E-commerce 1

NAME - SWETA JHA

T.Y.BMS (Vth Sem)
2007-2008
E-commerce 2

INDEX

Sr. Title Page

No. No.
1. INTRODUCTION OF E-COMMERCE

2. WHAT DO YOU MEAN BY COMMERCE

3. DEFINITIONS OF E-COMMERCE

4. HISTORICAL DEVELOPMENT

5. THE ELEMENTS OF A TYPICAL COMMERCE

6. THE ELEMENTS OF E-COMMERCE

7. MODELS OF E-COMMERCE
Business-to-consumer
Business-to-business
Consumer-to-consumer transactions
Common Technology Differences of B2B and B2C
8. E-Commerce –Case Studies leading the Tansformation
Intel
Amazon
eBay
9. E-COMMERCE PROCESS

10 E-COMMERCE PROCESS CYCLE

.

11 BENEFITS OF E-COMMERCE
.
E-commerce 3

12 SUCCESS FACTORS IN E-COMMERCE

.

13 PROBLEMS
.

14 PRODUCT SUITABILITY
.

15 ACCEPTANCE
.

16 E-COMMERCE TECHNOLOGIES
.

17 E-COMMERCE STANDARDS
.

18 E-COMMERCE SOFTWARE SOLUTION

.

19 SALES AND MARKETING CYCLE

.

20 ELECTRONIC STOCK TRADING

.

21 ELECTRONIC BANKING
.

22 SECURE ELECTRONIC TRANSACTION

.

23 2007 INFORMATION SECURITY TIPS FOR SMALL

. BUSINESSES

24 FUTURE EXPECTATION ABOUT THE E-

. COMMERCE
E-commerce 4

25 ELECTRONIC COMMERCE COMPANIES

.

26 BIBLOGRAPHY
.

The idea of doing business electronically over networks is nothing new: We

think nothing of ordering the products we’ve seen advertised on television
on in printed catalog with a phone call or a fax, & ATMs are always within a
reach for quick, easy, and automatic banking. Corporations advertise
through broadcasting & networks, & consumers’ flocks to local outlets of
national &international franchise networks. As the world become
increasingly interconnected, particularly through the internet with its open
protocols, forward looking business will be able to make their product
E-commerce 5

available to a global market, without having to create & maintain their own
private network s for selling, delivering & supporting customers.

While the techniques for attracting consumer attentions, describing products,

& delivering them electronically will be of interest to those who wish to
participate in this new markets, this project simply explain how business
transaction can be executed across an unreliable & unsecured medium like
the internet, & discussed some of the methods currently being planned &
implemented – in other words, how you will be buying & selling in the
future, & how it will work.

The number of businesses devoted to promoting commerce on the internet

has been growing like Topsy since the end of 1994, but they all share the
goal of making commercial transaction over the internet safe , simple secure
- & earn a profit in the process. The method employed to achieve these ends
are somewhat more various, but can be categorized as either creating secure
& reliable channel to carry transaction across internet connection (which are
inherently unsecured & unreliable), or using more traditional channels to
carry sensitive information.

Electronic merchants need to feel confident they can safely market & deliver
their product, get paid for all products purchased, & not lose any product to
theft. Electronic consumers need to feel confident they can safely select and
take delivery of products, pay for them, & not be concerned about
compromise of payment information ( like credit card or bank account no.).
Everyone wants to feel confident that the individuals they deal with across
the internet are who they say they are, to avoid losses to fraud.
E-commerce 6

“Search for better ways to do things and you will find

success”

OBJECTIVES
The study of e-commerce is much broader that
the current enthusiasm for home shopping on the
web. The objective behind the preparation of the
project on
“E-Commerce &
Internet” is:-
 To know the importance of E-commerce in today’s
environment.
E-commerce 7

 To make readers aware of the role played by E-commerce

in big organizations.
 To make readers aware that E-commerce is a double edged
sword. If it is properly used it can be a boon or a blessing, but
if it is abused or misused it can also act as a curse.
 Informal business to business transaction using internet e-
commerce;
 Consumer transaction with business, or other members of
the public, using internet e-commerce.
 To make readers aware that E-commerce is a double edged
sword. If it is properly used it can be a boon or a blessing, but
if it is abused or misused it can also act as a curse.

INTRODUCTION OF E-COMMERCE
Electronic Commerce is exactly analogous to a marketplace on the Internet.
Electronic Commerce (also referred to as EC, e-commerce eCommerce or
ecommerce) consists primarily of the distributing, buying, selling, marketing
and servicing of products or services over electronic systems such as the
Internet and other computer networks. E-commerce follows the same basic
principles that traditional commerce follows—that is, buyers and sellers
exchange and transport goods from one place to another. But rather than
conducting business in the traditional way—in stores and other “brick and
E-commerce 8

mortar” buildings or through mail order catalogs and telephone operators—

in e-commerce buyers and sellers transact business over networked
computers.

E-commerce offers buyers convenience. They can visit the World Wide Web
sites of multiple vendors 24 hours a day and seven days a week to compare
prices and make purchases, without having to leave their homes or offices.
In some cases, consumers can immediately obtain a product or service, such
as an electronic book, a music file, or computer software, by downloading it
over the Internet.

For sellers, e-commerce offers a way to cut costs and expand their markets.
They do not need to build, staff, or maintain a store or print and distribute
mail order catalogs. Automated order tracking and billing systems cut
additional labor costs, and if the product or service can be downloaded, e-
commerce firms have no distribution costs. Because they sell over the global
Internet, sellers have the potential to market their products or services
globally and are not limited by the physical location of a store. Internet
technologies also permit sellers to track the interests and preferences of their
customers with the customer’s permission and then use this information to
build an ongoing relationship with the customer by customizing products
and services to meet the customer’s needs.

At the close of the 20th century, retail transactions made up the largest part
of e-commerce. Consumers purchased computers, airline tickets, hotel
rooms, automobiles, clothing, electronics, books, event tickets, food,
furniture, and countless other commodities over the Internet. Business-to-
E-commerce 9

business commerce represented one of the fastest growing segments of e-

commerce. Businesses ordered supplies and coordinated complicated
projects electronically

E-commerce also has some disadvantages, however. Consumers are

reluctant to buy some products online. Online furniture businesses, for
example, have failed for the most part because customers want to test the
comfort of an expensive item such as a sofa before they purchase it. Many
people also consider shopping a social experience. For instance, they may
enjoy going to a store or a shopping mall with friends or family, an
experience that they cannot duplicate online. Consumers also need to be
reassured that credit card transactions are secure and that their privacy is
respected. E-Commerce according to Person Halls book E-Commerce
started in 1994 with the first banner ad being placed on a website.

WHAT DO YOU MEAN BY COMMERCE

Commerce is the exchange of goods & services, usually for money. When
you buy something at a store you are participating in commerce. Going to
work each day for a company that produces a product, is a link in the chain
of the commerce. When one thinks of different ways, he/she immediately
recognize several different players of the commerce such as:

• Buyers: These are the people or organization with money

who want to purchase goods & service products.
E-commerce 10

• Sellers: These are the people who offer goods & service to
buyers. Sellers are recognizing in different forms such as retailers who
sell directly to consumers and wholesalers who sell to retailers &
others. Wholesalers are also known as distributors.

• Producers: these are the people organization that create the

product & services that seller’s offer to buyers. Producer may is
classified in the category of a seller. They can sell their products to
any category to customers.

DEFINITIONS OF E-COMMERCE

“What is E-Commerce? E-Commerce supports an entire range of activities

such as product design, manufacturing, advertising, commercial transactions,
settlements of accounts using a variety of computer networks”.

Thus, e-commerce refers to the paperless exchange of business information

using electronic data interchange, electronic mail, electronic fund transfer &
other networked based technologies.

In a holistic sense electronic commerce can be summarized as:

E-commerce 11

 It is a business strategy.
 It uses technology to achieve business goals.
 It improves external business relationships.
 It is an evolution in the way companies’ internet.
 It provides information to facilitate delivery of goods & services.

WHAT DO YOU MEAN BY COMMERCE

Commerce is the exchange of goods & services, usually for money. When
you buy something at a store you are participating in commerce. Going to
work each day for a company that produces a product, is a link in the chain
of the commerce. When one thinks of different ways, he/she immediately
recognize several different players of the commerce such as:

• Buyers: These are the people or organization with money

who want to purchase goods & service products.
E-commerce 12

• Sellers: These are the people who offer goods & service to
buyers. Sellers are recognizing in different forms such as retailers who
sell directly to consumers and wholesalers who sell to retailers &
others. Wholesalers are also known as distributors.

• Producers: these are the people organization that create the

product & services that seller’s offer to buyers.

HISTORICAL DEVELOPMENT
The meaning of the term "electronic commerce" has changed over the last
30 years. Originally, "electronic commerce" meant the facilitation of
commercial transactions electronically, usually using technology like
Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT),
where both were introduced in the late 1970s, for example, to send
commercial documents like purchase orders or invoices electronically.

The 'electronic' or 'e' in e-commerce refers to the technology/systems; the

'commerce' refers to be traditional business models. E-commerce is the
complete set of processes that support commercial/ business activities on a
network. In the 1970s and 1980s, this would also (ATM) and telephone
banking in the 1980s was also forms of e-commerce. However, from the
1990s onwards, this would include enterprise resource planning systems
(ERP), data mining and data warehousing.

In the dot com era, it came to include activities more precisely termed "Web
commerce" -- the purchase of goods and services over the World Wide Web,
usually with secure connections (HTTPS, a special server protocol that
E-commerce 13

encrypts confidential ordering data for customer protection) with e-shopping

carts and with electronic payment services, like credit card payment
authorizations.

Today, it encompasses a very wide range of business activities and

processes, from e-banking to offshore manufacturing to e-logistics. The ever
growing dependence of modern industries on electronically enabled business
processes gave impetus to the growth and development of supporting
systems, including backend systems, applications and middleware.
Examples are broadband and fiber-optic networks, supply-chain
management software, customer relationship management software,
inventory control systems and financial accounting software.

When the Web first became well-known among the general public in 1994,
many journalists and pundits forecast that e-commerce would soon become a
major economic sector. However, it took about four years for security
protocols (like HTTPS) to become sufficiently developed and widely
deployed. Subsequently, between 1998 and 2000, a substantial number of
businesses in the United States and Western Europe developed rudimentary
web sites.

Although a large number of "pure e-commerce" companies disappeared

during the dot-com collapse in 2000 and 2001, many "brick-and-mortar"
retailers recognized that such companies had identified valuable niche
markets and began to add e-commerce capabilities to their Web sites. For
example, after the collapse of online grocer Webvan, two traditional
supermarket chains, Albertsons and Safeway, both started e-commerce
subsidiaries through which consumers could order groceries online.
E-commerce 14

The emergence of e-commerce also significantly lowered barriers to entry in

the selling of many types of goods; accordingly many small home-based
proprietors are able to use the internet to sell goods. Often, small sellers use
online auction sites such as EBay(tm), or sell via large corporate websites like
Amazon.com, in order to take advantage of the exposure and setup
convenience of such sites.

The Elements of a typical commerce

The basic elements of typical commerce activity are listed as below:

(1) Product or service: One must have a product or service to offer. The
product may be from a piece of paper to an airplane:

(2) Place: one must have a place to store the product for marketing. Place
can sometimes be very ephemeral for example a phone number may be
a place. For most physical product, we tend to think of the place as a
store or shop.

(3) Marketing: you need to figure out a way to get people to come to
your place. This process is known as marketing. It is very important
component of commerce. If the people are not aware of the place &
way to reach the place, you will not be able to sell anything.

(4) Method of accepting orders: in a mail order company the orders

come in by mail or phone & are processed by the employees in the
organization.
E-commerce 15

(5) Method of accepting money: If you are at Wal-Mart you can pay in
cash or by cheque or by credit card for your purchases. B-to-B
transaction often use purchased orders. Many businesses do not require
the payment at the time of delivery, & some of the products & service
are delivered continuously.

(6) Method of Delivery: You need to have a way to deliver the product
or service.
(7) Method of accepting Returns: If the customer is not happy with
your product then you need a way to accept a return.

(8) Warranty Claims: Sometimes if the product breaks in the way before
delivery or some other problems crop up with the product, after its
delivery during the warranty period, in such a situation warranty claim
are to be honored.

The Elements of E-commerce

In case of an E-commerce, all the above listed elements are available but hey
are having slight variation in the real life situation.

(1) A Product or service: In case of E-commerce, it is virtual product

shown on a web site. One can demonstrate multimedia presentation of
the product & its entire feature on the web page itself, which may not
be possible in case of physical product of commerce activity.

(2) A place to sell the product: In the e-commerce case, a website

displays the products in all ways & act as a place for E-Commerce.
E-commerce 16

(3) A way to get customers to visit your website: In case of E-

Commerce search engines and linkages with other web sites play an
important role in helping the customers to reach web sites of the e-
organizations.

(4) A way to accept orders: The orders are accepted on the web site
itself. On the web pages of the E-commerce companies shopping carts
are being provided. One can click on the icon and fill in the shopping
card to order items to be purchased and it is accepted by the E-
commerce Company as order from the customer.

(5) A way to accept money: In case of traditional commerce, buyers and

sellers are in direct contact with each other. The payments in E-
commerce are made using Electronic Fund Transfer in various form
using credit cards, smart cards, e checks, etc. The information .of
payment is routed through Value Added Networks (VANs) and
Payment Gateway Systems, etc.

(6) A way to accept returns: As is the case of commerce, in case of [-

commerce all the trading companies have the system of accepting the
returns if the goods and services are not to the satisfaction of the
customer or not up to the standards/ specifications mentioned in the
product catalogs or brochures hosted on the web pages.

(7) A way to handle warranty claims: Sometimes if the product breaks

in the way or some other problems crop up with the product. In such
situation, warranty claims are to be honored as in the case of commerce.
E-commerce 17

A way to provide customer service: The main tools of the customer service
are [-mail, On-line forms, on-line knowledge bases and frequently asked
questions.

Models of E-commerce
Most transactions in E-commerce may broadly be classified into two main
categories:
(I) Business-to-consumer
(ii) Business-to-business
(iii) Consumer-to-consumer transactions

The vast majority of this activity to date has been taking place in countries
with advanced economies and infrastructure. For developing countries,
electronic commerce presents important new opportunities to achieve a more
level playing field vis-à-vis larger, more developed economies, as it demises
in-place advantages of cost. Communication, and information, and creates
huge new markets for indigenous products and services. While many
developing countries are beginning to take advantage of the potential of E-
commerce, critical challenges remain to be overcome before the vision of a
truly integrated and equitable world economy can be realized.
E-commerce 18

Business-to-consumer transactions (B2C): These are the transactions that

most of us are familiar with today. It may be define as any business selling
its product or service to consumers over the internet for their own use. Like
individual customers buying books and music CDs over the Web, or surfing
the Web on find the best deal for some particular item. Here, the merchant
setting up the shop on the Web deals directly with the end customer. This
category is characterized by a large number of transactions, where each
transaction is typically small in volume. The end-customer could be totally
unknown to the merchant or might be visiting the shop for a few occasional
purchases.

Business-to-business transactions(B2C): These are transactions between

two businesses or corporations, where the product traded is for business use.
This category is characterized by limited number of transactions, where each
transaction is typically or larger volume. The end-customer is typically a
previously approved or registered customer or at least known to the
merchant.
The two forms of web-based e-commerce, business-to-business and
business to-consumer, share many common characteristics and technologies.
However, they also differ in important ways, in characteristics and
technologies as well as in the business drivers for adopting e-commerce.

Consumer-to-consumer transactions (C2C): Consumer-to-consumer

(C2C) electronic commerce promotes the opportunity for consumer to
transact goods or services with other consumer present on the internet. The
C2C, in many a situations models the exchange systems with a modified
E-commerce 19

form of deal making. For deal making purposes a large virtual consumer
trading community is developed.

Common Technology Differences of

B2B and B2 C

There are also important technology differences between the business-to

business and business-to-consumer e-commerce models. For example, the
need to process payments via credit card securely has been a major driver for
the development of the broad range of security technologies and payment
systems. However, this need is felt most acutely on business-to-consumer
sites because E-commerce merchants expect payment at the time an order is
placed and consumers want to be able to pay online to avoid the delay and
inconvenience associated with having to mail a check to the merchant. On
business-to-business e-commerce sites, this issue is not as pressing because
the merchant typically is willing to invoice the buyer and collect payment
later and because business customers are used to ordering via a purchase
order rather than paying immediately via credit card. For business-to-
E-commerce 20

business transactions, additional safeguards are built into the existing

processes to protect the companies against possible fraud. In the business to
business sector, EDI is getting replaced because of the advantage Internet
offers to conduct such transactions. In the business-to-consumer e-commerce
market, the anticipated benefits to the vendor vary according to the business
model for becoming involved with e-commerce initially.

In some cases, merchants have taken a familiar business model, such as

catalog shopping, and transported it to the web as a new medium, using their
web site instead of a paper catalog to provide product information and using
online ordering to replace calling .an operator to place an order. Today, these
web sites may not generate many incremental orders (orders that would not
be placed if the company was not on the web). Merchants are investing in e-
commerce to extend their presence to the web so they will not become
visible by their absence, to give consumers and additional mechanism
through which to do business with them; and to gain experience with web-
based e-commerce so that when (or if) it becomes a larger part of their sales,
they are ready to take advantage of it.

Gaining experience with web-based e-commerce is particularly important so

that a. company can avoid being-outflanked by competitors who take
advantage of the web more quickly and use it to gain market share. In the
future, as usage of the web becomes more widespread and possibly begins to
replace (rather than supplement) existing channels, other business drivers
may become important as well. For example, expenses of direct mail
merchants (such as printing and postage) could be reduced dramatically if
web-based e-commerce replaces traditional catalog sales.
E-commerce 21

TYPES OF E-COMMERCE
A variety of businesses are conducted online, including retail businesses that
sell products to consumers, service providers that sell services to consumers,
auctioneers that create a marketplace for products and services, and
business-to-business commerce. Retail transactions make up the largest part
of e-commerce. Consumers can find computers, automobiles, clothing,
books, music, airline and event tickets, food, and just about anything else for
sale on the Internet.

 Product Transactions
E-commerce 22

E-Commerce Web Site A page from the Amazon.com Web site illustrates
the ease and immediacy of electronic commerce. Shoppers are able to search
a wide variety of products, make their selection, order online, and receive
updates about the status of their shipment. After years of operating losses,
Amazon.com was among the first e-businesses to report a
profit.Amazon.com

Retail Web sites typically include electronic catalogs that describe and
display products for sale. Consumers can search for individual items or
randomly browse electronic catalogs, some much larger than their mail order
print counterparts. An Internet book retailer, for example, can offer millions
E-commerce 23

of different book titles for sale on its Web site, far more titles than could fit
into a store or that could be included cost-effectively in a print catalog.

 Service Transactions

Other e-commerce businesses offer services. Financial services represent a

large segment of e-commerce. For a small fee, online investment brokerages
trade stocks on behalf of their clients. Online stock brokerages typically
charge customers lower fees than traditional stock brokerages. Other sites
provide consumers with a way to research and obtain mortgages and other
loans online.

Travel sites offer a method of scheduling airline flights, renting cars, and
booking hotel rooms. Travelers can plan all the details of their vacation or
business trip, make reservations, and purchase tickets at the same site. Such
sites also offer maps, travel literature, and booking information for travelers.

E-Commerce –Case Studies leading the

Transformation
B2B Comprises about 80-90 percent of all e-commerce by value. In this
section we will present three case studies that are leading this transformation
in different areas. Intel is an existing company that started using the internet
as a distribution channel in the mid 1990s. It transformed itself into an e-
business. Amazon is a pure –play Dotcom Company that rediscovered itself,
after initial emphasis of sales through website only, in the physical world by
incorporating a supply chain, warehousing, & customer relationship to
E-commerce 24

become a profitable business. eBay is yet another pure-play dotcom

company that pioneered C2C e-commerce & became a profitable company
from the very beginning.

Intel:-

In the mid 1990s, Intel adopted e- commerce technologies to reach out to its
customer & trading partners. Within a few years, Intel was handling over 3
million page hits per day with online revenue of $ 2 billion per month.
Intel’s website deliver online information & support to a complex network
of customer, employees, channel resellers, suppliers & OEMs. Over 6000
user in more than 50 locations around the world use the customized,
personalized & secure B2B functionality.

Intel defined e-business in terms of what they called 100% e-corporation

concept: a corporate strategy to re-engineer & automate business processes,
using business system & internet technology, aimed at significantly
improving customer, employee & supplier business interactions.

Amazon:-

Amazon is a pure –play B2C dotcom website, opened as an online bookstore

in July 1995. It mission was to use the internet to transform book buying
into fasted, easiest & most enjoyable shopping experience possible. Jeff
Bezos, CEO of Amazon.com, argued that retail store required lot of real
estate in prime location to sell product to customers, & that the cost of real
estate was always going up. The Amazon.com main website offers millions
of books, CDs, DVDs, free electronic greeting cards, online auctions, games,
E-commerce 25

videos, toys, tools, electronics, home furnishings, apparel, kitchenware,

computers, health & beauty goods, prescription drugs , gourmet foods, &
services including film processing.

Amazon also expanded in parallel into international market. Even in July

1995, it had customers from 45 countries. By the year 2000, 13.8 percent of
its revenues came from over 150 countries. It opened distinct websites for its
customer in Britain, Germany, France & Japan with content in local
language for customers. The company also became sensitive to local
cultures. It also opened local office in these countries to serve customers.

eBay:-

The eBay website proclaims that “eBay is the world’s online marketplace,
enabling trade on a local, national & international basis. With a diverse &
passionate community of individual & small businesses, eBay offer an
online platform where millions of item are traded each day.” eBay enable a
visitor to the site to find, buy, & pay for an item by bidding as if he were
participating in an auctions. For example, in India, eBay acquired a
successful online auction site, baazee.com.

Seller & buyers meet through the eBay marketplace, & interact through it as
also directly. They follow the auction or fixed price formats facilitated by
E-commerce 26

the website. Payments are made by buyer & goods are received by them
from sellers. Most items require small payments to be exchanged. Both
buyer & seller found it inconvenient to deal with money orders or cheques.
Pay pal, a micro –payment gateway for effecting such payments, became
very popular with the trading community. It made C2C payments as easy as
sending an e-mail. The service was offered free to the buyer, but sellers were
required to pay a small fee to pay pal, that was comparable to credit card
charge.

There are other auction sites such as Yahoo! Auctions, Half.com’ and
Amazon.com. But eBay is the world’s largest auctions C2C marketplace,
just as Amazon.com is the world’s biggest store.

E-COMMERCE PROCESS

E-commerce process involves via three logical entities - the storefront,

the payment mechanism and the supply. The storefront is nothing but a
series of HTML web pages that display the products. The development of
the same is quite simple and easy, with thousands of software available in
the market. The third is more of a physical world operation which we're all
familiar with - like supply chain, logistics etc. However the second part, the
payment mechanism, is very crucial, and the entire e-commerce depends on
this.
E-commerce 27

E-payments are central to the whole e-business cycle, as they would

allow the companies to service customers faster, innovative and at lower
costs. This is also the crucial part; because if the claims and debits of the
various participating companies -customer, servicing company, and the bank
are not balanced, because of payment delays, or even worse payment
defaults then the whole process is disrupted. Hence, the central to the
problem is prompt and secure payment, clearing and settlement of credit and
debit claims.

Having understood how crucial they are to the system as such, let us
look into the various instruments that would allow us to do the same, and
where they stand. The companies, world over utilizing credit cards for
payments. This is a time-tested solution for all the problems. There is
nothing new in the process, it's very basic the consumer who buys a service
from merchant pays by entering his credit card details, and the credit card
organization will handle the payment.

The elements that go into the payment

mechanisms are- .

 Cardholder - The individual who is making the purchase (either goods

or services) using the credit card.

 Merchants - the Company that is selling goods and services to

cardholders.
E-commerce 28

 Issuing Bank - The bank that has issued the credit card to the

cardholder. The issuing bank provides the monthly billing statements to

the cardholder.

 Acquiring Bank - The bank that enables the merchants to accept the

credit/card payments. This works in conjunction with the payment

gateway (usually third party) to accept or decline the cardholders
purchase request. After getting the amount from the issuing bank, the
acquiring bank deposits it into the merchant account.

 Card Association - An association such as VISA International and

MasterCard, which issues credit card through its members (the issuing
banks to the cardholder). (Al1 American Express and Discover are not
Card Associations, as they are not issued by any bank, and are offered
directly to the card holder. They are referred to as Card Issuer.)

 Payment Application - An application used, by the merchants to

request credit card authorization and settlement of funds between the

merchant and the acquiring bank.

There are two types of processes that are utilized by the

payment mechanism:

 Authorization Process- The credit card details as entered by the

cardholder are verified and confirmed with the issuing banks; and

 Settlement process- The transfer of funds between the issuing banks

and the acquiring banks

E-commerce 29

Authorization Process

When making purchases over the web, the cardholder uses a web browser to
procure product information from the merchant. The merchant captures the
product information as well as credit card information and then
communicates the credit card information to the acquiring bank through the
payment application. The acquiring bank works with: i, e appropriate card
association (or card issuer) to execute the transaction.

The authorization process in a typical e-commerce cycle. There are two

cycles - Authorization (credit card authorization) and settlement (settlement
of payments to the merchant).

Using a web browser (Microsoft Internet Explorer or Netscape Navigator),

the cardholder visits the website of the merchant, where goods or service are
displayed.

E- Commerce Payment Mechanism

Under E-commerce payment mechanism, the customer selects the product,

which he intends to purchase by clicking on the "Purchase" button. A form
opens up on the web browser, which would be secure, (A lock symbol in the
status bar of the browser indicates that the site from that point on is secure
E-commerce 30

and encrypted), in which the cardholder enters his credit card information.
Some web sites would prompt for the shipping address as well.

 The payment application encrypts and transmits the credit card

information to the acquiring bank through secure communications with
Secured Sockets Layer (SSL).

 The system in the acquiring bank received the information and

forwards this information to the card associations for verification as well as
a4thorization. The card association (or issuer) verifies the card information
and determines whether the cardholder has sufficient credit line available
to pay for the purchases (the purchase amount is also transmitted). The
amount that he can buy is referred to as "open to buy". A confirmation
number is generated and the "open to buy" amount is blocked.

 If the card information is incorrect or if the credit card number is

invalid, then a message declining the transaction is generated and
transmitted to the customer through the merchant.

 Apart from the verification of credit card, the acquiring bank also
verifies the address whereby the shipping details provided by the
cardholder at the time of sale is 'compared to the billing information stored
in the database of the cardholder.

 The information encrypted and sent to the merchant through the

payment application, and then on to the cardholder.

This whole end-to-end process (from the moment the cardholder

clicks on "purchase" to the receipt of the authorization message) takes only a
E-commerce 31

few seconds based on the payment application, traffic, and Internet

connection on the client and others.

After successful authorization of the credit card, the merchant initiates

the fulfillment process of the product or services as requested by the
cardholder.

According to general rules, the merchant can initiate a settlement

process; only after the cardholders order has been fulfilled. Sometimes, the
fulfillment can take days- say physical goods like computers, while some
may take a few seconds - like subscription based services or software
downloads.

Settlement Process

The settlement process of the orders fulfilled by the merchant.

 The merchant on a periodic basis compiles a list of fulfilled orders and

transmits the details to the acquiring bank. This is a typical batch process.

 The merchant's payment application encrypts the purchase

information and transmits the encrypted information to the acquiring
bank.

 The acquiring bank sends settlement instructions to the appropriate

card association for verification. The credit amounts from the issuing
bank and makes the deposit to the merchant account.

 The merchant receives a notification with the fund transfer.

E-commerce 32

While the authorization process takes only few seconds, the settlement
process may take several days, depending on the funds availability with the
issuing bank, as well as other procedures and policies.

Currently, HDFC Bank and ICICI have launched payments gateways

for online transactions. Payments can be effected through credit cards or
directly by debiting the accounts of the customers of the respective banks.
HDFC bank claims it was the first to launch a payment gateway on May 1st
2000. Interestingly, even ICICI bank claims to be the first one to have a
payment gateway, which it flagged off on 15th July 2000. Besides HDFC
Bank and ICICI Global Tele-systems, LG Software and a few other non-
banking companies are toying the idea of launching payment gateways for
inter bank and Bank to Bank transactions.

E-Commerce Process Cycle

Card Holder Merchant Payment application

click on captures the encrypts the information
“purchase” information & forwards to the
button acquiring bank
 E-commerce 33

Acquiring bank forwards

the information to the card
association or card issuer

Payment application
Card Holder is Merchant receives encrypts the information
notified with confirmation & forwards to the
confirmation message acquiring bank
number

Examples of E-Commerce

Pay seal- Indian (ICICI)'s Payment Gateway: ICICl's gateway has been
developed along with Compaq and QSI. Financial Software and Systems is
implementing the project in India. The acquiring is done by ICICI bank. The
gateway is implemented in two-mode (I) Offline Purchasing Process (ii)
Online Purchasing Process. ]

(i) The Offline Purchasing Process: This is an example of business to

consumer credit card transactions. The transaction process is being
explained in the below diagram of transaction with the pay seal. The
customer presents his card at the merchant's shop. The merchant uses a
point of sale (POS) service to send the card information over a dial-up
connection to his acquiring bank. The acquiring banks then send this
information to the issuing bank through the card network. The issuing bank
than authorizes or rejects the transaction and sends the message back to the
merchant over the path.
 E-commerce 34

(ii) The online Purchasing Process: In the online market place, buyers and
seller are often unknown to each other in the process of purchasing a
product with a credit card by telephone. In the environment, the customer
can not validate the card usage with his signature, which is the norm in
offline transactions. The authentication of the card is in the absence.

Transaction process with Payseal

E-commerce 35

The Shopping Process with Payseal

In a typical retail process on the Internet

 The customer fills his shopping card on a merchant website and

proceeds & check out.

 The transaction information is transmitted to the merchant server.

The web merchant forwards a digital order to the Payseal server in
encrypted format.

 Payseal authenticates the merchant and provides a payment details

directly on the customer's browser over a secure 128 bit SSL+
connection.

 The customer provides his credit card details, which is directly sent
to the payment server.

 The credit card details are then switched to IGIGI Bank for
authentication. IGIGI bank then transmits the message to the card holders
(issuing) for payment authorization. The issuing bank authorizes the
payment transmits the confirmation back to the payment gateway through
acquiring bank.

 On receiving authentication and authorization, Payseal forwards

validation of the payment instrument to the merchant server.
E-commerce 36

 The merchant transmits the acknowledgement of the payment to the

customer's browser.

The entire process Payseal integrates seamlessly with the help buys
application of the web merchant ensuring a pleasant shopping experience the
customer.

The credit card details of the customer remain unknown to the net merchant.

Customer’s
Information

Customer
with Browser

Merchant with web server Acquiring Bank

The Process of Payseal

E-commerce 37

Benefits of E-commerce
Important benefits of E-commerce include the following:

 Lower transactions costs - If an E-

Commerce site is implemented well, the web can significantly lower both
order taking cost and customer service costs after sale.
 Larger Purchases per transaction.
 Integration into business cycle.
 People can shop, in different ways.
 Ledger Catalogues.
 Improved Customer Interactions.
 Reduction in inventions.
 Access to a more geographically
dispersed customer base.
 Low Procurement processing cost.

Some of the benefits are very specific to the consumer such as:

 Increased choice of vendors and

products.
 Convenience from shopping at home or
office.
E-commerce 38

 Greater amounts of information that

can be accessed on demand.
 More competitive and increased price
comparison capabilities.
 Greater Customization in the delivery
of services.

Success factors in e-commerce

In many cases, an e-commerce company will survive not only based on its
product, but by having a competent management team, good post-sales
services, well-organized business structure, network infrastructure and a
secured, well-designed website. A company that wants to succeed will have
to perform 2 things: Technical and organizational aspects and customer-
oriented. Following factors will make business of companies succeed in e-
commerce:

Technical and organizational aspects

1. Sufficient work done in market research and analysis. E-commerce is not

exempt from good business planning and the fundamental laws of supply
and demand. Business failure is as much a reality in e-commerce as in any
other form of business.
E-commerce 39

2. A good management team armed with information technology strategy. A

company's IT strategy should be a part of the business re-design process.

3. Providing an easy and secured way for customers to effect transactions.

Credit cards are the most popular means of sending payments on the
internet, accounting for 90% of online purchases. In the past, card numbers
were transferred securely between the customer and merchant through
independent payment gateways. Such independent payment gateways are
still used by most small and home businesses. Most merchants today
process credit card transactions on site through arrangements made with
commercial banks or credit cards companies.

4. Providing reliability and security. Parallel servers, hardware redundancy,

fail-safe technology, information encryption, and firewalls can enhance
this requirement.

5. Providing an attractive website. The tasteful use of colour, graphics,

animation, photographs, fonts, and white-space percentage may aid success
in this respect.

6. Streamlining business processes, possibly through re-engineering and

information technologies.

7. Providing complete understanding of the products or services offered,

which not only includes complete product information, but also sound
advisors and selectors.

Naturally, the e-commerce vendor must also perform such mundane tasks as
being truthful about its product and its availability, shipping reliably, and
 E-commerce 40

handling complaints promptly and effectively. A unique property of the

Internet environment is that individual customers have access to far more
information about the seller than they would find in a brick-and-mortar
situation.
(Of course, customers can, and occasionally do, research a brick-and-mortar
store online before visiting it, so this distinction does not hold water in every
case.)

Customer-Oriented

A successful e-commerce organization must also provide an enjoyable and

rewarding experience to its customers. Many factors go into making this
possible. Such factors include:

1. Providing an incentive for customers to buy and to return. Sales promotions

to this end can involve coupons, special offers, and discounts. Cross-linked
websites and advertising affiliate programs can also help.

2. Providing personal attention. Personalized web sites, purchase suggestions,

and personalized special offers may go some of the way to substituting for
the face-to-face human interaction found at a traditional point of sale.

3. Providing a sense of community. Chat rooms, discussion boards, soliciting

customer input and loyalty programs (sometimes called affinity programs)
can help in this respect.
 E-commerce 41

4. Owning the customer's total experience. E-tailers foster this by treating any
contacts with a customer as part of a total experience, an experience that
becomes synonymous with the brand.

5. Helping customers do their job of consuming. E-tailers and online shopping

directories can provide such help through ample comparative information
and good search facilities. Provision of component information and safety-
and-health comments may assist e-tailers to define the customers' job.

Problems
Even if a provider of E-commerce goods and services rigorously follows
these "key factors" to devise an exemplary e-commerce strategy, problems
can still arise. Sources of such problems include:

1. Failure to understand customers, why they buy and how they buy. Even a
product with a sound value proposition can fail if producers and retailers
do not understand customer habits, expectations, and motivations. E-
commerce could potentially mitigate this potential problem with proactive
and focused marketing research, just as traditional retailers may do.

2 Inability to predict environmental reaction. What will competitors do? Will

they introduce competitive brands or competitive web sites? Will they
supplement their service offerings? Will they try to sabotage a competitor's
site? Will price wars break out? What will the government do? Research
 E-commerce 42

into competitors, industries and markets may mitigate some consequences

here, just as in non-electronic commerce.

3. Over-estimation of resource competence. Can staff, hardware, software,

and processes handle the proposed strategy? Have e-tailers failed to
develop employee and management skills? These issues may call for
thorough resource planning and employee training.

4. Failure to coordinate. If existing reporting and control relationships do not

suffice, one can move towards a flat, accountable, and flexible
organizational structure, which may or may not aid coordination.

5. Failure to obtain senior management commitment. This often results in a

failure to gain sufficient corporate resources to accomplish a task. It may
help to get top management involved right from the start.

6. Failure to obtain employee commitment. If planners do not explain their

strategy well to employees, or fail to give employees the whole picture,
then training and setting up incentives for workers to embrace the strategy
may assist.

7. Under-estimation of time requirements. Setting up an e-commerce venture

can take considerable time and money, and failure to understand the timing
and sequencing of tasks can lead to significant cost overruns. Basic project
planning, critical path, critical chain, or PERT analysis may mitigate such
failings. Profitability may have to wait for the achievement of market
share.

8. Becoming the victim of organized crime. Many syndicates have caught on

to the potential of the Internet as a new revenue stream. Two main methods
are as follows: (1) Using identity theft techniques like phishing to order
 E-commerce 43

expensive goods and bill them to some innocent person, then liquidating
the goods for quick cash; (2) Extortion by using a network of compromised
"zombie" computers to engage in distributed denial of service attacks
against the target Web site until it starts paying protection money.

9. Failure to expect the unexpected. Too often new businesses do not take into
account the amount of time, money or resources needed to complete a
project and often find themselves without the necessary components to
become successful.

Product suitability
Certain products or services appear more suitable for online sales; others
remain more suitable for offline sales.

Many successful purely virtual companies deal with digital products,

(including information storage, retrieval, and modification), music, movies,
office supplies, education, communication, software, photography, and
financial transactions. Examples of this type of company include: Google,
eBay and Paypal. Other successful marketers such as use Drop shipping or
Affiliate marketing techniques to facilitate transactions of tangible goods
without maintaining real inventory. Examples include numerous sellers on
eBay.

Virtual marketers can sell some non-digital products and services

successfully. Such products generally have a high value-to-weight ratio, they
may involve embarrassing purchases, they may typically go to people in
remote locations, and they may have shut-ins as their typical purchasers.
E-commerce 44

Items which can fit through a standard letterbox — such as music CDs,
DVDs and books — are particularly suitable for a virtual marketer, and
indeed Amazon.com, one of the few enduring dot-com companies, has
historically concentrated on this field.

Products such as spare parts, both for consumer items like washing machines
and for industrial equipment like centrifugal pumps, also seem good
candidates for selling online. Retailers often need to order spare parts
specially, since they typically do not stock them at consumer outlets - in
such cases, e-commerce solutions in spares do not compete with retail
stores, only with other ordering systems. A factor for success in this niche
can consist of providing customers with exact, reliable information about
which part number their particular version of a product needs, for example
by providing parts lists keyed by serial number.

Purchases of pornography and of other sex-related products and services

fulfill the requirements of both virtuality (or if non-virtual, generally high-
value) and potential embarrassment; unsurprisingly, provision of such
services has become the most profitable segment of e-commerce. [Citation
needed]

There are also many disadvantages of e-commerce; one of the main ones is
fraud. This is where your details (name, bank card number, age, national
insurance number) are entered into what look to be a safe site but really it is
not. These details can then be used to steal money from you and can be used
to buy things on line that you are completely unaware of until it is too late. If
this information is leaked into the wrong hands. People are able to steal your
E-commerce 45

identity, and commit more fraud crimes under your name. Finally there are
many problems with e commerce some of which are:

Failure to understand customers, why they buy and how they buy. Even a
product with a sound value proposition can fail if producers and retailers do
not understand customer habits, expectations, and motivations. E-commerce
could potentially mitigate this potential problem with proactive and focused
marketing research, just as traditional retailers may do. Failure to consider
the competitive situation. One may have the will to construct a viable book
e-tailing business model, but lack the capability to compete with Amazon.
Inability to predict environmental reaction. What will competitors do? Will
they introduce competitive brands or competitive web sites? Will they
supplement their service offerings? Will they try to sabotage a competitor's
site? Will price wars break out? What will the government do? Research into
competitors, industries and markets may mitigate some consequences here,
just as in non-electronic commerce. Over-estimation of resource
competence. Can staff, hardware, software, and processes handle the
proposed strategy? Have e-tailer's failed to develop employee and
management skills? These issues may call for thorough resource planning
and employee training.

Products less suitable for e-commerce include products that have a low
value-to-weight ratio, products that have a smell, taste, or touch component,
products that need trial fittings — most notably clothing — and products
where colour integrity appears important. Nonetheless, Tesco.com has had
success delivering groceries in the UK, albeit that many of its goods are of a
generic quality, and clothing sold through the internet is big business in the
U.S. Also, the recycling program cheap cycle sells goods over the internet,
E-commerce 46

but avoids the low value-to-weight ratio problem by creating different

groups for various regions, so that shipping costs remain low.

Acceptance
Consumers have accepted the e-commerce business model less readily than
its proponents originally expected. Even in product categories suitable for e-
commerce, electronic shopping has developed only slowly. Several reasons
might account for the slow uptake, including:

 Concerns about security. Many people will not use credit

cards over the Internet due to concerns about theft and credit card fraud.

 Lack of instant gratification with most e-purchases (non-

digital purchases). Much of a consumer's reward for purchasing a product
lies in the instant gratification of using and displaying that product. This
reward does not exist when one's purchase does not arrive for days or
weeks.

 The problem of access to web commerce, mainly for

poor households and for developing countries. Low penetration rates of
 E-commerce 47

Internet access in some sectors greatly reduce the potential for e-

commerce.

 The social aspect of shopping. Some people enjoy

talking to sales staff, to other shoppers, or to their cohorts: this social
reward side of retail therapy does not exist to the same extent in online
shopping.

 Poorly designed, bug-infested e-Commerce web sites

that frustrate online shoppers and drive them away.

 Inconsistent return policies among e-tailers or difficulties

in exchange/return.

E-commerce Technologies
Some of the important E-commerce technologies are discussed as
under:

(1) Electronic Data Interchange: EDI is the preparation, communication,

and processing of business transactions and data electronically in a
predefined structure format, using computers and telecommunication links.
Large corporations mostly use it and their satellite suppliers working
together over a private network called a Value Added Network (VAN).
These VAN offer reliability and security that is difficult to on the internet
so far. An EDI services provide maintains a VAN, with mailboxes for each
business partner. The provider stores' then forwards EDI messages
between partners. Each participating company' has to run EDI translation
 E-commerce 48

software on its computers to convert EDI data in to formats used by the

Company's data bases. The basics of EDI software are: shown in Diagram
Store and
Forward messages

VAN
Translation

EDI standard EDI standard

messages messages

Business
application Business
application

The Basics of EDI Software

EDI service providers are now incorporating Internet services and open EDI
as a new service of specifications for handling EDI on the Internet.

(2) Electronic Fund Transfer (EFT): It involves the electronic transmission

of financing transactions (debit and credit) between banks, banks and
companies, banks and consumers, or companies and consumers. EFT adds
another dimension to EDI allowing for direct deposit of payments without
Cheque writing, receiving, processing or canceling.

Examples of EFT Systems

Banking and financial payments

 Large-scale or wholesale payments (e.g., bank-to-bank transfer),

 E-commerce 49

 Small-scale or retail payments (e.g. automated teller machines and

cash dispensers.

 Home banking (e.g. bill payment),

Retailing payments

 Credit Cards (e.g. VISA or MasterCard).

 Private label credit/debit cards,

Online electronic commerce payments

 Token-based payment systems Electronic cash (e.g. DigiCash)

Electronic Checks (e.g. Net Cheque)

 Smart cards or debit cards (e.g. Mondex Electronic Currency Card)

Credit card-based systems

 Encrypted credit cards (e.g., SSL CyberCash, or SET encryption)

 Third-party authorization numbers (e.g. First Virtual)

(3) Debit cards: With a magnetic strip and an embossed identification

number, debit cards are used by consumers to obtain money from
automatic teller machines, to pay for goods or services at retail locations,
and to access home banking or bill payment services. The major point is
that debit cards provide no line of credit; purchases are directly debited to a
consumer's bank account, or to the prepaid amount encoded on the card.
Debit cards are a substitute for cash or a personal Cheque.
 E-commerce 50

(4) Smart Cards: Smart Card is a plastic card with an embedded chip and a
tiny display that provides user with new password each time they log in a
system. The smart card (also called a memory card) is a portable data-
storage device with provision for identity and security, it differs from the
prepaid telephone card, or debits card. It is very popular in Europe, because
it contains microprocessors and memory chips that provide intelligence
and the ability to store a significant amount of information. Smart Cards
are designed to replace the traditional magnetic strip credit or bank cards
introduced at the end of the 1960s. "Representatives of the financial
services, telecommunications, entertainment, publishing, software,
computer and health care industries are joining with government agencies
to create a multi-industry effort to accelerate the widespread use of smart
card technologies", (Smart Card Forum 1993),

Examples:

Citibank & Chase Manhattan Bank Smart Card: In October, 1997,

Citibank and Chase Manhattan Bank launched a smart card. Primary
purpose of the joining forces was to promote inter operability of smart card
technology between MasterCard and VISA. Citibank and Chase Manhattan's
expectations were that most purchases made with the cash equivalent loaded
on the smart cards would be for $20 or less and this was basically confirmed
by the pilot test. For purchases greater than $20, consumers generally would
use their credit card. The program involved getting merchants to accept the
smart cards as cash payments. Regarding security of the smart cards, PIN are
required to download Cash, but not for purchases. If a consumer loses
 E-commerce 51

his/her smart card, the amount stored is lost and can be used by anyone
processing the cards, the same as losing Cash.

SMART CARD FACILITY

(5) E-mail: Electronic mail (e-mail) provides for the electronic transmission
of letters, messages, and other documents. There is a large installed base of
email users in the corporate environment the learning curve has proved to
be relatively short for new Users,
..
(6) Bulletin Board Systems: Bulletin board systems, or BBS, are computer
networks accessible by modem that offers the facility for multiple
subscribers to use information electronically. They provide access to
computer files, games, email, discussion groups, and other services.

(7) Facsimile (Fax}: Facsimile technology is not new. In fact, it has been
around in one form or another since 1924 (Jenkins and Lancashire, 1994).
 E-commerce 52

One of its biggest advantages is the enormous installed base. It is probably

the least controlled, most heavily used technology in today's office.

(8) Electronic forms and forms date interchange: Electronic forms or forms
automation software enables users to fill in forms on a desktop computer,
automatically save the information to various databases, and selectively
route forms and data transparently across most popular e-mail systems,
such as Microsoft Mail, Lotus cc: Mail, Lotus Notes Mail. Its value is in its
ability to link database, data collection, and data retrieval/presentation
technologies. Much of the electronic forms software 3vailable today
provides for links to transaction type databases, which still provide the
core information resource for most corporations, as well as other local or
departmental databases.

(9) Electronic Image Processing: Electronic Image Processing is not a recent

innovation. It is the result of bringing together several older technologies
to facilitate the following:

 Converting images from paper to electronic code:

 Classifying images for later retrieval Storing the images; and
 Distributing the images.

(10) Bar codes: EAN (European Article Numbering) numbers which are used
for identification items can be represented by bar codes. Bar codes allow
numbers to be encoded in machine- readable form. The data can then be
captured automatically, quickly and securely. A bar code is a pattern of
parallel bars and spaces of predetermined widths representing .data that is
then "read" by electronic scanners and transmitted either to a computer or
 E-commerce 53

to a storage device for subsequent transmission to a computer. The data is

then interpreted or decoded by the computer.
Bar codes are used extensively in the retail sector. The Universal
Product Code symbol, chosen as the industry standard for grocers, is
familiar to most people in North America.

(11) PKI Technology: The technology underlying e-trust is known as public

key encryption or Public Key Infrastructure (PKI) and has been around for
some time. Very briefly, PKI works by means of cryptographic keys issued
in the form of digital certificates, which enables parties to communicate
security over an insecure network such as internet.

E-commerce Standards
Important standards of E-commerce are discussed as under:

(i) Electronic Data Interchange (EDI): EDI is a common document

structure designed to let large organizations transmit information over

private networks. EDI is now finding the role on corporate web sites as
well.

(ii) Open Buying on the Internet (OBI): This standard is created by the
Internet purchasing round table, is supposedt6 ensure that all the different
E-Commerce systems can talk to one another. OBI, which was released
by OBI consortium, is backed by leading technology companies such as
Actra, Intelsys, Microsoft, Open Market, and Oracle.
 E-commerce 54

(ii) The Open Trading Protocol (OTP): It is intended to standardize a

variety of payments related activities including purchase agreements.
Receipts for purchases, and payments. It was created as a computing
standard to OBI by a group of companies AT&T, Cyber cash, Hitachi.
18M, Oracle, Sun Micro Systems, and British Telecom.

(iv) The Open Profiling Standard (OPS): A standard backed by Microsoft

and Firefly. OPS let users create a personal profile of preferences and
interests that they want to share with merchants. The idea behind it is to
help consumers protect their privacy without banning online collection of
marketing information.

(v) Secure Socket Layer (SSL): This protocol is designed to create a secure
connection to the server. SSL uses public key encryption, one of the
strongest encryption methods around to protect data as it travels over the
Internet. SSL was created by Netscape but now has been published in the
public domain.

(vi) Secure Electronic Transactions (SET): SET encodes the credit card
numbers stored on merchants' servers.This standard, created by Visa and
MasterCard, enjoys wide support in the banking community. The first
SET-enabled commerce is already being tested in Asia.

(vii) Trust: This partnership of companies seeks to build public trust in e-

commerce by putting a Good Housekeeping-style seal of approval on
sites that do not violateconsumer privacy.
E-commerce 55

E-COMMERCE AND INTERNET

According to Cathey J. Medich, Executive Director of Commerce

Net. "The Internet is redefining the model for electronic commerce to one
that supports the complete seller-to-buyer relationship. This model includes
promoting and communicating company and product information to a global
user base, accepting orders and payments of goods and services online,
delivering software and information products online. Providing ongoing
customer support, and engaging in on line collaboration for new product
development".
Electronic Commerce Systems relay on the resources the Internet, Intranets,
Extranets, and other computer networks to support every step of titles
process. For example E-Commerce can include interactive marketing,
ordering, and payment processes on the World Wide Web. Extranets access
E-commerce 56

to inventory data bases by customers and suppliers. Intranet access of

customer records by sales representatives and customer service, and
involvement in product developing via Internet news groups and E-mail
Exchange.

E-commerce Software Solution

Solutions like Intershop's ePages, iCat's Lemonade Stand, or Yahoo's Stores

provide storefronts that are ready to go. Just pick a design and pop in your
products: You are ready for business.

Other applications,such as Intershop 3.0 and iCat Professional, allow

you to change standard templates that came with the packaged softwareso that
you can customize the way your storefront will look and feel. These solutions
E-commerce 57

also let you extend the standard features and behaviors contained in the
templates - assuming you can "speak" their application languages.

Advertising
and awareness

Marketing Merchandising

Post sale CUSTOMER Sales

service service

Fulfillment sales transaction

trahsaction processing

Process of Sales. & Marketing

 Implementation of E-Commerce Solutions: There

are three options:

Option 1: Buy a ready-made system that closely matches your

specifications. This approach will give you a standardized set at e-commerce
features with a few additional business rules built in as a bonus. If your
business needs closely match what the package offers, buy it! This will save
you money and a good deal of time. If the system is lacking some of your
prioritized however, you may want to think again. The solution may be a
E-commerce 58

good fit now, but will likely become obsolete as more and more features
become later on in development. Trying to add these new features may mean
work and’ training in the software down the road. Be sure to budget for
ahead of time, if you're considering this option.

Option 2: Rent space in a network-based, e-'commerce solution: These

solutions are inexpensive and include many common features. They're fast
because the: whole store is administered through the Web. You don't need to
install any software; you just look. Configure some settings, and pour in
your product information. Then you're ready to go: instant storefront.

Option 3: Build the system from scratch to your specifications. This

approach will give you the exact solution you need but will require
expertise, time, and a sizable budget to pull it off. The advantage is that you
can build the features and functions you need to be unique and competitive
in the marketplace. So if you want to offer discounts any time, you'll need to
take this approach.

There are a series of application engines out there to help you get these
features. But you can create a commerce program in almost any
programming language. Many early Web-based business interfaces were
created in Perl or C++. More recently, a lot of work has been done with
Microsoft's Active Server Pages and Allaire's Cold Fusion development
environments. Also, Pandesic has released a new platform based upon a
suite of e-commerce objects accessible through Active Server Page
technology. The major functions on a website includes

 Displaying Products
E-commerce 59

 Order and Transaction Processing

 Attracting Customers
 Fulfillment and Customer Service
 Building Your Customer Base
 Cost- Effective Advertising
 Keeping Track of Everything
 Staying in E-Business

Electronic Stock Trading

Electronic commerce creates threats and opportunities for brokers and
intermediaries of all kinds-not only travel agents, but insurance brokers, loan
brokers, stockbrokers, and brokers of food and mechanical parts as well. The
threat to these intermediaries is that their customers will bypass them by
obtaining information and meeting their purchasing needs through new,
online channels. The opportunity for intermediaries is to use electronic
commerce to create one of those new channels, thereby providing better
service than a customer could otherwise obtain.
E-commerce 60

By 1997 Web-based information and transaction capabilities spanned

most of the customer involvement cycle for buying and selling stocks and
bonds. Private investors could obtain readily available data and analysis
software to identify stocks they wanted to buy and sell. Some of it could be
accessed for free from the home pages of companies providing search
engines and other services not specifically related to finance. Investors could
make the purchases through Web transactions, touch tone phones, or human
agents. Their stock and bond holdings and transactions could be tracked.
They could obtain customer service information about the status of buy and
sell orders. How the traditional brokerages would respond and whether they
could maintain their much higher cost structure remained to be seen.

Electronic Banking

The banking industry relied on computers for decades before

electronic banking created new way&> to provide service. A first step in
electronic banking for consumers was the advent of automatic teller
machines (ATMs) popularized by Citibank in the late 1970s. Thanks to
.ATMs, Citibank tripled its depositors from 1978 to 1987, increasing its
local consumer market share from 4.5% to 13%, As happened in the Merrill
Lynch case. the competition responded, Other banks banded together to
produce their own network, the New York Cash Exchange, or NYCE, which
E-commerce 61

began operation in 1985, and which Citibank eventually Joined. More

recently, several national ATM networks permit customers to withdraw
money from ATMs in all major cities in the United States and some cities
abroad.

The next step in electronic banking for consumers is to provide

additional banking 'services and transactions through personal computers
linked to the Web or to private networks. In addition to providing history and
bank balance information, electronic banking permits people to pay bills
without writing checks. The electronic banking customer starts by
identifying checks that are written to the same payee. Repeatedly, such as
checks for rent, water, electricity, and car payments. The electronic banking
system makes it possible to enter the amount of the check and then have the
bank transfer the money into the payee's account without ever handling a
physical check. For fixed payments such as rent, the amount can be entered
once and then transferred automatically each month. For the customer, these
electronic banking functions eliminate the annoyance of balancing a
checkbook and some of the uncertainty about whether or not the check
arrived. For the bank, the computer-to-computer transfers performed in
electronic banking are more automatic and less expensive than processing
paper checks for handling payment transactions.

Like many aspects of electronic commerce, electronic banking is more

complicated than it might appear. For example, assume that the payee is a
national firm with many offices and a number of different bank accounts for
different purposes. To pay the bill, you need to specify which account at
which bank should receive the funds. That bank may be out of state, and the
payee's accounts receivable system may not be set up to receive payments
E-commerce 62

directed to its bank; it may require that payments go to its accounts

receivable department. To minimize the chance that a payment transaction
will be lost or delayed, a bank offering the electronic banking service must
verify in advance that each payee is set up to receive funds in this manner.
This is especi311y important if the electronic banking service combines
multiple transfers to a given bank into a single transfer accompanied by a list
of all payments that are included. It may be noted that subsequent changes in
the payee's banking relationships might result in confusion or lost payments.
Electronic banking has advantages for people who write a lot of checks, but
for others it is simpler to slip physical checks into preaddressed reply
envelopes.

Secure Electronic Transaction

Secure Electronic Transaction (SET) is a standard protocol for securing
credit card transactions over insecure networks, specifically, the Internet.
SET is not itself a payment system, but rather a set of security protocols and
formats that enables users to employ the existing credit card payment
infrastructure on an open network in a secure fashion.

SET was developed by VISA and MasterCard (involving other companies

such as GTE, IBM, Microsoft, Netscape, RSA and VeriSign) starting in
1996.
E-commerce 63

SET was said to become the de facto standard of payment method on the
Internet between the merchants, the buyers, and the credit-card companies.
When SET is used, the merchant itself never has to know the credit-card
numbers being sent from the buyer, which provide a benefit for e-commerce.

FUTURE EXPECTATION ABOUT

THE E-COMMERCE
E-commerce 64

The Internet serves a great number of functions and not all of them should
be classified as e-Commerce. The e-Business applications of the Internet are
developing but they are a long way from fulfilling the predictions of the
pundits. Internet e-Commerce has changed the life of a few web
entrepreneurs but its effect on the lives of most other people has been very
slight. The e-Commerce guru of ICL put it thus:

'Everyone agrees that electronic commerce is going to be big, very big

or enormous. But nobody knows when. There is considerable
disagreement about the historic impact of electronic commerce, let
alone the future one. Although all commentators present forecasts for
the short-term which contain truly eye-catching growth, their figures
fail to achieve anything remotely approaching the size of existing
modes of trade. And yet no commentator doubts the power of
electronic commerce to challenge those existing modes.

In order to explain this paradox, many observers allude to technical,

cost and infrastructure impediments. For electronic commerce to
deliver its full promise, there will have to be business, social and
cultural changes and these will take more than two or three years to
complete.'

DRIVING BUSINESS ON THE

INTERNET
E-commerce will be the key driver of the Indian economy &
will be the key revenue stream for companies in the days to
come, many experts like Malay Sengupta, CMD, MSTC
E-commerce 65

Ltd., R S Pandey, Steel Secretary, & Dr Debesh Das, IT

Minister, WB at the inaugural session of Ecom, the seminar
on E-commerce organized by MSTC Limited with The
Economics Times on June 22, 2009 in Kolkata have
agreed in this statement. & they gave their views in a
different ways like:

A case in point was host-company MSTC Limited that has

successfully increased business manifold with the use of e-
commerce.

1. WHY E-COMMERCE?
 When MSTC has adopted e-commerce initiatives then it given
them returns far above anyone’s expectations.
The other reason for the success of e-
commerce
 “It’s a paper-less process & it doesn’t give any
unfair advantageous to any one party.”
 “One major advantage that e-commerce users
have now is that digital signatures are recognized by all courts
of law & that electronic contracts are legally valid.
For example, Coal India went online on November 19, 2004 &
coal is now booked electronically. & it’s not just the business to
business format that is profiting for this, even customer buying
E-commerce 66

daily-need product are turning largely to the internet. “& why

not? If you can see 10 different TV sets on the net before
choosing the one you want, you save the time of going to 10
different stores.”

2. THE LOOPHOLES:
 “In a country like India brandwidth is a major problem,
the internet is slow & for bidders it takes long to just log on.”
 “The poor power supply in various part of the country
that makes e-trading difficult.”
 Security also remains a large issue especially when it
comes to monetary transaction on the net. “The cyber laws are
still not equipped to bring a fraudulent person to book.”
 Electronic fraud might even happen at a nightclub when
the card is handed over to the cash counter.
 The inter-state transactions were difficult to make &
many suppliers were unwilling to do that last bit of door- step
delivery that is crucial in the B to C.
3. THE WAY FORWARD
 E-Commerce is poised to take over the country in the
next few years. Now people have started buying cars through
the net which in itself is a pointer that electronic trade is here to
stay.
E-commerce 67

 “E-Commerce will be driven by personalized & niche

thing hat are not available in stores,”

 “The B to C sector has generated business worth Rs 2300

crore in 2007, & the growth has been 100 percent for the last 3
years, that in itself shows what E-Commerce is capable.”

 “We have facilities like secured socket layering &

firewalls that are impossible to hack. These will make e-
transaction safer & promoted e-commerce.”

ELECTRONIC COMMERCE COMPANIES

These companies make information available on line about their product and
services, all of which are directly related to electronic commerce.
E-commerce 68

BroadVision, Inc.

http:// www.broadvision.com

Develop software to support foundations for electronic buying and selling.

Cardservice international

http:// www.cardsvc.com

Offer credit card services to internet merchants.

ClickShop com

http:// www.checkshop.com/

Offer electronic shopping cart software called shopping 770 to be added to

electronic shop web pages.

CyberCash, Inc.

http:// www.cybercash.com/

Provider of payment service for the internet.

Checkfree Corporation

http:// www.checkfree.com/

Provider of electronic payment services.

E-commerce 69

Verisign, Inc.

http:// www.verisign.com

A spin-off from RSADSI, Verisign provides public key certificates to

individuals & companies.

Financial institutions

The no. of banks offering some type of service over the internet, from simple
information service to actual banking service, is growing rapidly.

Bank of America

http:// www.bofa.com/

Currently offering information services on line.

BIBLOGRAPHY

The sources that contributed to this project are as follows:-

E-commerce 70

BOOKS:-
 E-COMMERCE
THE CUTTING Edge OF BUSINESS

KAMLESH K BAJAJ
DEBJANI NAG

 E-COMMERCE
STRATEGY, TECHNOLOGIES & APPLICATIONS
DAVID WHITELEY

 MANAGEMENT INFORMATION SYSTEMS &

CORPORATE COMMUNICATION (PAPER 4)
THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

NEWSPAPER:- “ECONOMIC TIMES ”

MAGAZINE:- “digit”

WEBSITES:-1) www.google .com

2)www.e-commerce.com

Conclusion
E-commerce 71

At last the conclusion comes that now a day -by- day e-

commerce are getting lots of success. Today many companies have
adopted the e-commerce. Because e-commerce has become the
buzzword for successful businesses across the world, as also in
India. So, it will be concluding that in the future e-commerce has
growing faster. That means in the future e-commerce is one most
important key factor to success of any company.
The Indian economy is expected to even overtake the US
economy by 2045 & e-commerce, I am sure, will play a major part
in that.