management: Electronic-based applications make the transmission of shipping
documents a lot easier and faster. Shipping documents include bills of lading, purchase orders,
advance ship notices, and manifest claims. E-commerce also enables more efficient resource
management by certifying that documents contain more accurate data.
Channel Management: E-commerce allows for speedier dissemination of information regarding
changes in operational conditions to trading partners. Technical, product and pricing information can
be posted with much ease on electronic bulletin boards.

Payment Management: An electronic payment system allows for a more efficient payment management
system by minimizing clerical errors, increasing the speed of computing invoices, and reducing
transaction fees and costs.
Business-to-Consumer (B2C)
Business-to-Consumer e-commerce involves customers gathering information, purchasing, and
receiving products over an electronic network.
The consumer uses electronic commerce in the following economic transactions:
Purchasing products and information: Electronic applications make it possible for consumers to look
up online information about existing and new products/services.
Personal finance management: In this field, electronic applications aid the consumers in managing
investments and personal finances through the use of online banking tools. Chow.net is a good
example of B2C electronic commerce application, particularly of purchasing products online.

E-commerce benefits

Benefits to Organization
Expends the marketplace to national and international markets.
Decrease the cost of creating, processing, distributing, storing and retrieving paper-based
Allows reduced inventories and overhead by facilitating "pull" type supply chain management.
The pull type processing allows for customization of products and services which provides
competitive advantages to its implementers.
Reduce the time between the outlay of capital and the receipt of products and services.
Support Business Processes Reengineering (BPR) efforts.
Lowers telecommunication cost the internet is much cheaper than Value Added Networks

Benefits to Society
Enables more individual to work at home, and to do less traveling for shopping, resulting in less
traffic on the roads, and lower air pollution.
Allows some merchandise to be sold at lower prices benefiting the poor ones.
Enables people in Third World countries and rural areas to enjoy products and services which
otherwise are not available to them.
Facilities delivery of public services at reduced cost, increases effectiveness, and/or improves

Benefits to Consumer
Enables customers to shop or do other transactions 24 hours a day, all year round from almost
any location.
Provides customers with more choices.
Provides customers with less expensive products and services by allowing them to shop in many
places and conduct quick comparisons.
Allows quick delivery of products and services in some cases, especially with digitized products.
Customers can receive relevant and detailed information in seconds; rather than in days or
Makes it possible to participate in virtual auctions.
Allows customers to interact with other customers in electronic communities and exchange ideas
as well as compare experiences.
Electronic commerce facilitates competition, which results in substantial discounts.

Limitations of E-commerce
Technical Limitations
Lack of sufficient system's security, reliability, standards, and communication protocols.
Insufficient telecommunication bandwidth.
The software development tools are still evolving and changing rapidly.
Difficulties in integrating the Internet and electronic commerce software with some existing
applications and databases.
The need for special Web servers and other infrastructures, in addition to the network servers
(additional cost).
Possible problems of interoperability, meaning that some E-commerce software does not fit with
some hardware, or is incompatible with some operating systems or other components.

Non-Technical Limitations
Cost and justification (35% of the respondents)
The cost of developing an EC in house can be very high, and mistakes due to lack of experience, may
result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple
issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are
difficult to quantify.
Security and Privacy (17% of the respondents)
These issues are especially important in the B2C area, and security concerns are not truly so serious
from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive
these issues as very important and therefore the E-commerce industry has a very long and difficult task of
convincing customers that online transactions and privacy are, in fact, fairly secure.
Lack of trust and user resistance (4%)
Customers do not trust an unknown faceless seller, paperless transactions, and electronic money. So
switching from a physical to a virtual store may be difficult.

Other limiting factors
o Lack of touch and feel online.
o Many unresolved legal issues.
o Rapidly evolving and changing E-commerce.
o Lack of support services.
o Insufficiently large enough number of sellers and buyers.
o Breakdown of human relationships.
o Expensive and/or inconvenient accessibility to the Internet.


Some major comparisons between the traditional commerce methods and modern E-Commerce are
listed below:

Traditional Commerce E-Commerce
Cost is greater due to taxes, advertisement
and employees.
Average cost is much lower than
traditional type.
Product market is limited because of geo-
graphical constraints.
Product market is across the world
because of non-physical aspects.
It requires product advertisement on various
Developers of the websites also makes
adds on domains.
It requires more time to go outside, to
choose, compare and evaluate product.
It takes less time to choose and make
comparison between several products.
Less accessible due to time or geo-graphical
Products can be accessed at any time
and from almost anywhere.
People trust it more because of physical
Due to lake of awareness this is less
popular among people.
Customers support centers support their
No physical support centers available.
Feedback from customers takes a lot of
Feedback is immediate by certain
website features.
Fewer customers can be interacting with at
a time because of less physical limitations.
Websites are especially designed for