Unit 1

Introduction to E-Commerce
Meaning of E-Business:
E-business is the conduct of business on the internet not only buying and selling of goods but
also serving the customer and also collaborating with business partners.
Definition of E-Business:
E-business (electronic business) is the conduct of business process on the Internet. These
electronic business processes include buying and selling products, supplies and services;
servicing customers; processing payments etc.
E-Business in a border perspective involves the use information and communication
technologies to facilitate and support processes and activities of business.
E-Commerce:
E-Commerce is where business on the transaction takes place by our telecommunication
network especially through internet it means doing business electronically. Electronic
commerce is about doing business electronically.
History of E-Commerce:
1.1960-1982 - Paving the way for electric commerce was the development of the Electronic
Data Interchange (EDI). EDI replaced traditional mailing and faxing of documents.
2.Michael Aldrich, an English inventor, innovator and entrepreneur is credited with developing
the predecessor to online shopping.
3.In 1982, France launched the precursor to the Internet called, Minitel.
4.In 1990 Tim Berners Lee, along with his friend Robert Cailliau, published a proposal to build
a “Hypertext project” called, “Worldwide Web.”
5.In September 1995, the NSF began charging a fee for registering domain names.
6.The Secure Socket Layers (SSL) – encryption certificate by Netscape in 1994 provided a safe
means to transmit data over the Internet.
7.The largest online retailer in the world Amazon, launched in 1995 as an online bookstore.
8.E-Bay, an online auction site that debuted in 1995.
9.Also in 1995, was the inception of Yahoo followed by Google in 1998, two leading search
engines in the US.
10.Global ecommerce company, PayPal, began its services in 1998 and currently operates in
190 markets.
11.As more and more people began doing business online, a need for secure communication
and transactions became apparent. In 2004, the Payment Card Industry Security Standards
Council (PCI) was formed.
Features of E-Commerce Technology:
1. Improved sales: E- Commerce is fast, cost efficient, time saving and easy to use where it
can result in better transaction, wide market coverage by offering the benefits of speed,
convince, being cost effective, impact and control over the market.
2. Improved responsiveness: It helps by improving responsiveness to market conditions and
customer preferences. Improve responsiveness by revising price change and marketing
programs as and when required.
3. Efficient Inventory Management: Using E- Commerce, inventory management of
products becomes automated. Product management inventory becomes very efficient and
easy to maintain. It enables reduced inventories and overheads by enabling “pull” – type
supply chain management by collecting the customer order and then delivering through
JIT (just In Time).
4. Effectiveness and Efficiency: Electronic commerce can increase the efficiency and
effectiveness of public relation programs, broadcast press releases, financial updates and
other corporate communications.
5. Planning and Execution of meetings: The mechanism of electronic operations in business
facilitates planning and execution of meetings. Executive management meetings,
seminars, workshops take a great deal of time and effort to manage.
6. Ubiquity: It is available just about everywhere and at all times. Consumer can connect it
to the Internet at any time, including at their homes, their offices, on their video game
systems with an Internet connection and mobile phone devices.
7. Global reach: The potential market size is roughly equal to the size of the online
population of the world. E- Commerce Technology seamlessly stretches across
traditional cultural and national boundaries and enables worldwide access to the client.
8. Personalization/Customization: E-commerce technologies enable merchants to target
their marketing messages to a person’s name, interests and past purchases. They allow a
merchant to change the product or service to suit the purchasing behaviour and
preferences of a consumer.
9. Information Density: The total amount and quality of information available to all market
participants is vastly increased and is cheaper to deliver. Most business owners use the
shopping cart and do the order of product and purchasing online.
Difference Between E-Business and E-Commerce:
Sl.No. E-Business E-Commerce
1. Running business using Internet is Trading of merchandise over Internet is
termed as E-Business termed as E-Commerce
2. E-Business is the broader concept E-Commerce is the part of E-Business or
and is the superset of E-Commerce is the subject of E-Business
3. Business transactions are carried out Commercial transactions are carried out
in it in it
4. Transactions are not limited in it Transactions are limited in it

5. Business status is received when E-Commerce status is received on buying

business is handled using phone Call, and selling of goods on the internet.
email Order, postal order and also the
online activities.
Difference Between Traditional Commerce and E-Commerce:
Sl.No. Traditional Commerce E-Commerce
1. Traditional Commerce is buying or E-Commerce carries out commercial
selling of products and services transactions electronically on the Internet.
physically.
2. Physical stores are not feasible to be It is always available on all time and all
open at all times. days of the year.
3. Scope of business is limited to Scope of business is global. Vendors can
particular area. expand their business worldwide.
4. Marketing is one way marketing. Marketing is one to one marketing.

5. Communication o f b u s i n e s s In e-commerce there is no human

d e p e n d s upon individual skills. intervention.

Advantages of E-Commerce:
Advantages to Organizations:
1. International market place: By becoming e-commerce enabled, business now have
access to people all around the world.
2. Operational cost savings: The cost of creating processing, distributing, storing and
retrieving paper-base information has decreased.
3. Enables reduced inventories and overheads: The customer orders are collected and
then delivering through JIT (Just in Time) manufacturing. This is particularly
beneficial for companies in the high technology sector where stock of components
held could quickly become obsolete within months.
4. Lower telecommunication cost: The internet is much cheaper than value added
networks which were based on leasing telephone lines for the sole use of the
organization and its authorized partners.
5. No more 24-hour-time constraints: Business can be contacted by or contact customers
or suppliers at any time.
Advantages to Consumers:
1. 24/7 access: enables customers to shop or conduct other transactions 24hours day,
all year round from almost any location.
2. More choices: Customers not only have a whole range of products that they can
choose from and customize, but also an international selection of suppliers.
3. Price comparisons: Customer can ‘shop’ around the world and conduct
comparison either directly by visiting different sites.
4. Improved delivery process: This can range from the immediate delivery of
digitized or electronic goods such as software or audio – visual files by
downloading via the internet, to the online tracking of the progress of packages
being delivered by mail or courier.
Advantages to Society:
1. Enables more flexible working practices: This enhances the quality of life for a whole
host of people in society, enabling them to work from home.
2. Connects people: Enables people in developing countries and rural areas to enjoy
and access products, services, information and other people which otherwise
would not be so easily available to them.
3. Facilitates delivery of public services: Health services available over the internet,
filling taxes over the internet though the Indian government website.
Disadvantages of E-Commerce:
Disadvantages to Organizations:
1. 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.
2. Rapidly evolving and changing technology: there is always a feeling or trying to catch
up and not be left behind. Under pressure to innovate and develop business models to
exploit the new opportunities which sometime leads to strategies detrimental to the
organization.
3. Problems with compatibility of older and newer technology
Disadvantages to Consumers:
1. Cost of computing equipment: computing equipment is needed for individuals to
particular in the new digital economy, which means an initial capital cost to customers.
2. Lack of security and privacy of personal data
3. Physical contact and relationships are replaced by electronic processes.
Disadvantages to Society:
1. Breakdown in human interaction: Sometimes people feel that they do not have received
sufficient personal attention.
2. 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.
3. Difficulty in policing internet: Which means that numerous crimes can be perpetrated and
often go undetected.
4. Wasted resources: As new technology dates quickly, we need to dispose of all the old
computers, key boards etc.
E-Commerce Business Models:
E-Commerce Business Models can be generally categorized in following categories;
 Business-to-Business (B2B)
 Business-to-Consumer (B2C)
 Consumer-to-Business (C2B)
 Consumer-to-Consumer (C2C)
 Business-to-Government (B2G)
 Government-to-Government (G2G)
 Government-to-Business (G2B)
 Government-to-Citizen (G2C)
 Citizen-to-Government (C2G)
 Peer-to-Peer (P2P)
1.Business-to-Business (B2B): Business-to-business (B2B) refers to a situation where one
business makes a commercial transaction with another. Website following B2B business model
sells its product to an intermediate buyer who then sells the product to the final customer. As an
example, a wholesaler places an order from a company's website and after receiving the
consignment, sells the end product to final customer who comes to buy the product at
wholesaler's retail outlet.

Example for some of the B2B websites:

1.www.getresponse.com
2.www.incorporate.com
3.www.foodtrader.com

Advantages of Business-to-Business (B2B):

 Improved efficiency in ordering material.
 Lower the search cost.
 Increase opportunities for collaboration. (one or more people)
 Reduces marketing and sales cost.
 Creates new sales opportunities.

Disadvantages of Business-to-Business (B2B):

 Low barriers to entry for competitors. (Difficult to new entry, tax cost, harder to enter if
competitor has a mature offering).
 Delay of goods delivering.
 Fraud websites and scams.
 Perishable goods cannot be purchased online.
 Unable to experience the product before purchasing.
2.Business-to-Consumer (B2C): Website following B2C business model sells its product
directly to a customer. A customer can view products shown on the website of business
organization. The customer can choose a product and order the same. Website will send a
notification to the business organization via email and organization will dispatch the
product/goods to the customer. 
Example for some of the B2C websites:
1. www.flipkart.com
2. www.Shoppersstop.com
Advantages for the Business:
1. It can reach worldwide market with unlimited volume of customers.
2. It can display information, pictures and prices of products and services
3. Order processing an easier task than before.
Advantages for the Consumers:
1. Consumers can shop at any time of day, from the privacy of their own home.
2. Consumer is offered many choices for the same products under various brands.
3. Consumer can shop online without hassles like traffic, congestion of the mails .
Disadvantages for the Business:
1. Many websites offering the same product to the customers
2. Technological problems can cause the website to not operate properly
3. People are hesitant to enter the credit card details if the website does not have
proper security norms.
Disadvantages for the Consumers:
1. Security issues, especially credit card information which is very sensitive. Fraud,
tip-offs are very common on the web.
2. Customer service may not be satisfactory for the consumers.
3.Consumer-to-Business (C2B): C2B e-commerce means transactions taking place between
consumer to business organisations. The end consumers create product and services which are
consumed by business organizations.
4.Consumer-to-Consumer (C2C): C2C is any website where people are brought together to
buy, sell or trade. Consumers interact directly with other consumers. The C2C model involves
transaction between consumers. Here, a consumer sells directly to another consumer.
Example for some of the B2C websites:
1. www.ebay.com
2. www.olx.in
Advantages for Consumer-to-Consumer (C2C):
1. Customers can directly contact sellers and eliminate the middle man.
2. Anyone can now sell and advertise a product in the convenience of one’s home.
3. Feedback on the purchased product helps both the seller and potential customers.
Disadvantages for Consumer-to-Consumer (C2C):
1. Although online allow one to display his or her products, there is often a fee
associated with such exhibitions.
2. Identity theft has become a rising issue.
3. Illegal or restricted products and services have been found on auction sites.
5.Business-to-Government (B2G): Business-to-Government (B2G) is a business model that
refers to businesses selling products, services or information to governments or government
agencies.
6.Government-to-Governement(G2G):Government-to-Government is the electronic sharing
of data and/or information systems between government agencies, departments or
organizations.
7.Government-to-Business (G2B): Government - to - Business (G2B) Government uses G2B
model website to approach business organizations. Such websites support auctions, tenders and
application submission functionalities. 
8.Governement-to-Citizen (G2C): Government - to - Citizen (G2C) Government uses G2C
model website to approach citizen in general. Such websites support auctions of vehicles,
machinery or any other material. Such website also provides services like registration for birth,
marriage or death certificates. Main objectives of G2C website are to reduce average time for
fulfilling people requests for various government services.
9.Citizen-to-Governement (C2G): Citizen-to-Government (C2G) is a business model where
citizens transact with the government. It encompasses electronic transactions online between
the individuals and the public administration.
10.Peer-to-Peer (P2P): In a P2P network, the "peers" are computer systems which are
connected to each other via the Internet. Files can be shared directly between systems on the
network without the need of a central server. 
Electronic Data Interchange:
Electronic Data Interchange (EDI) is the electronic interchange of business information using a
standardized format; a process which allows one company to send information to another
company electronically rather than with paper. Business entities conducting business
electronically are called trading partners.
Many business documents can be exchanged using EDI, but the two most common are purchase
orders and invoices. At a minimum, EDI replaces the mail preparation and handling associated
with traditional business communication. However, the real power of EDI is that it standardizes
the information communicated in business documents, which makes possible a "paperless"
exchange.

Advantages of Electronic Data Interchange:

1. Improved operational efficiency: Automating the flow of messages with integrated EDI
improves the speed and efficiency of your operations by eliminating the need to
manually rekey data in multiple systems.
2. Fewer errors: By removing manual, paper-based processes the occurrence of human
errors is dramatically reduced or even eliminated.
3. Increased accuracy: Automated message validation ensures that errors are flagged and
rectified before they impact your trading partners and data integrity in your internal
systems is maintained.
4. Increased return on investment (ROI): Automation through integrated EDI enables
you to maximise the benefits of EDI and move beyond simply complying with your
customers' EDI requirements.  
5. Enhanced visibility: EDI  provides full transparency of the ordering and invoicing
process for you and your trading partners. This end-to-end visibility enables more
informed decisions to be made and ultimately improves the service delivered
to consumers.
6. Reduced inventory cost: Increased visibility within the supply chain eliminates
unknowns and can therefore enable you to reduce the levels of inventory you need to
hold.

Disadvantages of Electronic Data Interchange:

1.Too many standards: There are too many standard bodies developing standard
documents formats for EDI. For example, one company may be following the x12 standard
format, while it’s trading partner follows EDIFACT standard format.
2.Changing Standards: Each year, most standards bodies revisions to the standards. This
poses a problem for EDI users. One organization may be using one version of the standard
while it’s trading partners might still be using older versions.
3.It is too expensive: EDI is expensive and requires a heavy investment to launch and
maintain the technology. Small companies might find it difficult to invest in EDI because of the
expenses to be incurred in implementing and maintaining it.
 4.EDI limits your trading partners: Some large companies tend to stop doing business
with companies who don’t comply with EDI. For example, WalMart is doing business with
only those companies that use EDI. The result of this is a limited group of people you can do
business with.
5.Rigid requirements: EDI needs highly structured protocols, previously established
arrangement, unique proprietary bilateral information exchanges.
6.Useage not easy: As a system, EDI is not easy to learn, use and implement.

Architectural Framework of E-commerce:

A framework is intended to define and create tools that integrate the information and allow the
development of e-commerce applications. The aim of the architectural framework is on
synthesizing the diverse resources already in place to facilitate the integration of data and
software for better applications. The e-commerce architectural framework consists of following
six layers of functionality, or services:
1.Applications Layer services: It includes all Customer to business, business to business and
intra organizational services. 2.Brokerage services, data or transaction management: It includes
order processing, payment process and mail interactions.
3. Interface and support layers: It facilitates Directory support functions, Interactive catalogues.
4.Secure messaging, security and electronic document Interchange: It deals with encrypted e-
mail, Electronic Data Interchange (EDI).
5. Middle ware and structured document interchange.
6. Network infrastructure and basic communications services.
All the above-mentioned layers are connected and help in integrating information access and
exchange within the context of the chosen application. As electronic commerce applications are
based on several layers, when they are integrated, then provide uniquely powerful solutions.

E-commerce Website Architecture:

Website architecture is the way information is laid out on a website. It includes organizing
content so that users can quickly find what they are looking for.
There are two essential things to keep in mind:
 A good e-commerce site architecture serves both humans and machines (sounds
technical, but we will describe it in a more detailed and understandable way below).
 A good site structure makes browsing intuitive. It thinks for users and predicts their
further actions.

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