1

Basics of E-commerce
________________________________________________________
Enterprises across the globe have experienced significant changes in their business
information system. The emergence of the Internet through out the world has
contributed a variety medium in doing business as well as people lifestyle. In fact,
Internet is the essential prerequisite for the existence of E-commerce. E-commerce is a
revolution in business practices, it is changing the way of doing business.

Meaning of E-commerce
Electronic Commerce or e-commerce has been defined as the ability to perform
transactions involving the exchange of goods or services between two or more parties
using electronic tools and techniques.
E-commerce is using the power of computers, the Internet and shared software to send
and receive product specifications and drawings; bids, purchase orders and invoices; and
any other type of data that needs to be communicated to customers, suppliers, employees
or the public.
E-commerce is made possible through the expanded technologies of the Internet, the
World Wide Web (www) and Value Added Networks (VAN). E-commerce is paperless
exchange of business information using key standards and technologies through
a)
b)
c)
d)
e)

Electronic Data Exchange (EDI),

Electronic Mail ( e-mail)
Electronic Bulletin Boards
Electronic Fund Transfers (EFT), and
Other Network-based technologies.

Thus, e-commerce is a methodology of modern business which addresses the need of

business organisations, vendors and customers to reduce cost and improve the quality of
goods and services with increasing the speed of delivery.

E-business vs. E-commerce

Commerce refers to purchase and sale of goods or services and includes the activities
of transport, banking, insurance, advertisement, packaging and warehousing which
facilitates the exchange (buying and selling ) of goods and services.
Business is an economic activity which includes production or procurement of goods
and services, sale or exchange of goods and services and other activities such as sales,
marketing, delivery, branding and research.
E-commerce involves buying and selling of goods or services over the Internet through
World Wide Web (www), while E-business include e-commerce and other functions like
production, product development, accounting and finance, inventory management,
marketing, branding, delivery, etc.
The following are the major distinctions between e-business and e-commerce :
No. Feature
1.

2.

Meaning

Activities

e-Business

e-Commerce

E-business refers to the processes

or areas involved in the running
and operation of an organisation
electronically.

E-commerce is the exchange

of merchandise on a large
scale
between
different
persons using Internet.

e-Business is the application of

information and communication
technologies in support of all the
activities of business. It includes
not only information exchanges
related to buying and selling but
also servicing customers and
collaborating
with
business
partners,
distributors
and
suppliers.

e-Commerce focuses on the

use of information and
communication technologies
to facilitate the exchange of
products
and
services
between businesses, groups
and individuals and is one of
the essential activities of any
business.

E-business includes direct business

activities such as marketing, sales
and human resource management
and indirect activities such as
business process re-engineering
and change management, which
affects
the
efficiency
and

E-commerce incorporates a
whole
socio-economic,
information technology and
commercial infrastructure at
the
macro-environmental
level.
All these elements
interact together to provide

integration of business processes the fundamentals

and activities.
commerce.

of

e-

3.

Internal vs. E-business includes e-commerce

External
as well as internal processes of
production, inventory control,
product development, finance,
human resources, branding and
research.

E-commerce covers external

processes
that
touch
customers, suppliers and
external partners including
purchase of raw materials,
sales,
marketing,
order
taking, delivery, customer
e-Business
methods
enable services, etc.
companies to link their internal
and external data processing
systems more efficiently and
flexibly, to work more closely with
suppliers and partners, and to
better satisfy the needs and
expectations of their customers.

4.

Scope

5.

Medium of E-business can be conducted using E-commerce is conducted via

Information the Web, the Internet, Intranets, computer networks including
Extranets or some combination of the Internet.
these.

E-business is a more generic term

and it is more than
just ecommerce. e-Business refers to
more strategic focus with an
emphasis on entire value-chain
electronic purchasing and supply
chain management, processing
orders electronically, handling
customer services and cooperating
with business partners.

Features of e-commerce

E-commerce is a subset of an
overall e-business strategy.
e-Commerce adds to revenue
streams
and
enhance
relationships with clients and
partners and to improve
efficiency.

Electronic Commerce means better business communication and data interchange

information is essential for every and any business. E-commerce is fast, cost efficient, time
saving and easy to use, i.e. economic tangibility and good business generation. E-commerce
provides the following features :
No. Features of e-commerce
1.

Online Facility

E-commerce provides the capability of buying and selling products

and information on the internet and other on-line services.

2.

Communication

E-commerce is the delivery of information through computer

networks or any other electronic mode of communication.

3.

Automation
of E-commerce is the application of technology towards the
Business Process
automation of business transactions and work flow.

4.

Service Perspective

E-commerce addresses the desire of firms, consumers and

management to cut service cost while improving the quality of
goods or services and increasing the speed of service delivery.

5.

Ubiquity

Internet or Web technology is available every where: at work, at

home and elsewhere via mobile devices, anytime.

Ubiquity means
appearance
everywhere

The market place is created beyond traditional boundaries of local

area to national geographic locations. Shopping can take place
anywhere. Customer convenience is enhanced and shopping costs
are reduced.

6.

Global Reach

The technology reaches across national boundaries around the

earth. The market space has widened across international
boundaries thereby accessing potentially billions of consumers
and businesses worldwide.

7.

Universal
Standards

There is one set of technology standards, namely internet

standards. There is one set of technical media standards across
the globe.

8.

Richness

Video, audio and text marketing messages are integrated into a

single marketing message and consuming experience.

9.

Interactivity

The technology works through interaction with the users.

Consumers are engaged in a dialog that makes the consumer a coparticipant in the process of delivering goods to the market.

10.

Information
Density

The technology reduces information costs and raises quality.

Information processing, storage and communication costs drop
dramatically, which accuracy and timeliness improve greatly.
Information becomes plentiful, cheap and accurate.

11.

Personalization
Customization

12.

Non-Cash Payment

/ The technology allows personalized messages to be delivered to

individuals as well as groups. Personalisation of marketing
messages and customization of products and services are based
on individual characteristics.
E-Commerce enables use of credit cards, debit cards, smart cards,
electronic fund transfer (EFT) via banks website and other
modes of electronics payment.

IMPORTANCE (Benefits / Advantages)

of E-Commerce or E-business
E-commerce is the new, profitable way to conduct business which goes beyond the simple
movement of information and expands electronic transactions from point-of-sale
requirements, determination and production scheduling, right through to invoicing, payment
and receipt. E-commerce has created new phenomena in our lifestyle especially in shopping
activities.
The global nature of the technology, low cost, opportunity to reach hundreds of millions of
people, interactive nature, variety of possibilities, and resourcefulness and growth of the
supporting infrastructure (especially the Web ) result in many potential benefits to

organisations, individuals and the society. Thus, E-commerce provides a lot of benefits to
the Organisations, Customers and the Society, discussed as follows :

No.

Advantages of E-commerce

A.

Benefits to Organisations

1.

Expanded
Market

Using e-commerce, organisations can expand their market to

national and international markets with minimum capital
investment. An organisation can easily locate more customers,
best suppliers and suitable business partners across the globe.

2.

Reduced Cost

E-commerce helps organisation to reduce the cost to create

process, distribute, retrieve and manage the paper based
information by digitizing the information.

3.

Reduced
Inventory

E-commerce allows reduced inventories and overheads by

facilitating pull type supply-chain-management which means
collecting the customer order and then delivering through just-intime (JIT) manufacturing which reduces storage costs.

4.

Time Saving

E-commerce reduces the time between the outlay of capital and

the receipt of revenue through sale of products and services.

5.

Low Cost of
Communication

The internet is much cheaper than value added networks, and it is

also cheaper to send a fax or e-mail via the Internet than direct
dialling.

6.

Better Marketing

E-commerce increases the reach of advertising of products and

services of businesses. It helps in better marketing management of
products or services.

7.

Improved Sales

Using e-commerce, orders for the products can be generated any

time, anywhere without any human intervention. By this way,
dependencies to buy a product reduce at large and sales increase.

8.

Improved
Transactions

Electronic business results in better transactions, wide market

coverage by offering the benefits of speed, convenience, being cost
effective, timeliness, high profit margins, instant customer
relations, no loss of customers, impact and control.

9.

Better Decisions

Application of electronic operations to commercial activities means

better business solutions. It greatly facilitates a firm to make
better decisions, sales forecasts, prices and other valuable
information can be sent and received instantaneously.

10.

Competitive
Advantage

E-commerce enables firms to have an edge over competitors by

informing, following up and requesting information faster and
easier to customers.

11.

Greater Control

E-commerce helps to maintain greater control at work, home or

while travelling, communicating with any business partner or firm,
anywhere instantly.

12.

Co-ordinates
Sales Efforts

The sales people spend a lot of their time on the roads, relying
heavily on telephone calls for contact with their head officers and
customers. The electronic business eliminates telephone tag,
sends and receives messages at convenience, links sales team
members to gather and effecting sales without delays.

13.

Effectiveness and E-commerce increases the efficiency and effectiveness of public

Efficiency
relation programmes, 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.

14.

Improved
Responsiveness

E-commerce increases responsiveness of the company about price

change and marketing strategies as and when required, and
ensures customer satisfaction. The requests for information and
follow-up-reports can be effected with greater efficiency using
instant messages.

15.

Planning and

Executive management meetings, seminars, workshops, symposia

Execution of
Meetings

and conventions take a great deal of time and effort to manage. 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.

16.

Digitisation
Products

of E-commerce has facilitated the digitisation in case of software and

music or video products, which can be downloaded or e-mailed
directly to customers via the internet in digital or electronic format.

B.

Benefits to CONSUMERS

1.

Easy Accessibility

E-commerce enables customers to shop or do other transactions

24 hours a day, all year around, from almost any location.

2.

Wide Choice

E-commerce provides customer with more choices, they can select

from many vendors and from many more products.

3.

Cost Saving

E-commerce provides customers with less expensive products and

services by allowing them to shop in many places and conduct
quick comparisons.

4.

Fast Delivery

E-commerce allows quick delivery of digitised products.

5.

Fast Information

Customers can receive relevant and detailed information in

seconds, rather than days or weeks.

6.

Wide Interaction

E-commerce allows customers to interact with other customers in

electronic communities and exchange ideas as well as share
experiences.

7.

More Discounts

E-commerce facilitates competition, which results in substantial

discounts.

C.

Benefits to SOCIETY

1.

Less Congestion

E-commerce enables more individuals to work at home and to do

less travelling for shopping, resulting in less traffic on roads and

lower air pollution.
E-commerce allows some merchandise to be sold at lowest prices,
so less affluent people can buy more and increase their standard of
living.

2.

Increased
Standard of
Living

3.

Access to Rural
Areas

E-commerce has enabled people in developing countries and rural

areas to enjoy products, services and information that otherwise
are not available to them.

4.

Better Utility
Services

E-commerce facilitates delivery of public services such as health

care, education and distribution of government social services at a
reduced cost and improved quality. Health-care services can reach
patients in rural areas.

Thus, e-commerce is a new way of doing business or an additional method of doing business
with new generation technology. 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.

LIMITATIONS / Disadvantages of E-Commerce

The limitations of e-commerce can be grouped into two categories Technical and Nontechnical, discussed as follows :
No.

LIMITATIONS of e-commerce

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A.

TECHNICAL Limitations to the Organisation

1.

Uncertain
System

There is lack of sufficient system security, reliability, standards and

communication protocols. There are numerous reports of websites
and databases being hacked into, and security holes in software.
Protocols are set of rules and regulations for communication and
transfer of data between two computers in a network.

2.

Rapid Change

The technology is changing rapidly, so there is always a feeling of

trying to catch up and not be left behind.

3.

Specialised
Servers

Vendors may need special Web servers and other infrastructures in

addition to the network servers.

4.

Incompatible
Software

It is difficult to integrate the Internet and E-commerce software

with some existing applications and databases.
Further, some e-commerce software might not fit with some
hardware or may be incompatible with some operating systems or
other components.

5.

Pressure
Innovate

to The firms innovate and develop business models to exploit the new
opportunities that can be copied over the Internet which is
detrimental to the organisation and curtails longer-term
competitive advantage.

6.

Price wars

E-commerce has increased competition from both national and

international competitors which leads to price wars and subsequent
unsustainable losses for the organisation.

7.

Internet Outrage

The network may not be reliable because of failures in networks

and the Net itself. Reliability is a major issue in net business that
needs to be attended.

8.

Absence of Cyber Advertising on the Net tends to focus on e-commerce rather than

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Brand Image

on brands found in the real world which proves to be a deterrent in

ensuring consumer loyalty.

9.

Preference
Foreign Sites

to On-line shoppers in India do not prefer Indian websites to a large

extent and prefer US and other foreign websites. Because they
provide better selection, prices, stock, quality products, shipping
payment process security, customer service and wide variety of
sites among other things.

B.

Limitations to Consumers

1.

Initial
Cost

2.

Updation Cost

The technology is updated regularly to be compatible with the

changing requirement of the Internet, websites and applications,
which requires further costs.

3.

Absence of
Personal Feeling

Customers are unable to touch and feel goods being sold on-line or
gauge voices and reactions of human beings.

4.

Lack of
Awareness

The lack of awareness of the technology and its potential benefits

as well as lack of interest and willingness to make a paradigm shift
are responsible for the poor growth of e-commerce.

Capital Computing equipment is needed for individuals to participate in the

new digital economy, which means an initial capital cost to
customers.

Most of the business people are unsure of the quality and delivery
schedule, physical delivery of goods and mode of payment.
It is difficult to change the minds and attitudes of the merchants in
tune with the emerging Information Technology ( IT ). A new
awareness is needed as well as optimism and strategic business
projections are required.
5.

Lack of
Confidence

The consumers still are hesitant in buying through the Net. Lack of
quality products, timely delivery of products, lack of security are the
potential reasons for not developing e-commerce.

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6.

User Resistance

User may not trust the site being unknown faceless seller. Such
mistrust makes it difficult to make user switch from physical stores
to online stores.

7.

Security
Privacy

8.

Dissatisfaction

C.

Limitations to SOCIETY

1.

Breakdown
Human
Interaction

2.

Social Division

3.

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

4.

Wasted
Resources

or The shoppers are still sceptical about safety and have not been
quick to trust sending personal information such as credit card
numbers or address over the Net. It is difficult to ensure security or
privacy on on-line transactions.
A key source of dissatisfaction is that the advertised products or
services are not available. The options of feedback and not
receiving suggestions are also reasons for annoyance. Many online
consumers want more detailed information on their purchases but
are not available.

in As people become more used to interacting electronically there

could be an erosion of personal, cultural and social skills which is
possible only through face to face interaction.
There is an increase in the social divide between technical haves
and have-nots, so people who do not have technical skills become
unable to secure better-paid jobs which is dangerous for social
stability.

As new technology dates quickly, it becomes difficult to dispose of

all the old computers, keyboards, monitors, speakers and other
hardware or software.

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5.

Absence of Tax There is no fixed location for the Internet, no emphasis on national
Laws
boundaries, and messages travel across the boundaries of several
countries globally. But a persons location and identity is necessary
for tax purposes. Since these two are difficult, the Net transactions
pose a big problem for taxation.

6.

Infant Stage

The IT function has not grown beyond the marketing department

and credit cards, merchant accounts, digital signatures and prompt
payment and one has to realize that the e-commerce role is more
about harnessing technological resources to deliver profits to the
Net users. Only a few big house have gone on-line to explore the
potentials of e-commerce.

E-Commerce Framework
__________________________________________
E-commerce Framework refers to the structure and pillars required to implement the ecommerce transactions and models. The structure and pillars are the important components
of the e-commerce framework which are required to carry on e-commerce transactions
efficiently, effectively and smoothly.

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Thus, the e-commerce framework identifies the different Components of business and
technology that interact together to make up e-commerce. The Components of E-commerce
Framework are discussed as below :
E-commerce Framework
Components
______________________________________________
Core Components
*
*
*
*

Network Infrastructure
Contents Development and
Network Publishing
Distribution Infrastructure
Business Services Infrastructure

1.

Network Infrastructure

Supporting Pillars
*
*
*
*

Public Policy
Technical Standards
Legal Framework
Financial Framework

Network Infrastructure is called as Information Superhighway. It is the path through which

actual information flows and moves between sender and receiver.
Information Superhighway consists of telecommunication networks, cables and direct
broadcast satellite networks, and computer networks like Internet, intranets and local area
networks.
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.

2.

Multimedia Contents Development and Network Publishing

The Network Information enables the transmission and publishing of Information (content)
through the World Wide Web (www). Web stores and transports electronic data and
multimedia content to create product information (content) in the form of Hyper Text
Markup Language (HTML) and a means to publish it in a distribution center (network or web
server). This infrastructure consists of following three components :

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i)

Multimedia Publishing Infrastructure to create multimedia contents for business

applications

ii)

Multimedia Storage Infrastructure to provide for efficient and organised storage

facilities for efficient and quick retrieval and deployment of multimedia contents

iii)

Content Deployment Infrastructure which helps to search and retrieve multimedia

contents from their storage locations.

3.

Messaging and Information Distribution Infrastructure

The information content transferred over the network consists of text, numbers, pictures,
audio and video. Once Information contents have been created and stored on a server,
translators interpret and transform data formats and messages are carried across via
satellite networks.
Messaging and information distribution infrastructure are like engines and fuel, which
transport the data around the network by EDI, e-mail, Hyper Text Transfer Protocol.
4.

Business Services Infrastructure

Business services infrastructure includes all vendors and other parties engaged in the business
activities which facilitate e-commerce transactions in any fashion. Such business activities
include :
i)
ii)

Providing hardware and software solutions to counter security threats. This includes
development of encryption technology and standards.
Development of secure Electronic Payments Funds Transfer systems.

iii)

Developing standards and formats for content creation, distribution and deployment
and development of protocols for data transmission, and other such infrastructure

iv)

Convergence of content, transmission technologies and information access devices.

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The business services are necessary for facilitating the buying, selling and other transactions
safely and reliably through Smart cards, Authentication, Electronic payment, Directories or
catalogues.
5.

Public Policy

Public Policy related to e-commerce includes such issues as universal access, privacy,
information pricing, electronic contracts and the terms and conditions that govern ecommerce. Public Policy is ensured through Standards and Legal systems which govern the
way in which personal information is acquired, disclosed and used on-line.
6.

Technical Standards and Network Protocols

Technical standards dictate the format of information publishing tools, user interfaces and
transport. They include transmission protocols, multimedia formats, interoperability,
integration of hardware and software, documentation specifications and acceptability of
standards. These standards are essential to ensure compatibility across the entire network of
world.
7.

Legal Framework

A Legal Framework includes Regulations for e-commerce transactions and ensuring legal
systems compatible to e-commerce. A legal framework for e-commerce in India has been
provided by the Information Technology Act, 2000, whose main objectives are :
i)
B2C
ii)
iii)
iv)

To make possible e-commerce transactions both B2B (business to business) and

(business to consumer)
To make possible e-governance transactions both G2C (government to citizen) and
C2G (citizen to government)
To curb cyber crime and regulate the Internet
To provide Security and Authentication of Electronic Funds Transfers through digital
signatures.

A proper legal framework ensures privacy, security, protection and confidentiality in ecommerce transactions.
8.

Financial Framework

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E-commerce requires financial and banking framework that allows for electronic payments
and transfers quickly, effectively and safely. This would include requirements for certification
of documents, electronic signatures, confidentiality and privacy.
Thus, the interaction of people and organisations to manage and coordinate the applications,
infrastructures and businesses are all necessary to make e-commerce work. This is
particularly useful framework for managers to understand the importance of technology and
business, both with the organisation and external to it, in the planning and development of
any e-commerce or e-business solution.

Pre-requisites of E-commerce Framework

The e-commerce framework consists of the basic and supportive infrastructure and business
applications as well as the basic issues that are needed to develop the e-commerce business
model. There are certain basic considerations (essentials) required while developing a generic
framework for e-commerce, discussed as below :
No.

Essentials for E-commerce Framework

1.

Interoperability

E-commerce must be based on a common set of services and

standards that ensure interoperability.
Preferably, service
providers and application designers will be able to use these
services and standards as building blocks that can be combined,
enhanced and customized.

2.

Flexibility

In fast changing technological environment, the e-commerce

framework should be able to acknowledge and accept such
advancements e.g. in the field of electronic payment systems. It
should have ability to publish, reuse and update information to
meet changing business conditions.

3.

Integration

New services and business application areas are emerging, so ecommerce framework should be able to accommodate future
enhancements and trends in the infrastructure, industry and
applications.

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4.

Media
Convergence

E-commerce transactions will involve all kinds of legacy and newly

developed devices and media, and networks over which these are
delivered.
The e-commerce framework must be able to
accommodate these technologies, devices and their convergence,
needed to reach and sustain the mass market.

5.

Personalization

E-commerce should permit the ability to target, format, and

automatically adapt content for specific users to meet their
preferences, interests and business requirements.

Customization

Customization means changing the delivered product or service

based on a users preferences or prior behaviour. Many of the
products are designed or tailored by customers according to their
own tastes, preferences and fashions. For example, customers can
customize their own clothing designs. This capability adds a
customer-driven activity a design phase to the purchase cycle.

Adaption
to Many legacy systems as paper checks, settlement and payment
Legacy Systems
systems and EDI VANs exist in the e-commerce. A successful
infrastructure must let the user transfer easily and transparently
between these older systems and newer, all electronic systems,
applications and processes.

A framework developed with all these considerations will form the strongest basis for a
powerful and useful e-Commerce Infrastructure.

E-Commerce Process
e-Commerce process consists of the following activities or stages (steps) :
Steps
1.

E-commerce Activity or Stage

Advertising
and Shopping

The first step in e-commerce includes searching and browsing

electronic directories and catalogues on a network by both sellers

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and buyers. The buyers send electronic requests for proposal and
sellers respond with various offers by advertising their products and
services.
However, the advertising and shopping activity is costly and time
consuming in developing, maintaining and finding relevant
information, products and services, given the plenty of available
information.
2.

Negotiating

Buyers and sellers negotiate the terms of a transaction, i.e. the terms
of exchange and payment. These terms may cover delivery, refund
policies, arranging for credit, instalment payments, copyright or
license agreements, usage rights, distribution rights, etc. These
terms can be standardized for routine commodity use, or customized
to suit specific customers.

3.

Ordering

The buyers and sellers enter into a contractual agreement (order)

that sets forth the quantity, price and other terms of the transaction.
The order may be verbal, in writing, or electronic.

4.

Billing

Once seller has delivered goods or services, a bill is sent to the buyer
which includes remittance information that should accompany the
payment.

5.

Payment and
Settlement

The buyers sends some form of electronic payment usually along

with remittance information to the seller. Settlement occurs when
the payment and remittance information are analysed by the seller
or the sellers agent and accepted as valid.

6.

Distribution
and Receipt

The seller arranges for delivery of the goods and services 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.

7.

Accounting

Both buyer and seller must reconcile all electronic transactions in the
accounts receivable and accounts payable, inventory information and

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accounting systems. Account and Management Information System

(MIS) records must also be updated.
8.

Customer
Service and
Feedback

Customer service and feedback consists of :

a)
b)

c)

providing the buyer with timely information as to the

progress of the transaction;
handling any mistakes, disputes or complaints regarding
product quality, delivery or payment, returns and refunds,
etc.; and
providing expert advice and assistance in the use of the
products and services.

Web based business ( e-Commerce / e-Business )

vs.
Land based business (Traditional Commerce )
Web-based-business, called as e-Commerce, is the ability to perform transactions involving
the exchange of goods or services between two or more parties using electronic tools and
techniques.
Land-based-business is the traditional business of buying and selling of goods or services,
where sellers open retail stores at different locations to offer their products and services and
buyers visit these places to buy goods or avail services to satisfy their needs, also called as
Bricks and Mortar business.
The following are the major differences between Traditional Commerce and E-commerce :
No. Basis of
Distinction

Traditional Commerce

1.

It requires more space, proper It requires less space and can be

location and is formed as an started from any location (even
Enterprise requiring high initial from home) by any person

Formation

e-Commerce

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set-up cost.

requiring less set-up cost.

2.

Operating Cost

It involves high operating costs It involves low operating costs of

of rent, staff, transport, etc.
internet connection, etc.

3.

Organisational
Structure

It
has vertical or tall It has horizontal or flat
organisational
structure organisational structure because
because of chain of command.
command and communication
are direct.

4.

Physical
presence

It requires physical presence.

5.

Nature of
Communication

It involves hierarchical flow of It involves non-hierarchical flow

communication i.e. from Top- of communication.
to-Middle-to-Lower
level
management to Operatives.

6.

Means of
Communication

Manual intervention is required Electronic systems automatically

for each communication or handle
when
to
pass
transaction.
communication to required
person or do the transactions.

7.

Business Cycle

The business process cycle is The business process cycle is

Long.
Short.

8.

Location

It is located locally at the places It is located Globally world-wide

where sources of raw material through Internet Networks.
are easily available or near the
markets for the products.

9.

Nature of
Contacts

It involves indirect contact with It involves direct contact with the

the suppliers and the customers suppliers and the customers.
through intermediaries.

10.

Personal Touch

It facilitates more opportunity It lacks opportunity for interfor inter-personal touch which personal touch.

It does not require physical

presence.

22

gives personal feeling.

11.

Pre-sampling of
Products

It provides many opportunities It provides opportunities for

for physical pre-sampling of the physical pre-sampling of the
products.
products only in case of books,
journals, videos, etc.

12.

Human Capital

It requires semi-skilled and It requires technically and

unskilled workers.
professionally
qualified
personnel.

13.

Transaction Risk

It involves low transaction risk It involves high transaction risk

because parties have direct because parties dont have direct
personal interaction.
personal interaction.

14.

Standards

It is difficult to establish and A uniform strategy can be easily

maintain standard practices in established and maintained in etraditional commerce.
commerce.

15.

Uniform
Platform

No uniform platform for

information sharing as it
depends heavily on personal
interactions between buyers
and sellers.

E-commerce provides a universal

platform through Website to
support
commercial
and
business activities across the
globe.

HISTORY and GROWTH of e-Commerce

________________________________________________________
E-commerce, a new means to carrying out business transactions through Internet
environment has been contributing to the effective socio-economic growth. E-commerce
as an essential part of the digital economy plays a key role to open out door to the 21 st
Century, the new era a knowledge-based economy.

HISTORY of e-Commerce

23

E-commerce means the process of execution of commercial transactions electronically

with the help of the leading technologies such as Electronic Data Interchange (EDI) and
Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange
business information and to electronic transactions. The ability to use these technologies
appeared in the late 1970s and allowed business companies and organisations to send
commercial documentation electronically.
This included ATM (automated teller
machines) and Credit Card transactions as well as the ability to do billing and invoicing
through electronic methods. During the periods of late 1970s to 1980s the people
started to use credit cards on a regular basis and that set the foundation for e-commerce.
In 1984, EDI was standardized through formulating standards ASC x12. This
guaranteed that companies would be able to complete transactions with one another
reliably. In 1990, Tim Berners-Lee wrote the first web browser, World Wide Web
(www), using a NeXT Computer. This was the time when average person started using
Internet.
E-commerce became possible in 1991 when the Internet was opened to commercial use.
Since that date thousands of businesses have taken up residence at web-sites.
In 1992, Compu-serve offered on-line retail products to its customers. This gave people
the first chance to buy things on their computer.
In 1994, Netscape arrived and providing users a simple browser to surf the Internet and
a safe on-line transaction technology called Secure Sockets Layer (SSL).
In 1995, two biggest names in e-commerce were launched which are Amazon.com and
eBay.com. Amazon.com, Inc. is one of the most famous e-commerce companies and is
located in Seattle, Washington (USA). It was founded in 1995 by Jeff Bezos and is one of
the first American e-commerce companies to sell products over the Internet.
Although the Internet began to advance in popularity among the general public in 1994, it
took approximately four years to develop the security protocols ( for example, HTTP and
DSL ) which allowed rapid access and a persistent connection to the Internet.
In 1998, the Digital Subscriber Line (DSL) provided faster, always-on-internet service to
subscriber across California (USA). This prompted people to spent more time and money
online. In 1999, retail spending over the Internet reached $ 20 billion ( $ 2000 crores),
according to Business.com.

24

In 2000, a great number of business companies in the United States and Western
Europe represented their services in the WWW. At this time the meaning of the word ecommerce was changed. People began to define the term e-commerce as the process of
purchasing of available goods and services over the Internet using secure connections and
electronic payment services.
However, the dot.com business collapsed in 2000 and led to unfortunate results and
many of e-commerce companies disappeared, the brick and mortar retailers
recognised the advantages of e-commerce and began to add such capabilities to their
web sites, for example, after the on-line grocery store Webvan came to ruin, two
supermarket chains, Albertsons and Safeway, began to use e-commerce to enable their
customers to buy groceries on-line. By the end of 2001, the largest form of e-commerce,
Business-To-Business (B2B) model, had around $ 700 billion in transactions.
After the dot.com collapse, Amazon had lost its position as a successful business model,
however, in 2003, the company made its first annual profit which was the first step to the
further development. At the outset, Amazon.com was considered as an on-line bookstore,
but in time it extended a variety of goods by adding electronics, software, DVDs, video
games, music CDs, apparel, footwear, health products, etc. The original name of the
company was Cadabra.com, but shortly after it became popular in the Internet, it was
renamed as Amazon after the worlds most voluminous river.
Although the Amazons main headquarters is located in the USA, it has set up websites in
other countries such as the United Kingdom (UK), Canada, France, Germany, Japan and
China. The company supports and operates retail web-sites for many famous businesses,
including Marks & Spencer, Lacoste, the NBA, Bebe Stores, Target, etc. In 2008, Amazon
entered into the cinema and sponsored the film The Stolen Child with 20 th Century Fox.
The Amazon.com attracted about 615 million customers every year. Amazon.com is also
well-known for its clear and user-friendly advanced search facility which enables visitors
to search for keywords in the full text of many books in the database.
One more company which has contributed much to the process of e-commerce
development is Dell Inc., an American company located in Texas, which stands third in
computer sales within the Industry behind Apple and Hewlett-Packard.
History of e-commerce is unthinkable without Amazon and eBay which are among the
first Internet companies to allow electronic transactions. Currently the most popular

25

categories of products sold in the World Wide Web are Music, Books, Computers, Office
supplies and other Consumer electronics.
History of e-commerce is a history of a new, virtual world which is evolving according to
the customer advantage. It is a world which we are all building together brick by brick,
laying a secure foundation for the future generations.

GROWTH Story of E-commerce in India

The growth of e-commerce started in India in the year with the introduction of
Business-to-Business (B2B) portals in 1996, now e-commerce is all set to become one of
the successful medium for business transactions. The growth story of e-commerce in
India, over the years, is discussed as follows :
No.
1.

E-commerce wave over the years

First Wave The first wave of e-commerce in India was characterised by a
1996 to 2005
small on-line shopping user base, low consumer acceptance and
inadequate logistics infrastructure.
The IT downturn in 2000 led to the collapse of more than 1000
e-commerce businesses in India, and there was thin activity in
India in between 2000 and 2005.

2.

Second wave During the second wave, two major transitions took place that
2005 to 2010 aided in the build-up of e-commerce story in India. They were :

a) On-line
Travel

The entry of Low Cost Carriers (LCCs) in the

Indian aviation sector in 2005 marked the
beginning of the second wave of e-Commerce in
India. The decision of LCCs to sell their tickets
on-line and through third parties enabled the
development of On-line Travel Agents.
The LCCs developed their own websites and
partnered with Agents to distribute their tickets

26

on-line.
The Indian Railways had already
implemented the e-ticket booking initiative by the
time LCCs started their on-line ticket booking
schemes.
b) On-line
Retail

3.

The growth of on-line retail was partly driven by

changing urban consumer life-style and the need
for convenience of shopping at home. This
segment developed in the second wave in 2007
with the launch of multiple online retail websites.

Third wave Third wave started in 2010 which consists of following two major
2010 onwards activities :
a) Group
Buying

Group-buying sites have seen a significant

rise in the number of unique visitors and
membership.

b) Social
Commerce

It is a key avenue for e-Commerce players to

reach out to target customers. Companies
have started establishing their presence in
the social media space for branding activities,
connecting with customers for feedback and
advertising new product launches.

E-commerce Today
Todays world is not an ordinary world or common world; we are living in on-line world
or Internet world for each and everything we are depending on Internet and Internet has
become part and parcel of human life. We are using internet not only for browsing
information but for everything like for booking tickets of train, bus and flight, for booking
cinema tickets, for payments, for banking transactions, for social networking, and also for
shopping of day to day needed goods.

27

E-commerce today is a remarkable experience. It has transformed traditional shopping

beyond recognition. People seem to shop literally everywhere at their workplaces
during lunch times, in rush hour when there is nothing else to do but switch on their
laptops and start surfing.
E-commerce today gained so much popularity because we are even offered to feel the
product with a 3D mouse to better understand its shape, size and texture. Why go
somewhere out when all you have to do is make an order on-line, choose the shipping
method, put up your feet and wait till the order is delivered right to your door-step, so
easy.
E-commerce today offers so much luxury that even conventional stores have already
signalled the alarm. Although, every one agrees that it is a long way for an e-commerce to
replace brick-and-mortar stores, it has every chance to happen in the future. Ecommerce which we are witnessing todays brings in so much adventure into our lives
that it is enjoyed by the whole on-line community.
Today people are not only having personal computers but also laptops, notebooks, tablets,
palmtops and smart phones and they are having 3G, 3G+ and 4G networks from where
they can easily access the internet. Day-to-day internet users are tremendously
increasing in India due to large availability of smart phones, faster networks, and cheaper
broadband services and the internet transactions are also increasing and customers are
attracted by the different benefits provided by on-line shopping and the number of online service websites are also increasing.
Today human life has become on-line, everything is purchased through internet only and
they dont want only products and services but also they need the different benefits along
with the shopping like discounts, offers, big deals, different brands, variety of choices,
convenience payments and delivery, and time saving. Due to all these reasons, ecommerce transactions are increasing and the e-commerce industry in India is also
growing day-by-day.

Present Status of E-commerce in India

The e-commerce market in India has been growing by leaps and bounds for the last few
years. The trend is expected to continue as the e-commerce market in India was worth #
16 billion in 2013 and is expected to touch $ 56 billion by 2023, according to the latest
ASSOCHAM report. Consumer behaviour and shopping-trends have helped the Indian ecommerce industry to record a staggering 85% growth in 2013 as compared to last year.
The e-commerce market in India will control 6.5% of total retail market by 2023.

28

The ASSOCHAM report on e-commerce market in India 2013-2023 claims that Mumbai
leads the other cities in number of on-line shoppers, followed by Delhi and Kolkata. Its
surprising to know that the silicon IT hub of India Bangalore, fails to make it to the
top 3 places despite of a superior technology infrastructure and a large number of
technology professionals who are quite used to internet usage.
Young generation on the internet has emerged as the driving force behind the growth of
the e-commerce industry in India. Nearly 90% of on-line shoppers in India belong to the
18-45 year age group. While classifying the on-line shoppers based upon gender, nearly
65% of on-line shoppers in India are Male as against 35%, who are Female. More than 76
lakhs people are found vising deals and discounts based websites, which is a proof itself of
their growing fad for on-line shopping.
The following are TOP 10 Indian E-commerce companies on Facebook :
No.

e-Companies

1.
Flipkart
2.
Amazon India
3.
eBay
4.
Olx.in
5.
Junglee
6.
Snapdeal
7.
Bewakoof.com
8.
BookmyShow
9.
Jabong
10.
Hungama.com
11.
Lootore.com
12.
Quiker.com
As per a study by ASSOCHAM, Indian e-commerce is emerging as the biggest B2C market
place of Asia after recording an increase of 35% and by 2020 it is likely to appear as the
central point for start-ups, investors and entrepreneurial activities.
This tremendous growth and trending shopping habits have brought a surge of new online companies that have created a competitive atmosphere. The attention grabbing ads,
tempting offers and discounts, free gifts, endless deals sites, easy return & exchange and
many such feats are the result of this brewing competition.

29

The products that are sold, mostly are in the tech and fashion category, which include
mobile phones, iPad and accessories, MP3 players, digital cameras and jewellery, etc. The
following is the percentage of products bought and sold by on-line shoppers as per
ASSOCHAM Report, Dec. 2013 :
Products
Gift Articles
Books
Electronic Gadgets
Railway tickets
Accessories Apparel
Apparel
Computers & Peripherals
Airline tickets
Movie tickets
Music
Hotel rooms
Magazines
Home tools, products and appliances
Toys
Jewellery
Beauty Products
Health & Fitness Products
Apparel Gift Certificates
Sporting goods

% of Products transaction by on-line

58
42
41
39
36
36
33
29
26
24
20
19
16
16
15
12
12
10
7

The year 2014 saw the biggest deals in Indian e-commerce arena. Flipkart acquired
fashion e-tailor Myntra in May 2014 for $ 370 million. In July 2014, the Flipkart had
raised $ 1 billion at a valuation of around $ 5 to 7 billion. This was followed by
Flipkarts biggest competitor Amazon infusing $ 2 billion into its Indian arm. Its close
competitor Snapdeal had raised $ 100 million in May 2014 from group of investors,
including Azim Premji (Wipro Chairman). Then its valuation had touched $ 1 billion ( $
1000 million).

30

In September 2014, the Chinese e-commerce giant Alibaba broke all records with is $
25 billion IPO (Initial Public Offer new issue of shares ) on US stock exchange
(NASDAQ).
The year 2014 will also be remembered in Indian e-commerce as the year when Mobilecommerce took to its wings. The e-tailers got 40% to 50% traffic from Mobiles and this
will grow further in 2015. Flipkart this year launched the Big Apple products sale in
December 2014 to promote sale on its mobile-platform.
Today, nearly 10% of the total population in India is on the Internet now. According to a
Report from Comstore, three out of every five internet users in India are shopping online.
This has made India, one of the most lucrative markets for global e-commerce giants,
especially the likes of Amazon, Alibaba and Flipkart. As per retail consultancy
Technpak, the total size of the e-tailing industry in India stood at $ 2300 million in 2014
and this is expected to grow up to $ 32 billion by 2020.

FUTURE of E-commerce
Experts predict a promising and glorious future of e-commerce in the 21st Century. In the
foreseeable future, e-commerce will further confirm itself a major tool of sales. Successful
e-commerce will become a notion absolutely inseparable from the web, because eshopping is becoming more and more popular and natural.
Each year the number of e-commerce deals grows enormously. Sales volumes of on-line
stores are more than comparable with those of brick-and-mortar ones. And the
tendency will continue, because a lot of people are imprisoned by work and household
duties, while Internet saves a lot of time and gives opportunity to choose goods at the best
prices. Present-day Internet sales boom is the foundation for magnificent e-commerce
future.
The quantity to quality tendency of e-commerce is also becoming more and more
obvious, as the Internet has excluded geographical factor from the sale. So it doesnt
matter any more whether your store is situated in New York or London or in a small town.
To attract more customers, e-store owners will have not only to increase the number of
available services, but to pay more attention to such elements like attractive design, userfriendliness, appealing goods presentation, they will have to employ modern technologies
for their businesses to become parts of e-commerce future.

31

E-commerce industry still has to reach to the minds of the people not only in Metropolitan
cities but also in other big cities, especially in small cities. It has to create awareness in
the Rural sector about the benefits of on-line shopping. Because in recent days mobile
phones have become basic need of human beings especially smart phones and these are
internet enabled, and they play an important role in increasing the business of on-line
shoppers.
The future looks very bright for e-commerce in India with even the stock exchanges
coming on-line providing a on-line stock portfolio and status with a 15 minutes delay in
stock price. In the next 3 to 5 years, India will have 100 million Internet users which will
equal to many of the developed countries.

TYPES of E-commerce
________________________________________________________

32

E-commerce is the process of conducting commercial transactions electronically over the

Internet, and the main aspect of e-commerce is a merchant selling products or service to
the consumers. The following are some popular e-commerce models used by companies
engaged in e-commerce.

1.

B2B Business-to-Business e-commerce

B2B commerce i.e. business-to-business involves e-commerce transactions between

business firms. It involves transactions relating to placing orders, monitoring production,
money transfer, creation of utilities, sending and receiving orders or invoices.
B2B includes internet-enabled initiatives of an enterprise to form commercial linkages
with another enterprise, dealer or manufacturer thereby reducing e-paperwork and timeto-market.
Business Organisation

Order
Processing

Supplies

Distributor or

WEBSITE

Orders

Wholesaler

A wholesaler may sell products to the retailers with multi-tier pricing, by setting up online stores to offer preferred pricing to some vendors and shared price to others.
B2B e-commerce is smart growing business which facilitates access to the ordering
process to only those with whom a concern has a commercial relationship.

Benefits
B2B e-commerce provides Small and Medium Enterprises (SMEs) with an excellent
opportunity to access new markets, improve customer service and reduce costs. As a

33

medium of information storage, the internet has emerged as a clear winner as compared
to other popular media such as newspaper, radio and television.
Disadvantages
B2B transactions are however relatively high value in nature and organisations are slow
to change their traditional systems for the Supply Chain Management (SCM).

2.

B2C Business-to-Consumer e-commerce

B2C commerce i.e. business-to-customers involves transactions which take place

between business firms and customers. It is also referred to as on-line shopping.
B2C e-commerce involves selling of goods and services to consumers or end-users
through Internet. It allows them to browse the product catalogue, select products or
services and complete the order on-line.

Business Organisation

Order
Processing

Supplies

Customer

WEBSITE

Orders

Some of the first examples of B2C e-commerce are Amazon.com and Dell.com in the
USA. The Amazon.com, which is the first on-line bookseller has proved a potential
competitor to the traditional bricks and mortar booksellers such as Barrens and Noble
in the USA.

Benefits

34

E-business in this mode significantly reduces the costs associated with intermediaries,
service centres and mass marketing campaigns. Since e-commerce makes Just-In-Time
(JIT) delivery possible, the supplier does not have to store the goods.
B2C is the most popular form of e-commerce, wherein the businesses use the internet for
offering their products or services 24 hours a day through global access to the ultimate
consumers.

3.

C2B Consumer-to-Business e-commerce

C2B is the exchange of products, information or services from individuals to business. A

classic example of this would be individuals selling their services to businesses.
In this model, a consumer approaches website showing multiple business organizations
for a particular service. Consumer places an estimate of amount he/she wants to spend
for a particular service. For example, comparison of interest rates of personal loan/ car
loan provided by various banks via website. Business organization who fulfils the
consumer's requirement within specified budget approaches the customer and provides
its services.

Business Organisation

Supplies
Product

Customer

Receives
Money

Order
Processing
WEBSITE

Places money for

Particular service

An example of C2B model of e-commerce is the site Priceline.com, which allows

prospective airline travellers, tourists in need of hotel reservations, etc. to visit its
websites and indicate their preferred price for travel between any two cities. If an airline
is willing to issue a ticket on the customers offered price, the consumer can then travel to
the mentioned destination at his terms.
Benefits

35

In C2B e-commerce, the customers can make toll free calls to the call centers set up by
the companies to make queries or to lodge complaints.

4.

C2C Consumer-to-Consumer e-commerce

C2C commerce refers to transactions between different consumers. It provides a

market for dealing in goods for which there is no established market e.g. selling of used
books or clothes.
Customer 1

Supplies
Product

Wants to sell
Products
Receives
Money

Customer 2

WEBSITE

Places money for

Buying Products

In this category consumers interact directly with other consumers.

information such as :
i)

Expert Knowledge

They exchange

where one person asks a question about anything and gets

an e-mail reply from the community of other individuals.

ii)
Opinions
products

where people share opinions about companies and

ii)

where people exchange goods both with consumer auction

sites such as e-bay and bartering sites such as swapitshop.
com, where individuals swap goods with each other
without the exchange of money.

Exchange of goods

Thus, C2C business models helps consumers to sell their assets like residential property,
cars, motor cycles, etc. or rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services. Another consumer may opt
to buy the product of the first customer by viewing the advertisement on the website.