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INFO3232
3rd Year 2nd Sem
Module 1
Electronic Commerce:
Overview, Definitions, Advantages & Disadvantages of E –
Commerce, Drivers of E –Commerce, Myths, Dot ComEra,E-
business. Technologies: Relationship Between E–Commerce
& Networking, Different Types of Networking For E –
Commerce, Internet, Intranet & Extranet, EDI Systems,
Wireless Application Protocol: Defn. Hand Held Devices,
Mobility & Commerce, Mobile Computing, Wireless
Web, Web Security, Infrastructure Requirement For E –
Commerce. Electronic Data Interchange (EDI):
Meaning, Benefits, Concepts, Application, EDI Model,
EDIFACT standard, Internet EDI
Definition
• As an order is placed, the customer's web browser communicates back and forth with the server
hosting the e-commerce website. Data pertaining to the order is relayed to a central computer
known as the order manager.
• The data is then forwarded to databases that manage inventory levels; a merchant system that
manages payment information using payment processing applications, such as PayPal; and a bank
computer. Finally, it circles back to the order manager. This ensures store inventory and customer
funds are sufficient for the order to be processed.
• After the order is validated, the order manager notifies the store's web server. It displays a message
notifying the customer that their order has been processed.
• The order manager then sends order data to the warehouse or fulfillment department, letting it
know the product or service can be dispatched to the customer. At this point, tangible and digital
products are sent to the customer, or access to a service is granted.
• Platforms that host e-commerce transactions include online marketplaces that sellers sign up for,
such as Amazon; software as a service (SaaS) tools that let customers rent online store
infrastructures; and open source tools that companies manage using their in-house developers.
Advantage of E-Commerce
• Reduced overhead costs
– Running an e-commerce store is a lot more cost-
effective than running a physical store. You don’t have
to rent commercial real estate — instead, you can pay
an affordable fee for web hosting. You don’t have to
invest in security for your commercial property, plus
you don’t have to worry about paying rent for a
warehouse or hiring employees. With an e-commerce
store, typical costs include your domain name, your
web hosting, and the cost of building your website, as
well as your inventory. That being said, most e-
commerce websites spend some money on marketing
as well.
• No need for a physical storefront
– There are so many difficult aspects to running a
physical storefront and using e-commerce means you
don’t have to face most of those obstacles. Renting a
commercial property can be expensive, especially if
you’re in a big city. You also have to pay for electricity,
water, and internet to ensure your space is up to code
and can handle your business. There’s also security to
consider; if you want your physical storefront to be
secure, you’ll need to invest in cameras and other
surveillance equipment. With an e-commerce store,
you can simply build your website and start selling
your products online without worrying about setting
up a physical storefront and spending as much money.
• Ability to reach a broader audience
– Perhaps the biggest advantage of e-commerce is the
fact that it allows you to reach a massive audience.
Your physical storefront can only get so many visitors
in a day, especially if you live in a smaller town or a
rural area. With an e-commerce store, you can reach
potential customers all throughout the world and
show them your products. Even if you’re not selling
your products overseas, you can still reach shoppers
all the way across the United States to boost your
sales. This expanded reach has even allowed a handful
of smaller e-commerce stores to become massive
brands over time.
• Scalability
– Of the advantages and disadvantages of a business
using e-commerce, scalability is one of the most
practical advantages for long-term growth. If you have
a physical storefront, your business can only grow so
much before you have to move to a larger storefront.
You also have to move inventory and equipment from
one location to another, which makes it even harder
to scale your store with the growth of your business.
With e-commerce, your website and store can grow as
your business does, and you don’t have to spend a
fortune moving to a new physical space.
• Track logistics
– Keeping track of logistics is an essential part of e-
commerce and retail marketing, and it’s
significantly easier with e-commerce than it is
with a physical storefront. You can outsource
fulfillment logistics so your customers can enjoy
benefits like 2-day shipping and easy returns
processing. You also have an electronic record of
everything, which makes it easy to track sales and
look for trends that help you grow your business
over time.
Disadvantages of e-commerce
• Potential security threats
– When you’re doing business online, there’s always
the potential for security threats. Poor website
security can allow unauthorized users to gain
access to your website and look at sensitive data.
In rare cases, issues with payment processors may
lead to data breaches that put customers’ credit
and debit card information at risk. A big part of
learning how to build e-commerce websites is
learning how to make sure that website is secure,
which is why some business owners prefer to hire
a professional.
• Competition
– There’s a lot of competition in the world of e-
commerce because it’s so easy for anybody to create
an online store. This is one of the biggest e-commerce
disadvantages because it means you have to work
extra hard to make sure you’re promoting your store
and driving traffic to your website. Certain niches are
also very crowded, so you may have a tough time
selling your product depending on your industry and
products. Ultimately, the success of your store is
determined by how hard you work to build your
online presence.
• IT issues
– There are no tech issues that can keep you from
accepting cash at a physical store, but IT issues
can be a big problem for e-commerce websites. If
your website suddenly crashes or you’re having a
problem with your payment processor, that
downtime could potentially cost you money and
customers. What’s even worse is that fixing these
IT issues could cost you even more. Keeping it
simple can help you avoid some of the potential IT
issues that come with e-commerce, but tech
problems are something to be aware of.
• Shipping logistics
– Running a physical storefront is simple because all you
have to do is sell products to customers when they
come in to shop. If you want to sell products over the
phone or through a catalog, you can use a simple
shipping service to send out a few packages each
week. With an e-commerce store, you have to figure
out all of the shipping logistics because every
purchase will have to be shipped. It can be difficult to
figure out a seamless shipping solution for your
business, and you don’t want to end up in the red due
to high shipping costs.
• Limited connection with customers
– You don’t get a chance to connect with customers
on a personal level when you’re running an e-
commerce store. Some people may prefer that,
but you can’t offer the same personal touch when
you make a sale online.
E-Commerce Drivers
• Product: everything starts with product – something customers want to have.
• Brand and content: creating the communications, in other words, the ‘story’ or
‘content’ and propositions that will excite and captivate your target shopper.
• Trading and conversion: taking the traffic to the website and converting it into
customers – sometimes changing the price/product and offers to maximize
revenue.
• Fulfillment: managing the inventory, making the right choices in terms of stock,
picking and packing products, and shipping orders to customers.
Dot Com Era : Late 1990s to mid-
2000s
• This era coincided with the spread of internet
across the globe. A lot of software companies
mushroomed delivering basic websites and
rudimentary customer facing capabilities for
their clients. Many of the early e-commerce
companies folded during the great ‘dot com
bubble burst’. Some reasons for the rampant
failure were –
• Internet penetration was still confined to urban
population. Moreover, the mobile internet access
was in its nascent stage thereby shrinking the
market size.
• Most companies did not think end-to-end, supply
chains were under-developed and costly,
hampering the scale up and destroying customer
value proposition.
• Excessive optimism on future led to
disproportionate investments in customer
acquisition despite no visibility of current
marginal profitability.
Digital Social Era – Early 2000s till
now
• This era was characterized by two mega trends
that swept all walks of life namely, “digital
ubiquity” and “social media”. Technology
became omnipresent with sharply reducing
device and internet access costs. The birth of
Facebook, WhatsApp, Twitter and the likes
created one giant hyper-connected world. This
was also the era of “mobile apps”.
• This era saw the emergence of two prominent
types of companies.
• Stand-alone e-commerce companies like Amazon,
Flipkart & the likes. These companies pumped in big
bucks to build very strong logistics and overcame the
drawback of their predecessors. The consumer
proposition became very strong – lowest prices, access
to widest product range, delivered home. The e-com
giants acquired customers in deeper interior towns &
villages in contrast to their predecessors.
• Companies operating on ‘market place’ model,
connecting buyers and sellers, simplifying the hitherto
cumbersome consumer need fulfillment mechanisms.
For example, Uber, Zomato and the likes. This era saw
the birth of myriad of start-ups on this model.
New Era of Hybrid Collaborative
Models :- The Future of digital
economy
• UPI, digital wallets and Google Pay have made cashless
payments between individuals and entities convenient,
secure and real time. The entry of small & micro
vendors (vegetable sellers, traders, door delivery
vendors and the likes) and service providers
(electricians, plumbers, painters, drivers, maids etc) in
the mobile commerce world has completed the
missing piece in the digital business models. We are at
the cusp of yet another digital transformation, an era
of efficiency, speed and even better value to
consumers. Below are some of the interesting
possibilities the new era will usher in.
• Digital Eco System Cross Overs – There is likely to be a confluence of “e-tailing”, “e-payments” and
“e-networking” in order to provide a very strong integrated, seamless and intuitively convenient
ecosystem to customers. Companies rooted in any of the three areas having large customer base
will attempt to foray into other two areas. PayTM originated as e-wallet has expanded its reach into
e-tailing. WhatsApp has already launched its payment service “WhatsApp Pay”. Amazon has
launched Amazon Pay for Person-to-Person payment (P2P). These cross-overs create new
compelling consumer propositions. For example, a customer can now interact real time with
neighborhood grocer on WhatsApp, finalize the order and pay on WhatsApp and get the delivery
super fast at no extra cost.
Involves use of only one website Multiple websites and CRMs, ERPs that
connect different business processes are
used
EDI Software
Option 1: Readymade EDI Solutions
Follows global standards and templates
Industry specific solutions
Common platform for multi-partner interaction
Not customizable and dependence on vendor
Option 2 : Custom built solutions
Can be integrated with existing backend applications
Flexibility of enhancements
EDI Standards
• Definition
A set of rules, agreed upon, accepted, and adhered to by two
entities, through which data is structured into electronic
formats for exchange of information
• Common standards
ANSI X12 is the standard that any industry can use
United Nations/EDI For Administration Commerce and Trade
(UN/EDIFACT) is the standard for international EDI
transactions
EDI LAYERED ARCHITECTURE
Information Flow WithoutEdi
Information Flow WithEdi
EDI ISSUES
• Initial and operative costs
• Need to share master data with external
partners.
• Security concerns Confidentiality of
Information Authenticity of information
Requires continuous maintenance and
resources.
EDI Applications InBusiness
• Four different scenarios in industries that
use EDI extensively: