E-Commerce

E-Commerce or Electronics Commerce is a methodology of modern business which

fulfills the need of business organizations, vendors and customers to reduce cost and improve the
quality of goods and services while increasing the speed of delivery.

E-commerce refers to paperless exchange of business information using following ways.

• Electronic Data Exchange (EDI)

• Electronic Mail (e-mail)

• Electronic Bulletin Boards

• Electronic Fund Transfer (EFT)

• Other Network-based technologies.

E-Commerce features
Non-Cash Payment: E-Commerce enables use of credit cards, debit cards, smart cards,
electronic fund transfer via bank's website and other modes of electronics payment.

24x7 Service availability: E-commerce automates business of enterprises and services provided
by them to customers are available anytime, anywhere. Here 24x7 refers to 24 hours of each seven
days of a week.

Advertising / Marketing: E-commerce increases the reach of advertising of products and

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

Improved Sales: Using E-Commerce, orders for the products can be generated anytime,
anywhere without any human intervention. By this way, dependencies to buy a product reduce at
large and sales increases.

Support: E-Commerce provides various ways to provide pre sales and post sales assistance to
provide better services to customers.

Inventory Management: Using E-Commerce, inventory management of products becomes

automated. Reports get generated instantly when required. Product inventory management
becomes very efficient and easy to maintain.

Communication improvement: E-Commerce provides ways for faster, efficient, reliable

communication with customers and partners.

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E-Commerce advantages can be broadly classified in three major categories:
Advantages to Organizations
Advantages to Consumers
Advantages to Society

Advantages to Organizations
Using E-Commerce, organization can expand their market to national and international
markets with minimum capital investment. An organization can easily locate more customers,
best suppliers and suitable business partners across the globe.
E-Commerce helps organization to reduce the cost to create process, distribute, retrieve and
manage the paper based information by digitizing the information.
E-commerce improves the brand image of the company.
E-commerce helps organization to provide better customer services.
E-Commerce helps to simplify the business processes and make them faster and efficient.
E-Commerce reduces paper work a lot.
E-Commerce increased the productivity of the organization. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request comes
from a customer and it uses just-in-time manufacturing way.

Advantages to Customers
24x7 support. Customer can do transactions for the product or enquiry about any
product/services provided by a company any time, any where from any location. Here 24x7
refers to 24 hours of each seven days of a week.
E-Commerce application provides user more options and quicker delivery of products.
E-Commerce application provides user more options to compare and select the cheaper and
better option.
A customer can put review comments about a product and can see what others are buying or
see the review comments of other customers before making a final buy.
E-Commerce provides option of virtual auctions.
Readily available information. A customer can see the relevant detailed information within
seconds rather than waiting for days or weeks.
E-Commerce increases competition among the organizations and as result organizations
provides substantial discounts to customers.

Advantages to Society
Customers need not to travel to shop a product thus less traffic on road and low air pollution.
E-Commerce helps reducing cost of products so less affluent people can also afford the
products.
E-Commerce has enabled access to services and products to rural areas as well which are
otherwise not available to them.
E-Commerce helps government to deliver public services like health care, education, social
services at reduced cost and in improved way.

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Differences between Traditional Commerce and E-Commerce.

E -Commerce disadvantages can be broadly classified in two major categories:

• Technical disadvantages
• Non-Technical disadvantages

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Technical Disadvantages

1. There can be lack of system security, reliability or standards owing to poor implementation
of e-commerce.
2. Software development industry is still evolving and keeps changing rapidly.
3. In many countries, network bandwidth might cause an issue as there is insufficient
telecommunication bandwidth available.
4. Special types of web server or other software might be required by the vendor setting the
e- commerce environment apart from network servers.
5. Sometimes, it becomes difficult to integrate E-Commerce software or website with the
existing application or databases.
6. There could be software/hardware compatibility issue as some E-Commerce software may be
incompatible with some operating system or any other component.

Non-Technical Disadvantages

Initial cost: The cost of creating / building E-Commerce application in-house may be very
high. There could be delay in launching the E-Commerce application due to mistakes, lack of
experience.
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/virtual stores.
Security / Privacy: Difficult to ensure security or privacy on online transactions.
Lack of touch or feel of products during online shopping.
E-Commerce applications are still evolving and changing rapidly.
Internet access is still not cheaper and is inconvenient to use for many potential customers like
one living in remote villages.

E -Commerce or Electronics Commerce business models can generally categorized in following

categories.

• Business - to - Business (B2B)

• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)

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Business - to - Business (B2B)
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.

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 mail
and organization will dispatch the product/goods to the customer.

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Consumer - to - Consumer (C2C)
Website following C2C business model helps consumer to sell their assets like residential
property, cars, motorcycles 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 post/advertisement on the website.

Consumer - to - Business (C2B)

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 that fulfills the consumer's requirement within
specified budget approaches the customer and provides its services.

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Business - to - Government (B2G)
B2G model is a variant of B2B model. Such websites are used by government to trade and
exchange information with various business organizations. Such websites are accredited by the
government and provide a medium to businesses to submit application forms to the government.

Government - to - Business (G2B)

Government uses B2G model website to approach business organizations. Such websites support
auctions, tenders, and application submission functionalities.

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.

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Electronic payment refers to paperless monetary transactions. Electronic payment has
revolutionized the business processing by reducing paper work, transaction costs, labour cost.
Being user friendly and less time consuming than manual processing, helps business
organization to expand its market reach / expansion. Some of the modes of electronic payments
are following.
Credit Card
Debit Card
Smart Card
E-Money
Electronic Fund Transfer (EFT)

Credit Card
Payment using credit card is one of most common mode of electronic payment. Credit card is
small plastic card with a unique number attached with an account. It has also a magnetic strip
embedded in it which is used to read credit card via card readers. When a customer purchases a
product via credit card, credit card issuer bank pays on behalf of the customer and customer has a
certain time period after which he/she can pay the credit card bill. It is usually credit card
monthly payment cycle. Following are the actors in the credit card system.

The card holder - Customer

The merchant - seller of product who can accept credit card payments.
The card issuer bank - card holder's bank
The acquirer bank - the merchant's bank
The card brand - for example, visa or mastercard.

Credit card payment process

Step Description
Step 1
Bank issues and activates a credit card to customer on his/her request.
Step 2
Customer presents credit card information to merchant site or to merchant from whom he/she
want to purchase a product/service.
Step 3
Merchant validates customer's identity by asking for approval from card brand company.
Step 4
Card brand company authenticates the credit card and paid the transaction by credit. Merchant
keeps the sales slip.
Step 5
Merchant submits the sales slip to acquirer banks and gets the service chargers paid to him/her.
Step 6
Acquirer bank requests the card brand company to clear the credit amount and gets the payment.
Step 7
Now card brand company asks to clear amount from the issuer bank and amount gets transferred
to card brand company.

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Debit Card
Debit card, like credit card is a small plastic card with a unique number mapped with the bank
account number. It is required to have a bank account before getting a debit card from the bank.
The major difference between debit card and credit card is that in case of payment through debit
card, amount gets deducted from card's bank account immediately and there should be sufficient
balance in bank account for the transaction to get completed whereas in case of credit card there
is no such compulsion. Debit cards free customer to carry cash, cheques and even merchants
accepts debit card more readily. Having restriction on amount being in bank account also helps
customer to keep a check on his/her spending.

Smart Card
Smart card is again similar to credit card and debit card in appearance but it has a small
microprocessor chip embedded in it. It has the capacity to store customer work related/personal
information. Smart card is also used to store money which is reduced as per usage. Smart card
can be accessed only using a PIN of customer. Smart cards are secure as they stores information
in encrypted format and are less expensive / provide faster processing. Mondex and Visa Cash
cards are examples of smart cards.

E-Money
E-Money transactions refer to situation where payment is done over the network and amount gets
transferred from one financial body to another financial body without any involvement of a
middleman. E-money transactions are faster, convenient and save a lot of time.
Online payments done via credit card, debit card or smart card are examples of e-money
transactions. Another popular example is e-cash. In case of e-cash, both customer and merchant
both have to sign up with the bank or company issuing e-cash.

Electronic Fund Transfer

It is a very popular electronic payment method to transfer money from one bank account to
another bank account. Accounts can be in same bank or different bank. Fund transfer can be
done using ATM (Automated Teller Machine) or using computer. Now a day, internet based
EFT is getting popularity. In this case, customer uses website provided by the bank. Customer
logins to the bank's website and registers another bank account. He/she then places a request to
transfer certain amount to that account. Customer's bank transfers amount to other account if it is
in same bank otherwise transfer request is forwarded to ACH (Automated Clearing House) to
transfer amount to other account and amount is deducted from customer's account. Once
amount is transferred to other account, customer is notified of the fund transfer by the
bank.