E-Commerce

For B.Com Semester III( CBCS)

Paper –SEC1

By
Tamal Basu
Assistant Professor
Department of Commerce ( UG & PG)
Prabaht Kumar College, Contai
 What is Ecommerce?

• Ecommerce, also known as electronic

commerce or internet commerce, refers to the
buying and selling of goods or services using
the internet, and the transfer of money and
data to execute these transactions.
Ecommerce is often used to refer to the sale
of physical products online, but it can also
describe any kind of commercial transaction
that is facilitated through the internet.
 What is Ecommerce? Contd .

• Whereas e-business refers to all aspects of operating an

online business, ecommerce refers specifically to the
transaction of goods and services.
• The history of ecommerce begins with the first ever
online sale: on the August 11, 1994 a man sold a CD by
the band Sting to his friend through his website
NetMarket, an American retail platform. This is the first
example of a consumer purchasing a product from a
business through the World Wide Web—or “ecommerce”
as we commonly know it today.
 Types of Ecommerce Models

There are four main types of ecommerce models that can

describe almost every transaction that takes place between
consumers and businesses.
• 1. Business to Consumer (B2C):
When a business sells a good or service to an individual
consumer (e.g. You buy a pair of shoes from an online
retailer).
• 2. Business to Business (B2B):
When a business sells a good or service to another business
(e.g. A business sells software-as-a-service for other
businesses to use)
 Types of Ecommerce Models –
Contd.
• 3. Consumer to Consumer (C2C):
When a consumer sells a good or service to another
consumer (e.g. You sell your old furniture on eBay to
another consumer).

4. Consumer to Business (C2B):

When a consumer sells their own products or services to
a business or organization (e.g. An influencer offers
exposure to their online audience in exchange for a fee,
or a photographer licenses their photo for a business to
use).
 Objectives of E -Commerce
• Define e-commerce and understand its role as
a transaction processing system

• List the three types of e-commerce, and

explain how e-commerce supports the stages
of the buying process and methods of
marketing and selling

• Discuss several examples of e-commerce

applications and services
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 Objectives (continued)
• Define m-commerce, and describe several m-
commerce services

• List the components of an e-commerce

system, and explain how they function
together to provide e-commerce services

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 Examples of Ecommerce
• Ecommerce can take on a variety of forms involving different
transactional relationships between businesses and consumers, as
well as different objects being exchanged as part of these
transactions.
• 1. Retail:
The sale of a product by a business directly to a customer without
any intermediary.

2. Wholesale:
The sale of products in bulk, often to a retailer that then sells them
directly to consumers.

3. Dropshipping:
The sale of a product, which is manufactured and shipped to the
consumer by a third party.
 Examples of Ecommerce
• 4. Crowdfunding:
The collection of money from consumers in advance of a product being
available in order to raise the startup capital necessary to bring it to
market.
5. Subscription:
The automatic recurring purchase of a product or service on a regular
basis until the subscriber chooses to cancel.
6. Physical products:
Any tangible good that requires inventory to be replenished and orders to
be physically shipped to customers as sales are made.
7. Digital products:
Downloadable digital goods, templates, and courses, or media that must
be purchased for consumption or licensed for use.
8. Services:
A skill or set of skills provided in exchange for compensation. The service
provider’s time can be purchased for a fee.
 The Roots of E-Commerce –
E-Commerce History
• EDI
– Uses private communications networks (VANs) to
transmit standardized transaction data
• Automating transactions using EDI
– Drastically reduced the amount of paperwork and
the need for human intervention
• Internet
– Provided the ideal platform for conducting EDI
transactions
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 Transaction Processing
• Transaction
– An exchange involving goods or services s
• Transaction processing system (TPS)
– Information system used to support and record
transactions
• Batch processing
– Transactions are collected over time and
processed together in batches
• Online transaction processing
– Takes place at theSucceeding
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of sale
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 The Transaction Processing Cycle
• Data collection
– The process of capturing transaction related data
• Data editing
– Checking the validity of data entered
• Data correction
– Implemented if an error is found in the entered
data
• Data manipulation
– Processing transaction data
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– Altering databases to reflect the transaction

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 Different Transaction Processing
for Different Needs
• Order processing system
– Supports the sales of goods or services to
customers
– Arranges for shipment of products
• Purchasing system
– Supports the purchase of goods and raw materials
from suppliers

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 Overview of E-Commerce – Types
of E-Commerce
• Business-to-consumer e-commerce (B2C)
– Connects individual consumers with sellers
• Business-to-business e-commerce (B2B)
– Supports business transactions across private
networks, the Internet, and the Web
• Consumer-to-consumer e-commerce (C2C)
– Connects individual sellers with people shopping
for used items

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 E-Commerce from the Buyer’s
Perspective
• Process of buying or acquiring goods or
services
– Realizing a need
– Researching a product
– Selecting a vendor
– Providing payment
– Accepting delivery
– Using product support
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 E-Commerce from the Seller’s
Perspective
• Sellers business practices
– Market research to identify customer needs
– Manufacturing products or supplying services that
meet customer needs
– Marketing and advertising to make customers
aware of available products and services

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 E-Commerce from the Seller’s
Perspective (continued)

• Sellers business practices

– Providing a method for acquiring payments
– Making arrangements for delivery of the product
– Providing after-sales support
• Supply chain management
– Involves three areas of focus: demand planning,
supply planning, and demand fulfillment

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 Benefits and Challenges of E-
Commerce
• Buyers enjoy the convenience of shopping
from their desktop
• B2C e-commerce
– Levels the playing field between large and small
businesses
• Challenges
– Established businesses must alter systems and
business practices
– Social concerns
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 E-Commerce Applications
• E-Commerce
– Playing an increasingly important role in our
personal and professional lives
– Allows us to discover new and interesting
products
– Allows us to find better deals
– Used to monitor bank accounts and transfer
electronic funds

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 Retail E-Commerce: Shopping
Online

• E-tailing provides customers with

– Product information
– The ability to comparison shop
• E-tailing options
– Set up an electronic storefront
– Lease space in a cybermall

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 Online Clearing Houses, Web
Auctions, and Marketplaces

• Provide a platform for businesses and

individuals to sell their products and
belongings
• www.ubid.com
– Provides a method for manufacturers to liquidate
stock and consumers to find a good deal
• eBay.com
– Most popular auction/marketplace
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 B2B Global Supply Management
and Electronic Exchanges
• Global supply management (GSM)
– Businesses can find the best deals on the global
market
• Electronic exchange
– Provides convenient centralized platform for B2B
e-commerce
– Promotes cooperation between competing
companies
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 Marketing
• Web is used for
– Unsolicited advertising
– Access to product information through business
Web sites
– Market research

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 Banking, Finance, and Investment
• Online banking provides
– Convenient access to bank balance information
– Ability to transfer funds, pay bills, and obtain
account histories
• Electronic funds transfer
– Popular for paying bills and receiving paychecks
• Online brokerages
– Able to execute trades fast, within seconds

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 Mobile Commerce
• A form of e-commerce
• Takes place over wireless mobile devices such
as
– Handheld computers and cell phones
• Presents unique opportunities and challenges

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 M-Commerce Technology
• Technologies and standards
– Wireless Application Protocol (WAP)
– Wireless Markup Language (WML)
– Infrared or Bluetooth wireless networking
technology

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Types of M-Commerce Applications
• Methods for delivering m-commerce services
– Directly from cell phone service providers
– Via mobile Internet or Web applications
– Using Short Message Service (SMS) text messaging
or Multimedia Messaging Service (MMS)
– Using short-range wireless technology, such as
infrared

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 E-Commerce Implementation
• Implementing e-commerce
– Requires large investment and expertise
• E-Commerce host
– Business that takes responsibility for setting up
and maintaining an e-commerce system

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 Infrastructure
• E-Commerce requires significant infrastructure
changes
• B2C e-commerce
– Often connects manufacturers directly with
consumers, cutting out the middleman
– Requires shipping individual products directly to
consumers

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 Hardware and Networking
• Underestimating the amount of Web traffic
– Leads to network stalls and long wait times
• Typical e-commerce Web site
– Employs one or more server computers and a
high-speed Internet connection
• Outsourcing to a Web hosting company
– Can operate 24 hours a day, 7 days a week

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 Software
• Web Server Software
– Responds to requests for Web pages
• Web Server Utility Programs
– Provide statistical information about server usage
and Web site traffic patterns
• E-Commerce Software
– Supports e-commerce activities
– Includes catalog management, electronic
shopping cart, and payment software

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 Software (continued)
• Web Site Design Tools
– What see what you-get (WYSIWYG) applications or
wizards
• Graphics Applications
– Design and create graphic elements of Web sites
• Web Site Development Tools
– Application programming interfaces (API’s)
• Allow software engineers to develop Web-driven
programs

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 Software (continued)
• Web services
– Programs that automate tasks by communicating
with each other over the Web
– Systems developers can provide tools for
automating trivial or repetitive tasks
– Important in transaction processing

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 Building Traffic
• The 3Cs Approach
– Content, community, and commerce
• Keywords and Search Engines
– Choose name and product names that best
describe business purpose and features
– Select descriptive domain names
– Business-related keywords can be listed in the
HTML meta tag

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 Building Traffic (continued)
• Marketing
– Online advertising methods include banner ads,
pop-up ads, and e-mail
– Offline advertising methods include magazines,
newspapers, radio, and television

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 Electronic Payment Systems
• Electronic cash (e-cash or digital cash)
– Provides a private and secure method of
transferring funds
– PayPal
• Best-known e-cash provider
• E-cash benefits
– Privacy - hides account information from vendors
– Convenient if seller cannot process a credit card
• Smartcards
– Credit cards with embedded microchips
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 International Markets
• Internet users of all nationalities will have
access to your products
• First consideration of a global e-commerce
strategy
– Visitors of all nationalities and cultures should feel
comfortable while viewing your Web content
• Costly approach
– Create multiple versions of your Web site, each in
a different language
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 E-Commerce Security Issues
• Digital certificate
– A type of electronic business card
– Attached to Internet transaction data
– Verifies the sender of the data
– Provided by certification authorities
– Encryption
• Uses high-level mathematical functions and computer
algorithms to encode data

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 Summary
• E-Commerce
– Systems that support electronically executed
transactions
• Transaction processing system (TPS)
– Supports and records transactions
• Three main types of e-commerce
– Business-to-consumer (B2C)
– Business-to-business (B2B)
– Consumer-to-consumer (C2C)
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 Summary (continued)
• Retail Web sites
– Allow consumers to comparison shop
• Mobile commerce
– A form of e-commerce that takes place over
wireless mobile devices
• E-Commerce
– Requires investment in networking, hardware, and
a wide variety of software
– Requires changes in infrastructure
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Information Technology Act, 2000
• In 1996, the United Nations Commission on International
Trade Law (UNCITRAL) adopted the model law on electronic
commerce (e-commerce) to bring uniformity in the law in
different countries.
• Further, the General Assembly of the United
Nations recommended that all countries must consider this
model law before making changes to their own laws. India
became the 12th country to enable cyber law after it passed
the Information Technology Act, 2000.
• While the first draft was created by the Ministry of
Commerce, Government of India as the ECommerce Act,
1998, it was redrafted as the ‘Information Technology Bill,
1999’, and passed in May 2000.
 Objectives of the Act

• The Information Technology Act, 2000 provides legal

recognition to the transaction done via electronic exchange of
data and other electronic means of communication or
electronic commerce transactions.
• This also involves the use of alternatives to a paper-based
method of communication and information storage to
facilitate the electronic filing of documents with the
Government agencies.
• Further, this act amended the Indian Penal Code 1860, the
Indian Evidence Act 1872, the Bankers’ Books Evidence Act
1891, and the Reserve Bank of India Act 1934.
 Objectives of the Act
The objectives of the Act are as follows:
• Grant legal recognition to all transactions done via electronic
exchange of data or other electronic means of communication or e-
commerce, in place of the earlier paper-based method of
communication.
• Give legal recognition to digital signatures for the authentication of
any information or matters requiring legal authentication
• Facilitate the electronic filing of documents with Government
agencies and also departments
• Facilitate the electronic storage of data
• Give legal sanction and also facilitate the electronic transfer of
funds between banks and financial institutions
• Grant legal recognition to bankers under the Evidence Act, 1891
and the Reserve Bank of India Act, 1934, for keeping the books of
accounts in electronic form.
 Features of the Information
Technology Act, 2000
• All electronic contracts made through secure
electronic channels are legally valid.
• Legal recognition for digital signatures.
• Security measures for electronic records and
also digital signatures are in place
• A procedure for the appointment of
adjudicating officers for holding inquiries
under the Act is finalized
 Features of the Information Technology Act, 2000

• Provision for establishing a Cyber Regulatory

Appellant Tribunal under the Act. Further, this
tribunal will handle all appeals made against
the order of the Controller or Adjudicating
Officer.
• An appeal against the order of the Cyber
Appellant Tribunal is possible only in the High
Court
• Digital Signatures will use an asymmetric
cryptosystem and also a hash function
 Features of the Information Technology Act, 2000

• Provision for the appointment of the Controller of

Certifying Authorities (CCA) to license and regulate
the working of Certifying Authorities. The Controller
to act as a repository of all digital signatures.
• The Act applies to offences or contraventions
committed outside India
• Senior police officers and other officers can enter any
public place and search and arrest without warrant
• Provisions for the constitution of a Cyber Regulations
Advisory Committee to advise the Central
Government and Controller.
Applicability and Non-Applicability
of the Act
• According to Section 1 (2), the Act extends to the entire
country, which also includes Jammu and Kashmir. In order to
include Jammu and Kashmir, the Act uses Article 253 of the
constitution. Further, it does not take citizenship into account
and provides extra-territorial jurisdiction.
• Section 1 (2) along with Section 75, specifies that the Act is
applicable to any offence or contravention committed outside
India as well. If the conduct of person constituting the offence
involves a computer or a computerized system or network
located in India, then irrespective of his/her nationality, the
person is punishable under the Act.
• Lack of international cooperation is the only limitation of
this provision.
 Non-Applicability
• According to Section 1 (4) of the Information
Technology Act, 2000, the Act is not applicable
to the following documents:
• Execution of Negotiable Instrument under
Negotiable Instruments Act, 1881, except
cheques.
• Execution of a Power of Attorney under the
Powers of Attorney Act, 1882.
• Creation of Trust under the Indian Trust Act,
1882.
 Non-Applicability
• Execution of a Will under the Indian
Succession Act, 1925 including any other
testamentary disposition
by whatever name called.
• Entering into a contract for the sale of
conveyance of immovable property or any
interest in such property.
• Any such class of documents or transactions
as may be notified by the Central Government
in the Gazette.
 Cyber crimes
• Cyber crimes are criminal offenses committed via the
Internet or otherwise aided by various forms of
computer technology, such as the use of online social
networks to bully others or sending sexually explicit
digital photos with a smart phone.
• Cybercrime, also called computer crime, the use of
a computer as an instrument to further illegal ends, such
as committing fraud, trafficking in child pornography
and intellectual property, stealing identities, or violating
privacy. Cybercrime, especially through the Internet, has
grown in importance as the computer has become
central to commerce, entertainment, and government.
 Digital Signature
• A digital signature is a mathematical
technique used to validate the authenticity
and integrity of a message, software or digital
document. As the digital equivalent of a
handwritten signature or stamped seal, a
digital signature offers far more inherent
security, and it is intended to solve the
problem of tampering and impersonation in
digital communications.
 Digital Signature- Contd.
• Digital signatures can provide the added
assurances of evidence of origin, identity and
status of an electronic document, transaction
or message and can acknowledge informed
consent by the signer.
• In many countries, including the United States,
digital signatures are considered legally
binding in the same way as traditional
document signatures.
 How digital signatures work
• Digital signatures are based on public key cryptography, also
known as asymmetric cryptography. Using a public
key algorithm, such as RSA, one can generate two keys that
are mathematically linked: one private and one public. (for
more on
• Digital signatures work because public key cryptography
depends on two mutually authenticating cryptographic keys.
The individual who is creating the digital signature uses their
own private key to encrypt signature-related data; the only
way to decrypt that data is with the signer's public key. This is
how digital signatures are authenticated.
 How digital signatures work
Contd.
• Digital signature technology requires all the
parties to trust that the individual creating the
signature has been able to keep their own
private key secret. If someone else has access
to the signer's private key, that party could
create fraudulent digital signatures in the
name of the private key holder.
 How to create a digital signature
• To create a digital signature, signing software -- such as an email
program -- creates a one-way hash of the electronic data to be
signed. The private key is then used to encrypt the hash. The
encrypted hash -- along with other information, such as
the hashing algorithm -- is the digital signature.
• The reason for encrypting the hash instead of the entire message or
document is that a hash function can convert an arbitrary input into
a fixed length value, which is usually much shorter. This saves time
as hashing is much faster than signing.
• The value of a hash is unique to the hashed data. Any change in the
data, even a change in a single character, will result in a different
value. This attribute enables others to validate the integrity of the
data by using the signer's public key to decrypt the hash.
 How to create a digital signature-
Contd.
• If the decrypted hash matches a second computed hash of the
same data, it proves that the data hasn't changed since it was
signed. If the two hashes don't match, the data has either been
tampered with in some way -- integrity -- or the signature was
created with a private key that doesn't correspond to the public key
presented by the signer -- authentication.
• A digital signature can be used with any kind of message -- whether
it is encrypted or not -- simply so the receiver can be sure of the
sender's identity and that the message arrived intact. Digital
signatures make it difficult for the signer to deny having signed
something -- assuming their private key has not been compromised
-- as the digital signature is unique to both the document and the
signer and it binds them together. This property is
called nonrepudiation.
 How to create a digital signature-
Contd.
• Digital signatures are not to be confused with digital certificates. A
digital certificate, an electronic document that contains the digital
signature of the issuing certificate authority, binds together a public
key with an identity and can be used to verify that a public key
belongs to a particular person or entity.
• Most modern email programs support the use of digital signatures
and digital certificates, making it easy to sign any outgoing emails
and validate digitally signed incoming messages. Digital signatures
are also used extensively to provide proof of authenticity, data
integrity and nonrepudiation of communications and transactions
conducted over the internet.
 Classes of digital signatures
There are three different classes of Digital Signature Certificates:
• Class 1: Cannot be used for legal business documents as they are
validated based only on an email ID and username. Class 1
signatures provide a basic level of security and are used in
environments with a low risk of data compromise.
• Class 2: Often used for e-filing of tax documents, including income
tax returns and Goods and Services Tax (GST) returns. Class 2 digital
signatures authenticate a signee’s identity against a pre-verified
database. Class 2 digital signatures are used in environments where
the risks and consequences of data compromise are moderate.
 Classes of digital signatures
There are three different classes of Digital Signature Certificates:
• Class 3: The highest level of digital signatures. Class 3 signatures
require a person or organization to present in front of a certifying
authority to prove their identity before signing. Class 3 digital
signatures are used for e-auctions, e-tendering, e-ticketing, court
filings and in other environments where threats to data or the
consequences of a security failure are high.
 Uses of digital signatures
Industries use digital signature technology to streamline processes and
improve document integrity. Industries that use digital signatures
include:
• Government - The U.S. Government Publishing Office publishes
electronic versions of budgets, public and private laws and
congressional bills with digital signatures. Digital signatures are used
by governments worldwide for a variety of uses, including processing
tax returns, verifying business-to-government (B2G) transactions,
ratifying laws and managing contracts. Most government entities must
adhere to strict laws, regulations and standards when using digital
signatures.
• Healthcare - Digital signatures are used in the healthcare industry to
improve the efficiency of treatment and administrative processes, to
strengthen data security, for e-prescribing and hospital admissions.
The use of digital signatures in healthcare must comply with the Health
Insurance Portability and Accountability Act of 1996 (HIPAA).
 Uses of digital signatures
• Manufacturing - Manufacturing companies use digital signatures to
speed up processes, including product design, quality assurance
(QA), manufacturing enhancements, marketing and sales. The use
of digital signatures in manufacturing is governed by the
International Organization for Standardization (ISO) and the
National Institute of Standards and Technology
(NIST) Digital Manufacturing Certificate (DMC).
• Financial services - The U.S. financial sector uses digital signatures
for contracts, paperless banking, loan processing, insurance
documentation, mortgages, and more. This heavily regulated sector
uses digital signatures with careful attention to the regulations and
guidance put forth by the Electronic Signatures in Global and
National Commerce Act (E-Sign Act), state UETA regulations, the
Consumer Financial Protection Bureau (CFPB) and the Federal
Financial Institutions Examination Council (FFIEC).