[MARKETING SPECIALISATION ; E – COMMERCE ] By Nisha Hariyani

What Is Ecommerce? Definition, Advantages and Disadvantages

Electronic commerce, known as ecommerce, is the buying and selling of goods or services
electronically on the internet. It can also refer to other online activities, such as auctions,
ticketing and banking.

In this article, we discuss the different types of ecommerce, its advantages and disadvantages
and why ecommerce is important.

Key takeaways:

Ecommerce is the online buying and selling of goods and services using computers, tablets
or smartphone.

Ecommerce makes up several types of business, including business-to-business, business-to-

consumer, consumer-to-consumer and consumer-to-business.

Many kinds of ecommerce activities are regulated by the Federal Trade Commission (FTC)

and the Payment Card Industry (PCI) Security Standards Council.

What are the different types of ecommerce?

Ecommerce is an essential part of many businesses that rely on the sale of physical products
or services online. Here are the main kinds of ecommerce:

Business-to-consumer (B2C): B2C is the most common kind of ecommerce. When

shoppers buy something from an online store, they are involved in business-to-consumer
ecommerce.

Business-to-business (B2B): B2B is when businesses sell raw goods or parts through e-

commerce to other companies that will then use those materials to create their own products.

Consumer-to-consumer (C2C): C2C ecommerce is when consumers sell to other

consumers. Sites like eBay and Craigslist are examples of this kind of ecommerce.

Consumer-to-business (C2B): C2B ecommerce is when consumers sell their products or

services to businesses.

Business-to-administration (B2A): B2A ecommerce refers to transactions between

businesses and public administration, which includes areas such as Social Security,
employment and legal.

Consumer-to-administration (C2A): C2A ecommerce refers to transactions between

consumers and public administration, where consumers pay for services like taxes and legal
document preparation.

Examples of ecommerce
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In addition to different types of ecommerce, there are also different functional versions of
ecommerce, distinguishable by the relationship of the transaction and the products or
services being sold. The most common examples include:

Retail: Retail ecommerce is when a product is sold directly to a customer.

Wholesale: Wholesale ecommerce is when products are sold in bulk often to a retail

company who, in turn, sells them to its customers.

Physical products: Physical product ecommerce refers to any products that affect inventory
and must be physically shipped.

Digital products: Digital product ecommerce refers to products purchased as downloadable

goods—such as books, templates or courses.

Dropshipping: Dropshipping ecommerce is when a product is sold by one company that

outsources its manufacturing and shipping to another company.

Subscription: Subscription ecommerce is when a customer has a recurring purchase of a

product or service—weekly, monthly, yearly, etc.—that automatically charges them and
replenishes the product.

Services: Service ecommerce refers to services purchased and often priced by the time spent
on providing the service.

Crowdfunding: Crowdfunding ecommerce is when money is collected as product capital in

advance of a product being available.

Advantages of e-commerce

There are many advantages of e-commerce including:

 Companies can reach a wider audience.

 Companies have lower operational costs.
 Shopping from home is more convenient for the consumer.
 Consumers can easily comparison shop across different brands.
 There's a greater selection of goods available.

Disadvantages of e-commerce

 While there are many benefits of ecommerce, there are some potential downsides as
well. Below are some common disadvantages:
 Less personalized service since there's no interaction with sales clerks
 Shipping charges and waiting for a product to arrive
 Inability to see a product before buying

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 Inconvenience of returning products

 Security issues of websites may put consumer information at risk

IMPORTANCE OF E-COMMERCE

• Electronic commerce means engaging commercial activities using the electronic media.

• Operating efficiency of the business firm will definitely improve and which in turn
strengthen the value and service given to customers and provide a completive edge over
competitors.

• The direct benefit accrue to an organisation on practising ecommerce are better quality,
greater customer satisfaction, better decision making, low cost, high speed and real time
interaction.

• E-Commerce has the potential to increase revenue by creating new markets for the existing
products and establishing new distribution channels to better serve and interact with
customers.

• Plenty of opportunities are available from e-commerce and the importance of e-commerce
can be discussed under the following heads.

1. Consumer Sovereignty

• Consumer is the king in the market.

• The marketing strategies.of all business organisations are one way or other, related
with the satisfaction of consumers.

• Consumers in e-commerce enjoy wide choice and best service. He is free to selèct
any goods and services displayed on computer screen.

• Orders can be placed over the Internet and goods are delivered at the doorsteps of
consumers, thus avoiding inconveniences associated with manual shopping.

• The consumer gets full attention of the supplier as e-commerce envisages one- to-
one marketing, There are no middlemen to operate between producers and consumers
in e-commerce since service of intermediaries are needed to facilitate exchange of
goods and services between buyers and sellers.

• The intermediaries' are start to disappear from the market scene as the world go for
electronic trading

2. Customisation

• High Quality relationship is crucial for retaining customers in the e-commerce

environment. • Customer relationship management (CRM) is a new concept in marketing

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and e-commerce provides plenty of opportunities to practice CRM in organisations with a

view to establish better relationship with customers. • It becomes absolutely necessary for
the company to enhance customer loyalty; • otherwise the customer is full of choice scan
jump from one web site to another. • In order to employ technology to develop, low cost
customer retaining methods, establish close relationship with customers and develop
customer loyalty. • To achieve this, marketers in all industries are seeking new ways to
interact with customers and delivering service,

3. New Markets

• It is easier to penetrate and reaching of the customers across the world within
minutes over Internet. • The net enables suppliers to introduce and promote new products to
meet the needs of the individual buyers. • Even if some customers have been missed may be
reached through the net. • Thus customer can have better quality products from any country
at reasonable prices CE-commerce also makes 'mass customisation' and 'net production'
possible. • An easy- to-use ordering system allows customers to order their own unique
product; business-to- business electronic commerce allows the quick and efficient
manufacture of what the customer ordered.

4. Efficient Use of Resources

• Availability of plenty of information, no transportation costs and free entry into

markets led to the efficient use of resources that will in turn reduce both cost and prices • For
example cost of processing invoice electronically is much cheaper than traditional methods •
The aggregate demand for goods and services will be increased due to the supply of
abundant information about goods and services. • An important reason for the growth of e-
commerce is that it reduces the cost of doing business. • Selling over the Web will reduce its
cost Online transaction costs are 70-90% less than those involving human mediation. • In the
US, it costs banks only 5 cents to process a Net-based transaction, compared to $1.07 if the
same transaction is done in a branch, and 27 cents for an ATM transaction.

5. Employment Opportunities

• E-commerce provides employment opportunities to large number of people across

the world. • A large number of professionals are employed in software services sector. •
Many of the western and European countries require large number of motivated
professionals in the future.

6. Quick and Speedy Disposal of Customers

• Internet related technology process transactions at a great speed and it takes less time
to complete formalities without considerable investment. • The time consuming procedures
of printing, mailing catalogues, inviting quotation etc. can be given to computerised system
to avoid delay associated with the traditional system of processing customers, moreover,
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massive exhibition of goods at a central place. • For example, Amazon.com, worlds biggest
book store have millions of e-books for online sale, can exhibit electronically their products
with texts, pictures, prices etc. in no time.

7. Managing Competition

• E-commerce is particularly attractive because it can serve as the 'great equalizer'. •

That is, it enables the small-and medium-sized enterprises to effectively compete with large
and multinational firms in the global marketplace.

THE NEED FOR E-COMMERCE:

E-commerce and e-business are not solely the Internet, websites or dot com companies. It is
about a new business concept that incorporates all previous business management and
economic concepts. As such, e-business and e-commerce impact on many areas of business
and disciplines of business management studies:

1. Marketing: Issues of online advertising, marketing strategies, consumer‟s behavior and

cultures. One of the areas in which it impacts particularly is direct marketing. In the past this
was mainly door-to-door, home parties and mail order using catalogues or leaflets. This
moved to telemarketing and TV selling with the advances in telephone and television
technology and finally developed into e-marketing spawning „e-CRM‟ data mining and the
like by creating new channels for direct sales and promotion.

2. Computer Sciences: Development of different network and computing technologies and

languages to support e-commerce and e-business, for example linking front and back office
legacy systems with the „web based‟ technology.

3. Finance and Accounting: On-line banking; issues of transaction costs; accounting and
auditing implications where „intangible‟ assets and human capital must be tangibly valued in
an increasingly knowledge based economy.

4. Economics: The impact of e-commerce on local and global economies, understanding the
concept of a digital and knowledge-based economy and how this fits into economic theory.

5. Production and Operations Management: The impact of on-line processing has led to
reduced cycle times. It takes seconds to deliver digitized products and services
electronically; similarly the time for processing orders can be reduced by more than 90 per
cent from days to minutes. Production systems are integrated with finance marketing and
other functional systems as well as with business partners and customers.

6. Production and Operations Management: Moving from mass production to demand

driven, mass customization customer pull rather than the manufacturer push of the past. Web
based Enterprise Resource Planning systems (ERP) can also be used to forward orders
directly to designers and/or production floor within seconds, thus cutting production cycle
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times by up to 50 per cent, especially when manufacturing plants, engineers and designers
are located in different countries. In sub-assembler companies, where a product is assembled
from a number of different components sourced from a number of manufacturers,
communication, collaboration and coordination are critical so electronic bidding can yield
cheaper components and having flexible and adaptable procurement systems allows fast
changes at a minimum cost so inventories can be minimized and money saved.

7. Management Information Systems: Analysis, design and implementation of E-business

systems within an organization; issues of integration of front-end and back-end systems.

8. Human Resource Management: Issues of on-line recruiting, home working and „intra-
pruners‟ working on a project by project basis replacing permanent employees.

9. Business Law and Ethics: The different legal and ethical issues that have arisen as a result
of a global „virtual‟ market. Issues are copyright laws, privacy of customer information, and
legality of electronic contracts.?

Traditional Commerce vs E-commerce

Overlooked are the days when business activities such as the exchange of goods and services
for money, between 2 parties, had to take place in a traditional environment. The consumer
going to the market, checking out a variety of goods, picking needed items, buying them and
then paying the precise amount is what distinguishes traditional commerce. However, now
with the advent of technological innovations, modern techniques of selling goods and
services have arisen. For example, e-commerce, where people purchase and sell
commodities via the Internet.

Both modes have their own merits and demerits, here, the students can learn the meaning of
traditional commerce and e-commerce.

Traditional Commerce

Traditional commerce includes the exchange of goods and services between 2 people. As
stated in the introduction, it is one of the traditional methods of purchasing goods and
services. It is followed by everyone across the globe.

E-Commerce

E-commerce i.e., electronic commerce is similar to traditional commerce. It also includes the

exchange of goods and services. The solitary difference is that it is handled online through
an electronic network – the Internet. Now it has spread across to online social networks.
With e-commerce, support, transactions and communication are done via the use of
electronic communication. All trading activities including selling, ordering, buying,
payments are executed over the internet.

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This article is a ready reckoner for the students to learn the comparison between Traditional
Commerce vs Ecommerce.

Comparison Table:

TRADITIONAL COMMERCE E-COMMERCE

Meaning

Traditional Commerce comprises to be a branch of E-commerce means executing the

trade, which concentrates on the exchange of goods transactions or exchange of data, on the
and services. internet.

Accessibility

Limited Any time

Scope

Restricted to a definite area Across the globe

Business Relationship

Linear End-to-end

Marketing

One way One to one

Payment

Cash, Debit or Credit card, cheque, etc., Debit or Credit card, NEFT or Cash on
Delivery (COD) etc.,

Delivery of products

Instantly Takes some time

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The following points are noteworthy so far as the difference between traditional commerce
and e-commerce is concerned:

 A part of business, that focuses on the exchange of products and services, and includes
all those activities which encourage exchange, in some way or the other, is called
traditional commerce. e-Commerce means carrying out commercial transactions or
exchange of information, electronically on the internet.
 In traditional commerce, the transactions are processed manually whereas, in the case
of e-commerce, there is automatic processing of transactions.
 In traditional commerce, the exchange of goods and services, for money can take
place, only during working hours. On the other hand, in e-commerce, the buying and
selling of goods can occur anytime.
 One of the major drawbacks of e-commerce is that the customers cannot physically
inspect the goods before purchase, however, if customers do not like the goods after
delivery they can return it within the stipulated time. Conversely, in traditional
commerce physical inspection of goods is possible.
 In traditional commerce, the interaction between buyers and sellers is direct, i.e. face
to face. As against this, there is indirect customer interaction, in the case of e-
commerce, because it may be possible that the customer is miles away from where
they place an order for the purchase of goods.
 The scope of business in traditional commerce is limited to a particular area, i.e. the
reach of business is limited to the nearby places where it operates. On the contrary, the
business has worldwide reach in case of e-commerce, due to its ease of access.
 As there is no fixed platform for information exchange in traditional commerce, the
business has to rely on the intermediaries for information fully. Unlike e-Commerce,
wherein there is a universal platform for information exchange, i.e. electronic
communication channel, which lessen the dependency on persons for information.
 Traditional commerce is concerned with the supply side. In contrast, the resource
focus of e-commerce is the demand side.
 In traditional commerce, the business relationship is vertical or linear, while in the
case of e-commerce there is directness in command leading to a horizontal business
relationship.
 In traditional commerce, due to standardisation, there is mass/one way marketing.
However, customization exists in e-commerce leading to one to one marketing.

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 Payment for transactions can be done by paying cash, cheque or via credit card. On the
other hand, payment in e-commerce transactions can be done through online payment
modes like credit card, fund transfer, etc.
 The delivery of goods is immediate in traditional commerce but in the case of e-
commerce, the goods are delivered at the customer’s place, after some time, usually
within a week.

E-commerce opportunities and challenges for industries

E-Commerce is presently an essential ingredient of India’s trade facilitation policy. Since

1991, after economic reforms explicitly took place in India, the need to facilitate
international trade both through policy and procedure reforms has become the foundation
stone of India’s trade and fiscal policies. Resultantly, a technological revolution
accompanied by the wide spread use of the Internet, web technologies and their applications
took place. E-Commerce has changed and is still changing the way business is conducted
around the world.

Opportunities: There is a rising awareness among the businesses in India about the
opportunities offered by e-commerce. E-commerce provides a new place for connecting with
consumers and conducting transactions. Virtual stores operate round the clock.

a) Global Trade: E-business is one of the major factors in the globalization of business.
Other factors include decreases in trade barriers, globalization of capital markets. Indian e-
business has grown at a compounded annual growth rate of 30% since FY09, and is expected
to be $18 billion (around Rs 1,116,00 crore) opportunity by FY15.

b) Virtual Businesses: Business firms now have the ability to become virtual E-Business.
Virtual business uses electronic means to transact business as opposed to the traditional
means of face to face transaction.

c) Lower search costs: The Internet brings low search costs and high price lucidity. E-
business has proved to be highly cost effective for business concerns as it cuts down the cost
of marketing, processing, inventory management, customer care, etc.

d) Round the clock: Customers can do transactions for the product or enquiry about any
product/services provided by a company anytime, anywhere from any location.

e) Greater Economic Efficiency: Greater economic efficiency (lower cost) and more rapid
exchange (high speed, accelerated, or real-time interaction) are achieved with the help of
electronic business. The e-commerce market in India has grown by 34 percent in the last
decade, was about USD 600 million in 2011-12 and is expected to touch USD 9 billion by
2016 and USD 70 billion by 2020.

the top 8 challenges that ecommerce businesses face in India.

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a) Indian customers return much of the merchandise they purchase online. Indian customers
return much of the commodities they purchase online. E business in India has many first
time buyers. This means that they have not yet made up their mind about what to expect
from e-business websites. As a result, buyers sometimes fall prey to hard sell. But by the
time the product is actually delivered, they regret and return the goods. Returns are
expensive for e-business companies, as reverse logistics presents unique challenges. This
becomes all the more complex in cross border e-business.

b) Cash on delivery is the preferred payment mode. Cash on delivery is the preferred
payment mode. Low credit card access and low trust in online transactions has led to cash on
delivery being the preferred payment choice in India. Unlike electronic payments, manual
cash collection is painstaking, risky, and expensive.

c) Payment gateways have a high failure rate. Indian payment gateways have an unusually
high failure rate by global standards. Ebusiness companies using Indian payment gateways
are losing out on business, as several customers do not attempt making payment again after a
transaction fails.

d) Internet penetration is low. Internet penetration is low. Internet penetration in India is still
a small fraction of what is there in a number of western countries. The quality of
connectivity is poor in several regions. But both these problems are on their last legs. The
day is not far when connectivity issues would not feature in a list of challenges to e-business
in India.

e) Feature phones still rule the roost. Though the total number of mobile phone users in
India is very high, a significant majority still use feature phones, and not smart phones. As a
result this consumer group is unable to make e-business purchases on the move. Though
India is still a couple of years away from the scales tipping in favour of smart phones, the
rapid downward spiral in the price of entry-level smart phones is an encouraging indication.

f) Postal addresses are not standardized. If an online order is placed in India, it is quite likely
get a call from the logistics company to ask about exact location. Clearly address is not
enough. This is because there is little standardization in the way postal addresses are written.

g) Logistics is a problem in thousands of Indian towns. Given the large size of the country,
there are thousands of towns that are not easily accessible. The problem with logistics is
compounded by the fact that cash on delivery is the preferred payment option in India.
International logistics providers, private Indian companies, and the government-owned
postal services are making a valiant effort to solve the logistics problem.

h) Overfunded competitors are driving up cost of customer acquisition. The long-term

prospects for ecommerce companies are so exciting that some investors are willing to spend

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irrationally high amounts of money to acquire market share today. Naturally the Indian
consumer is spoiled for choice.

The Internet

1. The Internet is a public and global communication network that provides direct
connectivity to anyone over a local area network (LAN) or Internet Service Provider
(ISP). 2. The Internet is a public network that is connected and routed over gateways.
End users are connected to local access providers (LANs or ISPs), who are connected
to the Internet access providers, to network access providers, and eventually to the
Internet backbone. 3. Since access to the Internet is open to all, there is a lack of
control that may result in an unruly proliferation of information.
2. The Intranet: 1. An intranet is a corporate LAN or wide area network (WAN) that uses
Internet technology and is secured behind company’s firewalls (see security and
protection). 2. The intranet links various servers, clients, databases, and application
programs like Enterprise Resource Planning (ERP). Although intranets are developed
on the same TCP/IP protocol as the Internet, they operate as a private network with
limited access. 3. Only authorized employees are able to use it. Intranets are limited to
information pertinent to the company and contain exclusive and often proprietary and
sensitive information.
3. The Extranet 1. An extranet, or “extended intranet”, uses the TCP/IP protocol network
of the Internet, to link intranets in different locations. 2. Extranet transmission is
usually conducted over the Internet, which offers little privacy or transmission
security. 3. Therefore, when using an extranet, it is necessary to improve the security
of connecting portions of he Internet. This can be done by creating tunnels (see
paragraph on security and protection) of secured data flows, using cryptography and
authorization algorithm. 4. The Internet with tunneling technology is known as a
virtually private network (VPN). 5. Extranets provide secured connectivity between
corporation’s intranets and the intranets of its business partners, material suppliers,
financial services, government, and customers. 6. Access to intranets is usually limited
by agreements of the collaborating parties, is strictly controlled, and is only available
to authorized personnel. 7. The protected environment of the extranet allows groups to
collaborate, sharing information exclusively, and exchanging it securely. 8. Since an
extranet allows connectivity between businesses through the Internet, it is an open and
flexible platform suitable for supply chain management. 9. To increase security, many
companies replicate the database they are willing to share with their business partners
and separate them physically from their regular intranets.

Transmission Control Protocol (TCP): TCP is a connection oriented protocol and offers end-
to-end packet delivery. It acts as back bone for connection. It exhibits the following key
features: Transmission Control Protocol TCP corresponds to the Transport Layer of OSI
Model. TCP is a reliable and connection oriented protocol. TCP offers: Stream Data
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Transfer. Reliability. 6 Efficient Flow Control Full-duplex operation. Multiplexing.

TCP offers connection oriented end-to-end packet delivery.

FTP(File Transfer Protocol): 1. File Transfer Protocol (FTP) enables file sharing between
hosts. 2. FTP uses TCP to create a virtual connection for control information and then creates
a separate TCP connection for data transfers. 3. The control connection uses an image of the
TELNET protocol to exchange commands and messages between hosts. The key functions
of FTP are: 8 1) to promote sharing of files (computer programs and/or data); 2) to
encourage indirect or implicit (via programs) use of remote computers; 3) to shield a user
from variations in file storage systems among hosts; and 4) to transfer data reliably and
efficiently.

Telnet: 1. TELNET is the terminal emulation protocol in a TCP/IP environment. 2. TELNET

uses the TCP as the transport protocol to establish connection between server and client.

3. After connecting, TELNET server and client enter a phase of option negotiation that
determines the options that each side can support for the connection. 4. Each connected
system can negotiate new options or renegotiate old options at any time. In general, each end
of the TELNET connection attempts to implement all options that maximize performance for
the systems involved.

Explain about World Wide Web (WWW)? 1. The WWW is such an immensely popular
Internet facility that for many users, it has become synonymous with the Internet. 2.
Developed in 1992 at the European Laboratory for Particle Physics at Cern, Switzerland, the
WWW links users to Internet sites. 3. The basic unit of WWW communication is the page,
similar to this printed page. Within a Web page are "links" on which users can click and be
automatically connected to related pages at the same or other Internet Websites. 4. With its
ease of use and its multimedia ability to transmit text, graphics, audio, and video and to
retrieve detailed information from anywhere in the world in seconds, the WWW has quickly
become the interface of choice for Internet users.

Internet Features and services?

1. The Internet is a public and global communication network that provides direct
connectivity to anyone over a local area network (LAN) or Internet Service Provider (ISP).

2. The Internet is a public network that is connected and routed over gateways. End users are
connected to local access providers (LANs or ISPs), who are connected to the Internet access
providers, to network access providers, and eventually to the Internet backbone.

3. Since access to the Internet is open to all, there is a lack of control that may result in an
unruly proliferation of information.

Major Features of Internet:

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1. The World Wide Web.

2. E-Mail.

3. News

4. Telnet.

5. File Transfer Protocol(FTP).

6. Internet Relay Chat(IRC).

7. Video conferencing:

1. The World Wide Web: The World Wide Web is a part of the internet, which
supports hypertext documents, allowing users to view and navigate different types of data.
A web page is a document encoded with hypertext markup language (HTML) tags. HTML
allows designers to link content together via hyperlinks. Every web page has an address , a
uniform resource locator(URL).

2. E-Mail: Electronic mail(E-Mail) is the most popular reason people use the
internet. To create, send, and receive e-mail messages you need an e-mail program and an
account on an internet mail server with a domain name. To use e-mail, a user must have an
e-mail address, which you create by adding your user name to the e-mail create by adding
your user name to the e-mail server’s domain name, as in [email protected].

3. News: One internet based service called news, includes tens of thousands of
newsgroups. Each newsgroup hosts discussion on a specific topic. A newsgroups a some
indicated its users special topic of interest, such as alt.food.cake. To participate in a
newsgroup, you need a news-reader program hat.left you read articles that have been posted
on a news server. You can post articles for others to read and respond to.

4. Telnet: telnet is a specialized service that lets you use one computer to access the
contents of another computer a telnet host. A telnet program creates a “Window” into the
host so you can access files, issue commands, and exchange data. Telnet is widely used by
libraries to allow visitors to look up information find articles and so on.

5. File Transfer Protocol: File Transfer Protocol(FTP) is the internet tool used to copy
files from one computer to another. Using a special FTP program or a web browser, you
can log into an ETP host computer over the internet and copy files on to your computer.
FTP is handy for finding and copying software files, articles and other types of data.

6. Internet Relay Chat(IRC): Internet Relay Chat is a service that allows users to
communicate in real time by typing text in a special window. Like news, there are

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hundreds of IRC “Channels” each devoted to a subject or user group. You can use a special
IRC program to participate in chat room discussion but many

7. Video conferencing: Video conferencing or video teleconferencing is a method of

communicating by two-way video and audio transmission with help of telecommunication
technologies. c. Modes of Video Conferencing: i) Point-to point: this mode of conferencing
connects two locations only. ii) Multi-point: this mode of conferencing connects more than
two locations through multi-point Control Unit.

What are the hardware and software requirement for

internet connection
Hardware requirements for internet connection:
Any one of the following is required to connect to the Internet.
• A modem is a device that connects to the Internet via a telephone line.
• A dongle is a device that allows you to connect to the Internet over a cellphone
network.
• A Wi-Fi router, often known as a hotspot, is a device that connects to the
Internet over a wireless network.
• A cellular network-capable electronic device.
Software requirements for internet connection:
TCP (Transfer Control Protocol) / IP Browsers and other Internet clients should
be able to access web applications such as Outlook, Gmail, Whats-app, Face-
book, Twiter, and so on.

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