What Is Electronic Commerce (e-

commerce)?
• Electronic commerce or e -commerce (sometimes written as e-
Commerce) is a business model that lets firms and individuals
buy and sell things over the internet.
E-commerce operates in all four of the following major market
segments:
• Business to business
• Business to consumer
• Consumer to consumer
• Consumer to business
 Types of E-Commerce Models

Business to Business
• This is Business to Business transactions. Here the
companies are doing business with each other. The
final consumer is not involved. So the online transactions
only involve the manufacturers, wholesalers, retailers etc.

Business to Consumer
• Business to Consumer. Here the company will sell their
goods and/or services directly to the consumer. The
consumer can browse their websites and look at products,
pictures, read reviews. Then they place their order and the
company ships the goods directly to them. Popular
examples are Amazon, Flipkart, Jabong etc.
• Consumer to Consumer
Consumer to consumer, where the consumers are in
direct contact with each other. No company is involved. It
helps people sell their personal goods and assets directly
to an interested party. Usually, goods traded are cars,
bikes, electronics etc. OLX, Quikr, etc. follow this model.

• Consumer to Business
This is the reverse of B2C, it is a consumer to business. So
the consumer provides a good or some service to
the company. Say for example an IT freelancer who
demos and sells his software to a company. This would be
a C2B transaction.
E-Commerce – History of E-Commerce

• Early Development:
The history of E-commerce begins with the invention of
the telephone at the end of last century.
EDI (Electronic Data Interchange) is widely viewed as the
beginning of ecommerce if we consider ecommerce as
the networking of business communities and
digitalization of business information.
Large organizations have been investing in development
of EDI since sixties.
It has not gained reasonable acceptance until eighties.
The meaning of electronic commerce has changed over
the last 30 years.
• Originally, electronic commerce meant the facilitation of
commercial transactions electronically, using technology
such as Electronic Data Interchange (EDI) and Electronic
Funds Transfer (EFT).

• These were both introduced in the late 1970s, allowing

businesses to send commercial documents like purchase
orders or invoices electronically.

• The growth and acceptance of credit cards, automated

teller machines (ATM) and telephone banking in the 1980s
were also forms of electronic commerce.

• Another form of E-commerce was the airline and railway

reservation system.
• Online shopping, an important component of electronic commerce
was invented by Michael Aldrich in the UK in 1979.
• The world’s first recorded business to business was Thomson
Holidays in 1981.
• The first recorded Business to consumer was Gates head SIS/Tesco
in 1984.
• From the 1990s onwards, electronic commerce additionally
included enterprise resource planning systems (ERP), data mining
and data warehousing.
• Although the Internet became popular worldwide around 1994
when the first internet online shopping started, it took about five
years to introduce security protocols and DSL allowing continual
connection to the Internet.
• By the end of 2000, many European and American business
companies offered their services through the World Wide Web.
• Since then people began to associate a word “E-commerce” with
the ability of purchasing various goods through the Internet using
secure protocols and electronic payment services.
 Advantages of E-Commerce
• E-commerce provides the sellers with a global reach. They remove
the barrier of place (geography). Now sellers and buyers can meet
in the virtual world, without the hindrance of location.
• Electronic commerce will substantially lower the transaction cost. It
eliminates many fixed costs of maintaining brick and mortar shops.
This allows the companies to enjoy a much higher margin of profit.
• It provides quick delivery of goods with very little effort on part of
the customer. Customer complaints are also addressed quickly. It
also saves time, energy and effort for both the consumers and the
company.
• One other great advantage is the convenience it offers. A customer
can shop 24×7. The website is functional at all times, it does not
have working hours like a shop.
• Electronic commerce also allows the customer and the business to
be in touch directly, without any intermediaries. This allows for
quick communication and transactions. It also gives a valuable
personal touch.
 Disadvantages of E-Commerce
• The start-up costs of the e-commerce portal are very high.
• The setup of the hardware and the software, the training
cost of employees, the constant maintenance and upkeep
are all quite expensive.
• Although it may seem like a sure thing, the e-
commerce industry has a high risk of failure.
• Many companies riding the dot-com wave of the 2000s
have failed miserably. The high risk of failure remains even
today.
• At times, e-commerce can feel impersonal. So it lacks the
warmth of an interpersonal relationship which is important
for many brands and products.
• This lack of a personal touch can be a disadvantage for
many types of services and products like interior designing
or the jewelry business.
• Security is another area of concern. Only recently, we
have witnessed many security breaches where the
information of the customers was stolen.
• Credit card theft, identity theft etc. remain big concerns
with the customers.
• Then there are also fulfillment problems. Even after the
order is placed there can be problems with shipping,
delivery, mix-ups etc.
• This leaves the customers unhappy and dissatisfied.
 E- business Model based on the
relationship of transaction types
This business model is usually controlled by two
parameters namely Control and value Integration.
Based on this six types of transaction can be
identified:
• Brokerage Model
• Community Model
• Subscription Model
• Aggregator Model
• Infomediary Model
• Market place Model
 Brokerage Model
• At the heart of this model are third parties known as brokers, who
bring sellers and buyers of products and services together to
engage in transactions.
• Normally, the broker charges a fee to at least one party involved in
a transaction. While many brokers are involved in connecting
consumers with retailers, they also may connect businesses with
other businesses or consumers with other consumers.
• A wide variety of different scenarios or business configurations fall
under the banner of a brokerage model. These include everything
from Web sites posting simple online classified ads and Internet
shopping malls (Web sites that sell products from a variety of
different companies) to online marketplaces, online auctions,
aggregators, and shopping bots.

Ebay.com
 Community Model

• The community model is a method of developing an online

presence in which several individuals or groups are
encouraged to join and participate in ongoing interaction
designed around a common purpose.
• Communities utilize electronic tools such as forums, chat
rooms, e-mail lists, message boards, and other
interactive Internet mechanisms, which are usually tailored to
the particular community.
• Ex: Facebook, Twitter
 Subscription Model

• The ecommerce subscription model is a business model

where a company provides ongoing services on a regular basis
in exchange for regular payments from the customer”

• Ex: Netflix, Amazon Prime and Spotify

 Aggregator Model

• Aggregators gathers the good/service suppliers from the single

industry and puts them under own brand. For example, Airbnb for
Hotel industry, OLA and Uber for taxis, Oyo for hotel rooms, etc.
Attributes of an Aggregator Business Model
• Customers: Any aggregator business model has two customer bases
- the consumers and the goods/service providers who act as
customers for the aggregator.
• Industry: All goods/service providers associated with a particular
aggregator belong to the same or similar industries.
• Partnerships: None of the goods/service providers are employed
with the aggregator. On the contrary, they are business partners of
the aggregator and are free to make independent business
decisions.
 Infomediary Model

• An infomediary is a Web site based model that provides

specialized information on behalf of producers of goods and
services and their potential customers.

• The term is a composite of information and intermediary.

• Policy Bazaar
 Market Place Model
• Marketplace model of e-commerce means providing of an
information technology platform by an e-commerce entity on
a digital and electronic network to act as a facilitator between
buyer and seller.”

• The main feature of the market place model is that the e-

commerce firm like flipkart, amazon etc. will be providing a
platform for customers to interact with a selected number of
sellers.
• When an individual is purchasing a product from flipkart, he
will be actually buying it from a registered seller in flipkart.
 ESLC Model
E-commerce sales have 4 four stages and life cycle
has 7 stages:
• Pre-Sales: Online promotions are done to create excitement
about the products that are being sold through online
advertisements.

• Transaction Stage: The customers place their order for the

products. The process should be user-friendly and secure.

• Delivery: It involves delivering the product to the consumer. Care

should be taken in delivery with proper packaging and speedy
delivery to make the customer happy.

• After Sales: This involves following up with the customer to let him
know that the product has been delivered or if he is satisfied. The
feedbacks from the customer can be furthers used in improving
services by the company.
ESLC Model
 Stages of ESLC Model
• Seed (Development) Stage
• Startup (Introductory) Stage
• Growth Stage
• Establishment (Maturity) Stage
• Renewed Growth Stage
• Decline Stage
• Exit Stage
 E-Payment System

• An e-payment system is a way of making transactions or

paying for goods and services through an electronic medium,
without the use of checks or cash. It’s also called an electronic
payment system or online payment system.
 Electronic Payment Methods
• Credit Card — A form of the e-payment system which requires the
use of the card issued by a financial institute to the cardholder for
making payments online or through an electronic device, without
the use of cash.

• Charge Card

• E-wallet — A form of prepaid account that stores user’s financial

data, like debit and credit card information to make an online
transaction easier. Ex: Paytm, Mobikwik, American Express,
Apple pay, Microsoft Wallet, Samsung Pay

• Smart card — A plastic card with a microprocessor that can be

loaded with funds to make transactions; also known as a chip card.
A smart card is a device that includes an embedded integrated
circuit chip (ICC) that can be either a secure microcontroller or
equivalent intelligence with internal memory or a memory chip
alone.
• Direct debit — A financial transaction in which the account holder
instructs the bank to collect a specific amount of money from his
account electronically to pay for goods or services.

• E-check — A digital version of an old paper check. It’s an electronic

transfer of money from a bank account, usually checking account,
without the use of the paper check.

EX: an electronic method of sending an employee’s wages directly

into the employee’s bank account.
Receiving tax return in your account

• Stored-value card — A card with a certain amount of money that

can be used to perform the transaction in the issuer store. A typical
example of stored-value cards are gift cards.
E-Cash
 Risks of E-Payment System
• Electronic payment systems are not immune to the risk of fraud.
The system uses a particularly vulnerable protocol to establish the
identity of the person authorizing a payment. Passwords and
security questions aren't foolproof in determining the identity of a
person.
• The payment is done usually after keying in a password and
sometimes answering security questions.
• There is no way of verifying the true identity of the maker of the
transaction
• Electronic payment systems encourage impulse buying, especially
online and customers are likely to make a decision to purchase an
item they find on sale online, because it will cost just a click to buy
it through credit card.

• Impulse buying leads to disorganized budgets and is one of the

disadvantages of electronic payment systems.
 Electronic Data Interchange (EDI)
• EDI or Electronic Data Interchange is the virtual exchange of data or
business documents in electronic format between trading partners
Or
• The simple definition of EDI is a standard electronic format that
replaces paper-based documents such as purchase orders or
invoices. By automating paper-based transactions, organizations
can save time and eliminate costly errors caused by manual
processing.
• It consists of three stages Data Transport, Data Translation and
Data Transformation.

• Many business documents can be exchanged using EDI, but the two
most common are purchase orders and invoices.
• Ex: Dell Boomi, Mule soft
 Benefits of EDI
• Minimal paper usage
• Improved timelines
• Costs saving in operational efficiency
• Enhanced quality of data
• Improved turnaround times: Business cycle is improved and
stock levels are kept constantly up to date and visible

• Helps create a greener world