B.

COM 1ST YEAR SEMESTER 2

ESSENTIALS
OF
E-COMMERCE
CHAPTER 1 :-INTRODUCTION TO E-COMMERCE
 INTRODUCTION
• Most people think of e-commerce as selling or purchasing a physical
product online. But e-commerce also includes the sale and purchase of
non physical goods, such as services and digital products.
• It's when a business sells online. In a broad sense, Electronic commerce
is the use of computer networks to improve organizational performance.
Increasing profitability, gaining market share, improving customer
service, ordering goods from an on-line catalog, and delivering products
faster is possible with electronic commerce.
• electronic commerce or e-commerce is simply the buying and selling of
goods and services using the internet, when shopping online. However,
the term is often used to describe all of a seller's efforts, when selling
products directly to consumers.
 HISTORY OF E-COMMERCE
• History of e-commerce dates back to the invention of the online "sell and buy" concept, along with other
complimentary things like computers, modems, electricity, cables, and INTERNET. E-commerce has been widely
spread in the year 1991 when the Internet was opened for commercial use.
• Since then, there are thousands of businesses which have taken residence at websites.Initially, the term E-
commerce just meant the process of execution of the transactions electronically with the help of some great
technologies i.e., Electronic Data Interchange (EDI) and Electronic Fund Transfer (EFT).
• These technologies were introduced in the 1970s and helped various business companies and organizations to send
commercial documentation electronically.
• In 1969, CompuServe was the first major e-commerce company to be formed in the United States.2Although the
Internet gained popularity in 1994, it took approximately 4 years to develop the security protocols (like HTTP and
DSL) which allowed rapid access and continuous connection to the Internet.
• In 2000, there were a great number of companies in the US and Western Europe which created their presence on
the World Wide Web (www). Till this time, the meaning of the word e-commerce was changed.
• E-commerce has gained a new definition for itself i.e., "the process of purchasing of available goods and services
over the internet using secure connections and electronic payment services."Basically, the history of online business
is unimaginable without Amazon and eBay which were the main internet companies to permit electronic
transactions.
• As of now, there are 5 biggest and most well known overall Internet retailers: Amazon, Dell, Staples, Office Depot
and Hewlett Packard. And some most popular categories of products sold on the internet are music, books,
computers, office supplies, and other consumer electronics.
 HOW DOES E-COMMERCE WORK?
• E-commerce is powered by the internet, where customers can access an
online store to browse through, and place orders for products or services via
their own devices.
• As the order is placed, the customer's web browser will communicate back
and forth with the server hosting the online store website. Data pertaining to
the order will then be relayed to a central computer known as the order
manager-then forwarded to databases that manage inventory levels, a
merchant system that manages payment information (using applications such
as PayPal), and a bank computer -- before circling back to the order manager.
• This is to make sure that store inventory and customer funds are sufficient for
the order to be processed. After the order is validated, the order manager will
notify the store's web server, which will then display a message notifying the
customer that their order has been successfully processed. The order manager
will then send order data to the warehouse or fulfillment department, in order
for the product or service to be successfully dispatched to the customer.
• At this point tangible and/or digital products may be shipped to a customer, or
access to a service may be granted.
 MEANING AND CONCEPTS OF E-COMMERCE
• The term 'electronic commerce' (e-commerce) refers to a business model that allows
companies and individuals to buy and sell goods and services over the Internet. E-commerce
operates in four major market segments and can be conducted over computers, tablets, smart
phones, and other smart devices.
• Nearly every imaginable product and service is available through ecommerce transactions,
including books, music, plane tickets, and financial services such as stock investing and online
banking.Since then, ecommerce has evolved to make products easier to discover and purchase
through online retailers and marketplaces.
• Independent freelancers, small businesses, and large corporations have all benefited from
ecommerce, which enables them to sell their goods and services at a scale that was not
possible with traditional offline retail.
• KEY POINTS-
• Ecommerce is the buying and selling of goods and services over the Internet.
• It is conducted over computers, tablets, smart phones, and other smart devices.
• Almost anything can be purchased through e-commerce today.
• It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain
both.
• Ecommerce operates in four market segments, including business to-
business, business-to-consumer, consumer-to-consumer, and consumer-
to-business.
• In nutshell, E-commerce is everything that involves buying, selling, and
making transactions online. The "e" in "e-Commerce" is just like the "e"
in "email." It's a prefix meaning "electronic" to represent the internet
version of an offline concept. E-Commerce transactions are performed
through specialized websites that can take payment for products.
 E-COMMERCE TRANSACTION PROCESS
• E-commerce is powered by the internet, where customers can access an online
store to browse through, and place orders for products or services via their own
devices.
• As the order is placed, the customer's web browser will communicate back and
forth with the server hosting the online store website. Data pertaining to the
order will then be relayed to a central computer known as the order manager --
then forwarded to databases that manage inventory levels, a merchant system
that manages payment information (using applications such as PayPal), and a
bank computer before circling back to the order manager.
• This is to make sure that store inventory and customer funds are sufficient for
the order to be processed. After the order is validated, the order manager will
notify the store's web server, which will then display a message notifying the
customer that their order has been successfully processed.
• The order manager will then send order data to the warehouse or fulfillment
department, in order for the product or service to be successfully dispatched to
the customer. At this point tangible and/or digital products may be shipped to a
customer, or access to a service may be granted.
 Features of e-commerce
• 1. Non-Cash Payment: E-Commerce enables the use of credit cards, debit cards, smart cards,
electronic fund transfer via bank's website, and other modes of electronics payment.
• 2. Product Comparisons: Product comparisons can improve a shopping experience and
increase sales. Consumers typically shop for similar features. A product comparison feature
on product pages can help them view features side-by-side, instead of flipping through
many pages. Many shopping carts are starting to incorporate this feature into their
platforms.
• 3. 24x7 Service: E-commerce automates the business of enterprises and provides services to
their customers. It is available anytime, anywhere.
• 4. Global Reach: E-commerce allows business transactions on the cross country bound can
be more convenient and more effective as compared with the traditional commerce. On the
e-commerce businesses potential market scale is roughly equivalent to the network the size
of the world's population.
• 5. Advertising/Marketing: E-commerce increases the reach of advertising of products and
services of businesses. It helps in better marketing management of products/services.
• 6. Interactivity: Twentieth Century electronic commerce business technology is called
interactive, so they allow for two-way communication between businesses and consumers.
 Functions of E-commerce
• 1. Registration: In order to make a purchase, users must register with the site. All
the information is provided for shipping and billing. The data will be stored on a
database and will be available from the back office.
• 2. Product Management: In online purchasing we have complete product
information about various things like: product code,category,subcategory,product
name,description,image zoom,sizes available,'pieces' in stock
• 3. Cart: The Cart is a tool that, allows users to select the products they want and
then go to the checkout for payment.
• 4. Payment: The payment system is a mechanism that facilitates interface between
the parties involved in financial transactions; the bank, the store and you with your
credit card.
• 5. Order and Shipping Management: This summarizes all the delivery and order
information to enable correct delivery. It includes:6 list of products purchased,user
information,details of place of delivery,payment information.
• 6. Transactions: It includes the several facilities:
Supports any bank for transferring money ,Works with any transaction processor ,Works with
any credit card clearing house ,Works with any merchant account vendor ,Transactions are
secure and immediate ,Support for address verification (AVS) is available
 Reasons for Transacting online
• Easy and best solution for online shopping users from sitting at home and also
delivery at home
• Online systems are most efficient and have fast response times.
• Company provide a Very easy to use interface as registration form which is as
simple as fill a form and the rest will be taken care of by the web and database
servers.
• Online banking is completely based on online transaction processing systems.
• You don't have to waste time in falling long line for paying the bills. For online
transaction you just have to use your fingers and computer in purchasing.
• You have twenty-four-hour access. When your bank closes, you can still access
your account and make transactions online. It's a very convenient alternative
for those that can't get to the bank during normal hours because of their work
schedule, health or any other reason.
 WORKING OF E-COMMERCE
• E-commerce, as this is known, has grown enormously in the last decade, making life
more convenient for consumers and opening up all kinds of new opportunities for
businesses. Here's one example of how a typical, fully computerized e-commerce
system might work.
1. Customer: Sitting at computer, a customer orders a product online. Computer's Web
browser communicates back-and-forth over the Internet with a Web server that
manages the store's website.
2. Web Server: The Web server sends order to the order manager. This is a central
computer that sees orders through every stage of processing from submission to
dispatch.
3. Order Manager: This Entity queries a database to find out whether what the
customer wants is actually in stock(available) or not
4. Stock Database: If the item ordered is not in stock, the stock database system order
new supplies from the wholesalers or can manufacturers. And make available to the
customer by communicating with order systems at the manufacturer's HQ while the
customer is still sitting at their computer. The stock database confirms whether the
item is in stock or suggests an estimated delivery date when supplies will be received
from the manufacturer.
5. Merchant System: If the item is in stock, the order manager continues to
process it. Next it communicates with a payment Gateway (run by a credit-
card processing firm or linked to a bank) to take payment using the
customer's credit or debit card number.
6. Bank Server: The Bank Server confirms the authorization of consumer
and also confirms whether the customer has enough funds in their account
or not.
7. Warehouse and Dispatching: When the merchant system authorizes the
transaction to go ahead, the order manager confirms that the transaction
has been successfully processed and notifies the Web server. In return the
web server confirming that customers order has been processed and the
transaction is complete. After that the order manager requests the
warehouse to dispatch the goods to the customer. A Vehicle from a
dispatch vendor collects the goods from the warehouse and delivers to the
customer. Once the goods have been dispatched, the warehouse computer
e-mails the customer to confirm that her goods are on their way.
 IMPACT OF E-COMMERCE
E-Commerce has major impacts over direct marketing, Customer service, product capabilities and
Manufacturing Finance. We can elucidate it by the help of following points:
• E-Commerce is more than just buying and selling products online. It also emphasizes the entire
online process of developing, marketing, selling, delivering, servicing and paying for products
and services.
• India has shown excellent growth in the E-commerce methodology. With an internet user base
of over 300 million, India has third largest internet population after US & China.
• India has witnessed a success stories particularly in e-retail in Consumer Electronics & Fashion
Apparel and Home Furnishing segments.
• E-commerce creates new opportunities for entrepreneurial start-ups. Ease of Internet access,
Safe and secure payment modes with excellent marketing skills has revolutionized this
segment of E-Commerce.
• Rapid development in mobile technology has given way to Mobile Commerce with many E-
Commerce companies shifting to different attractive and useful Apps.
ADVANTAGES OF E-COMMERCE
• The advantages of E-Commerce can be classified into main three
1. Advantages to Organizations
2. Advantages to Consumers
3. Advantages to Society

Advantages to Organizations:-
Attract New Customers: Using E-Commerce, organizations can easily
expand their local market to national or international markets with
minimum investment. An organization can easily find more customers,
best suppliers, and suitable business partners across the globe through
internet.
 Better Understand Your Customers: Organization can get a rough idea of who your
customers are. Organization can also have the ability to track your customers' buying
habits. What products are they most interested in? What motivates them? All of this
information can be beneficial to sell more efficiently to your customers.
 Better Customer Service: When an organization have an E Commerce site, it can
provide as much information as you want, which customers always appreciate. The
product description, customer reviews, shipping charges, etc. All these information are
available online on the internet and you don't need to provide the staff to answer
these questions.
Advantages to Consumers:-
 Convenience: It provides 24 hours support. Customers can enquire a product or
service and place orders anytime, anywhere from any location Every product is
available on the internet. Type the product into your search engine, you are looking
for, and every option will appear in a well-organized list in a second.
 Time Saving E-commerce application provides users with more options and quicker
delivery of products. It is very easy to purchase products online on a single click of
mouse and can be delivered to your door in just days.
Too Many Options: E-commerce application provides users with more
options to compare and select the cheaper and better options without
going from store to store. The customer can easily compare and contrast
products, see the best offers, best pricing etc. On the other hand a
physical retail store has limited space, where he/she can store the limited
products, but internet have unlimited stock.
Advantages to Society :-
Minimizes Traffic and Air Pollution: Customers need not have to travel to
shop for purchasing a product by vehicle, thus less traffic on road and low
air pollution.
Services in Rural Areas: E-commerce has also provides services and
products in rural areas, which are not available to them for any reasons.
Benefit to Government: E-commerce helps the government to deliver
public services such as healthcare, education, social services at a low cost
and in efficient manner.
 DISADVANTAGES OF E-COMMERCE
• Security: Online portals have been in the news a lot because of hacks by
cybercriminals and hackers. It is a very serious issue as your account might be
hacked because of negligence and wiped out clean of the existing cash.
• Site crash: E-commerce is fully dependent on internet connection. A major
disadvantage of e-commerce is putting a stop to buying capabilities because of
a site crash. Such a small word site crash but has the ability to put a whole
business down within a few seconds.
• Late delivery: Late delivery is one of the common disadvantages of e-commerce
platforms. While ordering a product the customer is assured that it will reach
him in maximum seven days or a particular time period. In most cases that do
not happen and you are kept waiting for it.
• Lack of privacy: Lack of privacy is a serious disadvantage of e-commerce. A
customer has to provide his personal details before making a purchase like
address, name, and phone number and so on. Some sites collect the sensitive
details illegally and this is why people are afraid to use e-commerce portals as
they have to give personal details which can be misused.
• Tax issues: E-commerce portals are accessible in most part of the world as
it is not limited to a particular geographical location. When a customer
makes a purchase, he has to pay the tax on it and it becomes difficult to
calculate the actual sales tax levied in that place.
• High labour cost: High labour cost is a serious disadvantage of the e-
commerce platform. You need to hire technically sound, trained and
qualified workforce for your website who are talented and capable of
handling them in an efficient manner.
• Lack of personal touch: When you enter a retail outlet you are welcomed
at the gate and as you enter inside there are several employees to help
you in case of any difficulties. When you are online and making a choice
there is no one to help you during your visit.
 Difference between Traditional and E-Commerce
TRADITIONAL COMMERCE E-COMMERCE
• Manual intervention is required for • The whole process is completely
each communication or transaction. automated and online.
• Person has to leave home, either • Stay at home and shop.
walk or take a ride for shopping.
• You can see the virtual product in
• You can see the actual product. the form of images.
• You have to immediate payment. • Cash on delivery is available.
• Chances of getting less defective • May you get unsatisfying product.
product.
• Comparison of price of product can
• Comparison of prices of product be done easily.
cannot be done.
• Products are available at much
• Products are available on fixed cheaper cost then MRP.
MRP.