Directorate of Distance & Online Education

UNIVERSITY OF JAMMU
JAMMU

SELF LEARNING MATERIAL

OF
E - COMMERCE
FOR
M.COM FOURTH SEMESTER
For the examination to be held in 2024 onwards

Course No M.COM-C451 Unit I-IV

Lesson No. 1-20

Prof. Gurjeet Kour

Course Coordinator
HOD, Commerce
University of Jammu.

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 COURSE NO. M.COM-C451

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Assistant Professor Teacher Incharge, M.COM
Govt. SPMR Collage of Commerce Room No. 205, IInd Floor
Jammu. DD&OE, University of Jammu.

Directorate of Distance & Online Education, University of Jammu, Jammu, 2024

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 DIRECTORATE OF DISTANCE & ONLINE EDUCATION
UNIVERSITY OF JAMMU
M.COM. FOURTH SEMESTER (NON CBCS)
E-COMMERCE
(Core Course)
Course: MCOMC451 Max Marks: 100 Marks
Credit: 4 External: 80 Marks
Time: 3.00 Hrs Internal: 20 Marks
(Syllabus for the examination to be held in May 2024, 2025, 2026)

COURSE OBJECTIVES
1. To provide an overview of E-Commerce content and detailed framework
2. To describe the mechanisms, platforms and tools of E-commerce
3. To make students aware about the E-Commerce applications in B2C and
B2B
4. To inform students about the innovative E-commerce systems
COURSE OUTCOMES
After the completion of this course the student will be able to:
1. To furnish the detailed knowledge of E-commerce and its intricacies.
2. To provide updated knowledge about the EC activities, support mechanisms,
platforms and tools.
3. To sensitize students about the applications of E-commerce
4. To make students aware about E-government, E-learning, C-Commerce and
C2C ecommerce
5. To exhibit adeptness in application of e-commerce in wholesaling and retailing.

(i)
UNIT I INTRODUCTION TO ELECTRONIC COMMERCE
E-Commerce: Basics, main activities, goals, technical components, functions; Electronic
Markets and Network; EC Framework; Classification of EC by the Nature of the
Transactions and the Relationships Among Participants; Drivers of E-Commerce; The
Digital and Social Worlds: Economy, Enterprises and Society; EC Business Models.

UNIT II EL ECTR ONIC COM M ERC E: M ECHA NISM S,

PLATFORMS AND TOOLS
Electronic Commerce Mechanism: An Overview; EC Activities and Support
Mechanisms; The online purchasing process; E-marketplaces: electronic markets,
components and the participants in E-marketplaces; Disintermediation and
Reintermediation; E-Commerce Platforms: Virtual World as an E-Commerce platform;
Emerging EC platforms: Augmented Reality and Crowdsourcing; The Future: Web
3.0, Web 4.0, Web 5.0; The Technological Environment.

UNIT III ELECTRONIC COMMERCE APPLICATIONS

Retailing in E-Commerce products and Services: Internet Marketing and B2C
Electronic Retailing; E-Tailing business models; B2B E-Commerce: Concept,
characteristics and models, one to many-sell side E-marketplaces, e-auctions; one
from many-e-procurement from buy side; B2B exchanges; B2B Portals and directories;
B2B in Web2.0 and social networking.

UNIT IV INNOVATIVE ELECTRONIC COMMERCE SYSTEMS

E-Government: Government to citizens, government to business, government-
togovernment, government to employees and internal efficiency & effectiveness,
implementing e-government, transformation e-government, e-government and social
networking, m-government; E-learning: concept, social networks & e-learning, learning
in virtual world and second life, virtual interactive simulation, e-learning managements
systems; Collaborative Commerce: Essentials, elements, processes, collaboration hubs,
barriers to C-Commerce; C2C E-commerce: C2C applications.

(ii)
Suggestive Readings
1. Turban, E., King, D., McKay, J., Marshall, P., Lee, J., &Viehland, D.
Electronic Commerce: A Managerial Perspective. Pearson, New Delhi.
2. Murthy G.S.V. E-Commerce Concepts, Models, Strategies. Himalaya
Publishing House, New Delhi.
3. Bajaj K. K. and Nag D. E- Commerce. Tata McGraw-Hill Education, New
Delhi
4. Schneider G. P. Electronic Commerce. Cengage Learning, Dryden Press,
Chicago
5. Chand S. E-Commerce, Fundamentals & Applications. Wiley, India.
Note: Latest edition of the books may be preferred.
NOTE FOR PAPER SETTING
The paper consists of two sections. Each section will cover the whole of the
syllabus without repeating the question in the entire paper.
Section A: It will consist of eight short answer questions, selecting two from each
unit. A candidate has to attempt any six and answer to each question shall be within
200 words. Each question carries four marks and total weightage to this section shall
be 24 marks.
Section B: It will consist of six essay type questions with answer to each question
within 800 words. One question will be set atleast from each unit and the candidate
has to attempt four. Each question will carry 14 marks and total weightage shall be 56
marks

(iii)
 MODEL TEST PAPER
E-COMMERCE
Course: MCOM C451 Time: 3 Hours
Credit: 4 Max. Marks: 80
SECTION A
Attempt any six questions. Each question carries 4 marks. Answer to each
question should be within 200 words.
1. What do you mean by email marketing and affiliate marketing in e-commerce?
2. Who are freelancers and which category of e-commerce business model they
prefer?
3. How can you protect your identity while shopping online?
4. Describe : a) Avatar b) Agents
5. Brief on the E-tailing key players in India.
6. Describe the inefficiencies of traditional procurement.
7. Write a note on social networking.
8. What is virtual world?
SECTION B
Attempt any four questions. Each question carries 14 marks. Answer to each
question should be within 800 words.
1. Define E-Learning. Describe various ways to use social networks in E-learning.
2. Define collaborative commerce. What are the elements and essentials of
collaborative commerce?
3. Define the digital revolution. List its characteristics and components.
4. Elucidate the concept of E-commerce framework. Write detailed a note on
pillars of E-commerce framework.
5. List the major EC activities and EC mechanisms. Explain in detail how EC
activities and EC mechanisms are inter-related?

(iv)
6. a) Throw a light on the opportunities for corporations to use social
networking in B2BEC.
b) Write a detailed note on the major functions of exchanges and the
services they provide

(v)
 CONTENTS
L.No. Title Page No.
UNIT - I INTRODUCTION TO ELECTRONIC COMMERCE
1. E-Commerce : Basics, Main Activities, Goals Technical 1
Components, Functions
2. Electronics Markets and Network 41
3. Electronics Commerce Framework 74
4. Classification of EC by the Nature of the Transactions and 90
the Relationships among participants
5. Drivers of E-Commerce; the Digital and Social worlds : 115
Economy, Enterprises and Society: EC Business Models

UNIT - II ELECTRONIC COMMERCE; MECHANISM,

PLATFORMS AND TOOLS
6. E-Commerce Mechanism: An Overview: EC Activities and 140
Support Mechanism
7. The Online Purchasing Process
8. E-Market Places: Electronics Markets, Components and the 158
participants in E-Market Places
9. Disintermediation and Reintermediation; E-Commerce 178
Platforms: Virtual World as an E-Commerce Platform
10. Emerging EC Platforms: Augmented Reality and
Crowdsourcing; The Future Web 3.0, Web 4.0, Web 5.0; 219
The Technological Environment
UNIT- III ELECTRONIC COMMERCE APPLICATIONS
11. Retailing in E-commerce Product and Services; Internet 251
Marketing and B2B Electronic Retailing
12. E-Tailoring Business Models 291

(vi)
13. B2B E-Commerce: Concept, Characteristics and Models 314
One to Many Sell Side E-Marketplaces
14. E-Auctions: One from Many E-Procurement From Buy Side 332
15. B2B Exchanges; B2B Portals and Directories; B2B in Web 2.0 354
and Social Networking

UNIT- IV INNOVATION ELECTRONIC COMMERCE SYSTEM

16. Electronic Government and its Key Components, E-Government, 376
Government to Citizens; Government to Government, Govt to
Employee and Internal Efficiency and Effectiveness
17. Electronic Government Management: Implementing of 397
E-Government, Transportation E-Government, E-Government
and Social Networking, M-Government
18. E-Learning, Concept, Social Network and E-Learning in Virtual 422
World and Second Life, Virtual Interactive Simulation, E-Learning
Management System
19. Collaborative Commerce : Essentials, Elements, Processes, 446
Collaborations Hubs, Banners to E-Commerce
20. C2C Electronic Commerce, C2C Applications 463

(vii)
Lesson No. 1 UNIT I
INTRODUCTION TO ELECTRONIC COMMERCE
E-COMMERCE: BASICS, MAIN ACTIVITIES, GOALS,
TECHNICAL COMPONENTS, FUNCTIONS

STRUCTURE
1.1 Introduction
1.2 Objectives
1.3 Meaning and Definition of E-commerce
1.4 Characteristics of e-commerce Technology in Business
1.5 Difference between Traditional commerce and E-commerce
1.6 Advantages and Benefits of e-commerce
1.7 Limitations and Constraints of e-commerce
1.8 Basics of e-commerce
1.9 Main activities of e-commerce
1.10 Goals of e-commerce
1.11 Technical components of e-commerce
1.12 Functions of e-commerce
1.13 Summary
1.14 Glossary
1.15 Self-Assessment Questions
1.16 Lesson End Exercise
1.17 Suggested Readings

1
1.1 INTRODUCTION
In the emerging global economy, e-commerce and e-business have
increasingly become a necessary component of business strategy and a strong
catalyst for economic development. Computer today is not only the language
of people but also for business. One of the fastest growing industries today is
electronic commerce. Almost anything can be purchased, traded, or sold all via
the Internet. Users can find any kind of information within a shorter time as
compared with conventional method that consumes more time. Initially
emerging from the Electronic Data Interchange, e-commerce has gone through
several major steps to get to its current point.
The emergence of the Internet throughout the world has been contributing
such a variety medium in doing business as well as people lifestyle. In fact,
internet is the essential prerequisite for the existence of e-commerce. Electronic
commerce is the exchange of money for goods and services via electronic means.
It has the potential to generate revenue and reduce costs for businesses and
entities. Marketing, retailers, banks, insurance, government, training, online
publishing, travel industries are some of the main recipients of e-commerce.
For instance, banks use the web for diverse business practices and customer
service. Overall, electronic commerce can be a benefit to society especially if
businesses adapt to their customers’ worries such as privacy concerns. As these
problems begin to be solved and technology improves, e-commerce will provide
individuals with more choice and add further depth to the economy.

Fig. 1.1 E-commerce

2
1.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the meaning and basics of e-commerce
 list the advantages and constraints of e commerce
 describe the activities and goals of e-commerce
 explain the components and functions of e-commerce

1.3 MEANING AND DEFINITION OF E-COMMERCE

The term ‘e-commerce’ refers to the amalgamation of tools built on
information and communication technologies (by and large known as business
software), in the organization, to enhance their performance. It also pertains to
“any form of business transaction in which the parties interact electronically
rather than by physical exchanges or direct physical contact”. This builds value
for the company, its customers, and its affiliates.
E-commerce is the electronic exchange of business information between
two or more organisations. E-commerce take place in electronic data interchange
over private networks. Companies that regularly do business together will set
up an automated and fast info exchange such as stock deliver and receive
confirmation. E-commerce, however, is more than just electronics and commerce
added together. It represents an entirely new way of doing business over a
medium that changes the rules of doing that business. It is, therefore, far more
about strategy and business management than it is about technology.
E-commerce is a powerful business setting that is formed when one
connects critical business systems directly with consumers, workforce, traders,
and business associates using intranet, extranet, e-commerce technologies, two-
way applications, and the Web. It is more than a smart web presence or a slick,
flash-driven shopping cart. This is a critical surfacing of business across the
world, with several technologies getting into the enterprise computing
ecosystem. It provides a powerful mechanism for companies to enhance
productivity and bring down costs. In order to utilise these substantial benefits,

3
o rganizat io ns must make sure t hat t heir e-co mmerce is implement ed
appropriately and matches with their market segment.
Examples of E-Commerce

 An individual purchases a book on the Internet.

 A government employee reserves a hotel room over the Internet.
 A business calls a toll-free number and orders a computer using the
seller’s interactive telephone system.
 A business buys office supplies on-line or through an electronic auction.
 Retailer orders merchandise using an EDI network or a supplier’s
extranet.
 A manufacturing plant orders electronic components from another plant
within the company using the company’s intranet.
 An individual withdraws funds from an automatic teller machine (ATM).
 Accepting credit cards for commercial online sales
 Driving information through a company via its intranet
 Driving manufacturing and distribution through a value chain with
partners on anextranet
 Selling to consumers on a pay-per-download basis, through a Web site,
etc.

4
Definitions of e-commerce
Some of the definitions of e-commerce are given below:
 The World Trade Organisation defines E-Commerce as, “E-Commerce
is the production, distribution, marketing, sales or delivery of goods
and services by electronic means.”
 Electronic Commerce is where business transactions take place via
telecommunications networks, especially the Internet – E. Turban, J.
Lee, D. King and H.M. Chung,
 Electronic commerce is about doing business electronically – P. Timmers
 Electronic commerce or e-commerce refers to a wide range of online
business activities for products and services – Anita Rosen
 E-commerce is the use of electronic communications and digital
information processing technology in business transactions to create,
transform, and redefine relationships for value creation between or
among organizations, and between organizations and individuals. –
Emmanuel Lallana, Rudy Quimbo, Zorayda Ruth Andam, e Primer
 It pertains to “any form of business transaction in which the parties
interact electronically rather than by physical exchanges or direct
physical co nt act .” – M K , Euro Info Correspondence Centre
(Belgrade, Serbia)
 Kalakota and Whintons defined the term E-Commerce from different
perspectives. These perspectives are:
 Communication Perspective: According to this perspective, E-
Commerce is the delivery of information, product/services or
payments over telecommunication channels, computer networks or
any other electronic mode of communication.
 Business Process Perspective: This says that E-Commerce is the
application of technology towards the automation of business
transactions and work flow.

5
  Service Perspective: E-Commerce is defined as a tool that addresses
the desire of firms, consumers and management to cut service cost
while improving the quality of goods/services and increasing the
speed of service delivery.
 Online Perspective: E-Commerce provides the capability of buying
and selling products and information on the Internet and other online
services.

1.4 CHARACTERISTICS OF ELECTRONIC COMMERCE

TECHNOLOGY IN BUSINESS
Electronic commerce, or e-Commerce, refers to the purchasing and
selling of goods or services via electronic means, such as the Internet or mobile
phone applications. It may also refer to the process of creating, marketing,
servicing, and paying for services and goods. Businesses, governments, and
the public can participate in e-Commerce transactions. The unique characteristics
of e-commerce technology include:
a. Ubiquitous technology: It is always available just about everywhere
and by using internet and Wi-Fi hotspot such as airport, coffee cafe and
hill station places. Consumer can connect it to the Internet at any time,
including at their homes, their offices, on their video game systems with
an Internet connection and mobile phone devices. E-Commerce is
ubiquitous techno logy which is available everywhere Moreover,
individuals who have cell phones with data capabilities can access the
Internet without a Wi-Fi connection.
b. Worldwide reach: It enables a business to easily reach across geographic
boundaries. The potential market size is nearly equal to the size of the
online population of the world. E-commerce technology seamlessly
stretches across traditional, cultural and national boundaries and enables
worldwide access to the client.
c. Universal standards: Universal standards are those standards which
are shared by all of the nations in the world. The whole online tradition

6
 is growing and expanding its features in the world. To develop any kind
of business, internet and communication application is required which
make the business relationship more lovingly and attractive for secure
business and successful business.

d. Business richness: The effects of e-commerce are already appearing in

all areas of business, from customer service to new product design. E-
commerce can deliver videos, audios, animations etc. much better than
other technologies. It facilitates modern types of business strategies for
reaching and interacting with customers such as online banking, online
shopping, online advertising and marketing, online order taking and
online customer service etc.
e. Interactivity: E-commerce technologies allow two-way communication
between the merchant and the consumer. As a result, e-commerce
technologies can adjust to everyone’s experience. For example, while
shopping online, an individual can view different angles of some items,
add products into a virtual shopping cart, checkout by inputting his/her
payment information and then submit the order.

7
f. Personalization: Technologies within e-commerce allow for the
personalization and customization of marketing messages that groups
or individuals receive. An example of personalization includes product
recommendations based on a user’s search history on a website that
allows individuals to create an account.
g. Information density: The use of e commerce reduces the cost to store,
process and communicate information, At the same time, accuracy, and
timeliness increase; thus, making information accurate, inexpensive, and
plentiful. For example, the online shopping process allows a company
to receive personal, shipping, billing, and payment information from a
customer all at once and sends the customer’s information to the
appropriate departments in a matter of seconds.
h. Social technology: E commerce technology has tie up with the social
media networking application to provide the best source of content
sharing technology and e-marketing systems. Anyone can share his/her
content or data easily in just one click.
i. User-generated content: Social networks use e commerce technologies
to allow members, the general public, to share content with the worldwide
community. Consumers with accounts can share personal and commercial
information to promote a product or service. When a company has a
professional social networking account, a member of the same social
network has the option of associating himself with the company or a
product by saying he likes or recommends it. When an individual updates
his status on a social networking account, he may also mention a product
or company by name, which creates word-of-mouth advertising.

1.5 DIFFERENCE BETWEEN TRADITIONAL

COMMERCE AND E-COMMERCE
Traditional commerce includes the exchange of goods and services
between two people. It is one of the traditional methods of purchasing goods
and services. It is followed by everyone across the globe. E-commerce, similar

8
to traditional commerce, also includes the exchange of goods and services.
The solitary difference is that it is handled online through an electronic network
– the Internet. Now it has spread across to online social networks. With e-
commerce, support, transactions, and communication are done via the use of
electronic communication. all trading activities including selling, ordering,
buying, payments are executed over the internet.
The following are the points of differentiation between the traditional
commerce and e-commerce:

S.No. Basis Traditional Commerce E-commerce

1. Meaning Traditional commerce is a E-Commerce means
branch of business which carrying out commercial
focuses on the exchange of transactions or exchange
products and services, and of information,
includes all those activities electronically on the
which encourages exchange, internet.
in some way or the other.
2. Processing of Manual Automatic
Transactions
3. Accessibility Limited Time 24×7×365
4. Physical Goods can be inspected Goods cannot be
inspection physically before purchase. inspected physically
before purchase.

9
 1. Customer Face-to-face Screen-to-face
interaction
2. Scope of Limited to particular area. Worldwide reach
business
3. Information No uniform platform for Provides a uniform
exchange exchange of information. platform for information
exchange.
4. Resource Supply side Demand side
focus
5. Business Linear End-to-end
relationship
6. Marketing One way marketing One-to-one marketing
7. Payment Cash, cheque, credit card, etc. Credit card, fund transfer
etc.
8. Delivery of Instantly Takes time
goods

1.6 ADVANTAGES AND BENEFITS OF ELECTRONIC

COMMERCE
E-Commerce is the process of buying and selling tangible products and
services online. It involves more than one party along with the exchange of
data or to process a transaction. It is part of the greater industry that is known
as electronic business (e-business), which involves all of the processes required
to run a company online. E-commerce has helped businesses (especially those
with a narrow reach) gain access to and establish a wider market presence by
providing cheaper and more efficient distribution channels for their products
or services. Target presence with an online store that allows customers to
purchase everything from clothes and coffeemakers to toothpaste and action
figures right from their homes.

10
Advantages to Organizations
 Using e-commerce, organizations can expand their market to national
and international markets with minimum capital investment. An
organization can easily locate more customers, best suppliers, and
suitable business partners across the globe.
 E-commerce helps organizations to reduce the cost to create process,
distribute, retrieve and manage the paper based information by digitizing
the information.
 E-commerce improves the brand image of the company.
 E-commerce helps organization to provide better customer services.
 E-commerce helps to simplify the business processes and makes them
faster and efficient.
 E-commerce reduces the paper work.
 E-commerce increases the productivity of organizations. It supports
“pull” type supply management. In “pull” type supply management, a
business process starts when a request comes from a customer and it
uses just-in-time manufacturing way.

11
Advantages to Customers
 It provides 24x7 support. Customers can enquire about a product or
service and place orders anytime, anywhere from any location.
 E-commerce application provides users with more options and quicker
delivery of products.
 E-commerce application provides users with more options to compare
and select the cheaper and better options.
 A customer can put review comments about a product and can see what
others are buying, or see the review comments of other customers before
making a final purchase.
 E-commerce provides options of virtual auctions.
 It provides readily available information. A customer can see the relevant
detailed information within seconds, rather than waiting for days or
weeks.
 E-Commerce increases the competition among organizations and as a
result, organizations provides substantial discounts to customers.
Advantages to Society
 Customers need not travel to shop a product, thus less traffic on road
and low air pollution.
 E-commerce helps in reducing the cost of products, so less affluent
people can also afford the products.
 E-commerce has enabled rural areas to access services and products,
which are otherwise not available to them.
 E-commerce helps the government to deliver public services such as
healthcare, education, social services at a reduced cost and in an
improved manner.

12
1.7 LIMITATIONS AND CONSTRAINTS OF E-COMMERCE
E commerce is a commercial sector where transactions are possible with
the help of internet connection. More and more industries are moving via online
mode as it is the choice of the consumer. Its prevalence continues to grow and
prosper without any signs of slowing down. The ability to operate online has
made many entities profitable. There cannot be ups without downs and pros
without cons and similar is the case with e-commerce. Its functioning is fully
dependent on internet connection and the world is still at a stage where several
places do not have this facility. The software industry is at an evolving stage
and keeps on changing the rules of the game. One of the most important
disadvantages of e-commerce can be a lack of reliability and security because
of poor implementation. The other factor is user resistance as most are not
comfortable in making a purchase without trying or physically touching
the product. This is especially true in the case of apparel where finding the
right size is always a permanent problem.
1) Security : Online portals have been in the
news a lot because of hacks by cyber
criminals and hackers. It is a very serious
issue as your account might be hacked
because of negligence and wiped out of
the existing cash. This is a harsh reality
of e-commerce sites and a website cannot
give this assurance that the financial
information cannot be compromised on its
portal. The website owner must t ake
important steps to change its password so as to stop any data breaches.
It is important to remain vigilant and proactive to protect the website
and ultimately the customer related information. Security has been a
concern since its inception and is considered a major disadvantage of e-
commerce.
2) Site crash : E-commerce is fully dependent on internet connection. A

13
 major disadvantage of e-commerce is
putting a stop to buying capabilities
because of a site crash. Such a small
word site crash has the ability to put a
who le business do wn wit hin a few
seconds. This can happen if you do not
have a good bandwidth connection as
yo u will face serio us issues while
loading pages and placing orders. It is
impossible to make a purchase if the site
you are looking at crashes down. Ensure
that your website is on the right platform
where there are already precautions in
place for this eventuality.
3) No possibility of tried and tested
pro duct : One o f t he majo r
disadvantages of e-commerce portal is that a customer is unable to try
and test the product for his own satisfaction. We are habituated to buy at
physical stores after trying a product several times and suddenly it takes
a lot of guts to change this lifetime habit where you cannot touch, try
and test beforehand. People miss the tangible feeling and there is always
the fear that the product will not meet the standard you are expecting.
This makes the consumer a bit hesitant before making a purchase.
4) Some products are difficult to buy online: If you think that you can
buy everything online then it is your misconception. There are, for
instance, eatables like ice cream, spectacles, and metals like gold and
silver that you do not want to buy online even if you have the option of
doing so. You cannot trust yourself to make a purchase without visibly
touching, trying, testing them and this can prove a disadvantage for an
e-commerce site. All the images and assurances cannot tempt you to
buy some items, for example, you need to buy a gold and diamond

14
 bracelet. Do you trust the online store to meet your expectations or will
you make the effort and travel to a physical store to verify and then
make a purchase.
5) 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. In most cases
that does not happen and you are kept
waiting for it. Ultimately when the
info rmat io n reaches yo u t hat t he
product will be delivered on this day
the portal is not specific about the timings. There are several instances
when a person who is going to collect the parcel had to wait for hours
for the delivery. His whole day is wasted and he could not go outside as
per his original schedule. Such a situation makes the customer angry as
he feels unnecessarily harassed.
6) Lack of privacy : Lack of privacy is a serious disadvantage of e-
commerce. A customer must provide his personal details before making
a purchase like address, name, and phone number and so on. Some sites
do not have advanced encrypted that can protect your personal details
from hackers and it is a cause of grave concern. This sensitive
information if leaked can create lots of problems for a consumer. Some
sites collect the sensitive details illegally and this is why people are
afraid to use e-commerce portals as they must give personal details which
can be misused.
7) Legal issues : Several cyber laws have been implemented to protect the
rights of both seller and buyer. If you are looking to create a website it
is important that you go through the local laws as well as cyber laws so
that you do not have to face any problems later. A serious disadvantage

15
 of e-commerce portals is that people either take care of local laws or
cyber laws and fail to realize that you need to pay attention to both if
you want to make a success of your business.
8) Tax issues : E-commerce portals are accessible
in most part of the world as it is not limited to a
part icular geo grap hical lo cat io n. When a
customer makes a purchase he has to pay the
tax on it and it becomes difficult to calculate the
actual tax levied in that place. The consumers
thus face issues during the computation of tax
and this is also an added disadvantage of e-commerce.
9) Huge technological cost : E-commerce
requires advanced platfo rms to bett er
their marketing. If it faces disturbances in
the form of software, network, or domain
issue, it will not be able to offer seamless
t r ansact io ns. The apt t echnical
infrastructure is costly and needs huge
investment. It also needs to be upgraded
periodically to stay with changing times.
Huge technological cost for a successful
venture is a disadvantage of the e-commerce portal.
10) Fear : People fear the unknown. E-commerce
transactions are mostly faceless and paperless
without any due proof. Most of the organizations
do not have a physical existence and customers
are hesitant to make card payments beforehand.
They fear that if the desired product does not
arrive then they will lose their money. If this
happens then how are they going to trace the
online o utlet and recover their hard-earned

16
 money? One of the disadvantages of e-commerce is the absence of the
physical existence of the store.
11) 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. The personal
touch at the physical store serves as an encouragement and feels good.
The interaction with sales associates help us in making choices. This is
why soft personal touches are encouraged in physical outlets. This
experience is valuable but is not available at online outlets and seems
like a disadvantage of e-commerce.
12) Dependency on the website : An e-commerce site is heavily dependent
on its website. If it is not properly projected or the software is not
implemented the site can face technology hiccups. It then comes under
the serious radar. Customers tend to lose faith very easily and shift their
loyalties to other portals that they find convenient. The portal will suffer
substantial loss because of this action. Do not keep all the eggs in one
basket as the dependency on the website can prove a disadvantage of e-
commerce in times of crises.
13) Severe competition : Healthy competition is considered a plus in the
business sector but what happens when there are unimaginable portals
for a single product. It is surely a disadvantage of e-commerce when
that happens because the competition turns inwards and the companies
try harder to attract a large chunk of the consumer base. This forces
them to drop their prices by allowing discounts, incentives and other
allowances on their products. How are they going to recover their money?
14) Credit card fraud : Online transactions are mostly made
by debit card, credit card, and internet and in very few
cases with cash on delivery option. Yes, the website
owners try to take every available precaution to protect
t he card det ails but what if t he sit e is hacked by

17
 cybercriminals. It is a growing concern as we hear news of data hacks
regularly. The websites need to place proper blockers in place because
the customers will lose faith and will stop making online payments.
Stop it before it starts proving a serious disadvantage for e-commerce
sites.
To conclude, we can say that although the popularity has forced several
business houses to shift base on online medium but running an e-commerce
operation is not a bed of roses as it also includes several challenges and
disadvantages like a rose with thorns. Software or web servers are necessary
along with network bandwidth for a successful e-commerce transaction.
Sometimes a site crashes down and you are in serious need of a product. What
will you do at that time as the only available option is a physical store? Security
has become a serious issue as hackers are on the look-out for any loopholes to
make mischief. Although purchasing process of products is easy but how can
you check the quality of the product and what about its availability. It takes a
few days for the product to arrive and what will happen when you need to use
the item as soon as possible. So, e- companies must consider these constraints
and challenges in mind while providing e-products and services to its customers.

1.8 BASICS OF E-COMMERCE

An e-commerce business sells goods, services, and funds over the
internet. Starting an e-commerce business is a lot like starting any company.
The following are the resources and techniques required for the successful
implementation of e-commerce are:
a. Computer system: The presence of the computer system is the first
requirement of e-commerce; because the basis of e-commerce is the
Internet and the computer is the medium of transaction. The computer
can be linked with the Internet, by pressing its keys. The business
transaction under e-commerce can be seen on the computer screen.
b. Internet connection: For conducting e-commerce transactions, Internet
connection is essential. We can get this facility of Internet connection,

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 sitting at home, through Private Service Provider companies. When we
open our Internet connection, the service provider tells us to install the
Web Browser. It controls the activities of e-commerce. It is the Web
Browser which takes us into the world of e-commerce. (Browser means
a programme that lets us look at or read documents on the Internet).
c. Technically qualified workforce: The business enterprise must have
technically qualified people who are capable of working with computer
networks and the Internet without difficulty.
d. System of receiving payments: The business enterprise must make
arrangements with banks, credit card agencies etc. to facilitate receipts
and payments electronically.
e. Well-designed website: To communicate effectively with customers
and others, the business enterprise must develop a comprehensive
website. The information must be detailed and hyperlinked with suitable
supporting pictures etc. (Hyperlink is a place in an electronic document
on a computer that is linked to another electronic document).
f. Effective telecommunication system: For a successful implementation
of e-commerce, an effective telecommunication system is necessary. If
telephone lines are getting frequently disconnected; e-commerce is not
successful.
g. Feedback Forms: It is important for an e-commerce company to findout
what people think about their company than to solicit their opinion. By
using customer feedback, an e-commerce can improve its site and provide
better service to their customers. Using feedback forms also shows that
e-commerce company is interested in what their customers have to say,
and provides an opportunity to build relationships with them.
h. Daily give-away/coupons/contests: E-commerce companies that offer
regular promotions such as a ‘give away’, coupons and contests are in a
solid position to capture a regular audience. The promotions act as the
driver that attracts customers to visit initially. It also provides an

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 opportunity to showcase new products and services, and deliver
important news about e-company. For example, an e-commerce company
offers discount coupons to customers which can be redeemed on next
purchases. This encourages customers to purchase goods in future.
i. Bookmarking: A good way to encourage customers to visit an
ecommerce company’s site is to ask them to bookmark it. Through
bookmarking, they have easy access to a site and do not have to remember
your site’s exact URL to visit. Bookmarking a site is particularly
beneficial for web surfers who like to follow links. It enables them to
go back and take a more in-depth look at what company has to offer
when they need to.
j. Surveys: Surveys provide an effective avenue through which important
customer data is gathered that will help an ecommerce company to
improve its business and plan accordingly. To encourage visitors to
complete the survey, the company can provide an incentive such as an
opportunity to win a prize.
k. Awards/Testimonials: Including awards and testimonials on ecommerce
site will provide credibility to its business. It will also provides a
foundation to build rapport and trust with customers, who will be more
willing to visit a site they can trust.
l. Online Chat: Online chat mechanisms provide a forum where customers
can come together and share their experiences with each other and e-
commerce Company. This interactive tool allows companies direct access
to customer opinions where they can gauge trends and determine their
views.
m. Product Tours: Online tours provide an e-commerce company with an
opportunity to showcase particular products and services, and highlight
their key benefits. Product tour is a better way to show how the product
works. Product tour makes complex product look simple and easy to
use.

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n. Using Video: E-commerce business benefits not only from the use of
words, but the use of words, sound and images combined, making it a
wonderful way for businesses to quickly and very inexpensively share
information about their products, services and business activities.
Ecommerce companies can create their own channels and link those
channels through their other online activities—web sites, blogs or social
media activities.
o. Relationship Building through social media: Relationship building is
a marketing strategy built on establishing a long-term and mutually
beneficial relationship between businesses and customers. Ecommerce
through social media allows ongoing two-way communication. Google+,
LinkedIn, Facebook, Twitter, YouTube and Pinterest are social media
platforms that businesses use to build relationships and communities
around their brands. Social media allows businesses of all sizes to address
public relations and customer service issues quickly, announce time-
limited offers and promotions and give customers a chance to share
their product-related stories and images.
p. Make checkout process easy: An e-commerce company should try to
get everything on one page. If it has several pages, it should show a
progress bar at the bottom of each page so that customers can visualize
how much longer the checkout process will take. The more time a
customer spends looking for the next button or the checkout button the
quicker they can become frustrated with the site.
q. Give customers helpful product descriptions: E-commerce companies
selling any type of clothing or accessory should provide a size guide.
This will not only help customers to select right product built will cut
back on returns of such goods. E-commerce Company should have a
page dedicated to frequently asked questions. It is desirable if company
has descriptions for every single one of their products. These details tell
customers what the product is made of, the size, fit and fabric, how to
clean it and even tells customers the height of the model in the photo.

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 Not only will they be able to easily find your products, but it will also
be easier for them to make a purchase decision.
r. Retargeting: Customers who have already shown an interest in website
are more likely to make a later purchase. Retargeting is a technique that
tracks customers who have visited website. The e-commerce company
can display ads to them while they are browsing the internet with the
intention of getting them back on the website. When these visitors enter
website again, they are far more likely to make a purchase.
s. Email marketing: An e-commerce company can build an email list by
collecting emails when they make a purchase. They can also collect
emails through social media campaigns and on its website in exchange
for coupons or discounts. An e-commerce company can send different
emails like:
 Welcome email: This email is received by customer when they create
account and login to the site.
 Email nurture series: This is a sequence of emails that companys ends
to educate customers about the product
 Cart abandonment email: This is the email sent when visitors fillup
the cart, then leave your store without checking out
 Email receipts: These are emails sent to confirm customer’s purchase;
it’s also a great time to send them further promotions.
t. Social media marketing: Using social media marketing for e-commerce
business has its benefits like user engagement and increasing sales. User
engagement involves likes, shares, comments and general interaction
on posts and this helps to create brand image in the mind of target
audience. It is also crucial for word-of-mouth marketing since it’s very
easy to share information within and between platforms (like from
Facebook to whatsapp and so on). Nowadays, social media platforms
have made it easier for eCommerce businesses to create and maintain

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 their presence. Instagram allows swipe-up links on stories and product
stickers on posts. When it is clicked, take viewers directly to a product
or catalog. Facebook has a ‘dynamic ads’ feature that allows owners to
upload entire catalogs and promote relevant content to individual users.
u. Build a mobile app: There are several benefits to have an app for
ecommerce business. Apps tend to load more quickly that websites so
that users can shop more efficiently. If an e-commerce company has an
app customers are one tap away from viewing products. The ecommerce
company can also send push notifications through apps to notify
customers when company is having a sale or when their favorite item is
back in stock. Building an app is an excellent way to boost sales and
drive growth. E-commerce Company should design site with mobile
visitors in mind from start to finish. The company should have a bigger
add to cart button on all mobile product pages, making it easier for the
visitor to add to cart without zooming in. It should also present images
in a different format, making it faster for mobile visitors to load product
photos and easier to zoom in.
v. Search Engine Optimization (SEO): Search Engine Optimization
(SEO) aims to draw the greatest amount of traffic possible to a website
by bringing it to the top of a search engine’s (Google, Yahoo, and Bing)
results. SEO is used by businesses to maximize the visibility of websites
and content to boost traffic and, therefore, business. Search engines are
the most common vehicle in bringing organic (non-paid) traffic to a
website, which makes SEO highly competitive: a successful strategy
can bring a business a high level of exposure.
w. Optimize website layout: After launching or redesigning e-commerce
site, it’s important to test website’s layout, language, and placement
different elements. When customers visit to the website, they should
feel easy and simple to check out products and information. They should
feel naturally inclined to purchase products.
x. Influencer marketing: Influencers are popular non-celebrity individuals

23
 with a large following on social media platforms ( like Instagram,
YouTube and Facebook) or blogs and who can affect the purchasing
decisions of their audience. E-commerce companies can make use of
such influencers and gain their audience trust.
y. Affiliate marketing: Affiliate marketers are the businesses promotes
content on their website to their audience and receive some percentage
of sales when leads the product. Affiliate marketing looks like display
ads. With display advertising, E-commerce company creates ad that
appear on other websites. When site visitors click on them, they’re taken
to a landing page where they can learn more about your product and
convert to become a paying customer.
z. Personalization strategy: With personalization strategies, the company
can target customers with tailored and dynamic offers, sales, discounts,
personalized emails, even recommended products and also helps them
find what they may need. The company can obtain these by observing
and analyzing customer-specific site behavior, cart items and purchase
history or demographic-specific history and data. Virtual Reality is often
the best option for ecommerce businesses. Examples could include:
 Furniture stores lets customer upload pictures of their actual room along
with it’s dimensions and then scale the furniture so the customer can
see how it would look.
 Apps allowing users to hold their phone over their wrist to see how a
bracelet would look.
 Makeup retailers who let users upload pictures of themselves to see
how the different products would look on them.

1.9 MAIN ACTIVITIES OF E-COMMERCE

Any activity through internet that requires a paid transaction is e-
commerce activity. The following are the main activities of e-commerce:
1) Registration: In order to make a purchase, the user must register on the
website by providing all necessary information for billing and shipping

24
 purposes. It also enables a firm to send updates and various offers to
their customers. The information required for the registration process
includes name, address, contact details, an alternative to the contact
number, Email-ID and other relevant data of the customer. The system
followed for the registration and shopping may vary from firm to firm.
Further, all the data of customers is stored on a database of the e-
commerce firm.
2) Information Search: After registration, users can surf for information
about the product which they desire to purchase. They can compare
different products before finalising what they wish to purchase. On some
e-commerce websites, information search can be made first, and
registration can be done at the time of purchasing a product.
3) Electronic Data Interchange (EDI): Electronic Data Interchange (EDI)
is the computer-to-computer exchange of business documents in a
standard electronic format between business partners. Many business
documents can be exchanged using EDI, but the two most common are
purchase orders and invoices.
4) Negotiations: E-Commerce facilitates negotiations between the buyer
and the seller. A buyer can negotiate with two or more sellers through
video-conferencing especially in case of B2B e-commerce. The buyer
can negotiate for price, delivery schedule, quality, quantity and other
terms and conditions.
5) Placing order: The buyer can place the order. On receipt of the order,
the seller processes the order. The seller must undertake proper order
management for timely delivery of product. In case of B2C e-commerce,
the customer adds the product in shopping cart. Shopping cart is a tool
which, like online basket, allows users to select products they want to
purchase and then add them in their cart. After all the products are
selected, the user can have a look at the number and types of products
purchased by her/ him and also add or delete products as per their
requirements.

25
6) Payment: After selecting products for purchase, the next step is to select
payment options. The variety of payment options offered are cash on
delivery, debit/credit card, net banking, payment by apps, etc. Customers
can select any mode of payment as per their convenience and suitability.
7) Logistics: After the payment processing is done, logistics function comes
into the picture for delivery of the product. This involves order
processing, packaging, transportation, tracking of product, etc. It ensures
timely delivery of product to the customer at his/her doorstep. E-
commerce firms need to make proper arrangement of logistic activities
so that the right product is sent to customers on time. Delay in delivery
of products can result in customer dissatisfaction.
8) After-sales Service: After timely delivery of products to customers,
the firm undertakes after-sales service wherein it takes customer feedback
about delivery, quality, services, overall experience, etc. The firms also
make service calls in case of durable products. They solve the queries
of customers and provide information about latest offers and other
products via e-mail, calls and SMS. This allows the e commerce firms
to maintain long-term relationship with customers and increase customer
loyalty.

1.10 GOALS OF E-COMMERCE

It is widely acknowledged today that new technologies, in particular,
access to the Internet, tend to modify communication between the different
players in the professional world, notably:
 Relationships of businesses and organizations with their clients
 Enterprise-employee relationships, that is, internal functioning
 Enterprise-partner relationships
 Enterprise-suppliers relationship
The term ‘e-commerce’ therefore refers to the integration, within the
company, of tools based on information and communication technologies

26
(generally referred to as business software) to improve their functioning in
order to create value for not just the business, organization or enterprise but
also its clients and partners.
E-commerce no longer only applies to virtual companies (called click
and mortar) all of whose activities are based on the Net, but also to traditional
companies (called brick and mortar). In fact, the term e-commerce which is
frequently mixed up with the term e-business, only covers one aspect of e-
commerce, i.e. the use of an electronic support for the commercial relationship
between a company and individuals. All e-commerce projects are aimed at
creating value. This value can be created in different ways:
a. By increasing margins, i.e. by reducing production costs or
increasing profits. E-commerce makes it possible to achieve this in a
number of different ways:
 Focussing on new markets
 Positioning on new markets
 Increasing the quality of products or services
 Prospecting new clients
 Increasing customer loyalty
 Increasing the efficiency of internal functioning
b. By increasing staff motivation. The transition from a traditional activity
to an e-commerce activity ideally makes it possible to motivate associates
to the extent that:
 By making the overall strategy more visible to the employees and
favouring a common culture
 By encouraging the players to shoulder more responsibilities
 By favouring team work and improving competencies
c. B y improvin g cu stome r sa tisfacti on . E-co mmerce favo u rs
customersatisfaction in the following ways:

27
  Reduced prices with increase in productivity
 Improved handling of clients
 Satisfaction of clients’ needs in terms of products and services
 Transparent mode of functioning
d. As a result of privileged relationships with the partners. The creation
of communication channels with the suppliers permits:
 More familiarity
 Faster and better responsiveness
 Improved anticipation capacities
 Sharing of resources beneficial for both parties
An e-commerce project can therefore only work as soon as it adds valueto the
company, but also to its staff, its clients and partners.E-commerce primarily
ensures that costs are reduced, product cycle timeis reduced, customer response
is speeded up and service quality is improved. Therefore, it will not be wrong
to say that the main goals of e-commerce are:
 To ident ify and fulfil the rapidly changing needs of co nsumers,
merchants, organizations, etc.
 To constantly improve the quality of goods and services with the feedback
from all stakeholders
 To increase the turnover by widening the market and the speed ofservices
 To bring down costs through speed and accuracy of information
All these goals can be achieved only if the website is user-friendly with
asimple design. Visitors should be able to navigate through it properly. In
addition, the business needs to be promoted well establishing a good connect
with the customers.It is important to understand what the company’s e-commerce
expectations are before plunging into implementing e-commerce solutions. Once
the expectations are known, the company can begin to plan its e-commerce
strategy. A company may benefit by conducting an e-commerce strategy project

28
to plan its e-commercefuture. E-commerce is a way to facilitate improvements
in a company’s internaland external processes, in addition to allowing a company
to expand market penetration and geographical markets. Therefore, the processes
that will be integrated into the e-commerce infrastructure must be both known
and ready for integration. To implement e-commerce without understanding
the company’s business goals or processes will result in failure of business.

1.11 TECHNICAL COMPONENTS OF E-COMMERCE

The following are the various components of e-commerce
a. Server : It is the most powerful computer of the network. In a local area
network, usually a powerful microcomputer or a super microcomputer
with the power of a minicomputer is used as a server. There are two
types of servers normally employed in a local area network. They are
dedicated servers and non-dedicated servers.In a dedicated server, the
server computer performs functions and services of the whole network.
It helps to efficiently run user applications and increases the overall
system cost. Users cannot run their applications directly in a dedicated
server. It provides e-mail service, sharing of multiple hard disks, and
sharing of other resources and faster response time. For larger networks
with heavy load, dedicated servers are usually employed.In a non-
dedicated server, apart from the role of a network controller, a server
also acts as an individual workstation. The server is equipped with large
memory. Network operations demand only a portion of server memory.
The remaining port ion of the memory may be used for the user
applications. Under light load conditions, it is advisable to use a non-
dedicated server. Some servers can operate on both modes, according to
the requirement of the user.
File server: The primary goal of a computer network is to share data
among several users. They also make their attached disk drives, printers,
modems and unique communication links available to the various client
stations. Providing one computer with one or more hard disks facilitates
this. All client stations share these hard disks. Clients can make their

29
 requests to access any of the shared facility to the server. The file server
is a powerful computer, which runs special software. It provides the
files and other shared resources to different users in the network. It
provides facilities like user authentication, security to various user
programs, anddata. It can be accessed through Network Operating
System (NOS). Typical configurations of a server are Pentium 4 machine
with 128 MB or higher capacity RAM, 40 GB or higher capacity hard
disk, to serve upto 10 nodes or workstations.
All activities of a file server can be monitored and controlled from the
monitor called console. The network administrators are given special
privileges. They are given supervisory passwords. They perform the
network administration operation for the entire network. Any user of
the network needs to get a new network service, they have to contact
the network administrator and make a request for the specific service
they need. The file server has a large memory, which is used for caching
directories, and files and hashing directories. Novell Netware and
Windows NT are the two network operating systems that run on a server
machine.
b. Workstation: Another important component of a network is the
workstation or a client. A workstation is an individual computer with
capabilities to communicate with other machines. It must be equipped
with the hardware and software necessary to connect to a LAN. Usually
a Network Interface Card (NIC) or an Ethernet card or an Arcnet card is
used for this purpose. Part of the network operating system is also
available in the workstation. A workstation can communicate with other
workstations or to the server. The hardware requirement for a workstation
depends on the application and the size of the network. In a typical
LAN of a university computer center, a Pentium III system with 64 MB
RAM and 4 to 8 GB hard disk capacity, with necessary network interface
card can be used for a typical workstation. In general, the memory and
hard disk capacity of a workstation is much less than that of the server.

30
c. Network Interface Unit: Every computer on the network needs one
add on card called Network Interface Card (NIC) or Ethernet Adapter
or Network Interface Adapter. The role of NIC is to move the serial
signals on the network cables, or media into parallel data stream inside
the PC. In some cases, two or more such NICs are used in the server to
split the load. These interface units also have the important jobs of
controlling access to the media. This includes activities known as carrier
sense (listen before transmit), sequential station number, and token
passing, which are discussed in the later chapters. The above activities
are known as Media Access Control.
d. Transmission Media: The data signal travels through this medium.
There are two general categories. They are bounded (guided) and
unbounded (unguided) medium. Twisted pair, coaxial cable and fibre
optic cables are all bounded media. The data signals travel within the
boundaries of the transmission media. On the other hand, microwave
and satellite transmissions, both travel through the air, which has no
boundaries, hence called un-bounded transmission.
e. Hub: The network hub is a centralized distribution point for all data
transmission in a network. Hub may also be referred to as a concentrator.
Data packet from a NIC arrives at the hub. The hub receives and
rebroadcasts them to other computers connected to it. In general, the
hub network is a passive device. It does not know the destination of a
received data packet. Hence, it is required to send copies to all the hub
connections. Hubs can be classified into the following three categories:
 Stackable and non-stackable hubs
 Active and passive hubs
 Intelligent and non-intelligent hubs
Stackable hubs are hubs that can be stacked or interconnected to make a
single hub appearance. They are useful for venders to make hubs of size
suitable to customer requirement. Non-stackable hubs cannot be

31
 interconnected. They are always provided only a fixed number of
connections.The hubs that connect to the network backbone are known
as active hubs. The hubs, which connect only to active hubs, are known
as passive hubs. Intelligent hubs contain a special firmware that can be
accessed by remote workstations. The firmware is known as Simple
Network Management Protocol (SNMP). Network performance and
network status data are read from SNMP.
f. Repeater: A repeater is a communication device that connects between
two segments of the network cable. It retimes, regenerates, strengthens
the digital data and sends them on their way again. Repeaters are often
used to extend the cable length to enlarge LANs. Wide area network
contain many repeaters. Ethernet also frequently uses repeaters to extend
the length of the bus.
g. Router: A router transfers data between networks. It is also possible for
a ro ut er to t ransfer dat a bet ween different compatible net wo rk
technologies, such as Ethernet and IBM token ring. Since Internet
consists of thousands of different network technologies, routers are an
integral part of the Internet. A router has the address on the network. A
bridge does not have an address. Hence, a router can act as an
intermediate destination. In other words, a computer can send a data
packet to the router of another network. The router will transfer the
packet to the other network. On the other hand, the bridge must examine
all the packets to determine which packets to transmit between networks.
As such, computers never send packets directly to a bridge. A router
examines a packet only if it contains the router’s address.A router also
can act as a bridge. Such a router is known as a brouter. The brouter
receives the packet and examines whether it supports the protocol used
by the packet. If not, it simply drops the packet. The packet is bridged
using the physical address information.
h. Gateway: Two dissimilar networks can be connected by means of a
gateway. For example, a main frame can be connected and accessible to

32
 a PC network by means of a gateway. Unlike routers, a gateway converts
the format of the data sent between two networks. A router adds only
addressing information to the data packet. Routers never change the
content of the message. But a gateway has to identify the protocols used
in the networks and recognize the data format and convert the message
format into suitable format to be accepted by the other network. Wide
area networks often use gateways because there is a large number of
dissimilar netwo rks present in a WAN. Gat eways pro vide go od
connectivity to different kinds of networks on the Internet.
i. Modem: Another significant network component is modem. The term
Modem is the shortened version of the name modulator–demodulator.
Modem provides twoway communication facility between a computer
network and telephone network. As Wide Area Network uses the existing
telephone network to connect to a distant network, it always uses a
modem to dial-up the telephone network. Modem converts the digital
data from the computer into useful analog signals that can be transmitted
through a telephone network. Similarly, signals from the telephone
channels are converted back into digital data suitable for a computer.
j. Bridges: Like repeaters, bridges are used to connect similar LANs
together, for example, Ethernet-to-Ethernet and operate at the bottom
two layers of the OSI model, i.e., physical layer and data link layer. As
it operates on the second layer of the OSI model, it relays only necessary
data to other signals. MAC addresses (physical addresses) are used to
determine whether data is necessary or not. It passes information from
one LAN segment to another based on the destination address of the
packet. In other words, when a bridge receives data through one of its
ports, it checks the data for a MAC address. If this address matches that
of the node connected to the other port, the bridge sends this data through
this port. This action is called forwarding. If the address does not match
with any node connected to the other port, the bridge discards it. This
action is called filtering. Unlike repeaters, bridges have buffers to store
and forward packets if the destination link is congested with traffic.

33
 The main advantage of a bridge over a repeater is that it has filtering
action. If any noise on Ethernet occurs because of collision or disturbance
in electrical signals, the bridge will consider it as an incorrectly formed
frame and will not forward it to the segment connected to the other port
of the bridge. Note that a bridge can relay broadcast packets and packets
with unknown destinations.
So far, you have seen that at the maximum, four repeaters can be used
to connect multiple Ethernet segments. However, if a bridge is provided
between repeaters, this limit of four is increased. The maximum number
of bridges is not specifically limited.From an architecture point of view,
bridges are protocol-independent devices and are very simple. They do
not perform complex processes on the data packets travelling through
them, such as the evaluation of the network as a whole in order to make
end-to-end routing decisions. They simply read the destination address
of the incoming data packet and forward it along its way to the next
link. Therefore, bridges are inexpensive and fast. There are bridges called
cascading bridges that are used to support multiple LANs connected by
multiple media.Dissimilar LANs, such as Ethernet-to-token ring can
also be connected with the help of a bridge known as encapsulating
bridge. The function of an encapsulating bridge is also very simple. It
encapsulates the originating LAN data along with control information
of the end-user LAN. Bridges with a routing function between LANs
are also available.
k. Media Access Control (MAC) Bridge: This is used to connect
dissimilar LANs, such as Ethernet-to-token ring using encapsulation or
translation. This bridge translates the original packet format from the
requesting LAN segment by encapsulating or enveloping with control
data specific to the protocol of the destination LAN segment.
l. Address Table: As explained, each bridge should have an address table
that indicates the location of different computers or nodes on the
segments of LAN. More specifically, it indicates the connection between

34
 nodes and ports. When a bridge is booted for the first time, this table is
found to be blank. Now, the question arises as to how this table is filled
with appropriate addresses of different nodes attached to ports. Most of
the bridges are called adaptive or self-learning bridges because they
learn the location of the node and associated port themselves and make
a list of nodes attached to each segment.When a bridge receives a data
packet from a computer, it first copies the physical address of that
computer contained in the packet onto its list. Afterward, the bridge
determines whether this packet should be forwarded or not. In other
words, the bridge learns the location of the computer on the network as
soon as the computer on the network sends some packet.If a computer
does not send a packet, the bridge will never be able to determine its
posit io n and unnecessarily fo rward t he packet on t he net wo rk.
Fortunately, this cannot happen because a computer with network
software attached to a network transmits at least one frame when the
system first boots. Furthermore, computer communication being
bidirectional, there is always an acknowledgement for each received
packet.
m. Bridge Protocols: Bridge protocols include source routing transparent,
source routing protocol and spanning tree.

1.12 FUNCTIONS OF E-COMMERCE

A firm can use electronic commerce to reach narrow market segments
that are geographically scattered. The web is particularly useful in creating
virtual communities that become ideal target markets for specific types of
products or services. The following are the main functions of e-commerce:
1) E-Marketing: E-Marketing (Electronic Marketing) is also known
asI nt er net Mark et ing, Web Market ing , Digit al Market ing, o r
OnlineMarketing. E-marketing is the process of marketing a product
orservice using the Internet. E-marketing not only includes marketing
onthe Internet, but also includes marketing done via e-mail and
wirelessmedia. It uses a range of technologies to help connect businesses

35
 tot heir customers. Internet marketing is asso ciated with several
businessmodels i.e., B2C, B2B, C2C. Internet marketing is inexpensive
whenexamine the ratio of cost to the reach of the target.
2) E-Advertising: It is also known as online advertising it is a form
ofpromotion that uses internet and World Wide Web to deliver marketing
messages to attracts customers. Example: Banner ads,Social network
advertising, online classified advertising etc. Thegrowth of these
particular media attracts the attention of advertisers asa more productive
source to bring in consumers.
3) E-Banking: It refers to any user with a personal computer and browser
can get connected to his bank website to perform any of thebanking
functions. In internet banking system the bank has acentralized data
base i.e., web-enabled. Best example for E-Banking is ATM. An ATM
enables handling cash deposits, transfer, Balance enquiries, cash
withdrawals, and pay bills. The main services through E-Banking
include:
 Bill Payment Service
 Fund Transfer
 Investing through Internet Banking
 Shopping
4) E-Learning: E-Learning comprises all forms of electronically supported
learning and teaching. E-Learning applications and processes include
web-based learning, computer-based learning.Content is delivered via.
The internet, intranet/extranet, audio, or videotape, satellite TV. E-
Learning is naturally suited to distance andflexible learning, but can
also be used conjunction with face-to-faceteaching. E-Learning can also
refer to the educational website such asthose offering learning scenarios
worst and interactive exercises forchildren. A learning management
system (LMS) is software used fordelivering, tracking, and managing
training /education.

36
5) Mobile Commerce: Mobile Commerce also known as M-Commerceis
t he abilit y t o co nduct , co mmerce as a mo bile device, such as
mobilepho ne. Banks and o ther financial inst it ut io ns use mobile
commerce toallow their customers to access account information and
maketransactions, such as purchasing, withdrawals etc., Using a mobile
browser or apps customers can shop online without having to be at their
personal computer.
6) Online Shopping: Online shopping is t he activity o r act io n of
buyingproducts or services over the Internet. It means going online,
landingon a seller’s website, selecting something, and arranging for
itsdelivery. The buyer either pays for the good or service online with
acredit or debit card or upon delivery.
7) Ente rtainmen t: The co nvent io nal media t hat have been u sed
forentert ainment are Bo oks/magazines, Radio , Television/films,
Videogames etc.Online bo oks /newspapers, o nline radio, online
television, online films, and online games are common place in internet
where we can entertain. Online social networking websites are one of
the biggest sources of E-entertainment for today’s tech-savvy generation.

1.13 SUMMARY
E-Commerce is a general concept covering any form of business
t ransact io n o r info rmat io n exchange executed using info rmat ion and
communication technologies ((ICT’s). It includes electronic trading of goods,
services and electronic material.It takes place between companies, between
companies and their customers or between companies and public administrations
Internet throughout the commercial world and general pubic increases, more
and more business activities using internet based technology. The real key to
making electronic commerce over the Internet a normal, everyday business activity
is the convergence of the telecommunications, content/media and software
industries. E-commerce is expected to improve the productivity and competitiveness
of participating businesses by unprecedented access to an online global market
place with million of customers and thousands of products and services.

37
 In this unit, we have studied about the concept and features of e-
commerce, advantages, benefits, limitations, main activities and goals of e-
commerce along with the technical components of e-commerce.

1.14 GLOSSARY
1. E-Commerce: Electronic Commerce is where business transactions take
place viatelecommunications networks, especially the Internet
2. E-Business: E-business is the transformation of key business processes
through the useof Internet technologies.
3. Internet: It is a worldwide system of computer network through which
the users at any place can interact and make transaction.
4. Educational Research Network (ERNET): Internet in India was
established asERNET. It was a joint undertaking of the Department of
Electronics (DOE) of theGovernment of India, and the United Nations
Development Program (UNDP)

1.15 SELF ASSESSMENT QUESTIONS

1. Define e-commerce. Explain its functions.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What do you mean by email marketing and affiliate marketing in e-
commerce?
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
3. Differentiate between traditional commerce and e commerce.

_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

1.16 LESSON END EXERCISE

1 Write a detailed note on ‘Basics in e-commerce’.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Throw a light on the main activities of e-commerce activity on the web?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What are the technical components of e-commerce?
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________

1.17 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

*********

40
Lesson No. 2 UNIT I
INTRODUCTION TO ELECTRONIC COMMERCE
ELECTRONIC MARKETS AND NETWORK

STRUCTURE
2.1 Introduction
2.2 Objectives
2.3 Scope of E-commerce
2.4 Meaning of Electronic markets
2.5 Business Models in electronic markets-Meaning and features
2.6 Key elements of a business model
2.7 E-commerce design models
2.8 Implementing business models in electronic markets
2.9 E-commerce revenue models
2.10 Meaning and types of electronic network
2.11 Essential elements and mechanism for an electronic market and network
2.12 Summary
2.13 Keywords
2.14 Self-Assessment Questions
2.15 Lesson End Exercise
2.16 Suggested Readings

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2.1 INTRODUCTION
E-commerce uses the power of computers, the Internet and software to
send and receive details on products, purchase orders and invoices or the fact,
any other type of data that needs to be communicated to customers, suppliers
or the public. It has the potential to reduce the cost of businesses and generate
more revenue. It also improves service quality by catering vast number of
services in each platform. Banks, Insurance, Retailers, Marketing, Government
are some of the main recipients of e-commerce. Though e-commerce may not
have a physical store and in most cases, the buyer does not even know who the
seller is but web and telecommunication technologies play a very important
role in e-commerce. As discussed in previous lesson, in traditional commerce
you can present product information in a physical store or by the use of
magazines and flyers. On the other side, e-commerce makes use of online
catalogues and websites. Traditional Commerce may involve checking for
product availability by phone, fax, or letter but e-commerce does it by e-mail
and website. But in both cases, the main objective of selling products and service
remains the same.

2.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the scope of e-commerce
 understand the concept of E-Business Model
 classify different types of E-Business Models
 explain the features of various E-Business Models
 list the essential elements and mechanism for an electric market and
network

2.3 SCOPE OF E-COMMERCE

Today, online shopping is a reality in India. The market place is flooded
with several e-commerce options for shoppers to choose from. In the recent

42
past, the growth of e-commerce industry in India has been phenomenal as more
shoppers have started discovering the benefits of using this platform. There is
enough scope for online businesses in the future if they understand the Indian
shopper’s psyche and cater to their needs. Listed below are the reasons that
guarantee the future prospect of e-commerce in India.
 Enhancing domain registrations
 Rising internet users
 Easy access to internet
 Awareness about internet even in rural areas
 Rising number of cyber cafes
 Growing need for E-commerce

a) Cash on delivery (COD)

Indian e-commerce industry has evolved over a period of time with innovations
that have changed the rules of the game globally. COD is one such
example. In a country where credit card penetration is much lower than
other developed markets and where e-commerce companies are still
working hard to build trust among shoppers, introducing cash on delivery
43
 has been one of the key factors for the success of the segment. At present,
COD is the preferred payment mode for close to 55-60% of all online
transactions in the fashion and lifestyle segment in India. Executing
COD efficiently and painlessly for the customer is critical to the success
of any e-commerce player in the country.
b) Delivering experiences : E-commerce needs to focus on customer
experience to build t rust and confidence. Cust omer experience
encompasses every interaction of a customer from placing an order to
interacting with customer service team, to the actual delivery experience.
Providing a great delivery experience is one of the core aspects to
delighting customers. This not only mean faster deliveries but also
consistency and reliability. The more faith the customer has in your
delivery service, the more likely he is to buy again. Besides, it builds a
good brand image and word-of-mouth publicity.
c) Growing the base : Despite the large base of internet users, the internet
penetration rate in the country stood at around 50 percent in 2020. This
meant that around half of the 1.37 billion Indians had access to internet
that year. In 2020, India had over 749 million internet users across the
country. This figure was projected to grow to over 1.5 billion users by
2040, indicating a big market potential in internet services for the south
Asian country.
d) Growing opportunities : The e-commerce industry is growing at a rapid
pace and changing the dynamics of the retail industry. In the coming
years, e-commerce is expected to contribute close to 8-10% of the total
retail segment in India. This growth is bound to continue provided e-
commerce companies focus on innovating, building strong technology
infrastructure and delivering the best customer experience. With a
turnover of $50 billion in 2020, India became the eighth-largest market
for e-commerce, trailing France and a position ahead of Canada.
According to NASSCOM, despite COVID-19 challenges/disruptions,
India’s e-commerce market continues to grow at 5%, with expected sales

44
 of US$ 56.6 billion in 2021. Indian e-commerce is projected to increase
from 4% of the total food and grocery, apparel, and consumer electronics
retail trade in 2020 to 8% by 2025. India’s e-commerce orders volume
increased by 36% in the last quarter of 2020, with the personal care,
beauty and wellness (PCB&W) segment being the largest beneficiary.
e) Online Travel Segment : The online travel segment has seen a CAGR
of 55.5% from 2007-2012. The is due to rise of disposable income,
surge in demand for domestic travel and the boom of the tourism industry.
Domestic travel contributed to as much as 50% of the total market,
followed by railways tickets, international air tickets, hotel bookings
and bus tickets. The global online travel market size was valued at $354.2
billion in 2020, and is estimated to reach $1,835.6 billion by 2031,
registering a CAGR of 14.8% from 2022 to 2031. Online travel providers
aim to ease travel planning and bookings for travellers. The online travel
industry is being pushed by quick and easy flight and hotel bookings,
an increase in customer trust in online payment, and the option to
compare numerous available travel alternatives. Market players are
extensively offering travel services through mobile websites and apps,
as it is one of the most preferred mediums of travel bookings, particularly
among the young professionals.
f) E-Tailing : E-tailing encompasses buying consumer items like apparels,
electronic devices, home and kitchen appliances, jewellery, online.
Competition is intense due to low entry barrier of this segment. However,
Amazon.com, flipkart, snapdeal.com, jabong.com, and myntra.com are
some of the major players. This segment is expected to grow further as
people become more pressed for time. Also the choice that e-tailing
sites offer to customers will drive demand for this segment. However,
there will be intense price based co mpet ition in this sector and
consolidations are in the order.
g) Online Financial Services
The financial services segment includes applying for insurance, paying online
bills, and premiums and online transactions for financial services. The
45
 costs of these insurance policies are lesser with premiums being 40%-
60% cheaper. This is a win-win situation for both the insurance provider
and the customers. Also the convenience provided by online portals has
led to more customers choosing the online route for bill payment.
h) Classifieds : It is in a very promising stage and has lot of scope for
growth. Online advertising is lot cheaper than conventional methods
and unlike the latter, it is not constrained to a geographic location. The
growth is mainly fuelled by services like online job (60% of the segment),
online matrimony, B2C classifieds and B2B classifieds. Naukri.com,
timesjob.com, monster.com are the major players in the job market while
jeevansathi.com, shaadi.com are the major matrimonial sites.
i) Other online Services : These include sites offering online services
like buying entertainment tickets, food, and grocery.

2.4 MEANING OF ELECTRONIC MARKETS

Electronic markets are rapidly emerging as a tool for conducting business
and commercial transactions. A market is a network of interactions and
relationships where info rmation, products, services, and payments are
exchanged. When the marketplace is electronic, the business centre is not a
physical one but a network-based location where business interactions occur.
In electronic markets, the principal participants-transaction handlers, buyers,
brokers and sellers-not only are at different locations but seldom even know
one another. They meet online or through the web and all necessary transactions
including transfer of money are handled electronically through the net. For
generations, home shopping from catalogues has flourished and television-
shopping channels have been attracting millions of shoppers for over a decade.
However, television shopping is limited to what is shown on the screen and
paper cat alo gues are so met imes inaccurat e. Who would not enjoy t he
convenience of shopping just by sitting down in front of a computer? The web
is open 24 hours a day, 7 days a week, offering a wide variety of products
including the most unique items, usually at a lower price. And even if you have
to pay the same price, you do not have to spend time for the same or wait for

46
salespeople or push your way through hordes of shoppers. And frequently, you
can get your package the next day at no extra cost. Finally, you can shop from
anywhere at any time. Electronic retailing is direct sale (business to customers)
through electronic storefronts, usually designed around a catalogue format.
Some companies, such as, Wal-Mart sell to corporations as well, usually at
discounts for larger quantities. Electronic retailing is mushrooming on the web.
There are two types of vendors, namely, solo storefronts and electronic malls.
Solo storefronts maintain their own internet name and web site and
may or may not be affiliated with electronic malls.
Whereas, electronic mall, also known as cyber mall, is a collection of
individual shops under one internet address. The basic idea of an electronic
mall is the same as that of a regular shopping mall, to provide a place that
offers many products and services at one location. Some cyber malls include
diverse stores, while others deal with one type of goods, such as, clothing or
sporting goods etc. ICT also enables one stop shopping over multiple malls
known as meta malls. Meta malls allow customers to shop in different
department stores and many individual stores using one search engine to find
items. In addition, it enables the customers to pay only once in a highly secure
system. Meta mall can provide other services, such as, comparative pricing
and finding substitute products.

2.5 BUSINESS MODELS IN ELECTRONIC MARKETS –

MEANING AND FEATURES
Business model is the most discussed and least understood aspect of the
web. There is so much talk about how the web changes traditional business
models. But there is little clear-cut evidence of exactly what this means.
Basically, a business model is the method of doing business by which a company
can sustain itself — that is, generate revenue. The business model spells-out
how a company makes money by specifying where it is positioned in the value
chain. Some models are quite simple. A company produces a good or service
and sells it to customers. If all goes well, the revenues from sales exceed the
cost of operation and the company realizes a profit. Internet commerce will

47
give rise to new kinds of business models. But the web is also likely to reinvent
tried-and-true models. Business models have been defined and categorized in
many different ways. When organizations go online, they have to decide which
e-business models best suit their goals.
A business model is defined as the organization of product, service and
information flows, and the source of revenues and benefits for suppliers and
customers. The concept of e-business model is the same but used in the online
presence. The e-Business model describes how a company functions; how it
provides a product or service, how it generates revenue, and how it will create
and adapt to new markets and technologies. It has four traditional components.
These are the e-business concept, value proposition, sources of revenue, and
the required activities, resources, and capabilities. In a successful business, all
of its business model components work together in a cooperative and supportive
fashion.
2.5.1 Features of Business model
i. E-Business Concept The e-business concept describes the rationale of
the business, its goals and vision, and products or offerings from which
it will earn revenue. A successful concept is based on a market analysis
that identifies customers likely to purchase the product and how much
they are willing to pay for it.
ii. Value Proposition The value proposition describes the value that the
company will provide to its customers and, sometimes, to others as well.
With a value proposition the company attempts to offer better value
than competitors so that the buyer will benefit most with this product. A
value proposition may include one or more of the following points:
 Reduced price
 Improved service or convenience such as the “1 click” checkout
 Speed of delivery and assistance
 Products that lead to increased efficiency and productivity

48
  Access to a large and available inventory that presents options for the
buyer
 Providing value in an e-business uses the same approach as providing
value in any
 business, although it may require different capabilities. But common to
both are the
 customers who seek out value in a business transaction. The value
proposition helps
 focus the business on the well-being of the customer, where it remains
in successful
 companies.
 Value Delivery through Integration of Activities
iii. Sources of Revenue: Depending on the business model, several revenue
sources may be available to an ebusiness. Many online businesses will
have a three or four of these sources. A mix of revenue sources is often
referred to as a revenue model but may be mistakenly called a business
model.
Some of these sources of revenue are:
 Advertising
 Affiliation
 Agent commissions
 Licensing
 Sales commissions
 Sales profits
 Sponsorship
 Subscription
 Syndication

49
  Use Fees
For large public-private or government projects revenue sources might
also include:
 Bonds, usually for large capital expenditures
 Taxes, primarily income, property and sales taxes
 Use fees and tolls
With small fast-growing companies such as e-Business startups, investors
often track
expected revenues and revenue growth and may make changes to increase
revenue. However, after the Dot-Com boom ended, more traditional
measures such as cash flow and earnings have came back into favour as
means of evaluation.
iv. Activities, Resources and Capabilities : The activities, resources and
capabilities of a business are sometimes known as its requirements. In
order to perform the activities required to carry out the mission of the
business, certain resources are needed; for example, employees with
certain skills, or capabilities, are needed to perform activities correctly
and efficiently. Also, inventions, processes and other intellectual property
may add to the individual knowledge of an employee to develop a
competence in the performance of the required activities.
a. Activities Activities are specific business processes or groups
of processes such as design, production and sales that implement
the business concept. The operational business model identifies
the costs and outputs of each activity. Activities drive the need
for resources.
b. Resources In order to perform activities an organization requires
human, tangible, intangible and supporting resources. Human
resources, in particular the skills and knowledge of employees
are important, as are the programs (e.g. incentives, training) and

50
 institutions that support them. Tangible, or physical and financial,
resources include facilities, equipment, and cash reserves.
Intangible resources include intellectual property, business
processes that can be patented, brands, customer profiles and
personalization data in databases, and customized software.
Sup po rt ing reso urces includ e o rganizat io nal st r uct u re,
information systems or communications processes that may have
little value as stand-alone resources.
c. Capacity The total resources of the organization represent its
capacity. When resources are underutilized, the company has
resources that aren’t used, or idle capacity. Idle capacity in
manufacturing tends to be measured in terms of additional output
that could be produced. In service organizations the measure for
idle capacity is usually a number of employees. Resource capacity
can also be measured in job-hours, machine-hours, sales per
employee, or square feet. Often these are compared with industry
standards to assess the efficiency of the organization.
Capacity also represents a constraint to growth. Demand for product or
services may exceed capacity and managers may take a variety of steps
to temporarily resolve the problem: overtime for existing employees,
additional shifts to increase the utilization of equipment, contracting to
outside entities, even competitors. For example, a software company
mayout source code writing, which is standard fare - almost a routine
activity, in order to increase itsdesign capacity.

2.6 KEY ELEMENTS OF A BUSINESS MODEL

To ensure that all these basic questions are adequately addressed,
following are some simple steps to create a strong business model:
1. Identify your specific audience: Targeting a wide audience won’t allow
a business to identify the right customers, who truly need and want the
product or service. Instead, when creating a business model, narrow

51
 down the audience (expected buyers) number to two or three and do
det ailed st udy o f t he buyer perso nas. Out line each per so na’s
demographics, common challenges and the solutions of the company
that it will offer.
2. Establish business processes: Before the business can go live, make a
clear understanding of the activities required to make the business model
work. It is important to determine the key business activities to establish
a proper business process. The first step is to identify the core aspects
of the business’s offering.
3. Record key business resources: What does a company need to carry
out during daily processes, find new customers and reach business goals?
Document essential business resources to ensure the business model is
adequately prepared to sustain the needs of the business. Common
example that a business may need includes a website, capital for the
business to start running, warehouses, intellectual property and the
customer lists.
4. Develop a strong, preferably a unique value proposition: For standing
among other competitors a company needs to provide some additional
value proposition to the customers in the form of an innovative service,
or a revolutionary product. Value proposition is about giving the value
to the business and how it stands out from other businesses in the market.
Once the business has got a few value propositions, then it is important
to link each of them to a service or product delivery system to determine
how the business would remain valuable to the customers over time.
5. Determine key business partners: No business can function properly
(let alone reach established goals) without key partners that donate to
the business’s ability to serve customers. While building a business model
it is significant to choose the key partners like for example suppliers,
strategic alliances, or advertising partners.
Keeping these five elements in mind, will lead to the creation of a solid
business model capable of fuelling the success of a new business entity.

52
 Once we are clear about what a business model is and how it is created,
we shall move on to apply this basic knowledge in understanding this
from the perspective of an e-commerce business.
Typically for an e-commerce business, a clearly defined business plan
usually must include following four subtypes of related models:
1. Customer Based Business Model - Model that would help decide who
is the ultimate target beneficiary of the proposed e-commerce initiative.
2. Design Model –Model that would help to decide the priority for
designing the proposed e-commerce website.
3. Implementation Model–Model that would decide how we implement
the proposed e-commerce initiat ive including how we reach our
customers, how we sale them, how we transact a sale, how the products/
services are distributed, how we deliver the products/ services.
4. Revenue Model–Model that would help us to generate revenue for the
e- commerce initiative as well as for the organisation/enterprise
responsible for launching the E-Commerce portal.

2.7 E-COMMERCE DESIGN MODELS

The fo ur mo dels t hat are asso ciat ed wit h t he info rmat io nal/
communicational design are:
a. Brand awareness and image building model
b. Promotion model
c. Info-mediary model
d. Customisation model
a. Brand awareness and image building model: Web sites that are using
this model provide detailed and rational information about the firm and
its offerings. The model reaches motivated and desperate customers with
an information/image-rich communications message. In this type of
model, the entry barriers are low, so, smaller firms can set up this kind

53
 of site as well. The website of Ford (www.ford.com) and Reebok
(www.reebok.com) are examples of brand awareness and image-building
models. As the website of ‘Ford’, not only lists all the models of its
seven famous automotive brands, but also posts about its environmental
policy, cleaner manufacturing, community involvement, and corporate
citizenship report.
Similarly, the website of Reebok lets its visitors read about sports and
fitness, hear from Reebok-sponsored athletes, and learn more about
Reebok’s human-rights activities, among other things.
b. Pro motio n mod el: This websit e mo del is based o n lucrat ive
‘advertisements’, which are attracting a potential customer to a site.
Sometimes, this model tries to provide free digital gifts such as discount
coupons, cash backs, gift cards, photography tools, etc. The website of
‘Kodak’ (www.kodak.com) is an example of the promotion model
because it provides technical help and tutorials for its digital cameras
and offers a library of colourful, high-quality digital images that are
made downloadable.
c. Info-me-diary model: The term ‘Info-me-diary’ is a composite of two
terms – ‘information’ and ‘intermediary’. This website model aggregates
information from multiple electronic commerce retailers (intermediaries)
and provides services of searching and co mparison for Int ernet
customers. This model sometimes offers free Internet access or free
hardware in exchange for detailed information about customer’s surfing
and purchase habits. The collected customer data is valuable and is used
for designing customized products and for target marketing campaigns.
Some firms even work as info-me-diaries by collecting and selling
information to other businesses.
This model also provides consumers with useful information about the
Web sites in the market segment. ‘Just dial’ (www.justdial.com) is an
example of the info-me-diary model, this company provides local search
for different services in India over the phone and online. The user just

54
 needs to register on the website. By tracking the users’ surfing pattern
info-mediary model provides the useful information to the user
d. Customisation model: This model provides customers with content that
is customised to meet their preferences by employing AI/ML algorithms.
By completely customising information needs, an e-commerce website
built on this model becomes highly attractive to its visitors.

2.8 IMPLEMENTING BUSINESS MODELS IN ELECTRONIC

MARKETS
Once the end customer of e-commerce has been identified, the next
important thing is to understand how e-commerce models are implemented.
These e- commerce implementation strategies constitute a part of the business
model and to know that how activities like inventory management and sourcing
of products are undertaken at the back-end of an e-commerce implementation.
There are many possibilities to this too, such as manufacturing and
storing products by the same business entity or may be finding another business
partner to do the manufacturing, stocking and so on. Based on such possibilities,
there are several-commerce implementation strategies such as Retail Model,
Brokerage Model, Mall Model, Drop Shipping Model, Warehousing and Whole
selling Model, Private Labelling, and White Labelling Models and so on.
1. Retail Model: When retailers directly use Internet to sell products/
services using Internet, it is also called ‘e-tailing’ (electronic- retailing)
and such a retailer is also called an ‘e-tailer’. e-Tailing stores could
either be a complete substitute for brick-and-mortar (the physical) retail
stores. However, some companies choose to maintain both- the physical
(brick and mortar) stores as well as its online marketplace too.
2. Brokerage model: Brokers are market-makers. They bring buyers and
sellers together and facilitate transactions. The Brokerage Model in e-
commerce resembles the offline brokerage model where the broker acts
as a third party connecting sellers and buyers to a transaction and charges
fees for their services. The advantage of e-commerce affords brokers

55
 the ability to connect buyers and sellers globally in contrast to the offline
world where a broker may be restricted to a certain region within their
local market.
For example, in the offline world, a mortgage broker who connects people
looking to purchase a house with financial institutions who sell Mortgages, may be
restricted to their local area, hence creating a finite group of potential buyers.
In contrast, as a result of the Internets inherent globalisation an e-
commerce mortgage broker has the potential to reach people located outside
their local area, in other states and other countries, drastically increasing the
number of potential buyers, their ability to connect more buyers with sellers,
and thus make better profits. It is well documented that eBay is one of the most
successful Auction Brokers in e-commerce.
eBay, like most companies on the Web, employ a number of business
models in order to make money. While the dominant model they leverage is the
Brokerage model, eBay also utilise the affiliate, advertising and community
business models to sustain their presence in e-commerce.
Brokers play a frequent role in business-to-business (B2B), business-
to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker
charges a fee or commission for each transaction it enables. The formula for
fees can vary. Brokerage models include:
 Marketplace Exchange — provides a full range of services covering
the transaction process, from market assessment to negotiation and
fulfilment, fo r a particular industry. The exchange can o perat e
independently of the industry, or it can be backed by an industry
consortium. The broker typically charges the seller a transaction fee
based on the value of the sale. There also may be membership fees.
 Business Trading Community — or vertical web community, is a
comprehensive source of information and interaction for a particular
vertical market. A community may contain product information, daily
industry news and articles, job listings and classifieds.

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  Buy/Sell Fulfilment — customer specifies buy or sell orders for a
product or service, including price, delivery, etc. The broker charges
the buyer and/or seller a transaction fee.
 Demand Collection System — the patented “name-your-price” model
pioneered by Priceline. Prospective buyer makes a final (binding) bid
for a specified good or service, and the broker arranges fulfilment.
 Auction Broker — conducts auctions for sellers (individuals or
merchants). Broker charges the seller a listing fee and commission scaled
with the value of the transaction. Auctions vary in terms of the offering
and bidding rules. Reverse auctions are a common variant.
 Transaction Broker — provides a third-party payment mechanism for
buyers and sellers to settle a transaction. [fsbohouse.com]
 Bounty Broker — offers a reward for finding a person, thing, idea, or
other desired, but hard to find item. The broker may list items for a flat
fee and a percent of the reward for items that are found.
 Distributor — is a catalogue operation that connects a large number of
product manufacturers with volume and retail buyers. Broker facilitates
business transactions between franchised distributors and their trading
partners.
 Search Agent — is an agent (i.e., a software agent or “robot”) used to
search-out the price and availability for a good or service specified by
the buyer, or to locate hard to find information?
 Virtual Mall — hosts online merchants. The Mall typically charges
setup, monthly listing, and/or per transaction fees. More sophisticated
malls provide automated transaction services and relationship marketing
opportunities.
 Mall model: An e-mall hosts many on-line merchants. The mall typically
charges setup, monthly listing, and/or per-transaction fees.
3. Manufacturer model: This model is based on the power of the Web to

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 allow manufacturers to reach buyers/customers directly and thereby
compress the distribution channel.
4. Drop Shipping Model: Drop shipping is probably the most popular
form of e-commerce implementation strategy where the items are
dispatched straight to customers by the supplier. A simplified life cycle
of drop shipping (Fig 2.1) includes following steps:
a. An online storefront could be opened by a drop-shipping company, where
a catalogue of products and services of different suppliers is displayed
for the customer, product-wise, category-wise, pricewise and so on. For
example, in India we have several drop shopping companies like
Indiamart, Trade India and Baapstore, where a supplier could upload
their items.
b. A supplier (or even the retailer or a manufacturer) could collaborate
with any of the existing drop shipping companies to upload their own
products on this online storefront.
c. Customer places the order on online storefront.
d. The drop shipping company transacts with the customers through digital
payment options such as credit cards and so on.
e. These order details are passed on to the supplier.
f. The supplier packs and ships the ordered product directly to the customer.
As is obvious from these lifecycle steps, supplier has the main responsibility
in Drop-Shipping. It is the supplier who must discharge prime business activities
including inventory management, warehousing, packaging and soon.
There are also several limitations of this model as well, such as the drop shipping
platform must keep track of supplier-wise customer orders and financial
transactions and each supplier too must maintain exact shipping information
of the customer.
This e-commerce model is best suited for those suppliers, retailers and
manufacturers who have perfect products or services, but do not have enormous

58
cash to create a separate e-commerce portal. Similarly, it is good for those
business entities who have vision, digital know how and resources to create an
online store but no inclination to manufacture their own products, or maintain
their own warehouses and factories.

Source: https://www.ecommerceceo.com/types-of-ecommerce-business-models
The following are the various business models for electronic markets:
a. Brokerage Model
5. Wholesaling And Warehousing Models: is one such model, where a
variety of products (and services) are available on the online store.
Obviously, to maintain these huge volumes, investment in massive
physical warehouse spaces is required but the principle of ‘economy of
sales’ assures profits, especially since both retailers and consumers could
approach such an online store. Keeping track of orders received could
be tough in this model, unless well supported by the related software.
6. Private Labelling and White Labelling: There is another possibility
of an e-commerce online store where individuals / designers / cottage
industries could ‘seek’ reputed brand labels for their products. This is
called ‘private labelling’. Such kind of private labelling e-commerce
portal brings together designers - who can’t afford to manufacture
products themselves and ‘manufacturers or ‘well-established’ brands

59
 who want to diversify using innovative designs/ ideas. Indiamart.in
provides this facility for a range of products. For example, products /
formula of a small, herbal cosmetic product manufacturer could be
‘private labelled’ by a reputed brand through Indiamart.in.
White labelling is just the reverse of private labelling. In this model, the
product of an existing brand could be re-packaged and labelled and sold
by another business entity.
7. Value chain Model : A value chain for a product is the chain of actions
that are performed by the business to add value in creating and delivering
the product. Activities which comprise of the value chain are undertaken
by companies to produce and sell product and services. All companies
undertake series of activities in order to deliver a product to the
customers. These series of activities understand customer needs,
designing products, procuring materials, production, storage of products,
distribution of products, after sale services of products and customer care.
The function of value chain activities is to add value to product at every
stage before it is delivered to the customers. There are two components,
which make value chain - primary activities and secondary activities.
The primary activities are directly associated with the manufacturing of
products like supply management, plant operations, etc. The secondary
activities are referred to as support functions such as finance, HR,
information technology, etc.
G. Winfield Treese and Lawrence C. Stewart suggest four general value-
chain areas:
• Attract — in which you get and keep customer interest, and includes
advertising and marketing
• Interact — in which you turn interest into orders, and includes sales
and catalogues
• Act — in which you manage orders, and includes order capture,
payment, and fulfilment

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 • React — in which you service customers, and includes technical
support, customer service, and order tracking.
In the era of advanced information and communication technology, many
businesses have started operations on the internet as its medium. Through
the internet, many commercial activities like buying, selling, auctioning
is taking place. This online commercial activity is known as e-commerce.
E-commerce value chain has series of activities like electronic fund
transfer, internet marketing, distribution channel, supply chain etc.

2.9 E-COMMERCE REVENUE MODELS

E-commerce not only involves doing business over the internet, it is
also about designing new profitable business models. After we have understood
some of the important implementation strategies for e-commerce businesses,
we would move on to understand possible modes of income generation in e-
commerce implementation. This is best explained by the revenue model defining
the e-commerce implementation. A revenue model is a part of the business
model that essentially explains different mechanisms of income generation and
its sources.
1. Advertising Revenue Model: Revenue in e-commerce businesses could
be primarily generated by hosting advertise ents of other products/ ser
ices on online stores; this is the most basic model of revenue generation
referred as Advertising Revenue Model. This model provides content
and services like email, chat, etc. mixed with advertising messages in
the form of banner ads. The advertising model only works when the
volume of viewer traffic is large or high. The banner ads may be the
major or sole source of revenue for the broadcaster. There could be
several variations of this revenue model such as display-marketing,
affiliate-marketing (advertising on engine-marketing (also called ‘cost
per click’ many websites), search- or CPC model), e-mail marketing
and social-media-marketing. Google and Facebook primarily operate
using this revenue model.

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2. Affiliate Revenue Model: It is a very popular variation to the advertising
revenue model that is based on pay-for-performance concept. In this
concept the sellers put advertisement of their products as ‘links’ on
websites of their partners, also called affiliates. Payments are made to
the sellers when the links are clicked, and orders are placed and in return
the partners/ affiliates get some part of the revenue.
3. Subscription Revenue Model: Another very popular concept of
generating revenue is to offer some basic free services but store has a
subscription amount, payable either monthly, or quarterly or annually.
That means that premium services of the e-commerce portal are available
only to the subscribers (also called members) . Users pay for access to
the site. High value-added content is essential. Eg Over-The-Top (OTT)
video streaming platforms like Netflix operate using subscription revenue
model.

Fig. 2.3 : E-Commerce Revenue Models

4. Transaction Fee Revenue Model: There are certain e-commerce sites,
such as OLX, e-bay who charge a transaction fee from its users. This
transaction could be either fixed or could be in terms of percentages of
the volume of transactions undertaken.
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5. Sales Revenue Model: Sale of products/ services itself generates
revenues for the sellers (who could be a retailer or wholesaler) who sell
their products online.
There could be several more variations of the aforementioned revenue
models by combining and improving these basic models. Since the e-
commerce world is evolving very rapidly, newer variations of revenue
models are expected such as group-buying, target campaigning, content
- syndication, monetisation of personal sensitive data etc and so on.
Understandably not all could be considered as pleasant variations and it
would need more strict legal enforcements at national and global levels.
6. Web-Advertising Model : The web-advertising model is an extension
of the traditional media broadcast model. The broadcaster is a web site,
provides content and services like e-mail, chat, forums mixed with
advertising messages in the form of banner ads. The banner ads may be
the major or sole source of revenue for the broadcaster. The broadcaster
may be a content creator or a distributor of content created elsewhere.
The advertising model only works when the volume of viewer traffic is
large or highly specialized.
It is relevant to point out that these are just some of the popular
implementation strategies of e-commerce and that in wake of emerging
technology trends and also because of excessive digitilisation popularised during
COVID times, several variations to these basic implementation strategies have
been adopted by the e-commerce business entities

2.10 MEANING AND TYPES OF ELECTRONIC NETWORK

An e-business network is one that allows businesses to communicate
via electronic means, but the term is most often used to denote business networks
that use the Internet to conduct e-commerce and related activities. E-business
networks allow businesses to communicate with each other and transmit
information quickly and efficiently at cheaper costs than using a traditional
electronic data interchange, resulting in lower prices for consumers while also

63
facilitating collaborations between companies. This leads to innovative new
products, knowledge exchange and reduced time-to-market. Thus, network
effects play an important role in e-commerce. Network effect strategy allows
companies in e-commerce to set up a network with noncompetitive prices. In
e-commerce network effects are important in areas including trade, money
transaction and all applications where the interaction between users exists.
Types of communication network in e commerce
The Internet, intranet, and extranet are the most popular platforms for
e-commerce. In Internet is the most common platform for B2C e-commerce;
the intranet is most the common for platform for corporate internal management;
and the extranet is the most common platform for B2B e-commerce.

Network Type Typical Users Access Type of information

The Internet Any individual Unlimited public no General public and
with dial- restrictions advertorial
upaccessor LAN

Intranet Authorized Private and restricted Specific,

employees only corporate, and
proprietary

Extranet Authorized Private and authorized Shared in authorized

groups from outside partners collaborating groups
collaborating
companies

The Internet
a. The Internet is a public and global communication network that provides
direct connectivity to anyone over a local area network (LAN) or Internet
Service Provider (ISP).

64
 b. The Internet is a public network that is connected and routed over
gateways. End users are connected to local access providers (LANs or
ISPs), who are connected to the Internet access providers, to network
access providers, and eventually to the Internet backbone.
c. Since access to the Internet is open to all, there is a lack of control that
may result in an unruly proliferation of information.
The Intranet:
a. An intranet is a corporate LAN or wide area network (WAN) that uses
Internet technology and is secured behind company’s firewalls (see
security and protection).
b. The intranet links various servers, clients, databases, and application
programs like Enterprise Resource Planning (ERP). Although intranets
are developed on the same TCP/IP protocol as the Internet, they operate
as a private network with limited access.
c. Only authorized employees are able to use it. Intranets are limited to
information pertinent to the company and contain exclusive and often
proprietary and sensitive information.
d. The firewalls protect the intranets from unauthorized outside access;
the intranet can be used to enhance the communications and collaboration
among authorized employees, customers, suppliers, and other business
partners.
e. Since the intranet allows access through the Internet, it does not require
any additional implementation of leased networks. This open and flexible
connectivity is a major capability and advantage of intranet. Intranets
provide the infrastructure for many intrabusiness commerce applications.
The Extranet
a. An extranet, or “extended intranet”, uses the TCP/IP protocol network
of the Internet, to link intranets in different locations.
b. Extranet transmission is usually conducted over the Internet, which offers
little privacy or transmission security.
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 c. Therefore, when using an extranet, it is necessary to improve the security
of connecting portions of he Internet. This can be done by creating tunnels
(see paragraph on security and protection) of secured data flows, using
cryptography and authorization algorithm.
d. The Internet with tunneling technology is known as a virtually private
network (VPN).
e. Extranets provide secured connectivity between corporation’s intranets
and the intranets of its business partners, material suppliers, financial
services, government, and customers.
f. Access to intranets is usually limited by agreements of the collaborating
parties, is strictly controlled, and is only available to authorized personnel.
g. The protected environment of the extranet allows groups to collaborate,
sharing information exclusively, and exchanging it securely.
h. Since an extranet allows connectivity between businesses through the
Internet, it is an open and flexible platform suitable for supply chain
management.
i. To increase security, many companies replicate the database they are
willing to share with their business partners and separate them physically
from their regular intranets.
Fig. 2.10: Diagrammatic Contrast of the Internet, Intranet, and Extranet

(Source : Turban et.al (2017). Introduction to e-Commerce & Social Commerce: Springer)

66
2.11 ESSENTIAL ELEMENTS AND MECHANISM FOR AN
ELECTRONIC MARKET AND NETWORK
Online marketplace or online ecommerce marketplace refers to a type
of ecommerce site where product and inventory information is provided by
multiple third parties, (whereas transactions are processed by the marketplace
operator). Various components are required for the successful working of
electronic markets and networking. Some of them are explained below:

Fig 2.11: E-Commerce Mechanism

(Source : Turban et.al (2017). Introduction to e-Commerce & Social
Commerce: Springer)
a. Customers include millions of people surfing the web who search for
detailed information, compare, place bid and buy (digital) objects.
b. Sellers comprises of millions of storefronts available on the Web who
provide huge variety of products and services. Sellers can sell directly
on their website or from e-marketplaces.
c. Products and Services In market spaces, it is possible to commerce in
digital products and services. Both type of markets can sell physical
products. Marketspaces can sell digital products, that can be delivered
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 over the Internet. With digital products most of the costs are fixed, and
variable costs are very low. Profit increase very rapidly as sales volume
increase
d. Infrastructure comprises electronic networks, hardware, software, etc.
e. Front-End The portion of an e-seller’s business processes through which
customers interact, including the seller’s portal, electronic catalogs, a
shopping cart, a search engine, and a payment gateway.
f. Back end The activities that support online order-taking. It includes
fulfillment, inventory management, payment processing, packaging, and
delivery.
g. Intermediary means a third party that operates between sellers and
buyers. Online intermediaries create and manage the online market. They
help match buyers and sellers, provide some infrastructure services, and
help customers and/or sellers to institute and complete transactions.
h. Storefront refers to a single company’s website where products and
services are sold. It may belong to manufactures, retailers, or to
individuals. Several components necessary to carry out the sale includes
electronic catalog, search engine, shopping cart, payment gateway,
shipment, customer service.
i. E-Mall is an online shopping center where many stores are located.
Different types of malls are available online which includes simply a
directory and shared services.
j. Information Portals (or enterprise portal) is a mechanism used in e-
marketplaces, e-stores, etc. It is an information gateway which enables
people to search and access relevant information from disparate systems
and the Internet. Many portals can be personalized by the users.
 Commercial Portals are the most popular type on the Internet, broad
audience, diverse communities, personalization.
 Corporate Portals provide organized access to a narrow set of
company and partners informations.

68
  Publishing portals include communities with specific interests, little
customization, great search.
 Personal Portals provide very personalized narrow content.
 Mobile Portals are accessible from mobile devices.
 Voice Portals are portals with audio interfaces.

2.12 SUMMARY
A business model is like a business plan conceived by a company so
that the company has an edge over its competitors and can make profits but it is
over and above a business plan too. It is also about specifying exact strategies
and approaches of initiating and sustaining the proposed business plan. Its key
focus stays on sustaining the proposed business by specifying ways and means
to create on-going value for the desired customers. An electronic business model
is an impo rtant baseline for t he development o f e- co mmerce system
applications. Essentially, it provides the design rationale for e-commerce
systems from the business point of view. However, how an e-business model
must be defined and specified is a largely open issue.

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2.13 GLOSSARY
 Portal is a doorway, entrance, or gate, especially one that is large
and imposing
 Customer Based Business Model: Model that would help decide who
is the ultimate target beneficiary of the proposed e-commerce initiative.
 Customisation model: This model provides customers with content that
is customised to meet their preferences by employing AI/ML algorithms.
 Design Model: Model that would help to decide the priority for designing
the proposed e-commerce website.
 Drop Shipping Model: Drop shipping model is probably the most
popular form of e-commerce implementation strategy where the items
are dispatched straight to customers by the supplier
 Business model is the method of doing business by which a company
can sustain itself — that is, generate revenue
 E-Business model is simply the approach a company takes to become a
profitable business on the Internet
 A virtual workplace: in which a business and a government agency
could coordinate the work on a contracted project by collaborating on-
line to coordinate on-line meetings, review plans and manage progress.
 Virtual Mall: hosts online merchants. The Mall typically charges setup,
monthly listing, and/or per transaction fees. More sophisticated malls
provide automated transaction services and relationship marketing
opportunities.
 Pro moti on model: This websit e mo del is based o n lucrat ive
‘advertisements’, which are attracting a potential customer to a site.
 Revenue Model: Model that would help us to generate revenue for the
e- commerce initiative.

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2.14 SELF ASSESSMENT QUESTIONS
1. Define E-Business Model. Explain its features.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain various types of E-Business Models.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What is a revenue model?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

2.15 LESSON END EXERCISE

1. Explain the four models that are associated with the informational/
communicational design
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
2. Explain Drop Shipping Model? Would emerging technologies have any
impact on implementation strategies of e-commerce? Justify.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Who are Digital Influencers and under which category of e-commerce
business model they could be considered?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. What are steps to create a strong business model?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
5. State whether the following statements are True or False:
i. Advertising Revenue Model is based on pay-for-performance concept.
ii. Business model is developed keeping in mind the revenue earned over
the previous years.

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 iii. A revenue model is a part of the business model that essentiallyexplains
different mechanisms of income generation and its sources.
iv. The advertising model only works when the volume of viewer traffic is
large or high.

2.16 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.
*********

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Lesson No. 3 UNIT I
INTRODUCTION TO ELECTRONIC COMMERCE
ELECTRONIC COMMERCE FRAMEWORK

STRUCTURE
3.1 Introduction
3.2 Objectives
3.3 Meaning and Layers of E-Commerce Framework
3.4 Features of E-Commerce Business Framework
3.5 Pre-requisites for successful implementation of E-Commerce Framework
3.6 Essential pillars of E-Commerce Framework in small organisations
3.7 Summary
3.8 Glossary
3.9 Self-Assessment Questions
3.10 Lesson End Exercise
3.11 Suggested Readings

3.1 INTRODUCTION
The explosive growth of internet, commerce has captured the public’s
imagination. The rapid growth of the internet and e-Commerce has almost
become a compulsion. Online shopping convenience has changed the entire

74
shopping experience and industry. Today without e-Commerce, the organization
will be just a little slaver, just a little bit more expensive, just a little less reliable
and in the end very less successful than its competitors every second in this
competitive world. The e-Commerce market is booming and so do the Large
businesses have understood the importance of e-Commerce stores that make it
easy to sell online and drive business growth. When you need to deliver reliable
and working software quickly, frameworks are the way to go. A framework is
a structure that helps you build software applications. Laravel, Shopify,
WooCommerce, React, Big commerce, Magento, Wix, Squarespace are some
of the frameworks for the e-Commerce platforms.

3.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the meaning of E-Commerce Framework
 classify different layers of E-Commerce Framework
 identify the essential elements of E-Commerce Framework
 explain the features and essential pillars of E-Commerce Framework

3.3 MEANING AND LAYERS OF E-COMMERCE

FRAMEWORK
The term ‘e-Commerce framework’ is related to software frameworks
for e-Commerce applications. They offer an environment for building e-
Commerce applications quickly.
An e-Commerce framework is a set of tools, libraries, and guidelines
that are designed to help developers build and maintain an e-Commerce website
or application. E-Commerce frameworks typically provide a range of features
and functionalities that are commonly needed for e-Commerce projects, such
as shopping carts, payment processing, product catalogs, and order management.
The basic framework of e-Commerce enables doing business online.
The framework consists of a comprehensive structure beginning with the based

75
technology layer to the general service layer. E-Commerce has, to acertain
extent, changedmarkets structure. Traditionally, market ties were created through
the exchange of goods, services, and money. e-Commerce has brought in an
essential element: information. Market ties are now based on information
services, information goods and electronic money. Although the nature of
exchanging products remains unchanged, the channel and the format of doing
business have changed. To better understand the basic framework of e-
Commerce, the following explain the various layers in the environment of e-
Commerce:

Fig 3.3 : Layers of e-Commerce framework

1. The Firstlayer: Network Infrastructure : Also known as the
“Information Superhighway”, network infrastructure is the foundation
layer of hardware infrastructure. It is a mixture of many forms of
information transport systems, which include telecom, cable TV, wireless
and the Internet.These systems, in particular the Internet, provide various
types of telecommunication channels for transmission of contents used
in e- commerce.
2. The Second Layer: Multimedia Content and Network Publishing:
While the Information Superhighway is the transportation basis that
allows content such as text, sounds and images to be transmitted, the

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 second layer provides an architecture that enablesthe content to be
developed in a programming language know as Hyper Text Markup
Language (HTML) for publishing on the World Wide Web (WWW).
Another programming language in use is Java, which enables multimedia
content to be transmitted to end users personal computers via various
networks such as cable, wireless, fiber optics and satellites.
3. The Third layer: Messaging and Information Dissemination:
Messaging transmission is usually done by the following technologies:
 Communicating non-formatted data: by using facsimile, electronic
mail, which mainly directs to individuals.
 Communicating formatted data: by using Electronic Data Interchange
(EDI) without human intervention.It is mainly used for business
do cuments such as purchase orders, invoices and packing list s.
Messaging transmission technology has encouraged business process
automation.
 Hyper Text Transfer Protocol (HTTP): HTTP is an information
dissemination tool generally used on the Internet. It uses a common
display format to publish non-formatted multimedia messages in various
environments.
 Uniform Resource Locator (URL): URL is at present used by many
web surfers tosearch for information.
4. The Fourth layer: Security Protection in Business Services: This layer
is regarded as the essential facilities for doing business because it is
required by both business corporations and individuals in business
transactions. The facilities include standardized product catalogues, price
lists, electronic payment methods, secured transmission of business
information, and the authentication of identity of both trading parties.
The ultimate goal of e-Commerce is that the seller gets the payment and
the buyer obtains the product.To ensure transaction security, e-Commerce
needs to ensure content reliability, integrity, non-repudiation, and to

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 provide the relevant evidence in case of disputes.Therefore, payment
security on the web is crucial to ensure smooth completion of a
transaction. The prevailing method of security measure is by electronic
certification which provides, end-to-end security protection.
5. The Fifth layer: Practical Application of E-Commerce: E-Commerce
is widely employed in supply chain management, electronic marketing,
electronic advertising, online shopping, online entertainment, pay-
information service and network banking.

3.4 FEATURES OF E-COMMERCE BUSINESS

FRAMEWORK
E-Commerce frameworks are designed to be flexible and scalable, and
they often offer a range of customization options to allow developers to tailor
the functionality of the e-Commerce site to the specific needs of the business.
Some popular e-Commerce frameworks include Magento, Shopnix, Shopify,
and WooCommerce.
E-Commerce frameworks can be helpful for businesses that want to
create an online store but don’t have the resources or expertise to build one
from scratch. They can also be useful for developers who want to streamline
the development process and reduce the time and effort required to build an e-
Commerce site.
E-Commerce frameworks are flexible enough to adapt them to your
specific requirements. As result, they are suitable for building virtually all kinds
of online shops and e-Commerce related (web) applications.
a. Quality search functionality- This is one of the functions which play a
very big role in the market with search functions that helps in conversion
rates. Basically this function is kind of filtering which processes
keywords and helps you to get precise effect over search and into your
sales too.
b. Content management system (CMS) - It is the system which makes

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 you are website unique in searches across the Global markets. This is
one of the features which highly impact over the website as speed key
to efficiency.
c. Multi-channel functionality- In current retail market and environment,
it is highly considered that your business is spread all across Global and
though it is possible to get done through managing products, listing and
orders in a multi- channel environment.
d. Mobile supported e-Commerce- The fact is that everyone is looking
forward to have easy browsing on mobile than to go for getting an
efficacious platform, which will surely help to grow user and customer’s
attraction.
e. Third party systems and plug-ins- It must have ability to use the third
party plug-ins which is meant to provide adaptability, customisation
and innovation. These features can be used while developing a website
and though some may not be the part of the standard package.
f. Business intelligence- When it comes to managing the data, it is
mandatory to get precise and accurate details over the data. The tempo
should be maintained while managing the data, business intelligence
helps to get that done on your website because only through the tempo
and flow, which you will be able to analyse the death of transaction and
then take advantages of the opportunities that comes up.

3.5 PRE-REQUISITES FOR SUCCESSFUL E-COMMERCE

FRAMEWORK
Successful implementation of any e-Commerce business is dependent
on implementing or adopting these seven key steps:

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 Fig. 3.5: Stages for e-Commerce implementation
Each of these steps has a positive and cascading effect on the other
steps and hence implementing each of them in the right priority and in a phased
manner is of utmost importance.
For an e-Co mmerce business to get t he maximum ROI o n their
investment, it is the execution of these seven steps around the four core pillars
that will be necessary for success:
1. Strategic business planning and roadmaps– Strategy is about making
the right choices that will help reach the stated business objectives. There
should to be a clear-cutvision, mission,and objective about what will be
achieved, inhowmuch time, within what budget, identification of the
right resources for and constraints in the face of execution of the strategy
mentioned in the business plan, and what elements will be considered
for roadmap. Knowledge and deep understanding of the digital marketing
tools and techniques that will help in reaching and acquiring customers
is required
2. Technology selection/ website audit and analysis– In order to provide

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 the maximum benefit to the end customer, your chosen e-Commerce
technology should be fully capable of being customizable, and be able
to complement the business model, and adhere to the existing best
practices in offline retail. If you are are tailer taking the first-time plunge
in to e-Commerce, various functionalities on the e-Commerce website
should be carefully thought over based on the industry, audience being
targeted, various customer segments who may be buying the offered
products and services.
3. Custome r ac quisitio n – Online o r po p ular dig it al mar ket ing
encompasses multiple tools for reaching out to the new generation of
customers, who are actively engaged in using multiple devices, throughs
earchengine optimization, searchengine marketing (paid advertisement
that includes both cost per click and cost per thousand impressions),
social media marketing (that includes both cost per click and cost per
thousand impressions), email campaigns, display advertisements using
various ad networks, referral programs and re-targeting campaigns.
4. Customer engagement– Customers these days are actively seeking to
engagewith brands to understand the core benefits and unique value
proposition that the brand offers, discount and offers during special
seasons, arobust support mechanism for queries/clarifications regarding
the products displayed and interaction with customer support executives
to know more about policies on returns and exchange, etc. Engaging
customers through various social media channels also in stils superior
trust in the minds of customers.
5. Customer retention –With the advent of sophisticated e-Commerce
technologies, new age retailers will be able to leverage an almost one-
to-one customer experience and that is the best a customer can really
expect.
6. Optimization based on key metrics– Some of the key metrics to
measure the health of an e-Commerce venture are the total revenue

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 generated, cost of customer acquisition, % of customers converted, and
% of customers entering the website through various channels.
a. Technology–This generally includes optimizing the page load
speed, shopping cart, check-out and other webpages, a/band
multivariate testing,etc.
b. Business– Optimizationhere includes analysis ofthetotal revenues
generated, total spends for running the e-Commerce operations,
optimizing the gross net margins, conversion rates from each of
the various channels, customer loyalty and retention rates, rate
of repeat purchase, frequency of repeat customers (across multiple
dimensions), % of carts abandoned, etc.
7. Business analysis and customer insights– The final step in the entire
process is about fine-tuning and understanding the product categories
that have performed well compared to other products displayed in the
web store. Assessing this is crucial since each of these categories and
products within those categories occupy the prime real estate in the online
world –the web store.
a. It also should consist of understanding the customer segments,
demographics, profitable customers, source of channels through
which the profitable customers cameto the web store, % of
revenue each profitable customer contributes to and the marketing
spends that has gone into acquiring these customers.
b. These metrics are only a small representation of a larger list that
can be optimized further. These metrics vary based on the business
needs and require a customized approach for defining, monitoring
and optimization.
As we know e-Commerce is continuously progressing and is becoming
more and more important to business as technology continues to advance.
E-Commerce frameworks are flexible enough to adapt them to your
specific requirements.

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3.6 ESSENTIAL PILLARS OF E-COMMERCE
FRAMEWORK IN SMALL ORGANISATIONS
Recent environmental factors have accelerated the shift of small
businesses to online to survive. Growing online has challenges with the
complexities of the environment and inconsistent results. For small businesses
to grow both effectively and sustainably, a strategic approach is required. The
following are the eight essential pillars of e-Commerce that are based on a
strategic framework specifically designed for small businesses:
1. Branding for growth : Branding for growth refers to an organisation’s
visual design, tone of voice and messaging being consistent across all
digital touchpoints such as your website, social platforms, emails and
other digital application’s. It takes approximately 50 milliseconds for
people to form an opinion about a company’s website or social presence.
Today in digital world,wedonot get a second chance to create a first
impression, particularly when customers can find competing brands
within just a few clicks.
2. Data, analytics and insights: There is a saying “you can’t manage what
you can’t measure” and this is especially true in e-Commerce. Many
business owners are daunted by data, however, if we want to grow our
business, data analysis is mandatory. So, we must have Google Analytics
connected to our store for advanced e-Commerce and tracking.

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 Fig 3.6: E-Commerce Growth Framework
3. Conversion Rate Optimisation (CRO) : CRO makes changes to our
website that improves the customer ’s journey or experience and,
therefore, increases our website’s conversion to sale. To calculate our
conversion rate, we divide the number of sales by the total number of
visitors during a given time frame; and then multiply by 100 as it is
usually expressed as a percentage. The average global conversion rate
is 1.82 per cent.
4. Search Engine Optimisation (SEO): SEO is the process of improving
our site to increase its rankings for search queries through search engines
like Google, Bing or Yahoo. The better ranking our pages have in search
results, the more likely search engines will recommend our content to
their users as the best solution to their problem. With approximately 75
per cent of users never going beyond the first page of Google search
results, wemust thrive to work towards ranking on the first page.

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5. E-mail marketing automation : E-mail marketing automation is sending
out emails to our customers and prospects automatically, based on a
schedule, or trigger that we have defined. E-mail marketing has yielded
the highest ROI in the past 10 years of all digital marketing channels
and has been reported to deliver an ROI of 44:1. Setting up automations
saves our time and increases our revenue.
6. Social content strategy : Organic content can be a significant effort
with minimal return, with around five per cent of our content being
seen by your followers. Unfortunately, it is a necessary evil for all online
businesses. We must ensure that we must not get sucked into the social
content vortex. It is always recommended to have structure around our
content with content pillars and topic clusters. It also helps to have our
personas identified so we can talk to them directly through our social
content.
7. Search Engine Marketing (SEM) : SEM is the process of gaining
website traffic by purchasing ads on search engines. SEM produces fast
results by targeting an audience that is already in-market looking for
our offering. It is the unbeatable digital advertising channel when it
comes to ROI and SEM is great for testing our products, our messaging
and our audiences.
8. Social paid media / advertising : Although social advertising has a
relatively low barrier to entry, the algorithms require a certain amount
of data and time to optimise to give us the best results based on our
campaign objectives. So, if we do not have the funds to invest in our
advertising for a minimum of two-three months and beyond, then it is
best to hold off until we have the required funds.
To conclude, we can say that while using these pillars to grow any
business, it is important to work through them from the top to the bottom,
that is, start with looking at their branding across their digital assets,
then move onto setting up their Google Analytics for advanced e-
Commerce.To track their conversion rate, they need to have Google

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 Analytics set-up and so on. Each of the pillars build on the pillars covered
previously.

3.7 SUMMARY
The e-Commerce framework and information infrastructure, still in the
early stages of itsdevelopment, is already transforming our world. Over the
next decade, advances on theEC framework will affect almost every aspect of
daily life — education, health care, work and leisure activities. Disparate
populations, once separated by distance and time, willexperience these changes
as part of a global community.As we know e-Commerce is continuously
progressing and is becoming more and more important to business as technology
continues to advance. E-Commerce frameworks are flexible enough to adapt
them to your specific requirements. We have studied in this lesson that
successful e-Commerce operations stand on strong pillars. So, if you are
planning to enter a new market or facing challenges in your current e-Commerce
setup, the detailed understanding of the pre-requisites and pillars of e-
Commerce, studied in this lesson earlier, is vital.

3.8 GLOSSARY
 Search Engine Marketing (SEM):process of gaining website traffic
by purchasing ads on search engines.
 E-mail marketing automation: sending out emails to our customers
and prospects.
 Content management system (CMS) - It is the system which makes
you are website unique in searches across the Global markets.
 Hyper Text Transfer Protocol (HTTP): HTTP is an information
dissemination tool generally used on the Internet.It uses a common
display format to publish non-formatted multimedia messages in various
environments.
 Interoperable: It means the system can work on different hardware
and software platforms

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  WAN: Wide area network, a type of network spread through the world
 VAN: Value added network, a privately owned network providing various
value addes services

3.9 SELF ASSESSMENT QUESTIONS

1. Elucidate the concept of E-Commerce framework.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain various layers of E-Commerce framework.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. State the pre-requisites of E-Commerce framework.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

3.10 LESSON END EXERCISE

1. Write detailed a note on pillars of E-Commerce framework.

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain the following terms with respect to E- commerce framework-
a. Customer retention
b. Customer acquisition
c. Uniform Resource Locator (URL)
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Give an account of various features of E-commerce framework.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

3.11 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.

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 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications. Electronic Commerce

*******

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Lesson No. 1 UNIT I
INTRODUCTION TO ELECTRONIC COMMERCE
CLASSIFICATION OF EC BY THE NATURE OF THE
TRANSACTIONS AND THE RELATIONSHIPS AMONG
PARTICIPANTS

STRUCTURE
4.1 Introduction
4.2 Objectives
4.3 Classification of E-commerce by the nature of the transactions and the
relationships among participants
4.3.1 Business-to-business (B2B)
4.3.2 Business-to-customer (B2C)
4.3.3 Consumer-to-consumer (C2C)
4.3.4 Consumer-to-business (C2B)
4.3.5 Business-to-administration or business-to-government (B-TO-G)
4.3.6 Consumer-to-consumer (C2C)
4.3.7 Consumer to business (C2B)
4.3.8 Consumer-to-administration (C2A)
4.3.9 Other business models
4.4 Summary
4.5 Glossary

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4.6 Self-Assessment Questions
4.7 Lesson End Exercise
4.8 Suggested Readings

4.1 INTRODUCTION
In the emerging global economy, e-commerce and e-business have increasingly
become a necessary component of business strategy and a strong catalyst for
economic development. The integration of Information and Communications
Techno lo gy (ICT) in business has revo lut io nized relat ionships wit hin
organizations and those between and among organizations and individuals.
Specifically, the use of ICT in business has enhanced productivity, encouraged
greater customer participation, and enabled mass customization, besides
reducing costs. With developments in the Internet and Web-based technologies,
distinctions between traditional markets and the global electronic marketplace-
such as business capital size, among others-are gradually being narrowed down.
The name of the game is strategic positioning, the ability of a company to
determine emerging opportunities and utilize the necessary human capital skills
to make the most of these opportunities through an e-business strategy that is
simple, workable and practicable within the context of a global information
milieu and new economic environment. With its effect of levelling the playing
field, e-commerce coupled with the appropriate strategy and policy approach
enables small and medium scale enterprises to compete with large and capital-
rich businesses. On another plane, developing countries are given increased
access to the global marketplace, where they compete with and complement
the more developed economies.

4.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand various types of e-commerce
 understand the B2B model

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  explain the C2C model
 list the characteristics of various types of e-commerce

4.3 CLASSIFICATION OF E-COMMERCE BY THE

NATURE OF THE TRANSACTIONS AND THE
RELATIONSHIPS AMONG PARTICIPANTS
E-commerce applicat io n provides a comprehensive solut io n fo r
businesses to manage their online sales and operations. It enables merchants to
set up an online store, list products or services, and accept payments from
customers. The platform provides a user-friendly interface for customers to
browse and purchase products, track orders, and receive updates on delivery
status. E-commerce applications provide tools for managing inventory, shipping,
and taxes in addition to selling and processing payments. Retailers can monitor
stock levels, restock alerts, and sales reports with the aid of inventory
management. Merchants can configure shipping options, print shipping labels,
and monitor deliveries thanks to shipping management. The management and
calculation of taxes guarantees that businesses follow all applicable local tax
laws and regulations. Customer relationship management (CRM) features for
e-commerce applications also include email marketing, customer reviews and
ratings, and customer support. By offering top-notch customer support,
promoting goods, and interacting with customers via email campaigns, these
features assist businesses in establishing and maintaining a loyal customer base.
Additionally, e-commerce applications offer a variety of analytics and reporting
tools that enable retailers to learn more about sales, consumer behaviour, Overall
E-commerce applications offer businesses a comprehensive and affordable way
to expand their customer base and efficiently run their online operations. E-
commerce applications assist merchants in saving time and resources while
expanding their online businesses by automating various business processes
and offering robust features.
From the above discussion, it is found that the general assumption about
e-commerce is that it is an online commercial transaction between a supplier
and a client. However, and although this idea is correct, it can be more specific

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if we classify e-commerce into several types, all with different characteristics.
The various classifications of e-commerce based upon the nature of the
transaction and the relationship among the participants directly involved in the
transaction are given below:
4.3.1 Business-to-business (B2B)
4.3.2 Business-to-customer (B2C)
4.3.3 Consumer-to-consumer (C2C)
4.3.4 Consumer-to-business (C2B)
4.3.5 Business-to-administration or business-to-government (B-TO-G)
4.3.6 Consumer-to-consumer (C2C)
4.3.7 Consumer to business (C2B)
4.3.8 Consumer-to-administration (C2A)
4.3.9 Other business models
These aforementioned types based on transactions and nature of
participants are explained below:

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4.3.1 BUSINESS-TO-BUSINESS (B2B)
A type of commerce transaction that exists between businesses, such as
those involving a manufacturer and wholesaler, or a wholesaler and a retailer
is known as Business-to-Business (B2B). It refers to business that is conducted
between companies, rather than between a company and individual consumers.
This is in contrast to business to consumer (B2C) and business to government
(B2G). Websit e following B2B business model sells its product to an
intermediate buyer who then sells the product to the final customer. For example,
a wholesaler places an order from a company’s website and after receiving the
consignment, sells the end product to final customer who comes to buy the
product at wholesaler’s retail outlet. B2B implies that seller as well as buyer is
business entity. B2B covers large number of applications which enables business
to form relationships with their distributors, resellers, suppliers etc. IBM,
Hewlet t Packard (HP ), CISCO, Dell are t he examp les o f B2B.
Chemconnect.com and chemdex.com are the examples of B2B that brings two
firms together on the virtual market. Following are the leading items in B2B e-
Commerce:
 Electronics
 Shipping and Warehousing
 Motor Vehicles
 Petrochemicals
 Paper
 Office products
 Food
 Agriculture
B2B applications can be witnessed in the following areas:
 Supplier management
 Inventory management

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  Distribution management
 Channel management
 Payment management

Fig. 4.3.1 Process of B2B

4.3.1 Models in B2B
a) The B2B model can be supplier centric, buyer centric or intermediary
centric models:
 Supplier Centric Model In this model, a supplier sets up the electronic
commerce market place. Various customers interact with the supplier at
its electronic market place. The supplier is generally a dominant supplier.
He may provide customized solutions and pricing to fit the needs of
buyers. Intel and Cisco have been adopting the supplier centric Model.
 Buyer centric Model In this model, big business organisations with
high volume purchase capacity create an electronic commerce market
place. The online electronic commerce market place is used by the buyer
for placing requests for quotations and carrying out the entire purchase
process. The US government and the General Electric Trading Process
Network are examples of buyer-centric model.
 Intermediary – centric model In this model, a third party sets up the
electronic commerce market place. The third party attracts both buyer

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 and seller to interact with each other at its market place. The buyer
places their request interacts with each other and reaches a final decision
in purchase or sale of goods.
4.3.1 (b) Advantages of B2B
Selling products to businesses using an online channel is much more
complex than selling to private customers. In addition to the way that you
approach the customer, which is different than in the B2C sector, there is a
whole range of other differences that are essential to understand and that can
be advantageous. The following are the advantages of B2B model.
1. Instant purchases: Online business allows for instant purchases. Now,
companies can do almost everything over the internet. They can get in
contact with the company they are seeking to transact with, make a first
time transaction, and then set up a system for future transactions. This
allows for frequent purchases. Under frequent purchases, prices usually
drop. Therefore, there is saving in time and money.
2. Increased revenue: 24/7 online ordering will increase companies’
revenue. Many different time zones exist in the world and potential
clients might not have the same business hours as you. By allowing for
companies to make transactions all the time, the time zone becomes
irrelevant. For example: If it is 10 am in your clients’ time zone and 2
am in your time zone, your client can still make purchases. By offering
products at all hours of the day, revenue will increase for the company.
3. Expands company’s presence: If your company has joined the online
community, than it is expanding its presence and increasing its brand
awareness. Nowadays, you can find just about anything over the internet.
Why not allow for people to find your company too?
4. Closer business relationships: Doing business with other companies
online will create closer business relationships. This will result in more
transactions. This frequent buying builds a stronger relationship.
Although this does not require face to face interaction, it does allow for
businesses to get more familiar with each other.

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4.3.1 (c) Disadvantages of a B2B
Companies that embrace a B2B, model, stand to capture significant profit
through the sales of high-cost products or sheer bulk orders. B2B practices
diverge in several and significant ways from standard business-to-consumer
practices. Although some differences entail simple changes in perspective, others
create disadvantages for companies seeking to sell to other businesses.
1. Limited Market Businesses selling to other businesses face a much
smaller buying group than businesses selling to consumers. The total
number of prospective buyers may be in thousands, rather than the
potential millions of customers for consumer products. These limited
numbers make every lead and every existing customer more valuable
and the loss of a single, large customer can devastate the bottom line.
For example, if you supply parts to businesses in mature markets, where
only a handful of competitors normally operate, your business might
not survive if one of your buyers closes shop.
2. Long Purchase Decision Time The majority of consumer purchase
decisions involve one or perhaps two decision makers and the total time
for a purchase decision tends to run on the short side. The B2B sales
cycle invo lves a co mplicat ed set o f fact o rs, involving mult iple
stakeholders and decision-makers, with total decision times that can
stretch out for months. B2B sellers cannot depend on a fast turnaround
with new clients for an influx of working capital and must maintain the
financial solvency to operate with long gaps between sales.
3. Inverted Power Structure In B2B, buyers wield more power than
seller s. A B2B buyer can, also wit hin limit s, demand cert ain
customizations, impose exacting specifications and drive a hard line
with pricing because the seller depends much more heavily on retaining
its customers. This requires B2B sellers to retain a level of flexibility in
both product development and production.
4. Sales Process The typical sale process in B2B demands considerable
face time, often multiple meetings, and gets driven by quantifiable

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 factors, rather than the qualitative and emotional factors. The sales
process often depends on the salesperson’s ability to demonstrate what
the product does or allows modifications that solve the very specific
problem the buyer faces, and can deliver a solid return on investment.

4.3.2 BUSINESS-TO-CUSTOMER (B2C)

As the name suggests, it is the model involving business and consumers
over the internet. B2C means selling directly to the end consumer or selling to
an individual rather than a company. Website following B2C business model
sells its product directly to a customer. A customer can view products shown
on the website of business organization. The customer can choose a product
and order the same. Website will send a notification to the business organization
via email and organization will dispatch the product/goods to the customer.
B2C is also known as internet retailing or E-trailing.
 The B2C model includes electronic shopping, information searching
(e.g. railway timetables) but also interactive games delivered over the
Internet.
 Popular items sold using B2C model are airline tickets, books, computers,
videotapes, music CDs, toys, music, health and beauty products,
jewellery etc..
Following are the key features of a B2C Model
• Heavy advertising required to attract large number of customers.
• High investment in terms of hardware/software.
• Support or good customer care service Consumer Shopping Procedure
Following are the steps used in B2C e-commerce “ A consumer
• determines the requirement.
• searches available items on the website meeting the requirement.
• compares similar items for price, delivery date or any other terms.
• gives the order.

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 • pays the bill.
• receives the delivered item and review/inspect them.
• consults the vendor to get after service support or returns the product
if not satisfied with the delivered product.

4.3.2 (a) Advantages of E-Commerce for B2C Businesses

Benefits of B2C e-commerce can be considered either from the viewpoint
of the consumer or from that of the business.
From the consumer side, benefits include:
1. Access to goods and services from home or other remote locations.
2. The possibility of lower cost of goods and services.
3. Access to a greater variety of goods and services on offer.
4. Consumers can shop at any time of day, from the privacy of their own
home. The internet has been called “the mall that never sleeps.”
5. So many choices – Consumers can shop for basically any item they can
think of! Airline tickets, groceries, clothing, and even medicine!

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6. Hassle free – Consumers can shop online without dealing with annoying
sales people, fighting the congestion of shopping malls, and driving 10
different places to find one thing.
From the business side, benefits include:
1. Lower transaction costs associated with sales.
2. Access to global markets and hence to more potential customers.
3. Can reach worldwide market with unlimited volume of customers.
4. Can display information, pictures, and prices of products or
services without spending a fortune on colourful advertisements.
5. In some cases, makes order processing an easier task than before.
6. Can operate on decreased, little, or even no overhead.
4.3.2 (b) Disadvantage of E-Commerce for B2C Businesses
1. Competition: The competition is so fast for the web. There can literally
be thousands of places a customer can go and purchase the same product.
2. Technology problem: Technology problem can cause problems to
operate the site properly, resulting in losing customers and sales.
3. Catalogue Inflexibility: The catalogue needs to regenerate every time
when there is some new information or items to add in.
4. Limited Market Place: Normally, customer will be from locally and
limited to certain area.
5. High Sales Cycle: Usually, a lot of phone calls and mailings are needed.
6. Required Higher Cost of Doing Business: Cost regarding inventory,
employees, purchasing costs, and order-processing costs associated with
faxing, phone calls, and data entry, and even physical stores increase
transaction costs.
7. Inefficient Business Administration: Store inventory levels, shipping
and receiving logs, and other business administration tasks might need

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 to be categorized and updated manually in and done only when have
time. This cause the information might not the latest or updated.
8. Need to employ number of staff: Need staffs that give customer service
and sales support service.
4.3.2 (c) Disadvantages for the consumer
1. Security issue: probably the number one reason why people don’t
purchase online. Credit card information is very sensitive and must be
handled by someone the customer can trust. Scams, frauds and rip-off
are not uncommon on the web.
2. Customer services: consumer are not always satisfied with their
purchases and when buying online.

4.3.3 CONSUMER - TO - CONSUMER (C2C)

Customer to Customer (C2C), sometimes known as Consumer to
Consumer, E- Commerce involves electronically-facilitated transactions
between individuals, often through a third party. One common example is online
auctions, such as Ebay, where an individual can list an item for sale and other
individuals can bid to purchase it. Auction sites normally charge commission
to the sellers using them. They act purely as intermediaries who match buyers
with sellers and they have little control over the quality of the products being
offered, although they do try to prevent the sale of illegal goods, such as pirate
CDs or DVDs.
Website following C2C business model helps consumer to sell their assets
like residential property, cars, motorcycles etc. or rent a room by publishing
their information on the website. Website may or may not charge the consumer
for its services. Another consumer may opt to buy the product of the first
customer by viewing the post/advertisement on the website.
Another popular area for customer to customer transactions is online
classified advertising sites, such as Craigslist and Gumtree. Major online
retailers like Amazon also allow individuals to sell products via their sites.

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 Fig. 4.3.3: Process of C2C e-Commerce
C2C is expected to increase in the future because it minimises the costs
of using third parties. However, it does suffer from some problems, such as
lack of quality control or payment guarantees and there can sometimes be
difficulties in making credit-card payments.
• The same customer can act as both buyer as well as seller
• The online market place will allow buyer to browse products by using
different criteria such as; best seller, most popular product, from your
city and many more
• Different sellers can bid on the products with list item listed by the
buyer, what they are looking for so that the buyer can get different best
prices and offers from sellers
• The social media linking functionalities include, community or forum
discussion and blog and other social media website link interface.
• The back end interface includes features for administration to manage
buyer and seller accounts, payment settings, gallery setting, etc.

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4.3.3 (a) Advantages of C2C E-Commerce
• It is always available so that consumers can have access to whenever
they feel like shopping
• There is regular updating of the website
• Consumers selling products to other consumers benefit from the higher
profitability that result from selling directly to one another
• There is a low transaction cost; sellers can post their goods over the
internet at a cheaper rate far better than higher price of renting a space
in a store
• Customer can directly contact sellers and do without an intermediary.
4.3.3 (b) Disadvantages of C2C E-Commerce
• Payment made has no guarantee
• There could be theft as scammers might try to create their website with
names of some famous C2C websites such as eBay to attract customers.
• There is lack of controlling quality of the products.
C2C e-commerce websites must update their technologies to suit the
current happenings in their business. It is every body’s wish to buy or sell
without any threat to their security. C2C e-commerce websites to upgrade their
security measures to arrest the situation of scammers and fraudsters that pose
threat to the security of consumers and sellers. C2C e-commerce websites should
increase their payment technology to allow consumers to purchase products at
ease.

4.3.4 CONSUMER - TO - BUSINESS (C2B)

Customer to Business (C2B), sometimes known as Consumer to
Business, is the most recent E-Commerce business model. In this model,
individual customers offer to sell products and services to companies who are
prepared to purchase them. This business model is the opposite of the traditional
B2C model.

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 C2B (Customer to Business) is a model where initiative comes from the
customers (consumers) and enterprises are the target group. The customers
actively contact the enterprises via the Internet and raise questions, suggestions
and ideas that can be used, for example for product or service innovation. The
enterprises can facilitate the C2B model by setting, for example discussions
forums on their websites or their pages on social networks. In these cases, the
Word-of-Mouth Marketing applies.
In this model, a consumer approaches website showing multiple business
organizations for a particular service. Consumer places an estimate of amount
he/she wants to spend for a particular service. For example, comparison of
interest rates of personal loan/ car loan provided by various banks via website.
Business organization that fulfils the consumer’s requirement within specified
budget approaches the customer and provides its services.
Elance was one of the first web sites to offer this type of transactions. It
allows sellers to advertise their skills and prospective buyers to advertise
projects. Similar sites such as People per hour and Guru work on the same
basis.
General features of C2B includes
– Direct action.
– Collaborative consumption.
– Detailed segmentation.
– Interaction.
– Reciprocity.
– Bi-directionality.

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 Fig 4.3.4: Process of C2B e-commerce
The advent of the C2B scheme is due to major changes:
• Connecting a large group of people to a bidirectional network has made
this sort of commercial relationship possible. The large traditional media
outlets are one direction relationship whereas the internet is bidirectional
one.
• Decreased co st o f t echnolo gy : Individuals now have access to
technologies that were once only available to large companies ( digital
printing and acquisition technology, high performance computer,
powerful software)
There are only a few kinds of companies whose trading models could
be considered as C2B.
Online Advertising sites like Google Ad sense, affiliation platforms like
Commission Junction and affiliation programs like Amazon are the best
examples of C2B schemes. Individuals can display advertising banners,
contextual text ads or any other promotional items on their personal websites.
Individuals are directly commissioned to provide an advertising/selling service
to companies.

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 The new C2B business model is a revolution because it introduces a
new collaborative trading scheme paving the way for new applications and
new socio-economical behaviours.
4.3.4 (a) Advantages of C2B
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3. One single place for all Magnolia configurable elements.
4. Could still be linked to java doc

4.3.5 BUSINESS-TO-ADMINISTRATION OR BUSINESS-TO-

GOVERNMENT (B-TO-G)
Business-to-government (B2G) e-commerce is concerned with the need
for business to sell goods or services to governments or government agencies.
Such activities include supplying the army, police force, hospitals and schools
with products and services.

Fig 4.3.4: Process B2A e-Commerce

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 Furthermore, businesses will often compete in an online environment
for contracts to provide services to the public on behalf of the government.
Such services may include the collection of taxes, and the supply of public
services. The exchange of information, services and products between business
organizations and government agencies on-line. This may include,
• E-procurement services, in which businesses learn about the purchasing
needs of agencies and provide services.
• A virtual workplace in which a business and a government agency could
coordinate the work on a contracted project by collaborating on-line to
coordinate on-line meetings, review plans and manage progress.
• Rental of on-line applications and databases designed especially for use
by government agencies.

4.3.6 CONSUMER-TO-CONSUMER (C2C)

The consumer-to-consumer model is an emerging e-commerce business
model involving buying and selling between consumers using third-party
platforms. You might want to sell a new or used product by listing it on a third-
party platform, such as OLX, Craigslist, or eBay. Potential buyers will check
and contact you to buy. This is simply how the C2C e-commerce model works.
The third-party platforms will only charge a little amount as commission for
using their website.

Fig 4.3.6: C2C Services

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4.3.7 CONSUMER TO BUSINESS (C2B)
For freelancers and work-from-home individuals looking to offer their
services to companies, the customer-to-business e-commerce model is a perfect
choice. C2B is a business model that helps businesses reach talents who can
offer solutions or quality services. For instance, Upwork is a marketplace that
connects freelancers and companies. The services offered include content
writing, copywriting, graphic designing, web development, UI/UX designing,
consulting, and many more. The e-commerce model is slowly gaining popularity,
and it helps individual customers set their prices and work with companies
worldwide from the comfort of their home.

4.3.8 CONSUMER-TO-ADMINISTRATION (C2A)

Cust o mer-t o -administ rat io n, po pularly kno wn as cust o mer-t o -
government, is another business model of e-commerce very similar to B2A.
In C2A, a customer conducts transactions directly with the government
agencies by providing something of value via online means. This can be paying
taxes, water, electrical bills, or something as simple as providing feedback on
a government website.

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 Fig. 4.3.8: C2A e-Commerce

4.3.9 OTHER BUSINESS MODELS

Other Business models include:
 Business-to-Peer Networks (B-to-P):
This would be the provision of hardware, software or other services to
the peer networks. An example here would be Napster who provided
the software and facilities to enable peer networking.
 Consumer-to-Peer Networks (C-to-P):
This is exactly part of what peer-to-peer networking is and so is a slightly
redundant distinction since consumers offer their computing facilities
once they are on the peer network.
 Government-to-Business (G-to-B):
Also known as e-government, the exchange of information, services
and products between government agencies and business organizations.

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 Government sites now enable the exchange between government and
business of:
 Information, guidance and advice for business on international trading,
sources of funding and support (ukishelp), facilities (e.g. www.dti.
org.uk).
 A database of laws, regulations and government policy for industry
sectors.
 On-line application and submission of official forms (such as value added
tax).
 On-line payment facilities.
This improves accuracy, increases speed and reduces costs, so businesses
are given financial incentives to use electronic-form submission and payment
facilities.
 Government-to-Citizen (G-to-C):

It is also known as e-government. Government sites offering information,

forms and facilities to conduct transactions for individuals, including
paying bills and submitting official forms on-line such as tax returns.
 Government-to-Government (G-to-G):
It is also known as e-government. Government-to-government transactions
within countries linking local governments together and also international
governments, especially within the European Union, which is in the
early stages of developing coordinated strategies to link up different
national systems.

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  Peer–to-Peer Network (P-to-P):
This is the communications model in which each party has the same
capabilities and either party can initiate a communication session. In
recent usage, peer-to-peer has come to describe applications in which
users can use the Internet to exchange files with each other directly or
through a mediating server.
 Peer Network-to-Consumer (P-to-C):
This is in effect peer-to-peer networking, offering services to consumers
who are an integral part of the peer network.
 Peer Network-to-Business (P-to-B)
Peer-to-peer networking provides resources to business. For example,
using peer network resources such as the spare processing capacity of
individual machines on the network to solve mathematical problems or
intensive and repetitive DNA analyses which requires very high capacity
processing power.
 M-commerce:
Mobile commerce is the buying and selling of goods and services through
wireless technology-i.e., hand held devices such as cellular telephones
and personal digital assistants (PDAs). Japan is seen as a global leader
in m-commerce. As content delivery over wireless devices becomes
faster, more secure, and scalable, some believe that m-commerce will
surpass wire line e-commerce as the method of choice for digital
commerce transactions.
Industries affected by m-commerce include:
 Financial services, including mobile banking as well as brokerage
services.
 Telecommunications, in which service changes, bill payment and account
reviews can all be conducted from the same handheld device;

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  Service/retail, as consumers are given the ability to place and pay for
orders on-the-fly; and
 Information services, which include the delivery of entertainment,
financial news, sports figures and traffic updates to a single mobile
device.
This framework can be used by organizations to segment their customers
and distinguish the different needs, requirements, business processes, products
and services that are needed for each.

4.4 SUMMARY
An elect ro nic business mo del is an impo rt ant baseline fo r t he
development of e-commerce system applications. Essentially, it provides the
design rationale for e-commerce systems from the business point of view.
However, how an e-business model must be defined and specified is a largely
open issue. We therefore present what should be in an e-business model. There
is little doubt that the Internet has introduced new and innovative business
models to both the B2B and B2C markets. It has shortened the value chain and
put increasing pressure on all players, but especially intermediaries, to add
value or risk extinction.

4.5 GLOSSARY
 B2B: A type of commerce transaction that exists between businesses
 B2C: It is the model involving business and consumers over the internet
 C2C: E-Commerce involves electronically-facilitated transactions
between individuals, often through a third party.
 C2B: In this model, individual customers offer to sell products and
services to companies who are prepared to purchase them.
 P-to-C: This is in effect peer-to-peer networking, offering services to
consumers who are an integral part of the peer network.
 Mobile commerce: Buying and selling of goods and services through

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 wireless technology- i.e., hand held devices such as cellular telephones
and personal digital assistants (PDAs).

4.6 SELF ASSESSMENT QUESTIONS

1. Define B2B business model. Explain its features.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain various types of E-Business Models.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What is a P2P model?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

4.7 LESSON END EXERCISE

1. Explain the features of B2G model.
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain Customer to Customer Model?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Who are freelancers and which category of e-commerce business model
they prefer?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

4.8 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e, 2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.
**********

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Lesson No. 5 UNIT I
INTRODUCTION TO ELECTRONIC COMMERCE
DRIVERS OF E-COMMERCE; THE DIGITAL
AND SOCIAL WORLDS: ECONOMY,
ENTERPRISE AND SOCIETY; EC BUSINESS MODELS

STRUCTURE
5.1 Introduction
5.2 Objectives
5.3 Drivers of E-commerce
5.4 The digital and social worlds: economy, enterprises and society
5.5 EC business models
5.6 Summary
5.7 Glossary
5.8 Self-Assessment Questions
5.9 Lesson End Exercise
5.10 Suggested Readings

5. 1 INTRODUCTION
Today, we live in era when the digital economy is reflection of the
changes that have taken place from the third industrial revolution, and we are

115
in the midst of this change. There is a third revolution, also known as digitial
revolution. This is characterised by the shift from analog electronics and
mechanical devices to digital ones as a result of the development of digital
technologies. The rapid advancement of digital technologies has transformed
the landscape of the economy, enterprises and society. This transformation is
characterised by digital innovation into various aspects of human activity,
economy, enterprises as well as society at large.

5.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the drivers of e-commerce
 list the advantages digital economy
 describe the digital revolution

5.3 DRIVERS OF E COMMERCE

The Indian e-commerce market is rapidly evolving as one of the most
vibrant sectors in the country. India’s young demographic profile, increasing
internet and smartphone penetration, a growing consumer base, budding start-
up ecosystem, rising investments in the e-commerce sector are a few of the
driving forces behind the boom in the sector. Additionally, Government
initiatives such as Digital India and a favourable FDI policy are also contributing
to the rapid growth of the sector.Indian e-commerce had recorded a compound
annual growth rate (CAGR) of 25% between 2016 and 2019 to reach a market
size of INR 2.9 trillion. The pace is expected to grow over the next three years
as India is projected to overtake the US as the second largest e-commerce market
by 2026.The following are the key drivers of e commerce:
a. Political Forces : Political forces refer to the government policies,
regulations, and stability that influence your e-commerce business. For
example, you need to consider the tax laws, trade agreements, consumer
protection laws, data privacy laws, and cyber security laws of the
countries where you operate or sell your products. Political factors can

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 create opportunities or threats for your e-commerce business depending
on how favorable or unfavorable they are. For instance, a free trade
agreement can lower your costs and increase your market access, while
a data breach can damage your reputation and expose you to legal risks.
1. Government Regulations: Every country have its own rules and
regulations but nowadays almost every country have well defined
cyberlaws which provides a right environment for the ecommerce.

2. Reductions in Government subsidies: Now world is very open,

some countries provides lot of rebate in tax and in other forms to
do business. But some other countries reducing the soaps for
business. E-commerce provides the opportunity to take these
challenges.
3. Rapid Political Changes: Whenever government changes any
country there are some changes in guidelines and polices towards
the business. It is also work as driving force for the e-commerce.
b. Economic Forces : Prevailing economic conditions in the marketplace

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help explain the forces that effect e-commerce outputs. Economic forces
are factors such as inflation, interest rates, labor and government
monetary policies that influence levels of production and demand for
goods and services. These factors dictate the availability and affordability
of production resources, as well as the abilities of consumers to obtain
your end products. E-commerce involves transacting business through
the use of automated information technology applications. The outcomes
of e-commerce activities are directly affected by economic forces, as
was evidenced by the global pandemic. In 2020, COVID-19 lockdowns
and supply chain shortages in stores pushed consumers of all ages to e-
Commerce adding $105 billion in online revenue, as reported by Digital
Commerce 360. Ecommerce continued to accelerate in 2021 at a record-
setting pace as consumers embraced the convenience of online shopping
for clothing, groceries and alcohol. This clearly shows that fluctuating
economic conditions are major forces affecting e-commerce.
1. Strong competition: Now competitions the part of any business
and companies are implementing newtechniques every day to
bear their competitors. E-Commerce is one of the tools of recent
days, which isadopted bythecompanies.
2. Global Economy: In Present Scenario world becomes a global
village and there are standard patters inmarket for business, so
every country must follow these norms. There is huge gap
between the growth rate of developed and developing nation, so
more and more developed nations are investing in every part
ofworld.E-Commerce is theneed of such ascenario.
3. Extremely Low Labour Cost in Some Countries: Now this
the common feature of business thatc ompanies are having
manufacturing units in one are of the world and the same products
is marketed in other part of the world. Definitely some medium
is required to maintain it and e commerce is providing such
medium.

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 4. Frequent Changes in Market demands: As we discussed above
that the age of techolnology so any change which takes place in
part of the world, rapidly reflects every where so e-commerce it
the tool which is necessary to sustain in present fast changing
world.
5. Increase Expectation of Consumers: The expectation of
consumers about quality and services are very high, so it works
like driving force for e-commerce.
6. Awareness Among Consumers: Awareness Among Consumers:
Now consumers are well aware. Internet, print media and
electronic media keep update the consumers about new products
and their rates.
c. Social Forces : Social factors refer to the demographic, cultural, and
behavioral characteristics of your potential and existing customers. For
example, you need to consider the age, gender, education, income,
lifestyle, values, preferences, and attitudes of your target segments.
Social factors can create opportunities or threats for your e-commerce
business depending on how they shape your customer needs, wants,
and expectations. For instance, a growing population of young and tech-
savvy consumers can increase your market potential, while a changing
consumer behavior due to the COVID-19 pandemic can affect your
customer loyalty and retention. Incorporating the level and advancement
in IT education and training which will enable both potential buyers
and the work force to understand and use the technology. Rising
standards of living and aburgeoning, upwardly mobile middle class with
high disposable incomes, Busy lifestyles, urban traffic congestion and
lack of time for offline shopping have given boost to e-commerce.
Evolution of websites such as Flipkart, Snapdeal, e-bay etc. has become
amarket place where seller register with them and pays commission on
every sale.
d. Technological Forces : Technological forces refer to the innovations,

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 developments, and trends that affect your e-commerce business. For
example, you need to consider the internet penetration, mobile devices,
social media, cloud computing, artificial intelligence, blockchain, and
online payment systems of your industry and market. Technological
factors can create opportunities or threats for your e-commerce business
depending on how they enhance or disrupt your operations, products,
services, and customer experience. For instance, a high internet
penetration can expand your reach and accessibility, while a new
technology can create a competitive advantage or a substitute for your
offerings.
1. Rapid Technological Changes: Technology is the factor, which
provides e-commerce an opportunity to be come and perfect
solution for business.
2. New Technologies: New and secure technology available in the
market, which provides an easy, cheap and secure platform for
the e-commerce.
3. Information Overload: By using e-commerce we can easily
efficiently manage information about the product and other
business related things. This is a cheap and secure medium for
managing important information.
4. Digital Convergence: The digital revolution has made it possible
for digital devices to communicate withone another. The Internet’s
massive growth during the past decades- a creation of market
forces- will continue. Steady increase in computer power and
decreasing cost made navigation on the internet.
e. Environmental forces: Environmental forces refer to the natural
resources, climate, and ecological issues that affect your e-commerce
business. For example, you need to consider the energy consumption,
carbon footprint, waste management, recycling, and sustainability of
yo ur e-co mmerce act ivit ies. Enviro nment al fact o rs can cr eat e

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 opportunities or threats for your e-commerce business depending on
how they impact your reputation, costs, and compliance. For instance, a
gr een co nsumer ism can incr ease yo ur cust o mer demand and
differentiation, while a natural disaster can disrupt your supply chain
and delivery.
f. Legal forces: Legal forces refer to the laws, rules, and regulations that
govern your e-commerce business. For example, you need to consider
the intellectual property rights, copyright, trademark, patent, and
licensing of your e-commerce products and services. Legal factors can
create opportunities or threats for your e-commerce business depending
on how they protect or expose you to legal liabilities and disputes. For
instance, a strong intellectual property rights can secure your competitive
edge and innovation, while a patent infringement can result in a lawsuit
and a fine.
To conclude, we can say that when looking at each of these trend areas,
we must remember that they do not operate in isolation. For example,
changes in technology may make things possible that were not possible
before and this can lead to the need for additional regulations, changes
in customer behaviour, social interactions, increases in affordability,
the creation of new jobs and industries, etc.

5.4 THE DIGITAL AND SOCIAL WORLDS: ECONOMY,

ENTERPRISES AND SOCIETY
E-commerce, including E-Commerce 2.0 is facilitated by developments
in the digital and social economy.The digital revolution is upon us. We see it
every day at home and work, in businesses, schools, hospitals, on the roads, in
entertainment. For an overview, see Sidhu (2015). Next, we describe three
elements of the digital world: econ- omy, enterprises, and society.

5.4.1 The Digital Economy

The digital economy, also known as the Internet economy, is an economy
based on online transactions, mostly e-commerce. It includes digital wireline

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or wireless communication net- works (e.g., the Internet, intranets, extranets,
and VANs), computers, software, and other related information technologies.
This digital economy displays the following characteristics:
• Many digitizable products—books, databases, magazines, information,
elect r o nic games, and so ft ware—ar e delivered o ver a d igit al
infrastructure anytime, anywhere in the world, interconnected by a global
grid. We are moving from analog to digital, even the media is going
digital (TV as of February 2009).
• Information is transformed into a commodity.
• Financial transactions are now digitized and chips are embedded in many
products (e.g., cameras, cars). Knowledge is codified.
• Work and business processes are organized in new and innovative ways.
• Disruptive innovation is occurring in many industries.
The major characteristics of the digital economy are discussed in the
following table:.

Area Description
Globalization Glo bal co mmunicat io n and co llabo rat io n; glo bal
electronic market places and competition.
Digitization Music, books, pictures, software, videos, and more are
digitized for fast and in expensive storage and distribution
Speed A move to real-time transactions, thanks to digitized
document s, pro ducts, and services. Many business
processes are expedited by 90% or more.
Information overload Alt ho ugh t he amo unt o f info rmat io n generat ed is
and intelligent search accelerating, intelligent search tools can help users find
what people need .
Markets Markets are moving online. Physical market places are
being replaced or supplemented by electronic markets;
new markets are be ingcreated, increasing competition

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Business models New and improved business models and processes provide
and processes opportunities to newcompanies and industries.
Innovation Digital and Internet-based innovations continue at a rapid
pace. More patents are being grantedthanever before
Obsolescence The fast pace of innovat io n creates a high rat e of
obsolescence.
Opportunities Opportunities abound in almost all aspects oflife and
operations.
Fraud Criminals employ as lew of innovative schemes on the
Internet. Cybercons are everywhere.
Wars Conventional wars are changing to cyberwars or are
complemented by them.
Organizations Organizations are moving to digital enterprises and social
businesses
The digital revolution also enables many innovations, and new ones
appear almost daily, improving business processes and productivity. The digital
revolution provides the necessary technologies for EC and creates major changes
in the business environment.

5.4.1 Sharing Economy

Sharing economy refers to an economic system constructed around the
concept of sharing goods and services among the participating people. Also
known as “collaborative consumption” and “collaborative economy” such
systems appear in different forms and frequently use information technologies
in their operations. A well-known example is car sharing.
The major benefits for participants are cost reduction for buyers and the
ability to sell more for sellers. Societal benefits include reduction of carbon
footprint (e.g., in ride sharing), increase recycling, and increase social
interactions.

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 Related to the shared economy is the distributed economy where Uber,
Airbnb, and crowdsourcing operate.

5.4.2 Sharing Economy and E-Commerce

Several EC models and companies are based on the concept of the sharing
economy. Examples include Uber (for ride sharing), Yerdle (a sharing economy
free marketplace), Kickstarter (for crowdfunding), Krrb (a P2P market place),
and Knok and Love Home Swap for home swapping. Money lending is growing
rapidly (lending clubs). Vacation rentals are a large area where home and condo
owners provide short- term rentals possibly for an exchange or renting (e.g.,
see Airbnb, HomeAway, and VRBO).

5.4.4 The Social Impact

The digital revolution is accompanied by social impacts that resulted in
part by improved communication and collaboration tools offered by social
media. For example, smartphones reduce the digital divide. In addition to
productivity improvement in the economy, one can see some major social
changes, such as the mass participation in social networks. One impact is the
creation of the social enterprise.

5.4.5 The Apps Society

New apps change the way that people communicate, work, and play.
People are looking for apps for thousands of new uses.
Example: Swedish Farmers Go Online
According to Willgren (2013), traditional farmers in Sweden created a
so cial net wo rk called “Min Farm (My Far m).” The net wo rk allo ws
communication between the farmers and their customers. It also allows people
that grow their own food to tell their stories and ask for advice. Customer can
visit farms and do some shopping there; they can also order online. The network
promotes self-sustainability.

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5.4.6 The Digital Enterprise
One of the major impacts of EC is the creation of the digital enterprise
concept that accompanies the social enterprise.
The term digital enterprise has several definitions. It usually refers to
an enterprise, such as Amazon.com, Google, Facebook, or Ticketmaster, which
uses computers and information systems to automate most of its business
processes. The digital enterprise is a new business model that uses IT to gain
competitive advantage by increasing employee productivity, impro ving
efficiency and effective- ness of business processes, and better interactivity
between vendors and customers. The major characteristics of a digital enterprise
are listed in Table below, where they are compared with those of a traditional
enterprise.

Brick-and-mortar organizations Digital organizations(enterprises)

Selling in physical stores Selling online
Selling tangible goods Selling digital goods online as well
Internal inventory/production Online collaborative inventory planning
forecasting
Paper catalogs Smart electronic catalogs
Physical market place Electronic market place
Use of telephone, fax, VANs, and Use of computers, smartphones, the
traditional EDI Internet, and extranets and EDI
Physicalauctions, infrequently Online auctions, everywhere, anytime
Broker-based services, transactions Electronic info mediaries, value-added
services
Paper-based tendering Electronic tendering (reverse auctions)
Push production, starting with Pull production, starting with an order
demand forecasting (build-to-order)

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Paper based billing and payment Electronic billing and payment
Mass production (standard products) Mass customization, build-to-order
Physical-based commission marketing Affiliated, virtual marketing
Word-of-mouth, slow and limited Explosive viral marketing, in particular
advertisement in social networks
Large amount of capital needed for Less capital needed forbuild-to-order;
mass production payments can be collected before
production starts
Linear supply chain Hub based supply chain
Large fixed cost required for Small fixed cost required for smaller and
plant operation less complex plant operation
It must be noted that the term ‘enterprise’ refers to any kind of
organizatio n, public or private, small or large. An enterprise can be a
manufacturing plant, a hospital, a university, a TV network, or even an entire
city. They are all moving toward being digitized.
A digital enterprise uses networks of computers in EC to facilitate the
following:
 All business partners are reached via the Internet, or a group of secured
intranets, called an extranet, or value- added private communication
lines.
 All internal communication is done via an intranet, which is the
counterpart of the Internet inside the company.
Most companies’ data and EC transactions are done via the Internet and
extranets. Many companies employ a corporate portal, which is a gateway for
customers, employees, and partners to reach corporate information and to
communicate with the company.
A key concern of many companies today is how to change themselves
into digital (or at least partially digital) enterprises.

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 The concept of the digital enterprise is related to the smart and intelligent
enterprise systems.

5.4.7 Smart and Intelligent Enterprise Systems

IBM is a leading force in developing smart (or intelligent) computing
systems (other companies include SAP, Intel, Oracle, Google, and Microsoft).
IBM provides software and knowledge to digital enterprises (including cities).

5.4.8 Smart Computing and Integrated Expertise

A major part of IBM’s project is based on cloud computing. The project
created software for efficient, easy to use and flexible computing systems that
include a built-in pattern of expertise. The integrated systems are known as
“IBM PureFlex” and “IBM PureApplication.” These systems, per IBM, are
changing the economics of computing by:
 Helping reduce time-to-market
 Conserving resources and reducing costs
 Consolidating diverse computer system components and applications
 Improving security and reducing human error
All of these contribute to IBM’s Smarter Commerce efforts.

5.4.9 The Social Business (Enterprise)

The concept of social business has several definitions and characteristics.
We present only a few of them.
The Social Business Forum’s Definition
The concept of social business was developed decades ago and was not
related to computers. Today, the Social Business Forum defines social business
as “an organization that has put in place the strategies, technologies and
processes to systematically engage all the individuals of its ecosystem
(employees, customers, partners, suppliers) to maximize the co-created value.”
The Forum also discusses the implication of this definition and its relevance
inside, across, and outside organizations. It must be noted that the efficient

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creation of value using technology is emphasized. The Forum conducts annual
conferences.
IBM’s Approach
IBM has been recognized by the research company IDC as the market
share leader in social software platform providers. IBM and IDC include in
their joint definition the following characteristics namely use of emerging
technologies such as social software, social-oriented organizational culture,
and improvements of business processes. The IBM effort also concentrates on
improved collaboration. The basic idea is that social media networks and social
customers require organizations to drastically change the way they work to
become a social business that can exploit the opportunities created by the digital
and social revolutions. IBM is helping organizations become social businesses.
IBM has an extensive “social business video library”;
The Social Enterprise
The concept of social business is frequently equated to and sometimes
co nfused wit h t he t erm so cial ent erprise. Many use t he t wo t er ms
interchangeably. The main goal of a social enterprise is to focus on social issues.
These enterprises generate revenue. The profits do not go to owners and share-
holders, but are put back into the company and used toward building positive
social change.

5.4.10 The Digital Revolution and Society

The final, and perhaps most important, element of the digital world is
people and the way they work and live. Clearly, the digital revolution has
changed almo st any activity one can think o f—wo rk, play, shopping,
entertainment, travel, medical care, education, and much more. Just think about
your digital phone, camera, TV, car, home, and almost anything else. It is only
natural that people are utilizing technology and EC at an increasing rate. Let us
take a look at some examples:
 Google has developed cars that drive themselves automatically in traffic
(autonomous vehicles). The cars are being tested in several states,

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 including California, and were approved in the state of Nevada in the
summer of 2012. As of 2014, self-driving cars are running in several
cities.
 AeroMobile is planning a flying car in coming years that will have a
full complement of e-business features.
 Washers and dryers in some college dorms are controlled via the Internet.
 Ford Company is using “My Ford Touch” system to calculate the fastest,
shortest, and most fuel-efficient way to get from a given place to a
destination. The system charts a route that avoids congestion (based on
historical and real-time traffic data).
 An international research project is developing a computerized system
that enables monitoring patients at home in real time, conducting a
diagno- sis, and providing medical advice. The objective is to reduce
traffic to medical facilities while increas- ing the quality of care. The
project is managed in Israel with collaboration of experts from several
European countries.

5.4.11 Disruptive Impacts

Digital technologies in general and EC and related technologies such as
m-commerce and social commerce may have adisruptive impact on economies,
industries, business models, and people (already studied in lesson 1).

5.4.12 The Social Customer

An important component in the digital society is the socialcustomer.
Social customers (sometimes called digitalcustomers) are usually members of
social networks whoshare opinions about products, services, and vendors,
doonline social shopping, and understand their rights andhow to use the wisdom
and power of social communities totheir benefit. The number of social customers
is increasingexponentially due to wireless shopping and new onlineshopping
models and opportunities. The highlights of the social customers are shown in
Figure below:

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 Uses new online
c hannels and ne w
communic ation tools
Tr usts in
Seeks support to advices made by
conne ct with online
like-minde d pee rs acquaintance s and
str anger s

The new
Reads and
Te nds to buy
Cr eates pr oduct Social Customer more online t han
reviews, pr oduct
r ankings and of fline
blog posts

Wants to
Provide
Expe cts be tter fee dback about
Custo mer the product and
experience
customer
se rvice

Fig 5.4.12 : Elements of new social customer

As the figure illustrates, social customers expect better service, are
willing to provide feedback, product reviews, and connect with like-minded
peers. This new behavior pattern requires a new strategy for both marketing
communication and customer service. The social customer is participatory, and
has active involvement in the shopping process both as a buyer and as an
influencer. Individuals are influenced byfriends, friends of friends, and friends
of friends of friends. Merchants must understand how these consumers differ
from conventional customers, and therefore use appropriate e-commerce
marketing strategy as well as superb customer service. Procedures, guidelines,
and software are publically available for social CRM.
IBM’s Smarter Commerce initiative is focusing on the digital customer.
IBM is developing new software and ser- vices that deliver intelligence-guided
customer experience (e.g., personalization and targeted advertising based on
cloud computing analytics).

5.5 EC BUSINESS MODELS

One of the major characteristics of EC is that it facilitates the creation
of new business models. A business model describes the manner in which

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business is done to generate revenue and create value. This is accomplished by
attaining organizational objectives. A key area is attracting enough customers
to buy the organization’s products or services. Several different EC business
models are possible, depending on the company, the industry, and so on.
Business models can be found in existing businesses as well as in proposed
ones.

5.5.1 The Structure and Properties of Business Models

A comprehensive business model (for a proposal company) may include
some or all of the following components illustrated in Figure below:

Models also include a value proposition, which is a description of the

benefits of using the specific model (tangible and intangible), both to the
customers and to the organization’

5.5.2 Revenue Models

A revenue model specifies how the organization, or an EC project, will
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generate revenue. For example, the revenue model for Net-a-Porter shows
revenue from online sales of luxury dresses. The major revenue models are
shown below:
• A description of the customers to be served and their value proposition.
Also, how these customers can be reached and supported.
• A description of all products and services the busi- ness plans to deliver.
Also, what the differentiating aspects of the products are.
• The company’s growth strategies.
• A description of the required business process and the distribution
infrastructure (including human resources).
• A list of the resources required, their cost and availability (including
human resources).
• A description of the organization’s supply chains, including suppliers
and other business partners.
• The value-chain structure.
• The relevant markets with a list of the major com- petitors and their
market share. Also, market strategies and strengths/weaknesses of the
company.
• The competitive advantage offered by the business model including
pricing and selling strategies.
• The anticipated organizational changes and any resistance to change.
• A description of the revenues expected (revenue model), sources of
funding, and the financial viability.
5.5.2 a) Subscription Fees. Customers pay a fixed amount, usually
monthly, to get some type of service. An example would be the
fee you pay to an Internet access provider (fixed monthly
payments).
5.5.2 b) Advertising Fees. Companies charge others for allowing them
to place a banner on their sites.

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5.5.2 c) Affiliate Fees. Companies receive commissions for referring
customers to certain websites. A good program is available at
Amazon.com.
5.5.2 d) Licensing Fees. Ano ther revenue source is licensing fees
Licensing fees can be assessed as an annual fee or a per usage
fee. Microsoft receives fees from each workstation that uses
Windows NT, for example.
5.5.2 e) Other Revenue Sources. Some companies allow people to play
games for a fee or to watch a sports competition.
A company uses its revenue model to describe how it will generate
revenue and its business model to describe the process it will use to do so.

5.5.3 Innovative Revenue Models for Individuals

The Internet allows for innovative revenue models, some of which can
be utilized even by individuals, as demonstrated by the following example.
Example: Buy Low–Sell High. This strategy has been known for
generations, but now you have a better chance. How about buying stuff cheap on
Craigslist (or other online classified ad sites) and resell it for a 50–200% profit at
an auction on eBay? Try it, you might make money. Some people make it even
bigger. The person who bought the domain name pizza.com for $20 in 1994 sold it
for $2.6 million in April 2008 (one of the many he purchased). The revenue model
can be part of the value proposition or it may supplement it.

5.5.4 Value Proposition

Business models also include a value-proposition statement. A value
proposition refers to the benefits, including the intangi- ble ones that a company
hopes to derive from using its business model. In B2C EC, for example, the
customer value proposi- tion defines how a company’s product or service fulfills
the needs of customers. In other words, it describes the total ben- efits to the
customer. The value proposition is an important partof the marketing plan of
any product or service.

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5.5.5 Functions of a business model
Business models have the following major functions or objectives:
• Describe the supply and value chains.
• Formulate the venture’s competitive strategy and its long-range plans.
• Present the customer value proposition.
• Identify who willuse the technology for what pur- pose; specify the
revenue-generation process; where the company will operate.
• Estimate the cost structure and amount and profit potential.

5.5.6 Typical EC Business Models

There are many types of EC business models. Examples and details of
EC business models can be found throughout this text, and in Rappa (2010).
The following are five common models. Additional models are listed in Online
File W1.3.
1. Online direct marketing. The most obvious EC model is that of selling
products or services online. Sales may be from a manufacturer to a
customer, eliminating intermediaries or physical stores (e.g., Dell), or
from retailers to consumers, making distribution more efficient (e.g.,
Net-a-Porter, Walmart online). This model is especially efficient for
digit izable pro duct s and services (t ho se t hat can be delivered
electronically).This model has several variations and uses different
mechanisms (e.g., auctions). It is practiced in B2C (where it is called e-
tailing).
2. Electronic tendering systems. Large organizational buyers usually
make large-volume or large-value purchases through a tendering
(bidding) system, also known as a reverse auction. Such tendering can
be done online, saving time and money. Pioneered by General Electric
Corp., e-tendering systems are gaining popularity. Indeed, many
government agencies mandate that most of their procurement must be
done through e-tendering.

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3. Electronic marketplaces and exchanges. Electronic marketplaces
existed in isolated applications for decades(e.g., stock and commodities
exchanges). But as of 1996, hundreds of e-marketplaces (old and new)
have introduced new methods and efficiencies to the trading process. If
they are well organized and managed, e-marketplaces can provide
significant benefits to both buyers and sellers. Of special interest are
vertical marketplaces that concentrate on one industry
4. Viral advertising and marketing. According to the viral marketing
model, people use e-mail and social networks to spread word-of-mouth
advertising. It is basically Web-based word-of-mouth advertising, and
is popular in social networks.
5. Group purchasing. Group purchasing is a well-known off-line method,
both in B2C and B2B. It is based on the concept of quantity discounts
(“cheaper by the dozen”). The Internet model allows individuals to get
together, so they can gain the large-quantity advantage. This model was
not popular in B2C until 2010 when Groupon introduced a modified
model in which people are grouped around special deals This model is
very popular in China.

5.5.7 Classification of Business Models in E-Commerce

Rappa (2010) classified the EC business models into the following
categories:
1. Brokerage: Market makers that charges fee for their services.
2. Advertising: Websites that provide content and charge advertisers for
related ads.
3. Infomediary: Provide information and/or infrastructure that help buyers
and/or sellers and charge for their services.
4. Merchant: Retailers (such as Walmart or Amazon): These buy the
products and sell them at profit.
5. Direct model: Sell without intermediaries.

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6. Affiliate: Paying website owners to place banners. Share fees received
from advertisers.
7. Community: A social media-based model that utilizes Web 2.0 tools
and social networks.

5.6 SUMMARY
The most interesting e-commerce application in recent years has been
the emergence of social and enterprise social net- works. Originating from online
communities, these networks are growing rapidly and providing many new EC
initiatives, revenue models, and business models. A social network is a social
entity composed of nodes (which are generally individuals, groups, or
organizations) that are connected by links such as hobbies, friendship or
profession. The structures are often very complex.In its simplest form, a social
network can be described by an image of the nodes and links. The network can
also be used to describe Facebook’s social graph.The major elements of the
digital world are the digital economy, digital enterprises, and digital society.
They are diversified and expanding rapidly.
The digital world is accompanied by social businesses and social
customers.The major EC business models include online direct marketing,
electronic tender- ing systems, name-your-own-price, affiliate marketing, viral
marketing, group purchasing, online auctions, mass customization (make-to-
order), electronic exchanges, supply chain improvers, finding the best price,
value- chain integration, value-chain providers, information brokers, bartering,
deep discounting, and membership.

5.7 GLOSSARY
 Digital enterprise: It is a new business model that uses IT to gain
competitive advantage by increasing employee productivity, improving
efficiency and effective- ness of business processes.
 Sharing economy: It refers to an economic system constructed around
the concept of sharing goods and services among the participating people.

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  Infomediary: Provide information and/or infrastructure that help buyers
and/or sellers and charge for their services.
 Merchant: Retailers (such as Walmart or Amazon): These buy the
products and sell them at profit.
 Direct model: Sell without intermediaries.
 Digital economy: It is, also known as the Internet economy, is an
economy based on online transactions, mostly e-commerce.
 Affiliate: Paying website owners to place banners. Share fees received
from advertisers

5.8 SELF ASSESSMENT QUESTIONS

1. Define the digital revolution and list its components.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. List the characteristics of the digital economy.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Define a digital enterprise and relate it to social business
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________

5.9 LESSON END EXERCISE

1. Describe the social enterprise.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Compare traditional and digital enterprises
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Describe the digital society.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

5.10 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.

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 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications Electronic Commerce

*******

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Lesson No. 6 UNIT II
ELECTRONIC COMMERCE; MECHANISM, PLATFORMS
AND TOOLS
E-COMMERCE MECHANISM: AN OVERVIEW; EC
ACTIVITIES AND SUPPORT MECHANISM

STRUCTURE
6.1 Introduction
6.2 Objectives
6.3 Electronic commerce mechanisms: An overview
6.4 EC Activities and Support Mechanism
6.5 Summary
6.6 Glossary
6.7 Self-Assessment Questions
6.8 Lesson End Exercise
6.9 Suggested Readings

6.1 INTRODUCTION
India, emerging economic superpower and the third largest internet
market in term of users, has opened up huge opportunities for the growth of e-
Commerce. The country has seen a great transformation in this market with the
increasing number of internet users. Further, the new trends coupled with
changes in urban lifestyle is fuelling the growth of e-Commerce in India.

140
 More and more organizations in India are joining the digital market
bandwagon these days. The rising literacy rate and huge adoption of internet in
India has tremendously raised the growth of e-Commerce. Further, with the
much-westernized generation exploring the new potentials and prospects, a
huge success rate of e-commerce industry has caught up. E-commerce is
probably the best thing that has happened to the changing middle class
population with higher aspiration and lesser time. As a business model too, it
appeals both the value-minded Indian consumer as well as small business
owners. Around the world, e-commerce has brought in bargain hunting – which
is quite beneficial for the middle-classes. The huge adoption rate of Myntra,
Amazon, Flipkart and Snapdeal have proved that e-commerce in India will go
a long way. It has the potential to generate revenue and reduce costs for
businesses and entities. Marketing, retailers, banks, insurance, government,
training, online publishing, travel industries are some of the main recipients of
e-commerce. For instance, banks use the web for diverse business practices
and customer service. Overall, electronic commerce can be a benefit to society
especially if businesses adapt to their customers’ worries such as privacy
concerns. As these problems begin to be solved and technology improves, e-
commerce will provide individuals with more choice and add further depth to
the economy.

6.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the meaning of electronic commerce mechanism
 activities involved in e-commerce mechanism
 describe the concept of electronic malls
 meaning and types of portals

6.3 ELECTRONIC COMMERCE MECHANISMS: AN

OVERVIEW
Conducting business electronically using networks and internet is known

141
as electronic commerce. Electronic commerce (EC) is an emerging concept
that describes the buying and selling of products, services and information via
computer networks, including the internet. EC uses several technologies ranging
from Electronic Data Interchange (EDI) to e-mail for commercial transaction
processing. EC applications began in early seventies with innovations, such
as, electronic transfer of funds. However, the applications were limited to large
corporations and a few small businesses. Then came Electronic Data Interchange
(EDI), which expanded EC from financial transactions to other kinds of
transaction processing and extended the types of participating companies from
financial institutions to manufacturers, retailers and other forms of business.
Today, EC is rapidly outgrowing its limited operational sphere to everywhere
in the entire globe.
The many EC models and types of transactions,discussed in previous
lessons, are enabled by several mechanisms. To begin with, most applications
are conducted on the Internet. In addition, the generic enablers of any
information system including data- bases, networks, security, software and
server software, operating systems, hardware (Web servers), and hosting services
need to be established. Added to the above are the specific EC mechanisms
presented in this chapter, such as electronic markets, shopping carts, e-catalogs,
and support services. In addition to all of the above, there are different methods
for executing EC, such as buying at a fixed price or at an auction, and each
method has a different support mechanism. Finally, there are the Web 2.0-based
collaboration and communication mechanisms (e.g., Twitter) and special
platforms such as the one used by Pinterest.

6.4 EC ACTIVITIES AND SUPPORT MECHANISMS

EC activities are divided here into six categories, which are listed on
the left side of Figure. Each activity is supported by one or more EC mechanisms,
which are shown on the right side of Figure below:

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 Fig. 6.1 EC activities and mechanism
Source : Turban et. al (2017)

6.4.1 EC Activities includes the following:

a. Large capacity information: Capacity to provide information on the
most Internet companies is unrestricted. Businesses or advertising
agencies can provide the equivalent of thousands of pages of advertising

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 information and instructions, without having to worry every minute of
the second increase on the expensive traditional media advertising costs.
The network behind small banner ads, companies can put their company
and its products and services, including product performance, price,
model, morphology, etc. It seems necessary to explain all audiences,
including detailed information made into a web page on their website.
We can say that under certain circumstances the cost (for storing banner
ads on other sites and pay for), companies can increase without limit
advertising information, which in the traditional media cannot be
imagined.
b. Online Trading: Online trading is basically the act of buying and selling
financial products through an online trading platform. These platforms
are normally provided by internet based brokers and are available to
every single person who wishes to try to make money from the market.

Most brokers, like Sharekhan, ICICI Securities provide a variety of

financial products including Shares, Commodities, Indices and Forex.
While trading Shares like Google, Infosys or buying and selling

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 Commodities like Gold or Silver might be quite familiar, Forex trading
has gained extreme popularity over the last couple of years due to some
of its major features. The use of online trades has increased the number
of discount brokerages because internet trading allows many brokers to
further cut costs and part of the savings can be passed on to customers
in the form of lower commissions. Another benefit of online trading is
the improvement in the speed of which transactions can be executed
and settled, because there is no need for paper-based documents to be
copied, filed and entered into an electronic format.
d. E-learning: E-learning, also called electronic learning or web-based
training, is anywhere, anytime instruction delivered over the internet or
a corporate intranet to students and other learners via a browser. Contrary
to traditional learning methods, e-learning lets students, employees in
training and casual learners part icipate in an organized learning
experience regardless of their physical location. In its formative years,
e-learning tools primarily enabled the delivery of learning material
directly from a teacher to a learner. Now, the e-learning experience has
evo lved t o enable mo r e mult idirect io nal co mmunicat io n using
increasingly interactive tools. Learners have greater freedom in choosing
how they receive and respond to e-learning content, and any number of
peers can be involved.

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e. E-Entertainment: Entertainment is a form of activity that holds the
attention and interest of an audience, or gives pleasure and delight. It
can be an idea or a task, but is more likely to be one of the activities or
events that have developed over thousands of years specifically for the
purpose of keeping an audience’s attention.
By the second half of the 20th century, developments in electronic media
made possible the delivery of entertainment products to mass audiences
across the globe. The technology enabled people to see, hear and
participate in all the familiar forms stories, theatre, music, dance
wherever they live. The rapid development of entertainment technology
was assisted by improvements in data storage devices such as cassette
t apes o r compact discs, alo ng wit h increasing miniat urisatio n.
Computerisation and the development of barcodes also made ticketing
easier, faster and global.
f. Improves performance through extensive coverage: Net wo rk
connection with computers worldwide, it is a global network of large
and small throughout the world in accordance with a variety of unified
communications proto col consist ing of info rmatio n transmission
network. Thus, over the Internet release wide range of advertising
information, regardless of time and geographical constraints. From the
advertising point of view, as an advertising medium, the wider the scope
of dissemination of information, human contact, the more advertising
effect will be. From the advertisers market, the consumer markets
throughout every corner of the world, even a small business are likely
to become an international company overnight.
g. Other Activities: Internet media has the right to change the function of
information, companies can make changes at any time according to need
advertising information, 24 hours warehouse industry can adjust product
prices, product information, you can instantly get the latest product
information dissemination to consumers and online media can also be
long term preservation advertising information. Enterprise established

146
 for the product website, you can remain, waiting for consumer inquiries,
enabling real-time and persistence unity.

6.4.2 EC Mechanism is discussed in detail below:

a. Electronic markets: Electronic markets are rapidly emerging as a tool
for conducting business and commercial transactions. A market is a
network of interactions and relationships where information, products,
services and payments are exchanged. When the market place is
electronic, the business centre is not a physical one but a network-based
location where business interactions occur. In electronic markets, the
principal participants-transaction handlers, buyers, brokers and sellers-
not only are at different locations but seldom even know one another.
They meet online or through the web and all necessary transactions
including transfer of money are handled electronically through the net.
b. Customer shopping mechanisms: webstores, malls, and portals:
Several kinds of interactions exist among sellers, buyers, and e-
marketplaces. The major B2C mechanisms are webstores (storefronts)
and Internet malls.
 Webstores or storefront : A webstore (or storefront) refers to a single
company’s (or individual seller’s) website where products and services
are sold. Webstores may target an industry, a location, or a niche market
(e.g., cattoys.com). The webstore may belong to a manufacturer (e.g.,
geappliances.com and dell.com), to a retailer (e.g., amazon.com), to
individuals selling from home, or to other types of business. It must be
noted that some companies refer to their webstores as portals.
A webstore includes tools known as merchant software that are necessary
for conducting online sales. The most common tools are an electronic
catalog; a search engine that helps the consumer find products in the
catalog; an electronic shopping cart for holding items until checkout; e-
auction facilities where auctions take place; a payment gateway where
payment arrangements can be made; a shipment center where shipping

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 arrangements are made; and customer services, which include product
and warranty information and CRM.
 Microsites
A microsite is a webpage(s) that acts as a supplement to a primary
website, but is external to it. It expands on the content by adding editorial,
commercial videos, or educational and training material.
 Electronic Malls
In addition to shopping at individual webstores, consumers can shop in
electronic malls (e-malls). Similar to malls in the physical world, an e-
mall (online mall) is an online shopping location where many stores
present their catalogs. The mall charges commission from the sellers
based on their sale vo lume. Fo r example, the E-mall of Maine
(emallsofamer- ica.com/emallofmaine.htm) is an e-mall that aggregates
products, services, and providers in the state of Maine. It contains a
directory of vacation services and product categories and the vendors in
each category. When a consumer indicates the category he or she is
interested in, the consumer is transferred to the appropriate independent
webstore. This kind of mall does not provide any shared services; it is
merely a directory. Other malls, such as choicemall.com or etsy.com,
do provide some shared services. Both yahoo.com and ebay.com operate
electronic malls.
 Web (Information) Portals
A portal is an information gateway that is used in e-marketplaces,
webstores, and other types of EC (e.g., in e-collaboration, intra-business,
and e-learning). A Web (information) portal is a single point of access,
through a Web browser, to critical business information located inside
and outside of organizations. This information is aggregated and is
accessed and presented in a consist ent way. Many Web portals
personalize for users. Now, wireless devices are becoming portals for
both enterprise and Internet access. A schematic view of a portal is shown

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 in Figure below. Information sources (external and internal) are shown
on the left side, and integrated and process data are shown as output on
the monitor’s screen. Web portals offer some useful services such as e-
mail, news, stock prices, entertainment, shopping capabilities, and so
forth.

Fig. 6.21 Web Portal Schemetic news

Source : Turban et. al (2017)
 Types of Portals
Portals can assume many shapes. One way to distinguish among them
is to look at their content, which can vary from narrow to broad, and
their community or audience, which also can differ. The major types of
portals are as follows:
 Commercial (public) portals. These popular portals offer content for
anyone. Although they can be customized by the user, they are still
intended for broad audiences and offer fairly routine content, some in

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 real time (e.g., a stock ticker and news). Examples of such sites are
yahoo.com, google.com, and msn.com.
 Corporate (private) portals. Corporate portals provide organized access
to internal corporate information. These also are known as enterprise
portals or enterprise information portals. Corporate portals appear in
different forms.
 Patient portals. Several companies offer patient portals, for example,
WebMD and myUCLAhealth. org. Patients have access to their personal
information. The UCLA portal also allows communication between
patients and their caregivers.
 Publishing portals. These portals are intended for communities with
specific interests and involve relatively little customization of content;
however, they provide extensive online search features and some
interactive capabilities.
 Mobile portals. Mobile portals are portals that are accessible from
mobile devices. An increasing number of portals are accessible via
mobile devices, telephones, as well as tools to build voice portals. Voice
portals are especially popular for 1–800 numbers (enterprise 800
numbers) that provide self-service to customers with information
available in Internet databases (e.g., finding your balance or last deposit
made at your bank).
 Knowledge portals. These portals enable easy access to knowledge by
company employees and facilitate collaboration.
 Board portals. These portals support decision- making.
 Community portals. These are usually parts of online communities.
They are dedicated to some theme and may be sponsored by a vendor
such as Sony.
c. E-catalogs- Catalogs have been printed on paper for generations.
Recently, electronic catalogs on a DVD (or CD-ROM) and on the Internet
have gained popularity. Electronic catalogs (e-catalogs) consist of a

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 product database, directory, and a presentation function. They are the
backbone of most e-commerce sales sites. For merchants, the objective
of e-catalogs is to advertise and promote products and services. For the
customer, the purpose of such catalogs is to locate information on
products and services. E-catalogs can be searched quickly with the help
of search engines. Some offer tools for interactions. Most early online
catalogs were static presentations of text and messages from paper
catalogs. However, online catalogs have evolved to become more
dynamic, cust o mizable, and int egrat ed with selling and buying
procedures, shopping carts, order taking, and payment. E-catalogs may
include video clips. The tools for building them are being integrated
with merchant software suites and Web hosting tools. Examples of a
simple product catalog can be seen at JetPens (jetpens.com) and
Starbucks Store (store.starbucks.com). Although used only occasionally
in B2C commerce, customized catalogs are used frequently in B2B e-
commerce.
 Search Engines
Customers look for information (e.g., requests for product information
or pricing) in similar ways. This type of request is repetitive, and
answering such requests manually is costly. Search engines deliver
answers economically and efficiently by matching questions with
frequently asked question (FAQ) templates, which respond with
“canned” answers. In general, a search engine is a computer program
that can access databases of Internet or intranet resources, search for
specific information or keywords, and report the results.
Google’s Internet Explorer and Chrome, and Bing are the most popular
search engines in the USA. Baidu is the primary search engine in China.
Portals such as Yahoo! and MSN have their own search engines. Special
search engines organized to answer certain questions or search in
specified areas include ask.com, mamma.com, and looksmart.com.
Thousands of different public search engines are available. Each of these

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 tools excels in one or a few areas. These can be very specialized with
different capabilities. In addition, many companies have their own
enterprise search engines.
 Shopping Carts
An electronic shopping cart (also known as shopping bag or shopping
basket) is software that allows customers to accumulate items they
wish to buy before they arrange payment and check out, much like a
shopping cart in a super- market. The elect ronic shopping cart
software program automatically calculates the total cost, and adds
tax and shipping charges when applicable. Customers can review
and revise their shopping list before finalizing their purchase by
clicking on the “submit” button.
d. Electronic auctions : The Internet provides an infrastructure for
executing auctions electronically at lower cost, with a wide array of
support services, and with many more participating sellers and buyers
than physical auctions. Individual consumers and corporations can both
participate in this rapidly growing and very convenient form of e-
commerce.
Electronic auctions (e-auctions) are similar to off-line auctions except
that they are conducted online.
Major online auction sites, such as eBay, offer consumer products,
electronic parts, artwork, vacation packages, airline tickets, and
collectibles, as well as excess supplies and inventories that are being
auctioned off by businesses. Another type of B2B online auction is used
to trade special types of commodities, such as electricity transmission
capacities and gas and energy options. Furthermore, conventional
business practices that traditionally have relied on contracts and fixed
prices increasingly are converted into auctions with bidding for online
procurements.
e. Web 2.0 : The term Web 2.0 was coined by O’Reilly Media in 2004.

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 Web 2.0 is the second generation of Internet-based tools and services
that enables users t o easily generat e content , share media, and
communicate and collaborate, in innovative ways. Web 2.0 uses dozens
of tools such as wikis, RSS feeds, blogs, and microblogs (e.g., Twitter).
With microblogging, you can transmit short messages (up to 140
characters) to a list of recipients via the Internet and wireless or wireline
devices. As of 2009, Twitter became a major Web 2.0 tool with diversified
business applications.
f. Augmented reality and crowdsourcing : Augmented Reality (AR) is
defined as “an enhanced version of reality created by the use of
technology to add digital information on an image of something. AR is
the technology of recreating a real world but adding a layer on the top
of the view with digital elements like texts, images, photographs, or
sensations i. e. a real world is augmented by computer generated
component. AR is the mix of real world and virtual world. Thus, AR
also helps to get a view of various places, towns, restaurants, banks,
schools, buildings, etc without visiting the real places. Generally, AR is
being watched 23 Introduction to Educational Technology using mobile
devices like laptops, smartphones, tablets, etc. Similarly, special AR
headsets, such as Google Glass and AR apps can also be used. Some of
the popular examples of AR includes Snapchat lenses and the game
Pokemon Go. A more advanced version of VR and AR is the Mixed
Reality (MR) that combines the technologies of both AR and VR.
Crowdsourcing is a newly developed term which refers to the process
of outsourcing of activities by a firm to an online community or crowd
in the form of an ‘open call’. Any member of the crowd can then complete
an assigned task and be paid for their efforts. Although this form of
labour organisation was pioneered in the computing sector, businesses
have started to use ‘crowdsourcing’ for a diverse range of tasks that
they find can be better completed by members of a crowd rather than by
their own employees.

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g. Online payment : Internet banking is an electronic payment system
that enables customers of a financial institution to conduct financial
transactions on a website operated by the institution. With the use of a
mobile device, the user can perform mobile banking via call, text, website
or applications. It utilises the mobile connectivity of telecom operators
and, therefore, does not require an Internet connection. Telephone
banking is a service provided by a bank or other financial institution
that enables customers to perform financial transactions over the
telephone, without the need to visit a bank branch or automated teller
machine. Telephone banking times can be longer than branch opening
times, and some financial institutions offer the service on a 24-hour
basis. But Indian paymentgateways have an unusually high failure rate
by global standards. E-commerce companies using Indian payment
gateways are losing out on business, as several customers do not attempt
making payment again after a transaction fails.

6.5 SUMMARY
The many EC models and types of transactions, discussed in previous
lessons, are enabled by several mechanisms. To begin with, most applications
are conducted on the Internet. In addition, the generic enablers of any
information system including data- bases, networks, security, software and
server software, operating systems, hardware (Web servers), and hosting services
need to be established. Added to the above are the specific EC mechanisms
presented in this chapter, such as electronic markets, shopping carts, e-catalogs,
and support services. In addition to all of the above, there are different methods
for executing EC, such as buying at a fixed price or at an auction, and each
method has a different support mechanism. Finally, there are the Web 2.0-based
collaboration and communication mechanisms (e.g., Twitter) and special
platforms such as the one used by Pinterest. EC activities are divided here into
six categories where each activity is supported by one or more EC mechanisms,
which are discussed in this chapter.

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6.6 GLOSSARY
 E-mall:An e-mall (online mall) is an online shopping location where
many stores present their catalogs.
 Microsites: A microsite is a webpage(s) that acts as a supplement to a
primary website, but is external to it.
 Knowledge portals. These portals enable easy access to knowledge by
company employees and facilitate collaboration.
 Board portals. These portals support decision- making.
 Internet: It is a worldwide system of computer network through which
the users at any place can interact and make transaction.
 Webstores or storefront: A webstore (or storefront) refers to a single
company’s (or individual seller’s) website where products and services
are sold.

6.7 SELF ASSESSMENT QUESTIONS

1. List the major EC activities.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. List the major EC mechanisms.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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3. Explain how EC activities and EC mechanisms are inter-related.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

6.8 LESSON END EXERCISE

1. Write a detailed note on ‘Portals’.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Discuss in detail about Customer shopping mechanisms.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. How e-commerce helps in online trading?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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6.9 SUGGESTED READINGS
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

********

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Lesson No. 7 UNIT II
ELECTRONIC COMMERCE; MECHANISM, PLATFORMS
AND TOOLS
THE ONLINE PURCHASING PROCESS

STRUCTURE
7.1 Introduction
7.2 Objectives
7.3 The online purchasing process
7.4 Advantages and disadvantages of online shopping
7.5 Online safety
7.6 Summary
7.7 Glossary
7.8 Self-Assessment Questions
7.9 Lesson End Exercise
7.10 Suggested Readings

7.1 INTRODUCTION
The marketing around the digital environment, customer’s buying
behaviour may not be influenced and controlled by the brand and firm, when
they make a buying decision that might concern the interactions with search
engine, recommendations, online reviews and other information. In modern

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shopping environments, people are more likely to use their mobile phones,
computers, tablets and other digital devices to gather information. In an online
shopping environment, interactive decision may have an influence on aid
customer decision making, through online product reviews and user-generated
content, typically provided through software from companies like Bazaar voice
and Trust pilot, or via social media. This content, which can include text or
video-based reviews, customer photos, and feedback, is often displayed
alongside products being sold on websites like Amazon, Myntra, Meesho, Ajio,
Flipkart, and most other digital storefronts. Subsequently, risk and trust are
also two important factors affecting people’s’ behaviour in digital environments.
Customers consider to switch between e-channels, because they are mainly
influence by the comparison with offline shopping, involving growth of security,
financial and performance-risks. Online retailers have placed much emphasis
on customer trust aspect, trust is another way driving customer’s behaviour in
digital environment, which can depend on customer’s attitude and expectation.
So, the company’s products design or ideas must meet customer’s expectations,
customer’s purchase intention based on rational expectations, and additionally
impacts on emotional trust.

7.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the steps involved in online buying process
 explain the pros and cons of online shopping
 ensure safety and security while shopping online

7.3 THE ONLINE PURCHASING PROCESS

Customers buy goods online in different ways. The most common is
purchasing from catalogs at fixed prices. Sometimes prices may be negotiated
or discounted. Another way to determine price is dynamic pricing, which refers
to non-fixed prices such as those in auctions or stock (commodity) exchanges.
The process involves the following steps:

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1. Browsing for Items: Just like you would in a regular store, you can
either look for a particular item or browse around in an online store. If
you already know what item you are looking for, you can go ahead and
search for that particular item. On most shopping websites, a search
tool will be located at the top of the screen. Type in the item name and
press “Go,” “Search,” or a similar word. The example below comes
from Amazon.com.

If you do not have a specific product in mind, you may either browse by
department, usually located on the left-hand side of the screen, or search
for a very broad category of item, like “toys.” If you know you are in
the market for a new TV, for example, you might search for “television”
in the search box, which would then show you all the different types of
TVs that Amazon carries. You could also browse in the “Electronics &
Computers” department. Most departments also have sub categories
when yo u click o n t hem; fo r examp le, t he “Elect ro nics &
Computers”department includes “TV & Video,” “Laptops, Tablets, &
Netbooks,” “Appliances,” and more.

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Often, you might get an over whelming number of results when you
search, so you can narrow down your results by smaller categories (for
example, HDTVs, 3DTVs, specific brands of TVs). These suggested
refinements and links might be at the top or left-side of the screen,
depending on the website. To find out more information about a product,
you may either click on the picture of the item, or the name of the item.
To return to the list of items, simply use the back button only our browser.

You can always change the department where you are browsing or refine
your search at any point in the process. Simply enter a new or more
specific word in the search box at the top of the screen and click “Search.”
You can always get back to your previous search by using the back
button on your browser. Likewise, you can simply click on a new
department to change where you are browsing.
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2. The Shopping Cart : When you find an item that you like and you are
ready to buy it (or at least seriously consider buying it—just like putting
an expensive grocery item in your cart, you can always return it to the
shelf before you check out), you simply click on the “Add to Cart” or
“Add to Shopping Cart” button at the top of the product page. The
“Shopping Cart” is also sometimes called the “Shopping Bag.” You can
also usually specify how many of the item you would like purchase at
this point.

Items will automatically go into your cart after you click the “Add”
button; you can view your cart at any time. There is usually a little
picture of a cart in the top right corner of any shopping page—click on
this to view what you have placed in your cart.

When you click on the shopping cart icon, you will be able to review all
of the items that you have placed in there—you are not obligated to
purchase anything simply because you have put it in your cart. You are
only financially liable for items remaining in your cart after you click
on the “Check Out” or “Pay Now” buttons and enter your payment
information.

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 From the shopping cart page, you can change the number of a particular
item you would like to purchase, “delete” or take an item out of your
cart, review the specifics of the items in your cart by clicking on the
item name or picture, and see a running sub total of the cost of your
items.

3. Paying for Your Items: When you have decided on what you would
like to purchase, you can complete your transaction by clicking on the
“Checkout,” “Proceed to Checkout,” or a similarly named button in the
shopping cart.

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Many online shopping websites require you to create an account before you
can checkout—generally, all you will need to do is enter your e-mail address
and create a password. These businesses ask for this so that they can send
you advertisements and deals to your e-mail inbox, as well as keep a record
of all of your purchases—the cost of the convenience of online shopping!
For most shopping websites, you will need to input, at a minimum, your
name and e-mail address, as well as create a password, in order to check-out
with your items. If you think that you might forget your user name or
password, then entering your mobile phone is probably a good idea. It also
allows you to get text messages about item deliveries to your phone, which
may be helpful or annoying.

In order to receive your items, you will need to enter an address for
where you would like the products to be shipped. This may or may not
be the same as your billing address. You may also choose to shipy our
items to other people. Depending on the website that you are using, this
st ep might loo k slightly different, and ask for slightly different
information.

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You generally have several options of payment methods when purchasing
items online. The most common way to pay online is with a credit card;
you almost never want to pay for items online with cash or cash-like
methods (e.g., debit cards, money orders, personal checks).

Credit cards offer some additional protections from fraud, including zero-
liability policies (you are not held responsible for purchases made with
your stolen card) and credit protector services that alert you to fishy
activity. Importantly, credit cards are not directly linked to your bank
account, so no money will be withdrawn from your account until you
pay your monthly bill

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Some people prefer to pay for their online purchases through online
payment services, like Google Checkout and PayPal. These services act
like middlemen in the online shopping world—you give your credit card
information to one of these services, then they will disguise your
information to the merchant. This way, your credit card information is
only shared with one company. There is no cost for you to pay with these
services, but there is a small charge for vendors. Many larger companies
and companies that appreciate that customers would feel more comfortable
with these services offer them, but not all companies do. All eBay purchases,
for example, are conducted via PayPal (more on this in a moment).
PayPal and other payment websites will never ask for your credit card
number or other personal information by e-mail, so never trust e-mails
that request this information, even if it appears the e-mail looks like it
came from PayPal or Google Checkout. Don’t click any of the links in
the e-mail if it requests this sort of information— it’s probably a scam.
Many shopping websites now include an additional security measure
called a “captcha.” This is a photograph of a word that might look a
little bit blurry or hard to read and is meant to prove that you area human
and not a robot. These can be tricky to decipher and, depending on the
website, sometimes you can have the words read out loud to you or get
more than one chance to enter it correctly.

Examples of Captchas

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7.4 ADVANTAGES AND DISADVANTAGES OF ONLINE
BUYING
As with most online activities, there are definite tradeoffs in online
shopping between convenience, cost savings, choice, and privacy. Before you
decide whether or not online shopping is for you, it is important to weigh the
pros and cons of entering into the world of e-commerce.

7.4.1 Advantages of Online Shopping

a. Convenience: One of the biggest benefits of online shopping is that
you can buy almost anything you could imagine without ever leaving
your house. Online stores are open 24 hours a day and are accessible
from any location with an Internet connection.
b. Selection : In general, online stores are able to carry more selection
than traditional brick-and-mortarstores. Because online stores don’t need
to attractively display their items on shelves, they can keep a larger
amount of inventory on hand. They also might only have small amounts
of each item, since they don’t need to display them, and can order more
from their supplier as needed.
c. Information : Online shops tend to provide more information about
items for sale than you would get in a physical store (unless you asked
a sales associate, and that can be hit-or-miss). Product descriptions most
often include a description from the manufacturer, another description
from the vendor, specific technical and size details, reviews from
professional magazines and journals, and reviews from people who have
bought the product. Online bookstores often will have excerpts of the
books (usually the first chapter) for you to read. Having all this
information available when you are considering a purchase makes you
a more informed consumer without having toper form extra research
yourself.

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d. Price : Because online stores don’t have to pay rent for a storefront in a
nice part of town and tend to sell much larger quantities of goods, they
can offer to sell products for a much lower price. Discounts online can
be substantial—up to 25-50 percent off the suggested retail price. There
are even some sites that only sell clearance items! However, buying
online does take away from local business, so that is a consideration to
keep in mind.

7.4.2 Disadvantages of Online Shopping

a. Hands-On Inspection : One thing that online stores can’t replace is the
experience of actually seeing and touching the item you are considering
buying. For example, clothes shopping can be very tricky online, since
you can’t try on the clothes before you buy. There may also be small
details that you decide you don’t like in a product that aren’t noticeable
until you have it in your hand.
b. Shipping : Some major online retailers now offer free shipping for their
products, but many require you to meet a minimum order cost to qualify

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 or only offer this incentive at certain times of year. In general, you should
expect to pay an additional shipping cost on top of the price of the items
that you order. For larger items, like furniture, this can really add up!
Additionally, if you decide that you don’t like a product, you will have
to pack it back up and take it to the post office to return it. Again, some
retailers will offer free returns, but some do require you to pay for return
postage. In that case, even if you have decided against keeping an item,
you’ve still had to pay several dollars for the shipping!

c. Wait Time: Waiting for your item to arrive is another downside of online
shopping. One of the great pleasures of shopping at a store is the instant
gratification—you see something you like, you pay for it, and then you
get to take it home and use it right away! In the case of online shopping,
you may have to wait days or even weeks for the item to arrive at your
door. Especially if you are in a time crunch, then you may want to
consider purchasing your item at a local retailer.
d. Privacy: When you shop online, you waive certain privacy rights to
the online retailer. Onlinestores can track your purchases over time to
give you more suggestions of things you might like to buy, send you e-
mails with sale information, and, occasionally, sell your contact
information to other companies. These days, many brick-and-mortar
stores do the same thing, tracking your information through your credit
card (Target is a notable example). However, it is much trickier for
traditional stores to do this, as you may sometimes pay in cash or refuse
to provide your e-mail address at checkout. In contrast, by purchasing

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 something in an online store, you sign away certain privacy rights—
this is why it is always a good idea to read the Terms of Service.

7.5 ONLINE SAFETY

The Internet is a great resource and can be a powerful tool for finding
information, shopping, and communicating. But, just like everything else in
life, you need to be careful using it. There are some bad people who will try to
steal your information online, but if you take the proper precautions, identity
theft will be unlikely to happen to you.
Before You Shop Online
a. Contact your bank and find out about their policies regarding identity
theft. It is also important to know these policies about your credit cards.
Will you be held responsible for purchases made with your information,
should it be stolen?
b. Consider installing anti-virus software on your computer. The cost of
antivirus software varies depending on the brand and protection period
(i.e., some antivirus software is only good for a year). The most popular
brands of anti-virus software are Symantec/Norton and McAfee. You
can buy anti-virus software anywhere computers are sold. Talk to a sales
associate at a computer store in order to determine which program best
suits your needs.
c. After you install anti-virus software on your computer, you will need to
update it frequently (most programs will do this automatically). Just
like real viruses, computer viruses can change quickly over time.
Consider an anti-virus update like getting your annual flu shot, except
needed more often.
d. Be aware of the variety of scams that appear on the Internet. As a general
rule, if you get an offer from an unknown e-mail address (or even an e-
mail forwarded on from a friend!) that sounds too good to be true, it
most likely is.

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Staying Safe Online
a. Shop on secure websites. When you log in with your account information,
a secure website’s address will begin with “https://” instead of “http:/
/”. This stands for a secure HTTP connection. If you are using Internet
Explorer, a padlock should appear in the top right-hand corner of the
address bar in your internet browser window. Many sites will also have
some form of a verification symbol to show that company complies
with the highest form of encryption and security.
b. Always read a website’s privacy policy before providing any information.
If something does not sound right, do not give them your information.
You would not hand your credit card to just anyone on the street, so
don’t do it online. Making websites is easier than you think, and
sometimes crooks can create very legitimate-seeming websites.
c. Smaller websit es o ft en use PayPal, a middleman co mpany t hat
exclusively handles online purchases. Using PayPal is generally
considered safe, but always read the privacy policy and beware of
imposters.
d. Legitimate websites will never ask for your credit card number or other
personal information by e-mail, so never trust e-mails that request this
information, even if it appears that the e-mail came from PayPal or
Amazon.com. Also, do not click on any links in the e-mail if it requests
this sort of information— it will probably a scam.
e. If you are not sure, stick to the websites of large companies you are
already familiar with from their physical stores—they are more likely
to have a secure website. For example, you probably recognize and would
trust Myntra.com or Ajio.com. Other popular online shopping sites
include Amazon.com, Bewakoof.com, Snapdeal.com, and Meesho.com
Protecting Your Identity
There are several key behaviours that can help ensure that your identity
is protected online:

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a. If you have anti-virus software on your computer, be sure to periodically
update it. This will keep newer viruses from infecting your computer.
b. Do not open .exe files sent to you via e-mail if you do not trust the
source. Exefiles can install spy software or other viruses on your
computer that can be difficult to remove.
c. Anti-virus software will sometimes remove links from e-mail messages
if they have been flagged as malware (malicious software). If you
occasionally get e-mails missing links, your anti-virus software is
working!
d. Do not forward chain e-mails. Chain e-mails often prey on sympathy,
contain jokes, or include vague threats (e.g., “Someone will die of cancer
if you do not forward this e-mail”). Computer programmers can collect
e-mail addresses and information from these e-mails, so it is best to
ignore them.

Example of a Chain E-mail

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 Use a secure browser when making purchases online and avoid storing
passwords and personal information on your computer.

7. 6 SUMMARY
Online purchasing is a form of electronic commerce which allows
consumers to directly buy goods or services from a seller over the Internet
using a web browser or a mobile app. Consumers find a product of interest by
visiting the website of the retailer directly or by searching among alternative
vendors using a shopping search engine, which displays the same product’s
availability and pricing at different e-retailers. As of 2020, customers can shop
online using a range of different computers and devices, including desktop
computers, laptops, tablet computers and smartphones.
The process starts with a buyer logging on to a seller ’s website,
registering (if needed), and entering an online catalog or the buyer’s “My
Account.” E-catalogs can be very large, so using a search engine may be useful.
Buyers usually like to compare prices; therefore, an online price comparison
service can be useful (now available on smartphones). Some sellers (e.g.,
American Airlines, Amazo n.co m) provide price co mparisons sho wing
competitors. If not satisfied, the buyer may abandon the seller’s site. If satisfied,
the buyer will place the chosen item in a virtual shopping cart (or bag). The
buyer may return to the seller’s catalog to choose more items. Each selected
item is placed in the shopping cart. When the item selection is completed, the
buyer goes to a checkout page, where a shipment option is selected from a
menu (e.g., standard, next day). Finally, a payment option is selected. For
example, payment options allows you to pay by credit card, PayPal, check
after billing, in installments, and so on. After checking all the details for
accuracy, the buyer submits the order. The Internet is a great resource and can
be a powerful tool for finding information, shopping, and communicating. But,
just like everything else in life, you need to be careful using it.

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7.7 GLOSSARY
 Spam The electronic equivalent of junk mail.
 Spam site Pages that trick search engines into offering biased search
results so that the ranking of certain pages is inflated.
 Search advertising Placing online ads on Web pages that show results
from querying a search engine.
 Search engine A computer program that can access data-bases of Internet
resources, search for specific information or keywords, and report the
results.
 Payment cards Electronic cards that contain payment-related data. They
include credit cards, charge cards, and debit cards.
 Malware (malicious software) A generic term for malicious software.
 Fraud Any activity that involves deceitful practices or devices to deprive
another of property or other rights.

7.8 SELF ASSESSMENT QUESTIONS

1. How can you protect your identity while shopping online?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What are the pros and cons of buying online?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
3. Explain in detail the various modes of paying online?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

7.9 LESSON END EXERCISE

1. Which of the following is NOT a common e-commerce payment method?
a) Credit Card
b) PayPal
c) Cash on Delivery
d) Bartering
2. What is the term used to describe the practice of offering personalized
product recommendations to customers based on their browsing or
purchase history?
a) Cross-selling
b) Upselling
c) Affiliate marketing
d) Product personalization
3. What is the main purpose of a shopping cart in e-commerce websites?
a) To store customer preferences
b) To track user behaviour
c) To calculate the total cost of selected items
d) To facilitate the checkout process

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4. Which of the following is an example of a social media platform
commonly used for e-commerce marketing?
a) Facebook
b) LinkedIn
c) Twitter
d) All of the above
5. What is the term used to describe the process of returning a purchased
product for a refund?
a) Reversal
b) Refurbishment
c) Refund
d) Returns
6. Which of the following is NOT a common e-commerce payment method?
a) Credit card
b) Cash on delivery
c) Mobile wallet
d) None of the above

7.11 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.

176
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

********

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Lesson No. 8 UNIT II
ELECTRONIC COMMERCE; MECHANISM, PLATFORMS
AND TOOLS
E-MARKET PLACES: ELECTRONIC MARKETS,
COMPONENTS AND THE PARTICIPANTS IN E-MARKET
PLACES

STRUCTURE
8.1 Introduction
8.2 Objectives
8.3 E-marketplaces
8.4 The components and participants in e-marketplaces
8.5 Types of e-marketplaces
8.6 Determinants of inter organizational relationships relevant to e-market
places
8.7 Advantages and disadvantages of selling through online market places
8.8 E-marketplaces: Challenges and solutions
8.9 Summary
8.10 Glossary
8.11 Self-Assessment Questions
8.12 Lesson End Exercise
8.13 Suggested Readings

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8.1 INTRODUCTION
Markets play a central role in the economy, facilitating the exchange of
information, goods, services and payments. In the process, they create economic
value for buyers, sellers, market intermediaries and for society at large. Recent
years have seen a dramatic increase in the role of information technology in
markets, both in traditional markets, and in the emergence of electronic
marketplaces, such as the multitude of Internet-based online auctions.
Markets (electronic or otherwise) have three main functions namely (a)
matching buyers and sellers; (b) facilitating the exchange of information, goods,
services and payments associated with market transactions; and (c) providing
an institutional infrastructure, such as a legal and regulatory framework, that
enables the efficient functioning if the market. In a modern economy, the first
t wo funct io ns are pro vided by int ermediaries, while t he inst it ut ional
infrastructure is typically the province of governments. Internet-based electronic
marketplaces leverage information technology to perform the above functions
with increased effectiveness and reduced transaction costs, resulting in more
efficient, “friction free” markets.

8.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand the concept of e-marketplaces
 explain the components and participants in e-marketplaces
 describe the pros and cons of selling in e-marketplaces

8.3 E-MARKETPLACES
Markets (electronic or otherwise) have four major functions namely a)
enabling transactions to occur by providing a meeting place for buyers and
sellers; (b) enabling the flow of relevant information; (c) providing services
associated with market transactions, such as payments and escrow; and (d)
providing auxiliary services such as legal, auditing, and security.

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 The term marketplace differs once it referred to on the Web. It is
sometimes referred to as e-marketplace or marketspace. The electronic
marketplace is the major venue for conducting EC transactions. An e-marketplace
(also called e-market, virtual market, or marketspace) is an electronic space where
sellers and buyers meet and conduct different types of transactions. Customers
receive goods and services for money (or for other goods and services, if bartering
is used). The functions of an e-market are the same as those of a physical
marketplace; however, computerized systems tend to make electronic markets much
more efficient by providing more updated information and various support services,
such as rapid and smooth executions of transactions.
The emergence of electronic marketplaces, especially Web-based ones,
has changed several of the processes used in trading and supply chains. In
many cases, these changes, driven by technology, have frequently resulted in:

8.4 THE COMPONENTS AND PARTICIPANTS IN E-

MARKETPLACES
The major components and players in a marketspace are customers,
sellers, products and services (physical or digital), infrastructure, front-end
and back-end mechanisms, intermediaries and other business partners, and
support services such as security and payments.
Components and participants in
E-Marketplaces
Product
Customer Seller &
Services

Infrastructure Front End Back end

Intermediaries

Fig. 8.1 Components and Participants in E-Marketplaces

Source : Turban et. al (2017)..... Springer

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 A brief description of each of the component and participant is as follows:
a. Customers: Several billions of Internet users world- wide are potential
buyers of goods and services offered on the Internet. These consumers
are lo o king fo r bargains, cust o mized it ems, co llect o rs’ it ems,
entertainment, socialization, and more. The social customers have more
power than regular customers. They can search for detailed information,
compare prices, bid, and sometimes negotiate. Buying organizations are
also customers, accounting for more than 85% of EC volume and value
activities.
b. Sellers. Millions of webstores are advertising and offering a huge variety
of items. These stores are owned by companies, government agencies,
or individuals. Every day it is possible to find new offerings of products
and services. Sellers can sell directly from their websites or from public
e-marketplaces.
c. Products and services. One of the major differences between the
marketplace and the marketspace is the possible digitization of products
and services in a marketspace. Although both types of markets can sell
physical products, they can also sell digital products, which are goods
that can be transformed into a digital format. However, in marketspaces,
buyers can buy digitized products online, anytime and from any place
in seconds, and receive the purchased goods instantly. In addition to the
digitization of software, music, and airline tickets, it is possible to digitize
dozens of other products and services.
d. Infrastructure. The marketspace infrastructure includes electronic
networks, databases, hardware, software, and more.
e. Front end. Customers interact with a marketspace via a front end. The
major components of the front end can include the seller’s portal,
electronic catalogs, a shopping cart, a search engine, an auction engine,
a payment gateway, and all other activities related to placing orders.
f. Back end. All the activities that are related to order aggregation and
fulfilment, inventory management purchasing from suppliers, accounting

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 and finance, insurance, payment processing, packaging, and delivery
are done in what is termed the back end of the business.
g. Intermediaries. In marketing, an intermediary is typically a third party
that operates between sellers and buyers. The role of electronic
intermediaries is frequently different from that of regular intermediaries
(such as wholesalers or retailers), as will be seen throughout the text.
For example, online intermediaries create and manage the online markets.
They help match buyers and sellers, provide escrow services, and help
customers and/or sellers complete transactions. Physical intermediaries
may be eliminated and their jobs be computerized (fully or partially).

8.5 TYPES OF E-MARKETPLACES

There are many different types of e-marketplaces based on a range of
business models. They broadly fall into different categories based on how they
operate.
a. Independent e-marketplace : An independent e-marketplace is usually
a business-to-business online platform operated by a third party which
is open to buyers or sellers in a particular industry. By registering on an
independent e-marketplace, you can access classified ads or requests
for quotations or bids in your industry sector. You may be required to
pay to take part.
b. Buyer-oriented e-marketplace : A buyer-oriented e-marketplace is
normally run by a consortium of buyers to establish an efficient
purchasing environment. If you are looking to purchase, participating
in this type of e-marketplace can help you lower your administrative
costs and achieve the best price from suppliers. As a supplier you can
use a buyer-oriented e-marketplace to advertise your catalogue to a pool
of relevant customers who are looking to buy.
c. Supplier-oriented e-marketplace : Also known as a supplier directory,
this marketplace is set up and operated by a number of suppliers. Each
supplier is looking to establish an efficient sales channel through the

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 internet to a large number of buyers. You can typically search these
marketplaces by the product or service being offered.
d. Vertical e-marketplace: Vertical e-marketplaces provide online access
to businesses vertically up and down every segment of a particular
industry sector such as automotive, chemical, construction or textiles.
Buying or selling using a vertical e-marketplace for your industry sector
can increase your operating efficiency and help to decrease supply chain
costs, inventories and procurement-cycle time.
e. Horizontal e-marketplace: A horizontal e-marketplace connects buyers
and sellers across different industries or regions. You can use a horizontal
e-marketplace to buy indirect products such as office equipment or
stationery.
f. Private Marketplaces (hierarchies)—operated by individual companies
to connect directly to their buyers/suppliers (e.g., Volkswagen);
g. Public or Intermediary Marketplaces—independently owned and may
be horizontal operations (e.g., Freemarkets) or operate within a specific
industry (e.g., ChemConnect).
h. Con sort ia M a rket plac es—o wned by no r mally co mpet it ive
organizations within one industry (e.g., Covisint).
i. Community or Cooperative e-M arketplaces—o wnership and
management is spread over a large number of participants and in some
cases all members (e.g., regional e-marketplaces).

8.6 DETERMINANTS OF INTERORGANIZATIONAL

RELATIONSHIPS RELEVANT TO E-MARKETPLACES
An e-marketplace can be understood as a type of interorganizational
relat io nship, net wo rk, o r alliance. Oliver pro po ses six generalizable
determinants of interorganizational relationships, which are relevant to e-
marketplaces:

183
1) Necessity—to fulfil legal or regulatory requirements. For example, some
privat e and go vernment pro cur ement syst ems are based o n e-
marketplaces. If companies wish to tender for contracts it must be done
through the e-marketplace.
2) Asymmetry—potential to exert power over other organizations.
Electronic marketplace consortia can be formed by major players in a
market to exert influence over other organizations to participate.
Consortia members are in a position to define the policies and structure
of the e-marketplace. When suppliers have to adopt specialized
information and technology systems to participate in the e-marketplace
then the supplier may feel “locked-in.” Porter argues that the open nature
of the Internet is less likely to result in lock-in. Although, this may be
true for business to consumer e-commerce, it is unlikely to apply to the
same extent to B2B e-commerce since these systems require specialized
software, training, and experience. Williamson argues that lock-in is
symmetrical since the buyer cannot easily or quickly change suppliers.
While this may act as a barrier in fixed supply chains, the buyer may
have considerable choice within the supplier participant base in an e-
marketplace.
3) Reciprocity—desire t o co operat e, collabo rate, and co ordinate.
Hierarchical e-marketplaces require the organizations in their supply
chain to cooperate and collaborate by transacting and exchanging
information.
4) Efficiency—internally focused efficiencies. E-marketplace participation
may be seen as a way to reduce the cost of procurement.
5) Stability—in response to environmental uncertainty. A company may
decide to enter an e-marketplace so it can become less dependent on a
small number of suppliers.
6) Legitimacy—related to reputation, image, prestige, or congruence with
prevailing norms in the environment. This has been shown to be an
ineffective rationale for e-marketplace participation as companies that

184
 emphasize this as their reason for e-marketplace participation are more
likely to be passive members.

8.7 ADVANTAGES AND DISADVANTAGES OF SELLING

THROUGH ONLINE MARKETPLACES
Online marketplaces allow you to sell goods without setting up your
own online store. Selling through online marketplaces provides a flexible
business opportunity with relatively low start-up costs. eBay and Amazon are
examples of well-established marketplaces.

8.7.1 Advantages of online marketplaces for your business

The potential advantages to be gained by joining an online marketplace
will vary between industries and businesses, and indeed between buyers and
sellers. Some of the potential benefits include:
a. It provides an additional channel to market and sell your products.
b. The platform offers reduced marketing costs compared to other sales
channels.
c. It allows new opportunities for overseas sales - there has been online
marketplace growth in the categories of homeware, pets, fashion and
sporting goods.
d. They are popular with customers and offer a convenient way to compare
prices and products from a single source.
e. Being part of an established online marketplace provides a level of trust
between you and the buyer.
f. Impartial reviews of your products and service may give new customers
the confidence to buy.
g. They offer opportunities to establish new trading partnerships with
traders and suppliers, either within your supply chain or across supply
chains.

185
h. They provide greater transparency - availability, prices and stock levels
are accessible in an open environment.
i. It is possible to operate a round-the-clock - time constraints and problems
with varying international trading hours are removed.
8.7.2 Disadvantages of online marketplaces for your business
There are a number of potential drawbacks that may need to be
considered when selling on marketplaces including:
a. Marketplaces can charge commission on every sale and fees can vary
from site to site. Before selling your products on a marketplace, make
sure you understand the marketplace’s pricing structure. See fees for
selling on Amazon, and fees for selling on eBay.
b. The online stores may impose restrictive terms and conditions in terms
of how you can communicate with customers.
c. There may be marketplace limitations as to how your business can brand
its online presence.

8.8 E-MARKETPLACES : CHALLENGES AND SOLUTIONS

The E- marketplace or the online market is a place or a website where
one can find different brands of products coming from multiple vendors, shops
or person showcased on the same platform. The marketplace owner is
responsible for attracting customers and the processed transactions, while the
third part y vendo rs deal wit h the manufacturing and shipping. Online
Marketplace streamlines the production process through one simple portal,
where the manufacturers sell their products directly to the consumers, therefore
avoiding the stagnant process of stocks holding. This kind of supply chain
management is usually referred to as the “Dropshipping” method.
Companies like Amazon, eBay, and Flipkart (India) have experienced
massive success in t he eCommerce marketplace business model. This
Omnichannel model has so far proven to be the most profitable business in
web eCommerce. The entire marketplace runs on one software infrastructure,

186
allowing all the vendors to sell their goods under the umbrella of one website.
In terms of revenue, these companies take a percentage of the sales on any
product sold across the platforms.
a. Seller and buyer retention – While the most important challenge has
always been to attract buyers and sellers to trade in the e-commerce
marketplace, the second next crucial problem is to make them active
users of the platform for a long time. The issue of buyer retention can still
be solved with the help of marketing, wide range of sellers’ availability and
improved user experience, however engaging lot of sellers at once is always
a problem. Therefore, the business owners should always come up with
new ideas of how to keep the sellers engaged for a long time at the same
time increase their base. E-commerce Marketplace can typically solve the
issue by providing an easy way to engage the sellers with the relevant buyers
and consecutively provide them with additional features and benefits to
expand their business on this platform.
b. Connecting buyers with relevant sellers- This process plays an
important role in engaging the buyers and sellers to the Marketplace. To
solve this issue the platform owners should use different methods like
tracking buyers and sellers behaviours driven on-site search system,
personalized emails based on the algorithms, auto filling sellers account,
providing handy and user friendly navigations, etc.
c. Buyers trusting the sellers – Trust between the buyers and the sellers
plays a very critical role in achieving a conversion. To build the trust,
the platform owners have to fall back on traditional way of feedback
giving it a digital twist. Features such as ‘Testimonials’ – which will
speak volumes about the authenticity of the product and the buyer, an
actionable ‘Rating’ system- where everybody can easily rate the products,
sellers and the services, or Social Proof- since customers don’t trust
machines, they trust people and experiences, this can make a great impact
in socially proving your testimonial and ratings through people who
have used it.

187
 d. First Impression is the best impression- This proverb is true to its
truest sense when it comes to eCommerce Marketplace. It is very
important to provide the best user experience to your customers on any
device through which they are accessing your platform. Easy to
understand and access application would prompt your customers to keep
coming back to you.
e. Price competition can pose a problem- In large marketplaces, price
competition can pose a huge problem. Vendors can choose to compete
for the lowest price, which may serve the customer but could end up
earning lower profits for both the marketplace and the vendor.
f. Quality assurance can also be an issue – Marketplaces may not always
have control over the quality of products or timeliness of delivery. One
way to combat this is to establish a review system, allowing consumers
to give feedback on specific third-party sellers and products. Some
marketplaces like eBay will move the seller down in search results or
downgrade their account due to negative reviews, while other sites like
Amazon leave it up to the consumer to penalize a vendor based on poor
reviews. The right enterprise software platform can help you manage
these aspects of quality assurance.

8.9 SUMMARY
An e-marketplace is a virtual online market where organisations register
as buyers or sellers to conduct business-to-business e-commerce over the
internet. There are many types of e-marketplaces based on a range of business
models. They can be operated by an independent third party or run by some
form of industry consortium set up to serve a particular sector or marketplace.
E-marketplaces offer electronic catalogues for online purchasing goods and
services, business directory listings and online auctions. To increase their
business, several e-commerce companies are implementing a multichannel
strategy. However, there are other obstacles to overcome, including a lack of
consistent branding and message across various channels, difficulties controlling

188
inventory for each channel and the risk of inventory mix-ups, and maintaining
multiple customer connections across different channels.
By merging various e-commerce processes, establishing inventory links,
and moving data from many channels into a single operational platform in
real-time, the e-commerce marketplace integration supports multichannel sales.
It helps you manage your day-to-day tasks such as uploading new product data,
downloading pending orders, printing invoices, producing labels, printing
dispatch manifests, tracking orders and shipments, checking and updating
inventory stock, and more with numerous online marketplaces.

8.10 GLOSSARY
 Vertical marketplaces: It fits the needs of a specific industry, product,
or customer. Vertical marketplaces are often hyper-targeted and tailored
to these specific needs to better reach target audiences.
 Concentrated and Fragmented market: A smaller market is known as a
concentrated market, while a larger market is called a fragmented market.
 Private Marketplaces (hierarchies)—operated by individual companies
to connect directly to their buyers/suppliers (e.g., Volkswagen);
 Public or Intermediary Marketplaces—independently owned and may
be horizontal operations (e.g., Freemarkets) or operate within a specific
industry (e.g., ChemConnect).
 Con sort ia M a rket plac es—o wned by no r mally co mpet it ive
organizations within one industry (e.g., Covisint).
 Community or Cooperative e-M arketplaces—o wnership and
management is spread over a large number of participants and in some
cases all members (e.g., regional e-marketplaces).

8.11 SELF-ASSESSMENT QUESTIONS

1. Define e-marketplace and describe its attributes.
_________________________________________________________

189
 _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What is the difference between a physical marketplace and an e-
marketplace (marketspace)?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. List the components of a marketspace.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

8.12 LESSON END EXERCISE

1. Define a digital product and provide five examples.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

190
2. Describe private versus public e-markets.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
8.13 SUGGESTED READINGS
 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

*******

191
Lesson No. 9 UNIT II
ELECTRONIC COMMERCE; MECHANISM, PLATFORMS
AND TOOLS
DISINTERMEDIATION AND REINTERMEDIATION;
E-COMMERCE PLATFORMS: VIRTUAL WORLD AS
AN E-COMMERCE PLATFORM

STRUCTURE
9.1 Introduction
9.2 Objectives
9.3 Disintermediation and reintermediation
9.4 E-commerce platforms
9.5 Virtual world as an e-commerce platform
9.6 Current virtual worlds: application environments
9.7 Main elements that compose a virtual world
9.8 Functionalities of the virtual world
9.9 Summary
9.10 Glossary
9.11 Self-Assessment Questions
9.12 Lesson End Exercise
9.13 Suggested Readings

192
9.1 INTRODUCTION
Intermediaries in the electro nic market are various intermediate
organizations, mainly exists in the market, regulating trade between producers,
consumers and their information, products, services, thus making it become a
more convenient and cheaper economic organization. In an age where it is easy
for any company to set up shop with an e-commerce website, it may be tempting
for a small business to eliminate intermediaries to maximize profit. For a scaling
business, however, this can create a lot of work in logistics and customer support.
Unless customers are buying a product directly from the company that makes
it, sales are always facilitated by one or more marketing intermediaries, also
known as middlemen. Traditional physical markets are often brokered by
intermediaries that facilitate market transactions by providing intermediation
service. For instance, the owner of a shopping mall typically provides many
intermediation services in the physical world. Four types of traditional
intermediaries include agents and brokers, wholesalers, distributors, and
retailers.

9.2 OBJECTIVES
After going through this lesson, you will be able to:
 understand concept of disintermediation and reintermediation
 describe the various intermedirie in traditional as well as e-marketplaces
 explain meaning and features of virtual world
 understand functionalities of virtual world
 explicit the role of Avatar in virtual world

9.3 DISINTERMEDIATION AND REINTERMEDIATION

Market intermediaries, situated between supply and demand, are
important actors in establishing, maintaining, and regulating market dynamics
for social e-commerce. As an integral connecting device, market intermediaries
involve selling, advising, matching and evaluating. Several studies have shown

193
the existence of different types of market intermediaries. For example, e-
commerce sites and platforms are market intermediaries that connect producers
and consumers. Online consumers’ reviews and other types of user-generated
co nt ent s serve t he funct io n o f mark et int er mediaries in mar ket ing
communication. Market intermediaries are engaged in activities that help
consumers in searching and obt aining informatio n, and evaluat ing and
comparing products on the one hand. On the other hand, they also help producers
in gaining market intelligence, estimating demands, and adjusting products to
serve different customer bases effectively.
As our marketplace is increasingly populated by different evaluation
devices such as rankings, ratings, and reviews, it poses challenges for both
consumers and producers to sort and select information.

9.3.1 Types of traditional intermediaries

It includes agents and brokers, wholesalers, distributors, and retailers.
a. Agent and Brokers: Agent and brokers are nearly in their roles as
intermediaries. In fact, when it comes to real estate transaction. However,
agents serve as an intermediary and a permanents basis between buyers
and sellers, while brokers do this on a temporary basis only. Both are
paid in commission for each sale and do not take ownership of goods
being sold.
b. Merchant wholesalers : Merchant wholesalers, which are also simply
called wholesalers, buy products from manufacturers in bulk and then
resell them, usually to retailers or other business. Some carry an extensive
range of different products but carry a large assortment. They may operate
cash-and-carry outlets, warehouses, mail order business or online
inventories in trucks, and travel to their customers.
c. Distributors : Also called functional wholesalers, distributors do not buy a
product from producers. Instead, they expedite sales between the manufacturer
and retailers or other business. Like agents and brokers, they can be paid by
commission, or they can pay in fees from the manufacturer.

194
d. Retailer : Whenever a consumer buys products from anyone other than
the company that makes it, the consumer is dealing with a retailer. This
includes corner stores, shopping mall and e-commerce website. Retailers
may buy directly from the producers or from another intermediary. In
some markets, they may stock items and pay for them only after they
make a sale, which is common for most bookstores today.
Types of Intermediaries in E-Marketplaces
The two major types of online intermediaries are brokers and infomediaries.
a. Brokers: A broker in EC is a person or a company that facilitates
transactions between buyers and sellers. The following are different types
of brokers:
 Trading. A company that aids online trading (e.g., E*TRADE or eBay).
 Organization of online malls. A company that organizes many online
stores in one place (e.g., Yahoo! Shopping and Alibaba.com).
 Comparison agent. A company that helps consumers compare prices,
encourages user comments, and provides customer service at different
stores (e.g., Bizrate for a great diversity of products and Hotwire, Inc.
for travel-related products and services).
 Shopping aids provider. A company that helps online shopping by
providing escrow, payments, shipping, and security (e.g., PuntoMio,
Inc.) for global shoppers.
 Matching services. These services match entities such as jobs to
applicants, and buyers to sellers.
b. Distributors in B2B: A special type of intermediary in e-commerce is
the B2B e-distributor. These intermediaries connect manufacturers with
business buyers (customers), such as retailers (or resellers in the
computer industry). E-distributors aggregate product information from
many manufacturers, sometimes thousands of them, in the e-distributor’s
catalog. An example is W.W. Grainger (grainger.com). The distributor
buys the products and then sells them, as supermarkets do.

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9.3.2 Disintermediation & reintermediation in the marketplace
The value of intermediation services may be reduced once a relationship
moves to an electronic marketplace. In particular, electronic markets do not
require services related to matching of customers and suppliers in the physical
space. In fact, the information infrastructure makes it easy to match customer
and suppliers that the role of intermediaries may be reduce deliminated. The
relationship between the company and its channel partners (customers) shown
in Figure (1) can be dramatically altered by the opportunities afforded by the
Internet. This occurs because the Internet offers a means of by passing some of
the partners.
Intermediaries usually provide three types of services: (1) they provide
relevant information about demand: supply, prices, and trading requirements,
(2) they help match sellers and buyers, and/or (3) they offer value-added services
such as transfer of products, escrow, payment arrangements, consulting, or
assistance in finding a business partner. In general, the first and second types
of services can be fully automated, and thus it is likely to be assumed by e-
marketplaces, infomediaries, and portals that provide free or low- fee services.
The third type requires expertise, such as knowledge of the industry, the market,
the products, and the technological trends, and therefore can only be partially
automated. Intermediaries that provide only (or mainly) the first two types of
services may be eliminated; this phenomenon is called disintermediation or
‘cutting out the middlemen’. Disintermediation means that the removal of
intermediaries such as distributors or brokers that formerly linked a company
to its customer. Disintermediation is more likely to occur in supply chains
involving several intermediaries.

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Fig.9.1: Intermediation in the Traditional market and Electronic marketplace
An example is the airline industry and its push for selling electronic
tickets directly by the airlines. Most airlines require customers to pay $25 or
more per ticket processed by an employee via telephone. This results in the
disintermediation of many travel agents from the purchasing process. In another
example, discount st ockbrokers that only execute trades manually are
disappearing. However, brokers who manage electronic intermediation are not
only surviving but may also be prospering (e.g., priceline.com and expedia.com
in the travel industry and tdameritrade.com in stock trading). This phenomenon,
in which disintermediated entities or newcomers take on new intermediary roles,
is called reintermediation. Reintermediation means that the creation of new
intermediaries between customers and suppliers providing services such as
supplier search and product evaluation. First, it is necessary to make sure that
company, as a supplier, is represented on the sites of the new intermediaries
operating and chosen market sector. Second, it is important to monitor the prices
of other suppliers within this sector. Third, it may be appropriate to create own
intermediation. Such tactics to counter or take advantage of reintermediation
are sometimes known as counter medication. Centermediation means that the
creation of a new intermediary by an established company.

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 Fig. 9.2: Disintermediation and Reintermediation in the marketplace
Figur e-9.2: S ho ws t hat t he sit u at io n o f disint er mediat io n and
reintermediation in the marketplace.
Figure 9.2: (a) Shows the traditional situation in which many sales were
through brokers such as the Automobile Association.
Figure 9.2: (b) Show that disintermediation situation. An electronic
market without the need for intermediation facilities. There was the opportunity
to sell directly initially via call centers with Direct Line and then more recently
by their transactional website.
Figure 2(c) show that reintermediation situation. Customer Purchases
of products still needed assistance in the selection of products and this led to
the creation of new intermediaries. New intermediation plays with an important
part in a commercial transaction between producers and customers.

9.4 E-COMMERCE PLATFORMS

An e-commerce platform is a software that enables the commercial
process of buying and selling over the internet. An e-commerce platform needs
a search feature that lets customers find a specific product, a cart feature that
lets them manage their order, and a payment feature. A company can choose to
use an e-commerce solution hosted by an e-commerce provider like Shopify
and delivered through the cloud, or they can host an e-commerce platform on
their premises. Mistakes companies make include not figuring out their goals
in advance, not choosing the best e-commerce platform for their needs, and not

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paying attention to security regulations. In the future, new devices like IoT,
voice, and virtual reality (VR) will change the landscape of e-commerce stores.

9.4.1 How does a company choose an e-commerce platform?

Choosing a platform needs to include a pretty exhaustive search process.
A company will look at what they can do with a certain platform and how the
features of the platform will meet their needs. Gross merchandise volume
(GMV) is one important criterion companies need to consider. Higher GMV
merchants tend to have more custom configurations, so they’ll be looking for a
suitable platform that allows substantial customization. Lower GMV merchants
might be looking for standard services, so they might need a suitable platform
with standard services at a relatively lower cost. Other criteria that will affect
a company’s choice of platform include the search feature, payment options
(whether the customers have to use a credit card or if they can pay through a
service like PayPal), security level, and how the platform ties into a larger
campaign. No single e-commerce platform can offer everything to all customers.
Each platform leaves gaps, so when you’re choosing a platform to use, consider
what specific needs you want the platform to address. One option is to choose
an extensible platform that can be customized with additional plugins and add-
ons, so that even if the base platform doesn’t do everything, it can be integrated
with other services like content management systems (CMS) and enterprise
resource planning (ERP) systems to make up the difference.
Choosing the proper foundation for your ecommerce website will have a
significant impact on your business’ growth potential, regardless of pricing.
There are only a handful of options for building this kind of customization.
 Select a proven ecommerce platform. The benefits of exist ing
ecommerce platforms are enormous if you look at some great examples
of successful online stores such as Shopify or even Amazon. The best
platforms are cloud-based and offer built-in customer personalization.
And they scale to your needs — often making them more affordable
than the other options.

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  Build your platform from scratch. This option is more feasible for the
largest, most successful companies and yields the most customized
functionality. Platforms are expensive to build and can be costly to run.
Customized ecommerce platforms also require a trained DevOps team
to maintain and upgrade as technology continues to evolve.
 Use a plugin. CMS plugins may work for tiny businesses or those
experimenting with ecommerce, but they are rarely an ideal solution.
Plugins are limited in capability and cross-channel integration, and
developers can suspend support at any time.
Established cloud-based ecommerce platforms such as DXPs and Agile
CMSs are the best option for most companies. They allow small- and
medium-sized businesses to participate and succeed in the digital
landscape and are extensible to every company’s needs.

9.4.2 Types of e-commerce platforms

Assuming an ecommerce platform is the best option for your company,
there are three types of platforms to choose from:
• Open-Source
• SaaS (software as a service)
• Headless commerce
a. Open-source ecommerce platform : An open-source ecommerce
platform allows you to modify and control everything — across the
board. This option is excellent for tech-heavy companies with internal
DevOps teams who can easily tweak open-source software to do their
bidding. However, it’s rarely a solution for small- and medium-sized
businesses or those with no development team.
b. Software as a Service ecommerce platform: SaaS ecommerce
platforms are effective for getting up and running quickly. You do not
have to build or maintain software, because you rent your ecommerce
platform from a provider. You can still retain some flexibility for your

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 in-house developers, too. A reputable SaaS ecommerce platform will
come with an API library, so you can integrate your existing teams’
tools to work with the SaaS ecommerce platform. Many allow you to
modify and redesign the UX buildouts as well. Such systems are often
called open SaaS ecommerce platforms.
c. Headless ecommerce platform: Headless ecommerce platforms are also
called CaaS platforms. They organize and distribute content as a service
(CaaS). Headless platforms decouple the shopping cart from the CMS
completely. This decoupling offers several benefits:
• Platform flexibility — you would not be tied to a single, monolithic
system
• You can use APIs to set up a separate SaaS shopping cart
• You are more flexible and open to front-end changes in the future
Many companies find that a headless ecommerce platform provides the
best of both worlds. First, they control a monolithic, typically cloud-based,
storage over their marketing, sales and product assets. Even better, businesses
can pick and choose which front-end services to use and easily connect to them
using APIs. If companies decide they want to change shopping cart services,
they can switch easily, as they aren’t tied to a monolithic, front-end and back-
end SaaS.
Digital experience platforms (DXPs) and Agile CMSs (a form of headless
CMS) are two types of headless ecommerce platforms that are gaining popularity
among companies of all sizes for their flexibility.

9.5 VIRTUAL WORLD AS AN E-COMMERCE PLATFORM

A virtual world is a computer-simulated representation of a world with
specific spatial and physical characteristics, and users of virtual worlds interact
with each other via representations of themselves called “avatars”. Virtual worlds
are being utilised by consumers to learn about real world products. Eventually,
consumers will be able to make real world purchases in virtual worlds as well.

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Some of the advantages of virtual worlds for ecommerce are the ability to browse
through virtual stores, view products in 3D, communicate with other consumers
and receive personalised advice from sales personnel.
 Bartle defined a “virtual world” as an environment where their
inhabitants are auto-contented.
 Klastrup opined virtual world as “a persistent on-line representation
that offers the possibility of synchronous interaction between users, and
between the users and the world, in the frame of a space designed as
navigable universe”.
 Castronova described virtual worlds “as artistic spaces in the computer
that have been designed to contain containing a large number of people”.
Characteristics of virtual world
These are some of the main characteristics that distinguish modern virtual
worlds from other kind of applications:
a. Presence : The ability to configure avatars that represent users and
distinguish them from other users is an important factor in current virtual
worlds. In fact, several studies demonstrate that when users access a
virtual world, they spend a lot of time configuring their avatar. Virtually
all current virtual worlds allow the physical appearance of the avatar to
be configured. For example, in the case of Second Life®, the user can
specify features as granular as eye color or the size of the nose.
Additionally, the avatar can be further personalized by means of models
and accessories developed by third parties, either commercial or free.
The current negative aspects, -that research centres and companies are
working on through different initiatives-, are the lack of definition of
the avatar identity and interoperability. Regarding identity, current virtual
worlds do not allow, for example, the configuration of features such as
personality. In any case, the necessity or advantage of creating a virtual
identity is already an open discussion.

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 The other aspect is more important. Until now, there has been a lack of
interoperability between virtual worlds. The clearest example is that if
the user customizes an avatar for a specific virtual world, they must
configure another from scratch to use in another world. There are several
initiatives, such as the new MPEG-V standard that tries to address this
lack of standardization.
b. Communication : Instead of other computer-mediated communication
systems, like traditional text-based chats, virtual worlds allow the
simulation of the principal human-human communication channels, that
is, the natural channels at least, potentially. The representation by means
of an avatar can allow the simulation of both verbal and gestural
communication and through the use of certain peripherals, e.g. haptics,
senses such as touch can also be stimulated. As Schroeder points out
(Ralph Schroeder, 2002), to allow a total sensory simulation, there exists
peripherals that stimulate the senses of taste and smell. But these systems
are in a prototype stage and have yet to show satisfactory results. It is
unlikely that this situation will be improved in the medium-term.
Following Schroeder’s thinking, the loss of these two senses causes an
absence of multimedia richness and cues in interpersonal relations.
However, it is currently not possible solve this problem with technology.
On the other hand and although opinions may differ, several studies
such as Robertson et al. (Robertson, Card, & MacKinlay, 1993) conclude
that people are more accustomed to using desktop computers than
complex immersive systems and for this reason first ones decrease the
physical and psychological stress. Almost all virtual worlds that present
multimodal communication capabilities are focused on exploiting typical
communication channels that are enabled by means of the sense of sight
and hearing. That is, sight, gesticulation, speech and hearing. The
application of these channels does not require costly specialized hardware
as is the case with haptics, but the use of standard peripherals as a
monitor, headphones, etc. are sufficient. For example, regarding channels
that are perceptible by the ear, a pioneering and representative case is

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 that developed in 2002 by DiPaola and Collins (DiPaola & Collins,
2002): OnLive Traveller, a 3D environment for chatting by voice. In
this environment, users are represented by 3D talking head avatars. In
order to give a better illusion of immersion, the audio corresponding to
the speech of each user is synchronized with the Avatar’s lips. The
objective of this project was the use of the natural communication
channels so that users have experience a more satisfactory interaction
with other users. As they can use voice for chatting, they are free to
move about in the environment simultaneously, instead of typing
comments. Regarding sight, almost all commercial virtual worlds that
use avatars for representing users allow the user to gesture with the
avatar. More advanced studies are focused on the automatization of these
gestures and their emotional coherence. That is, not to launch a set of
movements explicitly during the course of a conversation, but to generate
the gestures that composes the non-verbal language. For example, the
Miralab centre has conducted several studies for generating non-verbal
language with emotional traits (Egges & Magnenat-Thalmann, 2005).
c. Collaborative Capacity : One of the main functional features of a virtual
world is that it allows simultaneous access to a large number of users
from different locations. Therefore, one of the key factors in a virtual
world will be the network structure that supports it. Joslin et al. (Joslin,
Giacomo, & Magnenat halmann, 2004) have defined five basic aspects
that should be taken into account for the design of a network structure
that supports both virtual world and collaborative environments which
are given below :
i. Network Topology. There are three basic topologies:
 Peer-to-peer. The information transmission is between clients.
 Client/Server. Clients send the information to a central server. This
server is responsible for distributing the information to the other
clients.

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  Multicast. Each client sends the information to a specific IP address
that implies all of the other connected clients receive it.
Current topologies should be based on one of these topologies or a
combination of them.
ii. Dead Reckoning. It is a technique for reducing the message flow among
clients or between client and server. The client sends changes of state in
the avatar instead of continuous movements.
iii. Area of Interest Management. This technique defines a visibility area
around the client avatar that is shown with higher detail. The rest of the
virtual world is optimized.
iv. Scene Segmentation. It is the same idea as that of the Area of Interest,
but each area is managed by a different server.
v. Compression. It implies the compression of the messages between
clients and server. Nowadays, almost all worlds use this kind of
technique.
A special case is Second Life® which has been overloaded due to its
success. The developers have started to implement a new network architecture
that divides its client/server architecture in two domains: agents and regions.
The first will be responsible for managing all information about avatars and
users (profile, personal data, inventory, access data…) and the second will be
responsible for the virtual world regions management.

9.6 CURRENT VIRTUAL WORLDS: APPLICATION

ENVIRONMENTS
In recent years, and above all, after the success of Second Life®, many
more virtual worlds has appeared. Due to large number of virtual worlds that
have reached certain level of popularity, these worlds have been categorized
by their objectives. It is true that many virtual worlds maintain a strong social
character, but more and more worlds are appearing with different objectives
other than social. These are the most significant virtual worlds classified by
their application environment:

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a. Developers. Due to the popularity of virtual worlds, there are companies
that are focused on the creation of virtual worlds for other companies.
Some well known examples are Muse, OpenSim or Open Cobalt.
b. Leisure. Almost all virtual worlds –although not necessarily the most
popular-, are focused only on leisure. Leisure refers to social relations
they are basically 3D chats or games. Examples of these worlds are
CyberTown, Dreamville, The Manor, Moove, Playdo, The Sims Online,
TowerChat, Traveler, Virtual Ibiza or VPChat. A technologically eye-
catching development is Sora, which accesses by mobile phone.
c. General Purpose. In general, this field is where most popular virtual
worlds lay.
They do not present a particular focus, but they simulate different aspects
of real life. They may even have an economic and monetary system
based on a virtual currency that can be purchased with real money. The
most popular examples are Active Worlds, Second Life®, Habbo Hotel
or There.
d. Promotional. Some companies, seeing the popularity of virtual worlds,
have created environments whose goals are to promote their products
or events. Examples of these worlds are Coke Studios, created by the
Coca Cola Company, Disney’s Toontown Online and Virtual Magic
Kingdom, created by Disney, and Dubit, a world with a big commercial
focus where several companies are represented.
e. Educational. Apart from the case of general purpose worlds such as
Second Life®, where a large number of educational institutes are
represented in the case of Second Life®, Harvard University and Imperial
College London, to centers for medical or astronomy (Educational,
2009)-, virtual worlds with a complete educational focus also exist. Some
examples are Mokitown (Mokitown, 2009) for child road traffic
education or Whyville (Whyville, 2009), a virtual world focused on
teaching the sciences to children.

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9.7 MAIN ELEMENTS THAT COMPOSES A VIRTUAL
WORLD
There is no existing common and universal agreement of the main
elements that compose a virtual world. Researchers asserted that there are four
main elements that play the role of functionality containers in the virtual world.
They are the user, the avatar, the intelligent software agent and the virtual world
itself. The following sections detail each element and their function in the virtual
world environment.

Fig. 9.3 : Composition of ‘Virtual World’

Source : Turban et. al (2017)
a. The User: : The user is the main element in the virtual world system. Virtual
worlds, like most other computer applications are focused on offering
services to users either directly or indirectly. In this schema, services can
be both part of the virtual world –as its own content- or offered to the user
through software agents. The user is an intelligent element that interacts
through their avatar. The communication between user and avatar is made
by means of input/output devices. The definition of all the aspects that
characteizes a human being is beyond the scope of this work. However, the
basic aspects that are necessary for representing a person in a virtual world
have been compiled. That is, a minimum set of traits that make two persons
different and can be represented in a virtual world.

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A Human being is composed of body and mind. Body features are related
by appearance and movements. The aspects of the mind related by
emotions, mood and personality. In general, personality affects the way
a person perceives the world; emotions are precise personality modifiers
that depend on the environmental conditions; while mood is a mid-point
between emotions and personality. They are personality modifiers with
longer duration than emotions and they are usually caused by the addition
of several emotions.
These factors should be taken into account for representing a user in a
virtual world. This will faithfully represent the user in a virtual world
from the rest of the users’ points of view.
Another factor to be taken into account will be the user communication
features. A user could have the ability for some specific way of
communicating (for example, via text or via voice). The importance of
this factor is increased when it is transformed into a necessity. A user
with some type of disability would not to be able to use a particular
channel and thus depends on other means of communication.
In fact, according to a press report written by Gartner, an important ICT
consultancy, in 2011. 80% of Internet users will have a Second Life® in
virt ual wo rlds. Such fo recast ed gro wth that does no t co nsider
accessibility would create a new digital gap. Users with disabilities who
cannot access virtual worlds in their current conception, will exclude
from using these future virtual worlds. There have been some recent
initiatives for increasing the accessibility of current virtual worlds by
means of external devices and plug-ins.
Hansen has compiled most significant of these tools in (Hansen, 2008).
On the other hand Trewin et al. (2008) have studied the possibility of
developing accessible virtual worlds. They have tested their efficiency
using a multiuser game due to its technological similarity to a virtual
world.They present two types of existing applications for users with

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 disabilities: Developments that are for the disabled exclusively and
developments for the general public that take accessibility into con-
sideration. In their study, they highlight the need for research into the
second type of application to avoid the growth of a new digital gap.
There is current ly some directives and recommendations for the
management of each type of disability in a 3D virtual world. However,
they have yet to be implemented in real scenarios.
b. The Agent : Agents are software applications that are mainly related to
the field of Artificial Intelligence. Their base characteristics are autonomy
and sociability. The autonomy refers to their ability to decide on tasks
to do to obtain their objectives. Sociability is related to the need to
collaborate with other agents to carry out their goals (Morales, 2008).
Although, different classifications of agents exist, one of the classic
and extended divisions depends on their form of reasoning. That is
deliberative, reactive and hybrid agents:
 Deliberative Agents. They have a symbolic representation of the world,
including objects and intentions. Based on this world knowledge, they
take decisions through inference mechanisms.
 Reactive Agents. They contain an internal representation of the virtual
world where they are that is very simplistic. The intelligence of the
agents comes from interaction between them.
 Hybrid Agents. Are agents that are not pure reactive or hybrid, but
they have sub- systems of both kinds.
This system of classification is appropriate for any kind of agent, that
is, any kind of application that works autonomously.In the case of virtual
worlds, we define an agent as a subset of these systems whose objective
is the simulation of human behavior in a virtual world in an autonomous
manner. That is, systems that are part of the artificial life field –or ALife-
(Bedau, 2003). In a virtual world,other kinds of agents could exist that
act as content search robots, for example. However, they will be

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 dependent on the content of each particular virtual world. The definition
of agent as a main virtual world element is closer to that of AVA –
Autonomous Virtual Agent. Luengo defines these three features as
characteristics of an AVA:
 Its natural place is a 3D graphically simulated world.
 It has a graphic representation of the world that it inhabits, and it is able
to perceive, adapt and react to the environment, exhibits a human-like
graphical behavior.
 It is an independent software entity that is conscious of environmental
changes and is able to response to them autonomously, that is without
need of external instructions or control.
Some examples of these kinds of agents canbe found, usually represented
by means of avatars. As an example, as early as 1995, Maes etal. (Maes,
Darrell, Blumberg, & Pentland, 1995) developed an agents system using
mixed realitywith some validation scenarios called ALIVE.One of the
scenarios was an agent representedbya puppet-like avatar.
c. The Avatar: Nowadays the use of avatars for representing users or
intelligent software agents in virtual worlds is very common. Their
advantages or disadvantages are a topic of open field of discussion.
However, there is a set of studies who have concluded that they have
more advantages than disadvantages. Some of these, compiled in the
work of Ortiz (Ortiz, 2008) are:
 It Facilitates Social Interaction with the Machine. Prendinger et al.
in (Prendinger, Ma, Yingzi, Nakasone, & Ishizuka, 2005) stated that the
individual interactions of computer users are fundamentally social. Also
they included that the user hopesto obtain the same type of social
behaviour. Therefore, they proposed to give the interface personality
aspects and voice synthesis to improve the human machine interaction.
 The User then Considers the System to be more Reliable and

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 Credible. A user needs to believe inanagent’s reliability in order to have
the confidence to delegate certain tasks to it. There are evaluations that
demo nst rat e t hat co nfidence and credibilit y increase wit h t he
personification of the agent, in other words, by giving it a face, eyes,
body or voice. If the aspect of the character is also realistic, the agent is
seen to be more intelligent and friendly (Koda & Maes, 1996).
 The Commitment of the User Increases. Personifying the agents
increases the user’s commitment to the application (Kim,2004).
 It Catches the Attention of the User. Hongpaisanwiwat & Lewis,
(2003) concluded that the avatar is capable of catching the user’s attention
and this increases if the avatar is credible, as it generates the illusion of
life in the system.
 It Focuses the User’s Attention. An avatar can be used to focus the
user’s attentionon points of interest (Prendinger et al., 2005).
Mo r eo ver, Casanueva (Casanueva, 200 0) st at es t hat a virt ual
collaborative environment that is seen as being satisfactory and usable
to users, should create a grand illusion of presence and interaction with
other users. Slater et al. (Slater et al., 1998; Slater et al.,1996) divided
this illusion of presence into two components: the personal presence
and the shared presence, or co-presence. The first refers to the subjective
feeling of being in the virtual world, and the second, to the feeling that
the rest of the users are in the virtual world. The better these factors are
fulfilled, the more effective and satisfactory the virtual world will be.
The use representation elements improve this feeling of presence. Infact,
numerous studies (Ben-ford, Bowers, Fahlén, Greenhalgh, & Snowdon,
1995; Slater & Usoh, 1994; Snowdon & Jaa-Aro, 1996; Vilhjalmsson,
1997) conclude that having a visual representation of users improves
the feeling of presence and especially the feeling of co-presence. More
specifically, evaluations in the work of Casanueva (Casanueva, 2000)
state that the use of are alistic avatar, both in appearance and in
movement, improves this feeling even more.

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 Therefore, we define an avatar as an impor-tant element of the virtual
world that represents intelligent entities and enables, atleast potentially,
these communication channels:

Fig.: 9.5 Role of Avatar

Source : Turban et al (2017)

• Verbal. The avatar enables the possibilityof verbal communication in a

similar way t o human-human co mmunicat io n. This means o f
communication is possible with-out the need for an avatar. But the avatar
provides the possibility of synchronizing verbal communication with
lip animation, creating the illusion of seeing and hearing a person
speaking.
• Gestural. On the other hand, the avataral-lows the transmission of
gest ur al info r mat io n, info rmat io n t hat is part o f no n- verbal
communication. Authors as Mehrabian (Mehrabian, 1968), and Bickmore
and Cassells (Bickmore & Cassell, 2001) highlight the importance of
this kind of communication for transmitting a message. More exactly,
Mehrabian states that the acceptance of a message transmitted face-to-

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 face depends on the acceptance of words used at 7%, acceptance on the
way the voice isused at 38% and acceptance of gestures at 55%. This
kind of gesturing is divided in four types depending on the purpose
ofthe gestures (Cassell et al., 199 Iconics. Represent something concrete
about the conversation.
• Metaphorics. Represent an abstract feature about the conversation
• Deitics. Indicate apoint in space (people, places…)
• Beats. Soft movements that emphasizes parts of the dialog.
Moreover, although voice and gestures donot express the same idea, the
yalways express complementary information. The avatar gives the
potential to reproduce these four types of gestures. Until this point, in
case of user representation, the features that the avatar enables, donot
give an over all added value, for example, a video-conferencing system.
However, to take advantage of the virtual world potentialitis important
to exploit the illusion of presence. That is, users consider that both they
and the rest of users are contained in the virtual worlds. Regarding this,
the avatar provides two additional functionalities that would be barely
applicable with other kind of representation:
 Navigation in the Environment.Theavatar provides the entity that it
represents movement in the environment. This is an important point
because this way the rest of the entities can see this entity as contained
within the virtual world, as in the real world.
 Int erac tion wit h Ot her Elements. The avat ar allo ws o bject
manipulation and interaction with other avatars in a similar way as
happens in the real world.
In summary, the avatar is an interactive ele-ment of the virtual world
system that providesverbal and non-verbal communication channels,and
enables functionalities for navigation andinteractionwithobjects.

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9.8 FUNCTIONALITIES OF THE VIRTUAL WORLD
The concept of the virtual world, as contemplated in this scheme,
involves the interaction issues not directly related to users, agents or avatars. It
includes the terms content and medium that Straaten defines in his categorization
of virtual worlds (Straaten, 2000). The virtual world in this schema is the medium
that channels the interactions that takes place, including content and rules that
drive the application. Its specific features are:
a. Interactions channelling. The virtual world is the element that allows
interactions amongst avatars to take place. Although an avatar is the
element that allows interaction amongst users, and between users and
agents, this inter- action cannot take place without a medium that allows
it. This is one of the main functionalities of the ‘virtual world’ element
in the schema
b. Physical rules. These are the rules that drive the avatar interactions.
They can be realistic rules such as ‘an avatar cannot go through a wall’,
or not as is the case with the Second Life® avatars that can fly. Each
virtual world will establish its own rules and physical laws that condition
the interactions.
c. Logical rules. Refer to the objectives or goals of a virtual world and
they are dependent on each specific virtual world.
d. 3D objects. Dynamic or static 3D ob- jects, in the sense they have an
associated behaviour or not. They include those from the models that
compose the environment and those that the user or agent can interact
with. The behaviour the object has –let suppose a virtual pen that an
avatar can use for writing- will be defined by the same object or by
virtual world rules. Actions are usually defined in the object itself and
the avatar and the virtual world does not need to know all the possible
actions with all possible objects. The object ‘tells’ the avatar or the virtual
world which the pos- sible actions are. This technique was developed at
the end of 90s and is known as Smart Objects (Goncalves, Kallmann, &
Thalmann, 2001).

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e. Information. This is general information. It can be static or dynamic.
Static information can be text, videos, images, etc. Dynamic information
might be for example, a mapping of Google search engine in the virtual
world. This dynamism is driven by virtual world rules or by an agent
not represented by an avatar.

9.9 SUMMARY
With new age, intermediaries may various adjustment and evaluation of
form and function, but no matter how to change, the role of intermediary to
function as a bridge connecting producer and consumers is always the same.
The development of electronic commerce, new intermediaries refers to system
set-up under the network environment connection of producers and consumers
as the role of the bridge
In summary, the virtual world allows the interactions among avatars to
take place and offers users services and information. Future trends in virtual
worlds are principally focused on obtaining interoperability between them. In
the same way, Web portals for E-Commerce can be accessed by means of
different Web browsers maintaining a unique client account; virtual worlds
should also allow the same. From the author’s point of view, this is a key factor
in order to create a tool that establishes a new evolu- tion in Internet and E-
Commerce tools.

9.10 GLOSSARY
 Metaphorics. Represent an abstract feature about the conversation
 Deitics. Indicate a point in space (people, places…)
 Beats. Soft movements that emphasizes parts of the dialog.
 Deliberative Agents. They have a symbolic representation of the world,
including objects and intentions.
 Reactive Agents. They contain an internal representation of the virtual
world where they are that is very simplistic.

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  Hybrid Agents. Are agents that are not pure reactive or hybrid, but they
have sub-systems of both kinds

9.11 SELF-ASSESSMENT QUESTIONS

1. Explain the role of intermediaries in e-marketplaces.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Differentiate between disintermediation and reintermediation.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Describe Avatar.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

9.12 LESSON END EXERCISE

1. Explain the meaning and features of the virtual world.
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Throw a light on the main elements that compose a virtual world.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Describe role of agents in virtual world.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

9.13 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.

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 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

*******

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Lesson No. 10 UNIT II
ELECTRONIC COMMERCE; MECHANISM, PLATFORMS
AND TOOLS
EMERGING EC PLATFORMS: AUGMENTED REALITY
AND CROWDSOURCING; THE FUTURE WEB 3.0, WEB
4.0, WEB 5.0; THE TECHNOLOGICAL ENVIRONMENT

STRUCTURE
10.1 Introduction
10.2 Objectives
10.3 Augmented Reality
10.4 Crowdsourcing
10.5 The Future Web 3.0 And the Semantic Web
10.6 Web 4.0
10.7 Web 5.0
10.8 The Technological environment
10.9 Summary
10.10 Glossary
10.11 Self-Assessment Questions
10.12 Lesson End Exercise

10.13 Suggested Readings

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10.1 INTRODUCTION
As the coronavirus continue spread over the globe and caused damage
to the world economy. During the peak of the COVID-19 crisis, many countries
across the globe introduced lockdown as preventive measures. As stay-at-home
orders were issued to people to reduce the spread of the disease, many of us
adopted technology for work, education, communication, and shopping. From
tourism to finance, the global pandemic has also influenced nearly every industry
and sector. According to Adobe Digital Economy Index, COVID-19 gave
eCommerce an extra boost of $183 billion, as consumers flocked online to
meet their daily needs. Hence it can be concluded that the eCommerce industry
has seen a sudden spike due to COVID-19 pandemic, since consumers were
confined to their home.
Technology is the soul of the eCommerce industry and to support this
statement a survey of Statista reveals that the market for AR technology is
growing, with projections for 2024 valuing it at over $18 billion U.S. dollars.
By 2023, customer spending on Augmented reality and crowdsourcing mobile
applications worldwide is expected to reach $15.497 million.

10.2 OBJECTIVES
After going through this lesson, you will be able to:
 know emerging EC platforms
 understand The Future Web 3.0 And the Semantic Web, Web 4.0, Web
5.0
 know the features of technologies used in e-Commerce;
 understand the impact of emerging technologies of e-commerce

10.3 AUGMENTED REALITY

Augmented Reality refers to enhancing the perception of the real-world
environment by using comput er-generat ed perpet ual information. The
enhancement of the real-world environment can be through multiple sensory

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modalities, including visual, auditory, haptic, etc. AR can enhance real-world
perception by coupling it with the virtual world using computer-generated
information and can produce an immersive and lively experience. It often
focuses on simulating interactive virtual objects in the real world through
auditory and visual modalities onto a live camera feed. It blends digital
information into a person’s real-world perception. In a nutshell, Augmented
Reality (AR) can produce and blend virtual objects such as 3D models with the
real world through a live camera feed. Therefore, the end-user can better
understand how they would look in the real world.
10.3.1 Benefits of Augmented Reality in e Commerce
Augmented Reality (AR) shopping is the future of eCommerce. This
innovative technology has a lot of benefits to offer to eCommerce store owners.
The following are the benefits of AR in e-Commerce:
 Improve Customer Engagement
Experiential marketing is one of the most successful ways to drive sales
by engaging customers with the product and brand. Augmented Reality
in eCommerce allows the customers to get a lively feel of their products.
Also, it will enable the customers to interact with the product just like
they would in the real world. It provides live 3D interactive models to
help the customers make better purchase decisions. Implementing AR
in eCommerce will significantly increase the average time users spend
on the product page and leading to better conversions and more sales.
 Immersive Product Experience
One of the most significant drawbacks of online shopping or eCommerce
is poor product experience. Unlike offline shopping, customers can not
touch or get a complete understanding of the product they purchase.
Implementing augmented Reality in e-Commerce can help online
merchants to fill this gap by delivering more immersive product
experiences through 3d visualizations, virtual try-ons, and product
demos. It can help the online store owners to deliver more lively product

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 experiences by coupling the real world with the virtual one on the live
camera feed. Thus, the users can make better purchase decisions.
 Customize Shopping Experience
Customization and personalization of products are the most common
ways to impro ve t he custo mer experience and conversio n rate.
Implementing interactive AR in eCommerce or online shopping can help
customers get a customized and personalized product experience. AR
can get the customization in online shopping to the next level. Users
can customize the product attributes and experience the same using
Augmented Reality. For e.g. users can try t-shirts of different colours
and check which colour suits them the most using Augmented Reality.
 Reduced Return Rates
A high return rate is one of the most common problems that can take up a
lot of resources. According to one research conducted by the BBC, 49%
of UK shoppers returned the items they had purchased in the last year.
Dwelling on the reason for such a high number of returns, another research
found that most customers had returned things due to faulty or damaged
products. Also, many of the shoppers reported that they had to return the
product as it was not as described. The problem here is either the shop
owner is not able to describe the product or the customer is not able to
understand the product. Implementing an AR shopping experience can
fill this gap and help the customers experience the product and help them
choose the correct product. Thus, implementing Augmented Reality in
eCommerce can significantly reduce the return rates by allowing the
customers to choose the right product as per their requirements.
 Improve Conversion Rates
Improved Conversion Rates is one of the distinct advantages of augmented
Reality in eCommerce. The users are more likely to convert if they get a
better picture of the product they will be purchasing. Using Augmented
Reality in eCommerce, store owners can provide a more immersive and
charming product experience, leading to an improved conversion rate.
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Examples of Brands Using AR in eCommerce
Many of the renowned brands and market leaders are also trying out this new
technology to make a difference in the eCommerce market. Some of the
examples of implementation of Augmented Reality in eCommerce are as under:
 Lenskart Virtual AR Experience
Lenskart is one of the leading online sunglasses and eyeglasses store in
India which was founded in 2020. This renowned sunglasses and
eyeglasses bu siness has successfully implement ed AR and has
established its own reputation out of it by converting size charts to live
visuals. It is well known for its virtual Augmented Reality experience
that allows the customers to try different eye wears using the AR
technology.
 IKEA Studio app
IKEA Studio is a Swediesh home-furnishing products company founded
in 1943. Albeit old, this company has successfully managed to evolve
with the ever-emerging technology. In 2017, the company launched IKEA
Place, an Augmented Reality app that allowed the customers to visualize
the products within their space. To give a better idea about the furnishing
products, the app can automatically scale them as per the dimensions of
the room.
 Amazon Salon – Hair Colouring
How can we forget the market leader when we are talking about new
innovations in eCommerce? Recently, it launched Amazon salon in
London with an innovative approach using AR. The styling stations are
equipped with Fire tablets that allows the customers to try different virtual
hair colours and capture them. However, this experimental innovative
approach is currently open for amazon employees only.
 Lakme Virtual Try On
Lakme is one of the leading cosmetic product brand that thrives adding
beauty to its customers for more than 50 years. This half-century old
cosmetic brand has come up 223 with an innovative way to market its
 products. Lakme launched virtual try on feature on its online website
that allows the customers to try different shades of lipsticks and cosmetic
products before purchasing through AR. It has successfully managed to
provide its customers with a better idea of what they are purchasing
through Augmented Reality.
Thus, we can say that augmented reality is the future of ecommerce
businesses. AR has many things to offer in the eCommerce business,
from improved customer engagement to improved conversion rates.
Some retail marketing leaders such as American Apparel, Uniqlo,
Lacoste, Kohls have already started implementing augmented Reality
in their eCommerce businesses.
The e-Commerce market is not fully saturated by AR technology yet.
This is the best time to adapt to the new emerging technology to give a
competitive edge. Adapting Augmented Reality in e-Commerce can lead
to a win-win situation for online business owners and customers.

10.4 CROWDSOURCING
Another platform for e-commerce is crowdsourcing. Crowdsourcing
allows companies to farm out work to people anywhere in the country or around
the world; as a result, crowdsourcing lets businesses tap into a vast array of
skills and expertise without incurring the normal overhead costs of in-house
employees.
Crowdsourcing is becoming a popular method to raise capital for special
projects. As an alternative to traditional financing options, crowdsourcing taps
into the shared interest of a group, bypassing the conventional gatekeepers and
intermediaries required to raise capital. Thus, crowdsourcing usually involves
taking a large job and breaking it into many smaller jobs that a crowd of people
can work on separately.
The term crowd refers to a large group of people such as a group of
consumers, employees of a corporation, or members of a social network who
offer expertise.

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 AR is developed into apps for mobile devices to blend digital components
into real worlds. Crowdsourcing utilizes crowds to collectively execute tasks
such as solving problems, innovating, or getting large projects completed by
dividing the work among many people. The term was coined by Jeff Howe in
June 2006 (Howe 2008). In the crowdsourcing process, the initiator recruits a
crowd (e.g., customers) to create content, a cumbersome task (e.g., translating
Wikipedia articles), or in research and development. This is based on the idea
that two heads are better than one. The collective intelligence of large groups
is assumed to be able to solve complex problems at low cost (Zeref 2015;
Brabham 2013).
10.4.1 Elements of crowdsourcing
The basic elements of crowdsourcing are illustrated in Figure. Three
elements are involved: the task(s) to be carried out, the crowd, which is used to
work on the task, and the models and processes used by the crowd to execute
the task. These elements are connected by features related to the tasks and the
crowd (such as the psychology of the crowd), the technologies used (such as
idea generation and voting), and implementation issues such as incentives paid
to the participants.

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10.4.3 The Process of Crowdsourcing
Crowdsourcing can be viewed as a collective problem- solving or work-
sharing process, and usually is conducted as a Web-based activity. In a typical
use of crowdsourcing, problems are broadcasted either to a known crowd (e.g.,
employees or business partners) or to an unknown group of participants (e.g.,
expert problem solvers or consumers). The communication usually starts as an
open call for solutions or ideas. The members of the crowd ar. e organized as
an online community, and the members submit individual work (e.g., solutions).
The crowd may also discuss the solutions and may vote for a final short list.
Alternatively, the short list is then prioritized (e.g., ranked). The final selection
can be made by the crowd or by management. The winning individuals in the
crowd are well compensated, either monetarily or with special recognition. In
other cases, the only rewards may be the satisfaction with a job well done. The
use of crowdsourcing can yield results from amateurs or unrecognized
professionals.

10.4.3 Advantages and Disadvantages of Crowdsourcing

The advantages of crowdsourcing include cost savings, speed, and the
ability to work with people who have skills that an in-house team may not
have. If a task typically takes one employee a week to perform, a business can
cut the turnaround time to a matter of hours by breaking the job up into many
smaller parts and giving those segments to a crowd of workers.

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 Many types of jobs can be crowdsourced, including website creation
and transcription. Companies that want to design new products often turn to
the crowd for opinions. Rather than rely on small focus groups, companies can
reach millions of consumers through social media, ensuring that the business
obtains opinions from a variety of cultural and socioeconomic backgrounds.
Oftentimes, consumer-oriented companies also benefit from getting a better
gauge of their audience and creating more engagement or loyalty.
But that being said, crowdsourcing isn’t a magic bullet for companies
that hope to lighten their workload while pursuing the next shining star of an
idea. Many times, someone will have to sift through all the ideas being pitched,
fundraising goals can fall short in all-or-nothing type funding platforms, and
the right crowd can be difficult to find or engage.
10.4.4 Advantages
1. Problems can be analyzed or solved at comparative little cost.
(Payment can be determined by the results; however, sometimes there
is no monetary payment, just praise or accolades).
2. Solutions can be reached quickly since many people work on the needed
research project simultaneously. Also, designs of products may be
expedited.
3. The contributing crowd may reside within the organization; therefore,
talents may be discovered.
4. By listening to the crowd, organizations gain first hand insight into the
desires of their customers (or employees). There is built-in market
research when the crowd is composed of customers.
5. Crowdsourcing can tap into the global world of ideas. The crowd may
include business partners, customers, academicians, etc., and the
members of crowd can reside in different countries.
6. Customers tend to be more loyal if they participate in a company’s
problem-solving project.

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7. Make current applications smarter by introducing new intelligent features
8. Provide easier and faster interaction, collaboration, and user engagement
9. Facilitate intelligent-based powerful search engines
10. Provide more user-friendly application-creation and human-computer
interaction capabilities
11. Increase the wisdom and creativity of people
10.4.5 Disadvantages
a. Results can be easily skewed based on the crowd being sourced
b. Lack of confidentiality or ownership of an idea
c. Potential to miss the best ideas, talent, or direction and fall short of the
goal or purpose
Examples of Crowdsourcing
Companies that need some jobs done only on occasions, such as coding
or graphic design, can crowdsource those tasks and avoid the expense of a full-
time in-house employee.
While crowdsourcing often involves breaking up a big job, businesses
sometimes use crowdsourcing to assess how multiple people perform at the
same job. For instance, if a company wants a new logo, it can have dozens of
graphic designers assemble samples for a small fee. The company can then
pick a favourite and pay for a more complete logo package.
10.4.6 Types of Crowdsourcing
Crowdsourcing involves obtaining information or resources from a wide
swath of people. In general, we can break this up into four main categories:
a. Wisdom - Wisdom of crowds is the idea that large groups of people are
collectively smarter than individual experts when it comes to problem-
solving or identifying values (like the weight of a cow or number of
jelly beans in a jar).

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b. Creation - Crowd creation is a collaborative effort to design or build
something. Wikipedia and other wikis are examples of this. Open-source
software is another good example.
c. Voting - Crowd voting uses the democratic principle to choose a
particular policy or course of action by “polling the audience.”
d. Funding - Crowdfunding involved raising money for various purposes
by soliciting relatively small amounts from a large number of funders.

10.5 THE FUTURE WEB 3.0 AND THE SEMANTIC WEB

Web 3.0 (also known as web3) is the third iteration or version of the
Internet that interconnects data in a decentralized way to deliver a faster and
more personalized user experience. It is built using artificial intelligence,
machine learning and the semantic web, and uses the blockchain security system
to keep your information safe and secure. Decentralization, openness and
incredible user utility are the defining characteristics of web 3.0. A decentralized
aut o no mous o rganizat io n (DAO) is an auto mat ed co mput er net wo rk
organization model controlled by its community members rather than a single
establishment like the government or a financial institution, and whose
transaction records are maintained on a blockchain.
One of the major possible platforms of Web 3.0 technologies is the Semantic
Web. The term was presented by the inventor of the Web, Tim Berners-Lee, who
visualized the Semantic Web as the platform for making the Web smarter. There is
no standard definition of Semantic Web. It is basically a group of methods that
focus on machines (in contrast with Web 2.0 that focuses on people). The technology
attempts to enable computers to understand the semantics (i.e., the meaning) of
information, by using natural language understanding tools.
A similar view regarding the role of the Semantic Web is expressed by
Borland (2007), who believes that new Web 3.0 tools (some of which are already
helping developers put together complex applications) will enhance and
automate database searches, assist people in choosing vacation destinations,
and make sorting through complicated financial data more efficient.

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 An experimental Semantic Web browser has been in use lately. This
browser enables users to display data, draw graphs, and make browsing more
interactive (e.g., see w3. org/standards/semanticweb). Another example would
be “friend-of-a-friend” networks, where individuals in social networks provide
data in the form of links between themselves and friends.
The idea behind using the semantic web is that it understands and interprets the
context and concept of the data. Therefore, when a user searches for an answer,
web 3.0 delivers the most accurate and relevant result to the end-user. Tech
giants such as Google, Facebook and Microsoft are some of the few companies
currently making an enormous profit from user data. Hence, this third evolution
of the web is an Internet where you will enjoy personalized interactions with
machines and websites in the same manner as when you communicate with
any other human.
10.5.1 Key Features of Web 3.0
The key features of web 3.0 are:
 Open – It is ‘open’ in the sense that it is made with open-source software
developed by an open and available community of developers and
accomplished in full view of the public.
 Trustless – The network offers freedom to users to interact publicly
and privately without an intermediary exposing them to risks, hence
“trustless” data.
 Permissionless – Anyone, including users and providers, can engage
without the need for permission from a controlling organization.
 Ubiquitous – Web 3.0 will make the Internet available to all of us, at
any time and from any location. At some point, Internet-connected
devices will no longer be limited to computers and smartphones, as they
are in web 2.0. Because of the IoT (Internet of Things), technology will
enable the development of a multitude of new types of intelligent gadgets.

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10.5.2 Advantages of Web 3.0
Web 3.0 will make the web more intelligent, secure and transparent,
resulting in more efficient browsing and effective machine-human interaction.
The following are the top advantages of the semantic web or web 3.0:
1) Data Privacy and Control
The end-users will get the most significant advantage of data encryption
to protect their information from disclosure. The encryption will be
unbreakable in any given circu mst ance. It will prevent large
organizations like Google and Apple from controlling or using people’s
personal information for their own interest. Hence, users will gain
complete ownership and privacy of their information.
2) Seamless Services
Decentralized data storage will ensure that the data is accessible to users
in any circumstance. Users will get multiple backups, which benefits
them even in the event of server failures.
Additionally, no entity or government organization will have the ability
to stop any services or websites. Therefore, the possibility of account
suspension and denial of distributed services will be reduced.
3) Transparency
Regardless of which blockchain platform end-users use, they will track
their data and inspect the code behind the platform. Nonprofits develop
the majority of blockchain platforms, which means they provide an open-
source blockchain platform that allows open design and development
processes. This will help eliminate the dependency of users on the
organization that develops the platform.
4) Open Accessibility to Data
The data will be accessible from anywhere and from any device. The
idea is to increase data collection and its accessibility to users worldwide
by allowing smartphones and other connected devices to access data on

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 the computer if synced. Web 3.0 will further expand the scale of
interaction, ranging from seamless payments to richer information flows
to trusted data transfers. This will happen because web3 will enable us
to interact with any machine without passing through fee-charging
middlemen.
5) Restrictionless Platform
Since the blockchain network is accessible to all, users can create their
own addresses or interact with the network. Users cannot be restricted
on this network based on their gender, income, geographical location or
sociological factors. This feature will make it easier for users to transfer
their assets or wealth anywhere across the world in no time.
6) Single Profile Creation
With web 3.0, users do not need to create individual personal profiles
for different platforms. A single profile will work on any platform, and
the user will have complete ownership of any given information. Without
users’ permission, no corporation can access their data or verify its
accuracy. However, users have the choice to share their profiles and sell
their data to advertisers or brands.
7) Enhanced Data Processing
Web 3.0 is beneficial for problem-solving and intensive knowledge
creation tasks. It utilizes artificial intelligence to filter out valuable
information from a huge quantity of data. Users will also benefit from
its ability to conduct client demand forecasting and personalized
customer service, necessary for flourishing businesses.
10.5.3 Disadvantages
The following are the disadvantages of web 3.0:
1. Future Threats. According to Stafford (2006), Laurent (2010), and the
authors’ experiences, the following trends may slow the growth of EC
and Web 3.0, and may even cripple the Internet.

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2. Security and privacy concerns. Shoppers, as users of e-banking and
other services, and members of social networks, worry about online
security and privacy. The Web needs to be made safer.
3. Lack of Net neutrality. If the big telecommunications companies are
allowed to charge companies for a guarantee of faster access, critics
fear that small innovative Web companies could be demolished by the
big companies that can afford to pay more for efficient Internet usage.
4. Copyright complaints. The legal problems of YouTube, Craigslist,
Wikipedia, and others may result in a loss of originality, dedication, and
creativity of user-generated content.
5. Insufficient connectivity. Upstream bandwidths are still constraining
applications, making uploading of video files a time-consuming task.
6. Language Fitness. There will be a need to recon- sider the existing
spoken languages with Web 3.0 taxonomies and schemes.
7. Standards. There will be a need for architectural standards for Web
3.0.
Therefore, some believe that the Semantic Web will never work. Despite
these concerns, Web 3.0 and e-commerce could thrive due to several innovations
in the technological environment.

10.6 WEB 4.0

The evolution of the internet has been rapid and consistent, with each
iteration bringing a new wave of innovation and possibilities. We have seen the
rise of the internet of things (IoT), the introduction of cloud-based services,
and the development of artificial intelligence (AI).
Web 4.0 also known as the Symbiotic web. It aims at the interaction
between humans and machines in symbiosis. Humans and machines have a
symbiotic relationship, where machines are capable of learning from human
interactions and providing insights that can assist in decision-making.

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 The symbiotic web facilitates the development of autonomous, proactive,
co nt ent-explo ring syst ems. These systems are driven by self-learning,
collaborative, and content-generating agents based on fully matured semantics.
The symbiotic web is the platform for reasoning technologies as well as AI. AI
will be leveraged to automate processes, generate insights, and drive decision-
making. The AI-driven automation will be fuelled by deep learning models and
natural language processing.
10.6.1 Features of Web 4.0 Services
1. Web 4.0 services will enable the seamless integration of hardware,
software, and data. Through these services, users are able to connect to
a wide variety of data sources, process that data in real-time, and generate
insights for informed decision-making.
 These services enable users to access a wide range of devices and
services, from connected vehicles and appliances to virtual assistants.
The services are secure, reliable, interoperable, and scalable.
3. The services facilitates the development of personalized experiences.
For example, users can access tailored content based on their interests
and preferences. This enable users to be more engaged with the web, as
they will be able to find content that is relevant to them more quickly
and easily.
 Web 4.0 services enables the development of virtual reality (VR) and
augmented reality (AR) applications. These applications make users to
interact with content in a three-dimensional space. This opens new
possibilities for content creation, and delivery and will revolutionize
user experience.
 Finally, Web 4.0 services ensures the development of machine-learning
algorithms. These algorithms will enable machines to learn from data,
generate insights, and make decisions autonomously. This will enable
machines to become smarter and more capable over time.

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10.6.2 Opportunities of Web 4.0
 Web 4.0 presents a range of opportunities for businesses and individuals.
The symbiotic web will facilitate the development of more personalized
experiences, which will enable businesses to better understand their
customers and deliver content that is tailored to their needs.
 AI-driven automation enables businesses to improve their efficiency,
faster time to market, and reduce costs. This gives businesses a
competitive edge and enable them to better serve their customers.
 The integration of hardware, software, and data enable businesses to
develop new products and services. For example, a business could
develop a connected device that interacts with users and collects data to
enable the development of personalized experiences.
 Web 4.0 also enable businesses to develop new revenue streams. For
example, a business could leverage the data they collect to offer targeted
advertising or subscription services.
 Finally, the development of VR and AR applications will enable
businesses to engage their customers in new ways. For example, a
business could develop an AR application that allows customers to
interact with their products in a 3D space.
10.6.3 Challenges For Web 4.0
Web 4.0 is the next generation of the World Wide Web, and it promises
to be even more revolutionary than previous iterations. However, as with any
new technology, there are bound to be some challenges that need to be overcome.
1. One of the biggest challenges facing Web 4.0 is security. With more and
more personal data being stored online, there is a greater risk of identity
theft and other cybercrimes. Additionally, as the Internet becomes more
integrated into our daily lives, we are also at risk of losing our privacy.
2. Another challenge that Web 4.0 will need to address is scalability. As
the number of devices and people connected to the Internet continues to

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 grow, it will become increasingly difficult to keep up with the demand.
This could lead to slower connection speeds and higher latency for
everyone involved.
3. Finally, another challenge that Web 4.0 will face is accessibility. As the
technology becomes more sophisticated, it will become harder for people
who don’t have a lot of technical knowledge to use it. This could lead to
a digital divide between those who can take advantage of all the new
features and those who can’t.
In conclusion, Web 4.0 will be an exciting development in the evolution
of the web. It will enable us to interact with machines in a more natural
way, automate processes, generate insights, and create immersive
experiences. The possibilities are truly endless, and I am excited to see
what the future holds.

10.7 WEB 5.0

The internet is not the way it used to be, and it will continue to change
further in the future. Since the introduction of the internet in 1993, many
applications have been created to change the lives of normal people. The
assurance of a better user experience with the power of internet served as a
vital boost for adoption of the internet. The introduction of smart devices that
foresee your wants based on your habits without providing many hints
foreshadows what the Intelligent Web will bring. Symbiotic web algorithms
will be able to understand the evidence on a more complicated emotional and
intellectual level. Web 5.0 is being developed by Dorsey’s Bitcoin business
unit, The Block Head (TBH). Web 5.0 is called “The Telepathic Web” or “The
Symbionet Web”. It is called telepathic because the chips in a user’s brain
could instruct devices on what action to take after reading emotional cues in
terms of electric signals in the user’s brain.
Objectives
 To build an extra decentralised web that puts users in control of their

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 data and identity.
 Simply put, Web 5.0 is Web 2.0 plus Web 3.0 that will allow users to
‘own their identity’ on the Internet and ‘control their data’.
 To access the decentralised Web 5.0, users will have a digital wallet that
stores their identity, data and authorisations.
 When the user logs on to a decentralised social media app, she or he
will not have to build a profile because the digital wallet already has her
verified identity.
 Both Web 3.0 and Web 5.0 envision an Internet without threat of
censorship – from governments or big tech, and without fear of
significant outages.
The Importance of Web 5.0
It is about changing the “control of identity” of an individual and talks
about giving users control over their own data, it cites an example that it’s
totally up to the user whether to save his data anonymously encrypted on the
decentralized blockchain or to sell that data to vendors for monetizing and
advertising.
a. Both Web 3.0 and Web 5.0 envision an Internet free of censorship by
governments or big tech, and free of large outages.
b. The user’s inventiveness has increased as a result of emotive interaction
with the web.
c. The E-commerce industry will adapt to the emotional character of the
web and build real-time contact with users.
d. Demand will rise in the marketing and advertising sectors since posts
will need to be interactive and personalised for consumers.
Challenges Related to Web 5.0
Various Challenges Related to Web 5.0 are as follows.

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a. There are few consequences for this technology in the near future because
it is still a concept in its early stages, and no one knows how it will turn out.
b. How the sovereign government would allow this decentralised platform
free of government intrusion could lead to conflict bet ween the
government and Web 5.0 supporters.
c. There is still uncertainty about how the system will work, who will
regulate it, and what safety scenarios exist for vulnerable people such
as women, children, and the elderly.
d. The web democratised information exchange, but it lacks a critical layer
identity.
e. With hundreds of accounts and passwords, we struggle to secure personal
data. In today’s society, identity and personal data have become the
property of third parties.
f. Instead of being genuinely decentralised or owned by its users, it is
controlled by a number of venture capitalists and limited partners.
Way Forward
a. Both the government and the policy maker should promote a proper
blueprint and policy.
b. The effectiveness in the real world must be evaluated.
c. Individual privacy should be prioritised over the necessity for personal
data security.
d. It should not become yet another instrument for venture capitalists to
manipulate the platform for their personal gain, making a mockery of
the political system in the process.
The government should establish a regulatory authority to oversee these
new and emerging technologies.

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10.8 THE TECHNOLOGICAL ENVIRONMENT
The future of EC and the Semantic Web is dependent on how far the
relevant information technology advances. Emerging technologies are simply
new technologies that are currently developing or will be developed over the
next five to ten years, and which will substantially alter the business and social
environment. Broadly, emerging technologies can be understood as ‘science-
based innovations with the potential to create a new industry or transform an
exist ing o ne’, which will “subst antially alt er t he business and social
environment” There is no established definition of Emerging technology. The
t erm E merg ing t echno lo gy is int erchang eably used wit h Disr upt ive
Technologies. These Emerging technologies are broadly divided into three
cat eg o ries viz ‘Art ificial Int elligence-AI’, ‘Transparent ly Immersive
Technologies’ and ‘Emerging Digital Platforms’. Emerging technologies such
as Internet of Things (IoT), Artificial Intelligence (AI), Robotics, have
influenced every sector.
The accelerating pace of adoption of Emerging technologies in e-
commerce is going to be impressive, because of dramatic reductions in operating
costs, easier access to the consumer as well as because of innovations possible
in the design and delivery of products and services due to these newer forms of
digital technologies. Emerging technologies are also often referred to as
‘Disruptive’ – the one that displaces an established technology and shakes up
the industry and could be termed as a ground-breaking product capable of
creating a completely new industry. In the next few subsections, we shall
discover the tremendous impact of Emerging technologies on businesses and
that how these technologies have revolutionized the existing e-commerce
business models.
The following points will discuss important emerging technologies
namely Mobile Devices and Mobility, Big Data and Big Data Analytics, AI/
ML, IoT /IoE/IIoT/ Digital Twins, Clo ud/ Edge/ Fog co mputing, and
convergence of these technologies as Industrial Revolution 4.0, on the realm
of e-commerce:

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a. Mobile Devices and Mobility and its Impact on e-Commerce: In
present busy lifestyle, every consumer wishes to get services on the go.
These services could be as routine as payment of utility bills to ordering
of food or apparels or even buying and investing in fixed / movable
assets using smartphones and other handheld devices. No one could
ignore the significance of mobile devices and the advantage of mobility
these devices present in our daily lives. Growing penetration and popular
acceptance of mobile devices has led to the increase, and growth of
ever evolving mobile based solutions. It has also revolutionized the way
online shopping had been conducted earlier. E-commerce companies
are now striving hard towards offering unsurpassed User Interfaces (UI)
and User Experience (UX) to their target consumers on their handheld
digital devices. Mobility is indeed, becoming a highly significant aspect
of e-commerce design considerations.
b. Big Data and Big Data Analytics and its Impact on e-Commerce: E-
Commerce is a sector, in which companies handle a large amount of
data on their databases. Data about customers, distributors, retailers,
products, processes, prices, logistics, and several other aspects of
businesses is growing faster than ever before. In such situation use of
Big Data and Big Data analytics become relevant to save, update, use,
process and share this ever-growing business details. The term Big Data
is largely characterized by the mix of the 4 V’s— volume, velocity,
variety, and veracity. Big Data technologies not just process the huge
quantity and range of data formats but also lend speed to its processing.
Every second, more and more data is being created from heterogeneous
components of e-commerce which also needs to be analyzed in an
integrated manner in order to extract maximum value out of it. Big data
analytics is a collection of different types of tools, including those based
on predictive analytics, data mining, statistics, artiûcial intelligence, etc..
The complex analysis of Big Data is enabled by the science of big data
analytics coupled with intelligent and predictive processing enabled by
AI / ML algorithms.

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 Big data analytics is the process of examining large and varied data sets
i.e., big data to uncover hidden patterns, unknown correlations, market
trends; customer preferences and other useful information that can help
organizations make more-informed business decisions. Powered by AI/
ML, big data analytics help organizations to make better business
decisions and forecast future trends.
c. Artificial Intelligence (AI), Artificial General Intelligence (AGI ) and
Machine Learning (ML) and its Impact on e-Commerce: Artificial
Intelligence (AI) is an important Emerging technology, that has created
impact on everything that we do today – right from searching the Internet,
to watching series/movies on streaming platforms to what we order
online. Artificial Intelligence is the simulation of human intelligence
processes by machines, especially computer systems. These processes
include learning, reasoning, and self-correction. More typically, Artificial
General intelligence (AGI) is the representation of generalized human
cognitive abilities in software so that, faced with an unfamiliar task, the
AI system could find a solution. An AGI system could perform any task
that a human is capable of. Machine learning is an application of artificial
intelligence (AI) that provides systems the ability to automatically learn
and improve from experience without being explicitly programmed.
Machine learning focuses on the development of computer programs
that can access data and use it to learn for themselves. Artificial
Intelligence (AI) with its core subset of Machine Learning (ML) is
rapidly transforming life experiences– ranging from routine mundane
chores to critical decision-making. AI/ ML permit rule-based extractions
on heterogeneous multidisciplinary data collected over the entire value
chain of businesses. Artificial Intelligence is helping e-commerce
businesses get closer to their customers, as with the help of AI e-
commerce platforms are able to utilize large datasets regarding customers
purchasing behaviour and product search patterns. Artificial intelligence
self-learning algorithms can create personalized shopping experiences
for online buyers.
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 Typically, businesses are implementing AI/ML to increase retail
standards, customer experience, and profits and fast processing.
Following are some facilities that AI is providing to e-commerce:
 Personalization: The client s are pro vided with a perso nalized
experiences and easy to select products/searches based on their earlier
searches (machine learning technique).
 Real-time intent targeting: It is the next step in personalization. Enabled
by AI, it gives the ability to accurately predict ever- changing customer
intent.
 Voice Assistant: AI is also facilitating voice assistants, by which
customers can interact with and resolve their queries.
 Recommendation engines: A recommendation engine is a tool that
filters the data by using algorithms and suggests popular products for
customers. Based on the customers past purchasing behaviour, these
engines will suggest items which the customer may probably purchase.
 Chat box support: It is a computer program that allows conversational
performances, engaging purchasing more highly by text and voice.
Nowadays, it is popularly used in mobile phone, internet browsers, or
internet chat rooms. A basic and simple real- time human-like interaction
using both text options can also enhance user experiences (UX) and
thus nurture good engagement between the customer and the online store.
d. Internet of Things (IoT), Industrial Internet of Things ( IIoT), Digital
Twins and its Impact on E-Commerce: The Internet of Things (IoT)
is a system of interrelated computing devices, mechanical and digital
machines, objects, animals or people that are provided with unique
identifiers and the ability to transfer data over a network without
requiring human-to-human or human-to-computer interventions. IoT
devices keep capturing, sharing, collating, millions of zetta bytes (1021
bytes), which is made available to planners/decision makers for real-
time decision making through state-of-art control centres.

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 Industrial Internet of Things (IIoT) is similar interconnected network
particularly in industrial context, where all the instruments have sensors
and are interconnected with each other. Extending the concept of IIoT,
is the concept of ‘digital twin’- which refers to the digital process of
creating a virtual representation of a product. The application of ‘digital
t win’ can be u sed in p ro du ct d esig n, simulat io n, mo nit o ring,
optimization, and servicing and is an important concept of Industrial
Internet of Things (IIoT). The impact that IoT and its related technologies
have on e-commerce is interesting. For example, IoT sensors and RFID
(Radio Frequency Identification) tags have transformed the way
inventory is organized at the backend of online stores.
Most of the organizations are presently concentrating on handling their
warehouse operations for decreasing costs and increasing business
efficiency. Automated warehouses are progressively effective, adaptable,
quick and trustworthy as well. They help online shopping companies to
adapt and handle the distribution of warehouse products.
Because of interconnected sensors on the products, a unique online
shopping experience is possible, where both the buyers and sellers can
‘view’ and monitor the availability and movement of inventory in real
time. Such IoT based implementations in the back-end factories lead to
better ‘supply chain management’ models. Tracking the status of the
product has never been so accurate before the advent of IoT technology.
With the help of IoT sensors and RFID tags, customers can easily know
what happens to the product they have ordered, where it is, what the
arrival time of the product etc is.
e. Cloud Computing, Edge Computing and Fog Computing and its
Impact on e-Commerce: With the increase in storage capabilities and
methods of data collection, huge amounts of data must be stored and
managed well in remote data centres, called as ‘cloud’. three basic
manner viz. Software as a Service (SaaS), Platform as a Service (PaaS),
Infrastructure as a Service (IaaS). Cloud computing term is often referred

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 to refer to the process of analysing the data lying in these remote data
centres. A close variation of the concept of ‘cloud computing’ is ‘edge
computing’.
‘Edge Computing’ moves computing applications, data, and services
away from centralized nodes to the logical extremes of a network. It
enables analytics and data gathering to occur at the source of the data,
instead of remote data centres.
‘Fog computing’ refers to a collection of co-located edge-computing
devices and computations, connected over Internet. Therefore, fog
computing is a decentralized computing infrastructure in which data,
compute, storage, and applications are located somewhere between the
edge and the cloud. Edge and fog computing help to process co-located
data closer to where it has been captured from, rather than waiting for it
to ‘flow’ to the remote cloud servers. Fog computing and Edge
computing, therefore, reduce the time-gap between data capture, data-
processing and data-dissemination. All these varied possibilities of
computing offered by Cloud, Edge and Fog allow business enterprises
to launch applications without worrying about the infrastructure. These
remote implementations help businesses to have access the information
stored in big data storages without delays. Cloud based e-commerce
solutions are cost effective, scalable and could be considered as the best
option available to those enterprises who need to access terabytes of e-
commerce data, without the botheration of maintaining it on the local
premises. Another important benefit of cloud computing is that it
provides security to the data by storing it in a virtual space. Physical
servers or on- premises data centres cannot easily combat the risks of
disasters/risks which could occur anytime. Cloud computing, along with
its emerging trends like fog computing and edge computing can be
utilised in e-commerce realm to provide alternative contact points for
the related business processes and to its numerous users.
f. Block Chain Impact on E-Commerce: A block chain is a digital record

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 (distributed ledger), which is made to store a list of transactions (called
‘blocks’). Each block has a different feature which contains a link to the
previous block, a time stamp, and data about the transactions it
represents. Blocks cannot be modified once they are created. Since
nobody can modify a block after it’s been created, all parties (buyer and
Block-chain technology is a natural fit for E-Commerce since it was
designed for storing transactional data. However, this data doesn’t need
to be financial; it can be any distinct action that requires a fixed record,
including actions related to payment and order fulfilment.There are
various advantages (plus points) of block chain technology that make it
an approachable technology for the e-commerce industry (and other
industries) in the coming future.
g. Industrial Revolution 4.0 and its Impact on E-Commerce: These
‘smart’ digital technologies including AI, IoT, Cloud computing, Big
Data Analytics etc. have also led to a paradigm shift in businesses,
particularly the manufacturing sector, ushering in, what is popularly
referred as ‘Industry Revolution 4.0’ (IR4.0). Industry 4.0 completely
relies on real time data exchange and digital interconnectivity enabled
by cyber-physical systems (CPS) and emerging technologies. In IR 4.0,
the physical world of manufacturing relates to digital world using cyber-
physical systems (CPS), Internet of Things (IoT), and Industrial Internet
of things (IIOT), cloud computing, and artificial intelligence for better
collaboration across departments, partners, vendors, product, and people.
IR 4.0 has now been accepted as a more comprehensive, interlinked,
and holistic approach to manufacturing than the prevailing one. The
underlying concept of IR 4.0 is “interconnectivity using emerging
technologies”.

10.9 SUMMARY
Emerging technologies are simply new technologies that are currently
developing or will be developed over the next five to ten years, and which will
substantially alter the business and social environment. Broadly, emerging

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technologies can be understood as ‘science-based innovations with the potential
to create a new industry or transform an existing one’, which will “substantially
alter the business and social environment”. Technologies are widely used in e-
commerce domain. E-commerce is booming in an unprecedented way with
implementation of frontier technologies. For instance, Cloud based/Fog based
systems are helping businesses to have access the information stored in big
data storages without delays, it’s cost effective, offers scalability and is the
best option available to the larger organizations and companies who need to
hold terabytes of e-commerce data.
The impact of Emerging technologies on e-commerce has been enormous
in the last few years. Convergence of Emerging technologies has led to the
emergence of newer cloud-based ‘digital platforms’, which are more complex
in implementation than online stores that we had been talking so far about.
Undoubtedly, Emerging technologies have ushered Digital transformation in
the area of trade and commerce. Businesses have become cloud-based and
mo bile-enabled. Ent erprises have beco me mo re agile and ‘virt ual’ in
nature.Crowdsourcing involves obtaining work, information, or opinions from
a large group of people who submit their data via the Internet, social media,
and smartphone apps.People involved in crowdsourcing sometimes work as
paid freelancers, while others perform small tasks voluntarily. For example,
traffic apps like Waze encourage drivers to self-report accidents and other
roadway incidents to provide real-time, updated information to app users.
Crowdsourcing is the collection of information, opinions, or work from a group
of people, usually sourced via the Internet. Crowdsourcing work allows
companies to save time and money while tapping into people with different
skills or thoughts from all over the world. While crowdsourcing seeks
information or work, crowdfunding seeks money to support individuals,
charities, or startup companies. The advantages of crowdsourcing include cost
savings, speed, and the ability to work with people who have skills that an in-
house team may not have. Web 5.0 will not just provide a decentralized platform
to the users but will also be working on the addition of human emotions to it.

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This means that the use of artificial intelligence is going to be highly prominent
in this version of the internet. Such a vision is there just to create a deeper
connection between humans and computers. For example, a Website or
application can read the emotions on your face and then suggest the results or
even advertisements based on those emotions.

10.10 GLOSSARY
 Blockchain: A block chain is a digital record (distributed ledger), which
is made to store a list of transactions (called ‘blocks’). Each block has
different feature which contains a link to the previous block, a timestamp,
and data about the transactions it represents.
 Chat box: It is a comput er program that allows conversatio nal
performances, engaging purchasing more highly by text and voice. It is
popularly used in mobile phone, internet browsers, or internet chat rooms.
 Community model: The existence of the community model is based on
user loyalty. The community model may also run on a subscription fee
for premium services.
 Customisation model: This model provides customers with content that
is customised to meet their preferences by completely customising
information needs. A website built on this model can be highly attractive
to visitors.
 Industrial Internet of Things (IIoT): Industrial Internet of Things (IIoT)
is the instruments have sensors and are interconnected with each other.
 Info-me-diary Model: The term ‘Info-me-diary’ is a composite of
info rmat io n and int ermediary. This websit e mo del aggr egat es
information from multiple electronic commerce retailers and provide
services of searching and comparison for Internet customers.
 Manufacturer model: This model is based on the power of the Web to
allow manufacturers to reach buyers directly and thereby compress the
distribution channel.

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  Personalization- E-commerce technology allows for personalization.
On the basis of name, interests and past purchase behaviour products
can be customized and personalized, further this collected information
could be used for sending marketing and promotional messages to the
targeted customers.
 Recommendation Engines: A recommendation engine is a tool that
filters the data by using algorithms and suggesting popular products for
customers. Based on the customers past purchasing behaviour, these
engines will suggest items which the customer may probably purchase.
 Ubiquity: Ubiquity in E-commerce means that it can be everywhere,
whereas, the traditional business market is a physical place.
 Web Server: A web server is server software, or hardware dedicated to
running the software, that can satisfy client requests on the World Wide
Web

10.11 SELF ASSESSMENT QUESTIONS

1. Define augmented reality. Describe how AR can facilitate E
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_________________________________________________________
2. Define crowdsourcing. List the elements of crowdsourcing.
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3. Describe the process of crowdsourcing. How is crowdsourcing used in
EC?
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10.12 LESSON END EXERCISE

1. Explain various features of technology required while designing E-
Commerce.
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2. State the impact of various emerging technologies such as mobility,
cloud, AI and IoT on E-commerce.
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3. Explain the role of AI in e-commerce.
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 _________________________________________________________
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10.13 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004.

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Lesson No. 11 UNIT III
ELECTRONIC COMMERCE APPLICATIONS
RETAILING IN E-COMMERCE PRODUCT AND SERVICES;
INTERNET MARKETING AND B2B ELECTRONIC
RETAILING

STRUCTURE
11.1 Introduction
11.2 Objectives
11.3 E-Retailing
11.4 Components of E-retailing
11.5 Advantages of E-retailing
11.6 Shortcomings of E-retailing
11.7 Challenges in E-retailing
11.8 Brick and Mortar retailing
11.9 Multi Channel retailing
11.10 Challenges for adoption of digital commerce
11.11 Essentials of Online retailing
11.12 Future of of E-retailing
11.13 Internet marketing and B2C electronic retailing
11.14 Online travel and tourism (hospitality) services
11.15 Employment and the online job market

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11.16 Online real estate, insurance, and stock trading
11.17 Online banking
11.18 Summary
11.19 Glossary
11.20 Self-Assessment Questions
11.21 Lesson End Exercise
11.22 Suggested Readings

11.1 INTRODUCTION
IT has revolutionised the business process and it has brought changes in
the business operations. Internet has provided an extra edge to the customers
New-a-days, buyers prefer to shop as per their convenience and comfort from
their homes for various reasons. While surfing internet, we often see many
advertisements regarding various offers and schemes of products for online
purchases. This is termed as e-retailing (popularly known as e-tailing). E-
retailing simply means retailing over internet or selling of retail goods on the
internet. In simple words, we can say that e- tailing refers to shopping through
the internet or other media. In this unit you will learn about e-retailing, its
components, advantages and shortcomings, challenges faced by e- retailers,
role of IT in e-retailing, and brick and mortar retailing.

11.2 OBJECTIVES
After reading this lesson, you will be able to:
 describe e-retailing;
 discuss advantages and shortcomings of e-retailing;
 discuss the components of e-retailing ;
 describe the challenges in e-retailing ;
 explain brick and mortar retailing;

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  discuss multi channel retailing; and
 explain the pre-requisites for online retailing.

11.3 ELECTRONIC RETAILING

Electronic retailing (e-tailing) is a buzzword for any business-to-
consumer (B2C) transactions that take place over the Internet. Business-to-
consumer (B2C) transactions refer to transactions that occur between a business
or company (dealing in goods and services) and a consumer. E-tailing refers to
the sale of goods online. Companies like Amazon and Dell created the online
retail industry by putting the entire customer experience. These experiences
may run from browsing products to placing orders to paying for purchases on
the Internet. The success of internet buying and selling encouraged more
traditional retailers to create an online presence to augment their brick-and-
mortar outlets (business that have physical presence rather than virtual or online).
Although e-retailing is an independent business model with certain specific
constituents like; trust model, electronic transaction process, etc. In real sense
it is a subset of e- commerce by nature.
In simple words, we can state that a retailer is a sales intermediary
between manufacturers and customers. Even though many manufacturers sell
directly to consumers, they usually do so to supplement their major sales through
wholesalers and retailers. In the physical world, retailing is done in stores (or
factory outlets) that customers must visit physically in order to make a purchase,
although sometimes customers may order by phone. Companies that produce a
large number of products for millions of customers, such as Procter and Gamble,
must use retailers for efficient product distribution. However, even if a company
sells relatively few different types of products (e.g., Apple Computers), it still
might need retailers to reach a large number of customers who are scattered in
many locations.
Catalog (mail-order) sales offer companies the opportunity to reach more
customers and give customers a chance to buy from home. Catalog retailers do
not need a physical store with staff; online shopping has created the need for

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electronic cata- logs. Retailing conducted over the Internet is called electronic
retailing (e-tailing), and sellers who conduct retail business online are called e-
tailers. E-tailing can be conducted through catalogs that have fixed prices as
well as online via auctions. E-tailing helps manufacturers (e.g., Dell) sell directly
to customers.

11.4 COMPONENTS OF E-RETAILING

Electronic retailing or e-tailing refers to the direct sale of products,
information and service through virtual stores on the web which is designed
around an electronic catalogue format and auction sites. There are thousands
of storefronts or e-commerce sites on the Internet that are extensions of existing
retailers or start-ups. There are certain essential ingredients for an electronic
retailing business to be successful. You must consider these components well
in advance before setting up an electronic storefront. Let us learn the components
of E-Retailing. These are as follows:
a. Attractive business-to-consumer (B2C) e-commerce portal: The
interfaces and navigation should be user friendly and pleasing. The site
should have a strong sense of branding.
b. Right revenue model: Revenue model should be accurate and there is
transparency in terms of service levels and pricing.
c. Penetration of the Internet: As the e-commerce portal is in addition to
the existing brick-and-mortar infrastructure aimed to bring in customer
loyalty. The retailer should keep in mind the local internet penetration
for better success.
d. E-Catalogue: It is a database of products with prices and available stock.
The retailer can provide value added service by giving price and feature
comparison between products. This would enhance the value of the e-
commerce portal for the customers. The retailer can indicate special
benefits available to customers under the loyalty programme thus making
the customer feel special.

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e. Shopping Cart: The customers can select the products that they wish
to purchase and fill their shopping cart. The Shopping Cart can be
designed in a way that it could allow the customer to store their preference
and previous purchase history for easy selection. This adds value to the
shopping experience and save time. Finally, as in a real store, at the
time of checkout, the system calculates the price to be paid for the
products. The experience should be seamless and without errors.
f. A payment gateway: Customer makes payments through his/her credit
card or e- cash. The payment mechanism must be fully secure.
g. Support Services in E-Retailing: The electronic retail business requires
support services, as a prerequisite for successful operations. These
services are required to support the business, online or offline, throughout
the complete transaction- processing phases. The following are the
essential support services:
 Communication backbone
 Payment mechanism
 Order fulfilment
 Logistics

11.5 ADVANTAGES OF E-RETAILING

Whether it is conventional brick and mortar retail store or extension of
the existing business or a new start-up, there are many advantages from e-
tailing. E-tailing provides lots of opportunities to all types of retailers. Let us
learn advantages of E-Retailing. These are as follows:
a. Price and selection: Online shopping provides quick deals for many
items with many different vendors. E-tailing provides the facilities of
online price comparison which makes selection quite easy and fast.
b. Opportunities to reach new markets: E-retailing gives retailers an

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 opportunity to reach new markets which is physically not possible.
c. Provides home shopping experience: E-Retailing overcomes some
limitations of the traditional formats. For instance, the customers can
shop with the ease and comfort of their homes.
d. Extension to leverage: For the existing retailers, it is an extension to
leverage their skills and grow revenues and profits without creating new
business.
e. Valuable insights: E-commerce software also traces the customers’
activities on the internet. It enables e-retailers to gain valuable insights
to the customers shopping behaviour.
f. 24 hours shopping: Online stores are usually available 24 hours a day.
Many customers who have internet access both at work and at home go
for online shopping. Moreover, increasing fuel costs, large mall crowds
and time constraints are motivating buyers to shop online. Retailers can
get the order from any customer living any place at any time of the day.
E-tailing removes the barriers of time and space.
g. Reasonable cost: E-Commerce channels are efficient and they are highly
cost-effective retailers. Retailers do not have to pay a heavy price (rent)
for shops in costly shopping malls.

11.6 SHORTCOMINGS OF E-RETAILING

The online retailing (e-retailing) process suffers from various drawbacks.
There are some drawbacks of E-retailing. Let us learn them one by one.
i) It lacks an emotional shopping experience that the customer can get in a
personal shopping store.
ii) It is expo sed to intangible merchandise (i.e., virt ual display of
merchandise). Therefore, it does not provide sensory support to the
customer. The customer cannot hold, smell, feel, or try the product.

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iii) Online customers are reluctant to part with their credit card debit cards
or net banking details on net, fearing they may be misused. It arises
security issues. Customers are not yet convinced about the foolproof
status of this method.
iv) It provides impersonal services which the Indian customers are not
exposed to. They are rather used to the tangible personalised services
which they may miss in online retailing services.
v) It is lacking in family shopping experience. The Indian customers enjoy
shopping at the weekends, and particularly during festive seasons and
marriage occasions.
vi) There is always a sense of fraud in the mind of customers while shopping
online as customers are unable to inspect the product before purchase.

11.7 CHALLENGES IN E-RETAILING

E-retailing is totally a new concept in India and online retailing is a
tedious task here. E- tailers face so many problems and challenges in this
process. The following are the major challenges faced by e-tailers :
a. Resolving channel conflict: If a seller is a click-and-mortar (both web
and physical presence) company, such as Levi’s or GM. It may face a
conflict with its regular distributors when it sells directly online. This is
known as channel conflict. This situation can alienate the regular
distributors. Channel co nflict has forced some co mpanies (e.g.,
Lego.com) to limit their B2C efforts. Others (e.g., some automotive
companies) have decided not to sell direct online. An alternative approach
is to try to collaborate in some way with the existing distributors whose
services may be restructured. For example, an auto company could allow
customers to configure a car online. It requires that the car be picked up
from a dealer, where customers would arrange financing, warranties,
and service. IT tools can facilitate resolution of channel conflict.
b. Resolving conflicts within click-and-mortar organizations: When an

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 established company decides to sell direct online, it may create a conflict
within its existing operations. Conflicts may arise in areas such as pricing
of products and services, allocation of resources (e.g., advertising budget)
and logistics services provided by the offline activities to the online activities
(e.g., handling of returns of items bought online). As a result of these
conflicts, some companies have completely separated the “clicks” (the online
portion of the organization) from the “mortars” or “bricks” (the traditional
brick-and-mortar part of the organization). Such separation may increase
expenses and reduce the synergy between the two. The decisions about
how to organize the online and off-line operations and whether or not to
separate them, can be facilitated by IT tools. In addition, Group Decision
Support System (Group DSS) can be used to resolve conflicts.
c. Organising order fulfilment and logistics: E-tailers face a difficult
problem of how to ship very small quantities to a large number of buyers.
This can be a difficult undertaking, especially when returned items need
to be handled. IT-supported decision models can help with scheduling,
routing, shipments, inventory management and other logistics-related
decisions.
d. Determining viability and risk of online e-tailers: Many pure online
e-tailers faced the problems with customer acquisition, order fulfilment,
and demand forecasting. Online competition, especially in commodity-
type products such as CDs, toys, books, or groceries, became very fierce,
due to the ease of entry to the marketplace. So a problem most young e-
tailers face is to determine how long to operate while they are still losing
money and how to finance the losses. In deciding on new EC initiatives,
or on an entire dot-com company, a risk analysis is needed. A DSS
modeling can be helpful in such cases.
e. Identifying appropriate revenue models: Many dot-com companies
were selling goods at or below cost, with the objective of attracting
many customers and advertisers to their sites. One early dot-com model
was to generate enough revenue from advertising to keep the business

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 afloat until the customer base reached critical mass. This model did not
work. Too many dot-com companies were competing for too few
advertising dollars, which went mainly to a small number of well-known
sites such as AOL and Yahoo. In addition, there was a “chicken-and-
egg” problem. Sites could not get advertisers to come if they did not
have enough visitors. To succeed in e-Commerce, it is necessary to
identify appropriate revenue models.
f. Req uire ment to C hange B usiness Pro cess: The p ro cess o f
procurement, storage and logistics in e-businesses is different from that
in traditional brick-store businesses. The e-retail organization has to
carefully redesign and integrate various processes to suit the new e-
business. Traditional sections of departments and management hierarchy
may pose hindrances and bottlenecks in the process of order processing
and shipments. For example, the traditional business may require the
goods to be present at the warehouse and inspected before being shipped
to the customer. In electronic retailing, shipping of goods from one place
to another to a customer would not be possible. The retailer may appoint
a local supplier at the city where the customer resides and instruct the
supplier to deliver the goods. This would require by passing certain
business rules and a lot of faith on the local supplier. It would require
business confidence that the supplier would follow the instructions and
deliver t he same product in go od quant it y and perfect quality.
Merchandise planning and demand analysis is also difficult in e-retailing,
as compared to traditional retail businesses. IT can play a great role in
defining these processes and ensure compliances.
g. Legal Issues: Proper laws have not yet evolved for Internet based
transactions. Validity of e-mails, digital signatures and application of
copyright laws is being checked by various government authorities. E-
mail and digital signatures are now being recognized as valid for any
legal purpose. Value Added Tax (VAT) is yet another area that creates
problems. Taxes on goods and services are still an issue. Since the taxes

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 are levied and shared by multiple government agencies at local, state or
federal level, there are no clear rules to guide retailers. In e-retailing,
the
h. Security and Privacy: Security is one of the major challenges in the
digital world. Despite a lot of security arrangements, such as passwords
and firewalls, we come across the news of website hacking and data
pilferages. The Internet being on public domain is more susceptible to
unaut ho rized p eeping. Peo ple are su spicio us abo ut d isclo sing
information regarding their credit cards and personal details on the Net
because of a fear that they can be misused. Cyber criminals have
exploited the Internet weaknesses and have broken into computer
systems, retrieving passwords and banking information. Security of
payment gateway is a major concern, which has to be taken care of by
the retailer by putting up proper security layers. IT must ensure proper
established framework that can have multiple layers of security. IT should
also ensure inter-operability between systems.

11.8 BRICK AND MORTAR RETAIL STORE

Brick and mortar retail store means a retail store that deals with its
customers face to face in physically constructed office building or store that
the retailers owns or hire on rent. Local grocery retail store is the example of
brick and mortar retailing. In simple terms we can say that brick and mortar
retail store operates from a constructed building and have physical presence
rather than virtual or online presence. It may be a store built of physical material
such as bricks and mortars where customer can drive to and enter physically to
check, touch, see and purchase merchandise. Generally brick and mortar term
is used as the basis for the term clicks and mortar, a business that deals on the
web as well as from physical locations.
11.8.1 Integration of Brick and Mortar with E-retailing
Today‘s shopper expects convenience. Merchants integrating brick-and-
mortar stores, ecommerce sites and catalogues will increase repeat purchase

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rates and achieve higher levels of customer satisfaction. In any multi-channel
retail consumer interaction, traffic and sales are being driven from one channel
to the other. In “web-to-store” or “store-to- web” situations, the limitations of
one channel are mitigated by the strengths of the other. This calls for greater
integration with both these business processes so as to maximize the revenue
opportunities. For this purpose, the retailer needs to focus in the following
business process areas:
i) Centralised Order Fulfillment: The centralised order fulfilment
includes:
 Common merchandise data base for item data, hierarchy across channel.
 Merchandising operation through integrated platform for pricing,
promotions and offers
 Corporate wide CRM
 Offer consistent pricing and promotions
 Choice for customers to order through any channel and pick at any
channel
 Distributed Order Management, consolidates all channel order and fulfill
from Distribution center
 Put away stocks and cross-dock stocks
 Re-allocate & Re-distribute the stocks based on demand in the channels
 Transport planning for courier to customer in web/ mobile/ Store channel
sales
 Customer returns on any channel is accepted irrespective of the channel
that was the purchase made on, and is accounted in inventory through
POS or Web Payment gateway
 Customer returns through Web/Mobile, the web/mobile should accept
the returns as a separate transaction or along with shopping list of
purchase

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ii) Supply Chain Synchronisation: It includes:
 Integration to store pickup order, inventory and billing
 Vendor to supply for all channels
 Visibility of inventory in all channel
 Near real-time POS data for inventory position for accuracy
 Ability to update channels on stock out items
 Ability to transfer the store pickup orders to delivery order if stock out
iii) Merchandising planning: It includes:
 Demand planning & forecasting for web / mobile / direct store
 Regular Ordering system for different categories
 Category sales planning for all channels and contribution to total financial
plan
 New product introduction in all channels
 Inventory planning for all channels based on the sales trends. (min /
max/ re order)
 Visual images selection for SKU for display in Mobile and Web
iv) Customer Profile: It includes:
 Single window registration for all channels
 Common Identity for every customer / family across the channel
 All channel bills pertain to customer to integrate in common database
 Schemes on rewards, pre calculated value before merge into common
database
v) Metrics and Measurement: It includes:
 Measure across channel for consumer growth & satisfaction
 Effective loyalty program to track across channel

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  Surveys to gather additional insight across channels
 Measure by category and not by channels
 Inventory reports on efficiency in utilization of inventory across channels
 Category performance reports across channels
 Marketing analysis reports to add value in all channels & enhance
customer experiences and conveniences

11.8.2 Opportunities from integration

Once integration is achieved, the retailer can provide value-added
services to the customers which work across channels. After the integration,
there are some opportunities, let us learn them one by one.
i) In-store pick up: In-store pick up is a process allowing your customers
to order online and pick up in your physical store. During the process,
communication with the customer primarily happens via email and
instructs the shopper the steps necessary to complete the transaction. In
most cases, the order is fulfilled at the “brick-and- mortar” store the
same business day the order is placed online, with best practices showing
most orders filled within a two-hour period. The primary value to
consumers is that they receive their items almost immediately after
purchasing. By using in- store pick up, consumers pick up their
merchandise at a special designated area. Thus they may avoid heavy
crowds at the checkout counter. This is a core reason why in-store pick
up is so popular during the holiday season, when last minute ordering is
often done online. The consumer also benefits from not having to pay
shipping costs. Sometimes the associated shipping cost of a product can
be a critical factor to cart abandonment. In-store pick up reduces this
risk. The retail business also benefits from the incremental purchases
that are made when a customer goes to the physical store to pick up
online purchases.
From a technology perspective, in-store pick up needs to have some

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 level of inventory integration to work effectively. The integration of
data is critical in being able to display to the consumer the availability
of products at their closest geographic store. After a user selects the
“in-store pickup” option and enters his pin code, the system needs to
cross-reference available store-level inventory data. This ensures that
the product is available within an acceptable distance. ‘PVR Cinemas’
is a very handy example to this. The customers can view the availability
of seats, choose the location of the seats vacant or available and book
the tickets online. The customer is given a pin, showing which tickets
can be obtained from ticket counters or ticket vending machines (kiosk).
This inventory accuracy is crucial to deliver a great shopping experience.
Integration does not have to work in real time, but needs to execute
multiple data checks throughout the day. Work your in-store pick up
product availability based upon thresholds. For example, once an
inventory level reaches three in a store location, do not display as
available for in-store pick up. In-store pick up should not be executed
for all products. Focus on products with high shipping costs and products
that a consumer would typically want immediately.
ii) In-store returns: Returning a product purchased online can be an
extremely frustrating experience. Between determining if the retailer
will pay for the shipping, waiting in line at the post office and waiting
for a refund, the returns process is known for giving consumers
headaches. Accepting online product returns in a physical store is a tactic
to make the returns experience pleasant and easier for the customer. By
displaying an in-store returns option on your site’s home page, product
page and within the shopping cart, a retailer reduces consumer purchase
hesitation and will likely drive conversion improvement.
Similar to in-store pick up, in-store returns generate incremental in-
store purchases. After receiving their refund, consumers frequently shop
for and purchase additional items while in the store. These actions can
lead to order values that are actually greater than the initial online

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 purchase and drive higher lifetime consumer value. The key to executing
in-store returns is to have order management from the web and the
physical stores driven from the same database. By providing the in-
store associate the ability to look up information based upon order
numbers on the packing slip, the process can be verified and the
transaction can be closed by the associate.
iii. Emailed in-store coupons and promotions: Email is predominantly
used as a mechanism to drive web-store promotions. Multi channel
businesses, however, are realizing the value of emailing “in-store” or
hybrid promotions to their mail lists. ”In-store” email promotions allow
the consumer to print an email promotion (say Rs.100 off a Rs.1000
purchase) and have it accepted at the retail store. For businesses wanting
to further track multi channel purchasing, consider generating unique
barcodes for each email that provide added levels of insight and security.
Hybrid emails allow promotions to be leveraged in-store and online via
a purchase code. By giving the consumer the ability to choose how they
want to utilize the promotion, a retailer builds a stronger service
connection with the shopper.
iv. Store locator: Now standard among e-commerce stores, a store-locator
function must be able to find the closest stores based upon pin code
while providing door-to- door directions online. If retailers have a
physical store network but do not provide store locator functionality,
retailers are dramatically behind the innovation curve.
All of these initiatives are geared toward achieving one objective i.e.
closing the sale.

11.9 MULTI CHANNEL RETAILING

Due to high competition in retail sector, it is very difficult to serve the
customers with a single channel of retailing. Retailers are increasingly
multiplying their channels, adding Web platforms and call centers to brick-
and-mortar stores to reach more and more customers. Interestingly, customers

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do not use one channel exclusively to complete their purchases anymore. As a
matter of convenience, many customers use the multiple channels to complete
the purchase process. Consumers also are mixing different channels for different
activities. For example, a multi-channel customer might research a product at
home by visiting a retailer’s online store, doing comparisons and reading reviews
about the product. If this user has specific queries that are not answered online,
he may then call the retailer’s call center. After completing his research, he
may go back to his computer, place an order online and then track the order
status or shipping details. Or he may place the order online and then pick up
the product from a nearby store instead of having it shipped from a warehouse.

Fig 11.1 Multichannel Retailing

While many retailers add different channels one-by-one to respond to
rapid changes in the marketplace and in customer expectations, disparate
channels are no longer able to drive customer satisfaction or revenue. This is
due to Retailers’ inability to provide consistent user experience and service
levels. Certain channels such as Web call for more product data whereas a
mobile store front expects integration with location services.

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 Integrating multiple channels poses several challenges, due to different
systems that work using different technologies, organization structure that is
already established and the need to manage inventory across channels. It is
important to identify business needs and align integration road maps to satisfy
these needs before embarking on a multi channel integration initiative. Making
product and pricing information and inventory visibility uniform across channels
poses huge challenges that should be dealt diligently.

11.10 CHALLENGES FOR ADOPTION OF DIGITAL

COMMERCE
In a country like India where a large number of semi-urban and rural
customers exist, they generally want to see, touch and compare merchandise
before purchase. Customers are not much familiar with internet and digital
commerce is a tough task here. Let us learn main challenges for adoption of
digital commerce.
i) Effectively using digital media: Overall, retailers are not able to
leverage Internet and Mobile as branding as well as customer acquisition
medium. They look at online sales and in-store sales as two different
worlds. Retailers typically consider their online presence as a means to
overcome the physical limitations of offline promotions, particularly
catalogue and newspaper inserts, not as an integrated channel.
ii) Provide complete experience to consumers across digital channels:
Retailers do not feature all the products available in stores online, and
this presents a cut off to the customers. They are not able to find the
products that they are looking for. Moreover, consistent product
information across all channels of marketing is not available. The
customers do not get all the information about a product like images,
product features, and hence influencing purchase capabilities which are
required to drive sales using digital channels.
iii) Managing technology is not a retailer’s expertise: Technology is often
a capital intensive department and retailers are often weary of getting

267
 into an area which they are not experts in. It is important for retailers to
be able to acquire and manage technology without requiring technical
expertise or huge investments.
iv) Showcase products and offers: Consumers want to know of all the
products and offers available from a retailer. They also want to be
able to quickly find the product or offer that they are interested in.
So product discovery and showcasing is a critical challenge for most
retailers.
v) Expensive & difficult to manage Payment systems & logistics: Getting
a flexible payment solution and logistics solution for retailers’ digital
commerce requirements is a complex job. It is hard to find affordable
and reliable solutions that will take care of such core requirements such
as payment and shipping.
vi) A consumer lost online, is a consumer lost: Many retailers view online
and offline retail sales as different domains. The reality is that a customer
who is looking for a particular retailer and does not find that retailer or
finds a competitor or gets a not-so-good impression about that retailer
on the Internet might choose not to do business with that retailer.

Fig 11.2 : Elements of Digital Commerce

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11.11 ESSENTIALS OF ONLINE RETAILING
Retailing over internet is not as simple as running a brick and mortar
retail store. It is totally different and challenging task. Look at figure 11.3
which shows building blocks for running a store online.

Fig 11.3: Building Block for running a store online

There are some very important points which should be kept in mind
while deciding to go for online for retail. Let us discuss the essential points
one by one.
a) The Commerce Platform: It is very important to select appropriate
platform for digital commerce foray. The choice a retailer makes at the
beginning will have a long term impact. The choices one needs to make
are:
a) Service Model vs. Owning the platform
b) Using a standard platform vs. building your own platform
c) Using Open source vs. proprietary platforms

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b) Logistics Partner: It is very important that orders received get executed
within the promised time window. The logistics partner should be able
to integrate his systems with retailers’ systems so that orders flow through
uninterrupted and supply chain visibility is available to the customers.
In certain payment options such as Cash-on-Delivery (COD), the partner
should be able to collect the payment. Reverse logistics includes handling
customer returns and non-delivered goods.
c) Payment Gateway: Retail store should be able to accept the customer
payments using various methods. Most common include:
a) Credit Card and Debit Card Payments
b) Net banking
c) Using Digital Gift vouchers
d) Cash on delivery
e) Payment at Store in cash
d) Digital Marketing Agency: In order to drive customer traffic to retail
online store, retailer needs to engage a Digital Marketing Agency. The
scope of work for such agency includes:
a) Content Creation for catalogue including photographs, videos and
detailed product specifications
b) Writing reviews, blogs
c) Search Engine Optimisation to make easier for customers to find retail
store and merchandise
d) Managing the loyalty programme
e) Running campaigns on leading portals using advertising networks such
as MSN, Google, etc.

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 Fig 11.4: Retail Operations Platform

11.11.1 Models for online retailing

a) Common process models: For online retailing there are some common
process models and these are:
i) Web Store linked to one store: The online store front uses catalogue of
the items available at one particular store in the chain. The orders received
are executed through POS. Integration is in batch mode.
ii) Web Store linked to warehouse: The catalogue exposed on the online
store reflects stocks available at the warehouse. Execution takes place
from the warehouse itself. Integration may be event driven/real time or
in batch mode.
iii) Each physical store has a web store front: Here, each Point of Sale
(POS) is linked to the web stores and customers may place order online
but pick up from the store. In some variant, it allows pre-booking of

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 new models/ items on the web front end. Payments may be online of
offline.
b) Models for web stores: For web stores, some models are:
i) EBO on Popular Platforms: Many brands / retailers launch their online
store on popular portals such as Rediff.com or Indiatimes.com. This
gives them shorter time to launch and get online footfalls due to the
traffic delivered by the portal. As a part of marketing campaigns, highly
effective to get noticed but difficult to sustain due to high investment
required to maintain high visibility.
ii) Store at the Marketplace: Many a brands / retailers set up their online
stores on E-commerce Hubs or Marketplaces such as MartJack Exchange
or Amazon. This gives them access to technology infrastructure which
is very scalable along with advanced tools to manage the content as
well as to run targeted campaigns. The operating costs are moderate.
iii) Stand alone Stores: Mature retailers prefer to make their own platform
a destination for online shoppers. The technology platform can be on
software- as-a-service model or can be owned by the retailer. Integration
with the supply chain systems is must
iv) Pure play: These are the retailers who do not have physical stores. They
may have physical supply chain of their own or it is managed by their
suppliers.
v) Social Commerce: The retailer opens his store on social platforms such
as Facebook.
11.11.2 Who owns Multi channel Retail in the organization?
In some organizations, IT owns the multi-channel commerce. There are
few where marketing owns the same. In mature organizations, the multi-channel
team is a part of the operations.

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11.12 FUTURE OF E-RETAILING
E-tailing is a new concept in India. With limited internet users, this
industry (e-tailing) is growing very fast and there is much to be achieved yet.
Many growth drivers are in favour of e-tailing- demography, economy, changing
lifestyle, exposure to new ideas etc. Indian’s generally do not shop online.
They shop merchandise after touching, seeing and after price comparison. Many
times they gather information on the net. Indian e- tailing websites like
Naptol.com are offering shopping along with price comparison. Future of e-
tailing in India is bright with many sites like indiatimes.com, Naptol.com,
Flipkart.com, inflibeam.com etc. are providing good services and major retailers
like VishalMegaMart is also entering in this line. FMCG’s like Amway is giving
additional option to shop online, this shows the shifting trend towards e-tailing.
With the advent of new innovations like Web 3.0 retailing system will go in
hand-in-hand. In this highly competitive environment customers want full value
from their shopping with full convenience and ease. Online shopping is not
only more convenient for customers with hectic lifestyles but also gives a better
deal for their money.

According to a study by Indian Council for Research on International

Economic Relations (ICRIER), India’s unorganised retail sector is expected to
grow at about 10 per cent per annum with sales rising from USD 309 billion in
2006-07 to USD 496 billion in 2011-12. The study further suggests that

273
organised retail is likely to grow at a much faster pace of 45-50 per cent per
annum and quadruple its share in total retail trade to 16 per cent by 2011-12.
The study also revealed that the majority of unorganised retailers indicated
their preference to continue in the business and compete rather than exit. This
represents futures scenario in which both unorganised and organised retail not
only coexist but also grow substantially in size.

11.13 INTERNET MARKETING AND B2C ELECTRONIC

RETAILING
Today, the amount and percentage of goods and services sold on the
Internet is increasing rapidly, despite the failure of many dot-com companies.
Internetworldstats an online website estimates that there are over 7.26 billion
Internet users worldwide and over 357 million in North America as of April
2016. Forrester Research estimates that U.S. shoppers will spend $327 million
online in 2016, a 62% increase over 2012 (reported by Rueter 2012). Experts
fore- cast the global B2C to be over 1.5 trillion in 2018, especially due to the
growth in China. Some think that as the number of Internet users reaches
saturation, the rate of increase of online shopping may slow down. However,
this may not be the case. In fact, the rise of social and mobile shopping seems
to have accelerated the pace of B2C. In addition, the economic downturn may
increase online shopping as a means of saving money (e.g., save on gas if you
do not need to drive to a physical store).
Finally, global B2C is still increasing rapidly. Therefore, one of the
challenges facing e-tailers is increasing the amount of money each person spends
online. Companies have many benefits from selling their goods and services
online. Innovative marketing models and strategies and a better understanding
of online consumer behavior are critical success factors in B2C.
11.3.1 Size and Growth of the B2C Market
B2C e-commerce is growing rapidly, especially in develop- ing countries
(e.g., China, Russia, and India). The statistics for the volume of B2C EC sales,

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including forecasts for future sales, come from many sources. Reported amounts
of online sales deviate substantially based on how the numbers are derived,
and thus it is often difficult to obtain a consistent and accurate picture of the
growth of EC. Some of the variation stems from the use of different definitions
and classifications of EC. Another issue is how the items for sale are categorized.
Some sources combine certain products and services; others do not or use
different methods. Some sources include online travel sales in the statistics for
EC retail; others do not. Sometimes different time periods are used in the
measurement. Therefore, when reading data about B2C EC sales, it is important
that care is taken in interpreting the figures.
11.3.2 Developments in B2C E-Commerce
The first generation of B2C e-commerce sold books, soft- ware, and
music—simple to understand small items (known as commodity items) that
were easily shipped to consumers. The second wave of online growth started
in 2000, as consumers started researching and buying complex products such
as furniture, large appliances, and expensive clothing (see Case 1.1 on Net-a-
Porter, p. 11). Today consumers research product information and purchase
online from cat- egories such as bedding, spas, expensive jewelry, designer
clothes, appliances, cars, flooring, big-screen TVs, and building supplies.
Consumers are also buying many services such as college educations and
insurance policies.

11.14 ONLINE TRAVEL AND TOURISM (HOSPITALITY)

SERVICES
Online services are provided by many travel vendors. Some major travel-
related websites are expedia.com, travelocity. com, tripadvisor.com, and
priceline.com. All major airlines sell their tickets online. Other services are
vacation packages (e.g., blue-hawaii.com), train schedules and reservations
(e.g., amtrak.com), car rental agencies (e.g., autoeurope.com), hotels (e.g.,
marriott.com), commercial portals (e.g., cnn.com/TRAVEL), and tour companies
(e.g., atlas-travelweb.com). Publishers of travel guides such as lonely-

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planet.com, fodors.com, and tripadvisor.com provide considerable amounts of
travel-related information on their websites, as well as selling travel services.
The competition is fierce, but there is also collaboration. For example, in 2012,
TripAdvisor helped New Orleans hotels to attract more guests.
Example:
a. TripAdvisor
According to comScore Media Matrix (March 2016), TripAdvisor
(tripadvisor.com) is the world’s largest travel site. The company provides
trip advice generated from actual travelers. This is a global site with
more than 350 million visitors a month.
b. Qunar.com
Qunar (qunar.com) is the world’s largest Chinese-language travel
platform. The site provides services similar to those provided by
TripAdvisor, such as travel information, travel arrangements, and in-
depth search.
Online travel services generate income from commissions, advertising
fees, lead-generation payments, subscription fees, site membership fees, etc.
With rapid growth and increasing success, the online travel industry is
very popular, although online travel companies cite revenue loss due to fraud
as their biggest concern. Consumers themselves can fall prey to online travel
fraud. However, competition among online travel e-tailers is intense and has
low margins. In addition, customer loyalty and difference in prices make it
more difficult to survive. Thus, guaranteed best rates and the provision of loyalty
programs are becoming a necessity.
Three important trends will drive further changes in the online travel
industry. First, online travel agents may try to differentiate themselves by
providing superior customer service. Second, they provide easy search
capabilities (e.g., for best prices). Third, online travel companies are likely to
use social media tools to provide content to travelers and would-be travelers.

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 Online travel agencies offer almost all the same services delivered by
conventional travel agencies, from providing general information to reserving
and purchasing travel accommodations and event tickets. In addition, they often
provide services that most conventional travel agencies do not offer, such as
travel tips and reviews provided by other travelers, fare tracking (free e-mail
alerts on low fares), expert opinions, detailed driving maps and directions.

11.14.1 Using Mobile Devices

The use of these is increasing rapidly, with hundreds of apps related to
comparing prices, making reservations, looking at travel reviews, and finding
the best travel deals available.

11.14.2 Social Travel Networks

Travelers are using sites like Facebook, YouTube, Twitter, Gogobot,
Flickr, Foursquare, and TripAdvisor to plan their trips and share experiences
(both good and bad) afterward. For example, all major airlines have pages on
Facebook that provide information and news about their airline and offer their
customers a community to meet other travelers and share experiences (e.g., see
facebook.com/American Airlines).
Several social networks have travel channels that cater to travelers. An
example of such networks is wikitravel.org, which features a travel channel
that uses a wiki allowing any Internet reader to create, update, edit, and illustrate
any article on the website (“the travel guide you write”). For a comprehensive
resource on travel, see tripadvisor.com. Other social networks available
exclusively for travelers are Trip Wolf, Trip Hub (a blog dedicated to group
travel), Trip Advisor, Virtual Tourist, BootsnAll, and Lonely Planet.

11.14.3 Benefits, Limitations, and Competition in Online Travel

Services
The benefits of online travel services to travelers and travel providers
are extensive. The amount of free information is voluminous, and is accessible
at any time from any place. Shoppers can find the lowest prices. Travel providers

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also benefit by eliminating commissions and selling otherwise- empty spaces.
Finally, processing fees are reduced.
Online travel services do have some limitations. First, complex trips
are difficult to arrange and may not be available on some sites because they
require complicated arrangements. Therefore, the need for travel agents as
intermediaries remains, at least for the time being.
11.14.4 Competition in Online Travel
The competition in online travel is intense. In addition to well-known
pure players such as Expedia (expedia.com), Priceline (priceline.com), and
Hotels.com (hotels.com), there are thousands of travel-related sites online. Many
service providers have their own sites, related websites advertise travel sites,
and tourist guides sell services or direct users to them. In such a competitive
environment, online businesses may fail (e.g., Travel-Ticker folded in September
2012).

11.14.5 Corporate Travel

The corporate travel market is huge and its online portion has been
growing rapidly in recent years. Corporations can use all the online travel
services mentioned earlier where they may receive special services. Companies
can enable employees to plan and book their own trips to save time and money
Using online optimization tools provided by travel companies, such as those
offered by American Express (amexglobalbusinesstravel.com), companies can
try to reduce travel costs even further. Expedia via Egencia TripNavigator
(eg encia.co m), Travelo cit y (t ravelo cit y. co m), and Orbit z
(orbitzforbusiness.com) also offer software tools for corporate planning and
booking. TripAdvisor for Business (tripadvisor.com/Owners) provides informa-
tion to the tourism and hospitality industries. TripAdvisor TripConnect offers
a way for businesses to compete for bookings and generate new business by
bringing visitors directly to their online booking pages.

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11.15 EMPLOYMENT AND THE ONLINE JOB MARKET
The online job market connects job seekers with potential employers.
An online job market is now very popular with both job seekers and employers.
In addition to job ads posted online and placement services available through
specialized websites, larger companies are building career portals on their
corporate websites as a way of reducing recruitment costs and expediting the
time to fill vacancies. Advantages of the online job market over the traditional
one are listed in Table activities.

Cost Expensive, Can be very

especially inprime space inexpensive
Life cycle Short Long
Place Usually local and limited if Global
global
Context updating Can be complex, expensive Fast, simple,
inexpensive
Space for details Limited Large
Ease of search by Difficult, especially for out-of- Quick and easy
applicant town applicants
Ability of employers to May be very difficult, Easy
find applicants especially for out-of-town
applicants

Matching of supply and Difficult Easy

demand
Reliability Low, material can get lost in High
mail
Communication speed Can be slow Fast
between employees and
employers
Ability of employees to Limited Easy, fast
compare jobs

Table 11.5: Difference between traditional & online job market

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Online resources are the most popular recruitment option for many companies.
Since 2000, online job recruitment revenues and volume significantly overtook
print ad classifieds. Tens of thousands of job-related sites are active in the
United States alone. The U.S. market is dominated by several major players,
especially as Monster acquired Yahoo! HotJobs and CareerBuilder. However,
socially oriented sites such as Craigslist, LinkedIn, Twitter, and Facebook are
becoming very important online recruitment sites.

11.15.1 Online Job Markets on Social Networks

According to McCafferty (2012), 58% of recruiters agree that social
networking is the "next big thing" in recruiting. Specifically, 86% already use
LinkedIn, 51% use Facebook, and 27% use Google+. In 2016, Del Castillo reported
that over 31% of job seekers had found jobs using social media. Facebook has many
features that help people find jobs and help employers find candidates. One such
feature is Jobcast, which is an app for companies to place on their Facebook page to
recruit candidates. The app, which has different types of plans (free and paid), offers
social shar- ing to LinkedIn and Twitter, as well as to Facebook. Their app on Facebook
is for job seekers and employers to connect, and they also have interesting articles
regarding the job market. Another way for employers and job seekers to connect via
Facebook is through a company called Find Employment (facebook.com/
findemployment), which also offers tips and suggestions for job seekers. A similar
service is provided by linkedin.com/ jobs. Craigslist, for example, claims more than
one million new job listings every month. The LinkedIn search engine can help
employers find appropriate candidates quickly. In addition, job referral social
networking sites solve the need for finding the right people for the job (e.g., jobster.
com). These sites provide job seekers opportunities to pro- mote themselves and
their areas of expertise, as well as help them be discovered by employers. The site's
algorithms enable headhunters to analyze qualified applicants by different criteria.
When a job offer is made, the job referral site receives referral fees. Lately, the use of
Twitter as an aid for job searches has increased. Bortz (2014) provides a strategy for
job seekers and for how to use Twitter to access recruiters and increase job seekers'
visibility. Global Online Portals for Job Placement.

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 The Internet is very helpful for anyone looking for a job in another
country. An interesting global site for placing/finding jobs in different countries
is xing.com. The electronic job market may increase employee turnover and its
costs. Finally, recruiting online is more complicated than most people think,
mainly because there are so many résumés online. To facilitate recruitment,
top recruiters are seeking the ben efits of using new tools like video conferencing
to interview and connect with candidates from remote locations.

11.15.2 Benefits and Limitations of the Electronic Job Market

The online job market has many benefits for both job seekers and
recruiters. The major advantages are shown in Table 11.6

Advantages for job seekers Advantages for employers

Can discover a large number of job Can reach a large number of job seekers
openings
Can communicate directly and Can reduce recruitment costs
quickly with potential employers
Can market themselves quickly to Can reduce application-processing costs
appropriate employers (e.g., by using electronic application forms
Can post résumés for large-volume Can provide greater equal opportunity for
distribution (e.g., at job seekers
Opportunity of finding highly skilled
employees who match the job
requirements
Can search for available positions Can describe positions in great detail
any time
Can obtain several support services Can interview candidates online (e.g., at
no cost provide free career-planning using video teleconferencing)
services)
Can determine appropriate salaries Can arrange for testing online

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in the marketplace (e.g., use; look Can view salary surveys for
for salary surveys) recruiting strategies
Can learn how to behave in an
interview
Can access social network groups Can use existing staff to refer
dedicated to electronic job markets applicants
Table 11.6 : Advantage of Electronic Job Market

11.16 ONLINE REAL ESTATE, INSURANCE, AND STOCK

TRADING
Online infrastructures enable additional marketing channels, new
business models, and provide new capabilities. The infrastructures provide a
different way of delivering products and services. Some major services are
presented in this and the following section.

11.16.1 Real Estate Online

Changes in online real estate information search and transactions
significantly impact the way that business is conducted.
To get some idea of the changes, see realtor.org/research- and-statistics, and
for statistics on the growth of the online and off-line real estate markets, see realtor.org/
research- and-statistics/research-reports. For example, in 2012, 74% of all realtors
used social media tools regularly. Additional studies by the National Association of
Realtors® (NAR) have shown that over 42% of real estate buyers begin their searches
for properties on the Internet, and 87% of all recent buyers used the Internet at some
point in their home search (National Association of Realtors® 2015).
E-commerce and the Internet are slowly but surely having an ever-
increasing impact on the real estate industry. For example, despite the changes
that are beginning to emerge, real estate agents have not been disintermediated.
Home buyers today tend to use both real estate agents and the Internet. One
possible impact is declining commissions that sellers pay agents.

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11.16.2 Insurance Online
An increasing number of companies use the Internet to offer standard
insurance policies, such as auto, home, life, or health, at a substantial discount,
mo st ly to individuals. Furthermore, third-part y aggregat ors o ffer free
comparisons of available policies. Several large insurance and risk- management
companies offer comprehensive insurance contracts online (e.g., allstate.com,
ensurance.com, statefarm.com/insurance, progressive.com/insurance-choices,
geico.com). Although many people do not trust the faceless insurance agent,
others are eager to take advantage of the reduced premiums. Many insurance
companies use a dual strategy, using sales agents in the field but also selling
online (e.g., advertising on e-mails and Google searches). Like real estate
brokers, insurance brokers send unsolicited e-mails to millions of people. The
stiff competition will probably reduce the commission for the surviving agents.
Example
The insurance industry has seen that over 86% of potential insurance
customers are researching and gathering information on the Internet. Thus,
insurance companies are trying to capitalize on this trend. Many insurance
companies are quickly rolling out a variety of online tools to meet this need.
Online Stock Trading and Investments
The commission for an online trade is between $1 and $15 (“dirt cheap
brokers”) to $15–$30 (“mid-priced discount brokers”), compared with an
average fee of $100–$200 per trade from a full-service broker telephone lines,
and the chance to err is small, because there is no oral communication in a
frequently noisy environment. Orders can be placed from anywhere, at any
time, and there is no biased broker to push a sale. Furthermore, investors can
find a considerable amount of free research information about specific
companies or mutual funds. Many services provided to online traders include
online statements, tax-related calculations, extensive research on industries,
real-time news, and even tutoring on how to trade.

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11.17 ONLINE BANKING
Electronic (online) banking (e-banking) refers to conduct- ing banking
activities online. Consumers can use e-banking to check their accounts, pay
bills online, secure a loan, trans- fer money, and much more. Sixty-one percent
of U.S. adult Internet users bank and pay bills online. Several sites have tools
that can help you with personal finance and budgeting. Examples are mint.com,
geezeo. com, and kiplinger.com.
E-Banking
E-banking saves users time and money. For banks, it offers a rapid and
inexpensive strategy to acquire out-of-the-area customers. In addition, the banks
may need fewer branches or employees. Many physical banks now offer online
banking services, and some use EC as a major competitive strategy.
Online banking in general has been embraced worldwide, including
developing countries. For example, online banking in China is increasing rapidly
in popularity, especially among China’s new educated middle class who live in
the more developed cities. It is facilitated by the use of smartphones and other
mobile devices.
Online banking in general has been embraced worldwide, including
developing countries. For example, online banking in China is increasing rapidly
in popularity, especially among China’s new educated middle class who live in
the more developed cities. It is facilitated by the use of smartphones and other
mobile devices.

11.17.2 Online Banking Capabilities

Banking applications can be divided into the following cat- egories:
informational, administrative, transactional, portal, and others. In general, the
larger the bank, the more services are offered online.

11.17.3 Pure Virtual Banks

Virtual banks have no physical location and conduct only online
transactions. Security First Network Bank (SFNB) was the first such bank to

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offer secure banking transactions on the Web. Amid the consolidation that has
taken place in the banking industry, SFNB has since been purchased and now
is a part of RBC Bank (rbcbank.com). Other representative virtual banks in the
United States are First Internet Bank (firstib.com) and Bank of Internet USA
(bankofinternet.com).
However, more than 97% of the hundreds of pure-play virtual banks
failed by 2003 due to a lack of financial viability. The most successful banks
seem to be of the click-and-mortar type (e.g., Wells Fargo, City Corp, HSBC).
Virtual banking can be done with new business models, one of which is
P2P lending. The introduction of online banking enables the move of personal
loans to the Web in what is called online person-to- person money lending, or
in short P2P lending. This model allows people to lend money and to borrow
from each other via the Internet
Customers accessing a bank system online must go through encryption
provided by SSL (Secure Socket Layer) and digital certificate verification. The
verification process assures users each time they sign on that they are indeed
connected to their specific bank. The customer inquiry message then goes
through an external firewall. Once the logon screen is reached, a user ID and a
password are required. This information flows through a direct Web server and
then goes through an internal firewall to the bank’s application server.
Information is shared among a bank’s business partners only for
legitimate business purposes.
Banks do not capture information provided by cust omers when
conducting hypothetical scenarios using planning tools (to ensure privacy).
Many banks use cookies to learn about their customers; however, customers
can control both the collection and in some cases the use of such information.
In addition, most banks provide suggestions on how users can increase security
(e.g., by using a browser that supports 128- bit encryption).
With the increased use of mobile devices, the threat of security risks
has increased. Banks are creating innovative solutions. For example, in January

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2009, Bank of America introduced “SafePass,” a feature that can generate a
six-digit, one-time passcode that is necessary to complete an online transaction.
The passcode is delivered via text message to your mobile device.
The popularity of e-payments is growing rapidly. Many people prefer
online payments of monthly bills such as mortgage payments, car loans,
telephone, utilities, rent, credit cards, cable, TV, and so on. The recipients of
such payments are equally eager to receive money online because online
payments are received much more regularly and timely and have lower
processing costs.
Another method for paying bills via the Internet is electronic billing or
electronic bill payment and presentment (EBPP). With this method, the consumer
makes payments at each biller’s website, either with a credit card or by giving
the biller enough information to complete an electronic withdrawal directly
from the consumer’s bank account. The biller sends the invoice to the customer
via e-mail or a hosting ser- vice site. The customer then authorizes and initiates
a payment via an automatic authorization, e-check, and so forth.
11.17.4 Taxes
One important area in personal finance is advice about and computation
of taxes. Dozens of sites are available to help people with their federal tax
preparations. Many sites will help people legally reduce their taxes.
11.17.5 Mobile Banking
Mobile banking is a system that enables people to conduct financial
transactions from a smartphone or other wireless mobile device. Many of the
recent developments are in the area of mobile banking. Topics such as payments
from smartphones and handling micropayments have revolutionized the
financial systems. The need for an improved banking and financial system is
clear.

11.18 SUMMARY
Electronic retailing (e-tailing) is a buzzword for any business-to-

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consumer (B2C) transactions that take place over the Internet. E-retailing simply
means retailing over internet or selling of retail goods on the internet. In simple
words, we can say that e- tailing is nothing but shopping through the internet
or other media. There are certain essential ingredients for an electronic retailing
business to be successful like attractive business-to-consumer (B2C) e-
commerce portal, right revenue model, e-catalogue, proper payment gateway
and support services in e-retailing etc. E-tailing provides so many advantages
like price selection, opportunity to reach new markets, extension to leverage
and 24 hours presence etc. There are so many challenges which are faced by e-
tailers like channel conflict, legal issues, security and privacy issues etc. To be
successful retailer, it is important to integrate the brick and mortar retail store
with e-retailing. It provides lots of opportunities. In present era, no single mean
of retailing is sufficient to serve the customers, therefore retailers are using
multi channels for their retail stores. Most of the conventional brick and mortar
stores have now become the click and mortar store and enjoying the benefits of
this integration of brick and mortar store with e- retailing. But retailing over
internet is not as simple as running a brick and mortar retail store. It is totally
different and challenging task. There are some very important points which
should be kept in mind while deciding to go online for retail like selection of
appropriate platform, integration with logistics partner and proper payment
gateway etc. E-tailing is a new concept in India. With limited internet users,
this industry (e- tailing) is growing very fast and there is much to be achieved
yet. Many growth drivers are in favour of e-tailing- demography, economy,
changing lifestyle, exposure to new ideas etc. Online shopping is not only more
convenient for customers with hectic lifestyles but also gives a better deal for
their money.

11.19 GLOSSARY
 E-Retailing: Retail activities over internet.
 Brick and Mortar store: Retail store which deals with its customers in
a physically constructed building rather virtually.

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  Click and Mortar store: Retail store which deals with its customer
both in physically and virtually.
 Multi channel retailing: A marketing strategy that offers customers a
choice of ways to buy products.
 Business-to-Consumer (BLC) Transaction: A transaction, that occurs
between a company and a consumer.
 Online Payment: Payment through debit or credit card over internet.

11.20 SELF ASSESSMENT QUESTIONS

1. E-tailing is a new concept in India and online retailing is a tedious task
here” Comment on this statement.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Is it fruitful to integrate brick and mortar retail store with e-retailing?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Discuss the various models for online retailing.
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
4. How are banks protecting customer data and transactions?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

11.21 LESSON END EXERCISE

1. List the challenges which are faced by e-retailers.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Discuss in detail any three advantages of e-retailing.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Explain Shortcomings of E-Retailing .
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________

11.22 SUGGESTED READINGS

 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Girdhar Joshi, “Information technology for retail”, Oxford University
Press, 2009.
 ht t p ://www.zenit hresearch.o rg.in/images/ st o ries/pdf/ 2011/July/
9%20SUMAN%20E- tailing_Paper.pdf
 http://www.techopedia.com/definition/14351/electronic-retailing-e-
tailing
 http://www.bobyhermez.com/2012/02/concept-and-issues-in-e-tailing/
 http://www.articlesbase.com/online-business-articles/introduction-to-
electronic-retailing- 1058777.html
 http://www.practicalecommerce.com/articles/236-Integrating-Bricks-
and-Mortar-with- eCommerce
 h t t p : / / w w w. it c in f o t e c h . c o m / u p lo a d s / g u i / k n o w l e d g e c e n t r e /
multi_channel_retailing.pdf
 http://retail-guru.com/use-merchandise-management-to-streamline-
retail-sourcing- buying-and-merchandising/
 htt p://www.chillibreeze.com/articles_vario us/E-tailing.asp http://
www.economywatch.com/business-and-economy/e-retailing-india.html

************

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Lesson No. 12 UNIT III
ELECTRONIC COMMERCE APPLICATIONS
E-TAILORING BUSINESS MODELS

STRUCTURE
12.1 Introduction
12.2 Objectives
12.3 E-tailing
12.4 Models of E-tailing
12.5 E-retail Mix-Sale the 7Cs
12.6 E-tailing in India
12.7 Summary
12.8 Glossary
12.9 Self-Assessment Questions
12.10 Lesson End Exercise
12.11 Suggested Readings

12.1 INTRODUCTION
E-shopping or Online Shopping is the process of buying goods and services
from merchants who sell their products on the Internet. Finding a product online
is much easier than looking for it in the local store. Electronic retailing (E-tailing)

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is the sale of goods and services through the Internet. It can include business-to-
business (B2B) and business-to-consumer (B2C) sales of products and services.
It requires companies to tailor their business models to capture Internet sales,
which can include building out distribution channels such as warehouses, internet
webpage, and product shipping centres. Notably, strong distribution channels
are critical to electronic retailing as these are the avenues that move the product
to the customer. It includes a broad range of companies and industries. However,
there are similarities between most E-tailing companies that include an engaging
website, online marketing strategy, efficient distribution of products or services,
and customer data analytics.
Successful e-tailing requires strong branding. Websites must be engaging,
easily navigable, and regularly updated to meet consumers’ changing demands.
Products and services need to stand out from competitors’ offerings and add
value to consumers’ lives. Also, a company’s offerings must be competitively
priced so that consumers do not favour one business over another on a cost basis
only. E-tailers need strong distribution networks that are prompt and efficient.
Consumers cannot wait for long periods for the delivery of products or services.
Transparency in business practices is also important, so consumers trust and
stay loyal to a company

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12.2 OBJECTIVES
After reading this lesson, you will be able to:
 explain the concept of E-tailing;
 understand the advantages and disadvantages of E-tailing to the retailers
and buyers;
 understand the models of E-tailing;
 understand the E-retail mix; and
 understand the E-tailing in India.

12.3 E-TAILING
Retail is the process of selling consumer goods or services to customers
through multiple channels of distribution to earn a profit. Retailers satisfy demand
identified through a supply chain. The term “retailer” is typically applied where
a service provider fills the small orders of many individuals, who are end-users,
rather than large orders of a small number of wholesales, corporate or government
clientele. Thus, Retail is the sale of goods on a physical location where the seller
and the buyer meet in person. Whereas e- tail is the sale of goods on the internet
where the transaction happens in a digital environment. Various popular players of
E-tailing are Amazon, Flipkart, Zomato, Swiggy, MakemyTrip etc, and for retailers
are Walmart, Mcdonalds, Big Bazaar etc. E-tailing has various advantages as well as
disadvantages both for the retailers as well as buyers as explained below:
12.3.1 Advantages of E-tailing for retailers:
1. Location utility: Location is utmost important for the conventional
retailing process to provide convenience utility to its consumers. However,
in e-tailing location is not important. Retailers and customers need internet
for e-tailing and transaction can happen from anywhere from within the
country or overseas.
2. Less expensive: As compare to organised retailing, e-tailing is less
expensive as it saves wages of salesmen and premises co st and
maintenance. These expenditures are low as compare to internet cost.
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3. High Reach: Integration with customers is high in e-tailing as customers
can be local, national and international. Through internet, e-tailers can
reach to large audience.
4. 24*7 businesses: The time utility for customers is high in e-tailing as
customers can buy the products and services from anywhere and anytime.
5. Feedback: It is easy to manage customer relationship management in e-
tailing on the basis of feedback of consumers.

12.3.2 Disadvantages of E-tailing for retailers

1. Lack to infrastructure: The issues of accessibility and connectivity of
internet causes problems in functioning of e-tailing activities. Also, the
initial investment cost is very high in e-tailing.
2. Lack of technological expertise: To start an online retailing project it is
important to have technological expertise and not all retailers have it.
3. Complex logistic management: Intrinsic and extrinsic challenges
increase the complexities in e-tailing logistics. Like cash on delivery
increases the operational cycle, managing high rates of returns, poor
logistic management in rural areas and problems in cross-nation
shipments.
4. Customers’ expectations: In terms of flexibility in delivery, detailed
product descriptions, cost and security of delivery, flexible payment
options sets high expectations of customers.
5. Lack of personal touch: The lack of face-to-face interaction, persuasion
and handling the customers’ query is a major disadvantage in e-tailing.
6. High competition: E-tailers have to compete with other e-tailers as well
as the organised and unorganised retailers in the market that increase the
competitions for them.

12.3.3 Advantages of E-tailing for buyers

1. Time utility as consumers can shop 24*7

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2. Place utility as consumers can shop from anywhere
3. Convenience utility as consumers can shop from any mode via computer,
laptops or mobile
4. Option utility as consumers can get wide range of option via e-tailing
12.3.4 Disadvantages of E-tailing for buyers
1. Customers may be uncertain regarding the quality of the products and
services offered online
2. Fear regarding online fraud and loss of money
3. Every time not every product is available.
4. Lack of technological know-how

12.4 MODELS OF E-TAILING

Two models of E-tailing are explained below:

Fig 12.1: Models of e-tailing

1. Inventory based model: According to the FDI policy in India, “Inventory

model of e-commerce means an e-commerce activity where inventory of

295
 goods and services is owned by e-commerce entity and is sold to the
consumers directly.” It includes the e-tailing activities where inventory
of products and services is owned by e-tailers and it is directly sold to
customers. The main feature of this model is end to end process i.e., from
initiating from product purchase to managing logistics and finally
dispatching the products. Example- Alibaba, Jabong.
2. Marketplace based model: According to the FDI policy guideline,
“Marketplace model of e-commerce means providing of an information
technology platform by an e-commerce entity on a digital and electronic
network to act as a facilitator between buyer and seller.” This model
provides a platform where buyers and sellers do the transactions in
efficient, transparent and trusted environment. Here, buyers can compare
the prices and accordingly place the orders to the authorized sellers on
the website. Majorly, e-tailers like Amazon, Patym mall and Flipkart
practice the marketplace-based model. For example, when buyer login to
Amazon India and place an order to a registered seller, Amazon India act
as a mediator here. Subsequently, the registered seller takes care of
logistics and dispatching of the products to the customers.

12.5 E-RETAIL MIX-SALE THE 7CS

E-retail mix is defined as the different techniques and tools e-retailers
use to provide values for customers. The e-tailing mix is the combination of 7Cs
and first four Cs are similar to the 4Ps proposed by E. Jerome McCarthy’s (1960)
i.e. Place, Product, Price and Promotion. In 1990, Lauterborn proposed 4 Cs
namely Convenience for the customer; Customer value and benefits; Cost to the
customer; and Communication. However, with paradigm shift, more Cs added
in the list i.e., Customer relationships; Computing and category management
issues; Customer franchise and Customer care and service. Customer relationship
is emphasis on long-term relationship with consumers and follows continuous
interaction with them. Therefore, customer relationship merged with
communication and finally there are 7 Cs.

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 Fig 12.2: 7 (Seven) C’s of marketing
C1: Convenience for the customer (‘Place’ from the 4Ps)
 Physical location
 Multi-channel options: browse the web, buy in store or vice versa – or
buy on the web, return to the store for a refund
 Virtual location and ease of finding the website: registration with search
engines, location in e-malls and links from associates
 Website design: connectivity; navigation; ‘shelf’ space allocation and ease
of purchase.
 Layout: ‘free-flow’; ‘grid’; or ‘free-grid
C2: Customer value and benefits (‘Product’)
 Satisfactions wanted by customers
 Solutions to problems or good feelings
 Specify (sometimes design) products reflecting closeness to the customer
and benefits that customers want
 Selecting the range of products offered for sale – assembled for target
markets from diverse sources

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  Wide and/or deep range – where the ‘clicks’ e-retailer can score relative
to the ‘bricks’ retailer
 Content: describing a compelling offer of products clearly in customer
value and benefits terms
 Customisation of products to match the wants of customer segments as
closely as possible
C3: Cost to the customer (‘Price’)
 The real cost that customers will pay including transport, carriage and
taxes
 Costs of Internet telephone access
 Customers’ perceptions that prices should be cheaper online than in store
C4: Communication and customer relationships (‘Promotion’)
 Communication is a two-way process also involving feedback from
customers to suppliers, including:
 Marketing research surveys
 Public relations (PR)
 Direct mail
 E-mail
 Internet
 Offline advertising such as magazines and ‘click here’ sections of
newspapers
 Online methods include banner ads and pop-ups (often incentivised); paid-
for listings in search engines and directories; and affiliate programmes
 Atmospherics and Web atmospherics: visual (décor, colour management,
video clips, 3D), oil factory (perfume and samples), touch (smooth and cool
or soft and cuddly – communicated by visuals or samples) and oral (music).
(But need to avoid long download times – ‘click here for broadband’).

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  Customer relationships
 In store sales representatives use verbal and non-verbal (body
language) communication
 Marketing database and loyalty schemes
 The e-retailer can enhance product value using Cust omer
Relationship Management (CRM) and data mining to tailor
products specifically to individual customers.
C5: Computing and Category Management Issues
 Supplying the products that customers want, in the right sizes and
quantities, at the right time and in the right place
 Efficient supply chains with computer network links between suppliers
and retailers Minimising stocks and speed of response: QR or ECR
 Co-operation between suppliers and (e-) retailers aiming to improve the
efficiency of satisfying customers whilst minimising stocks and costs.
On the larger scale, this is ‘Category management’ (CM), the retailer/
supplier process of managing categories as strategic business units
 Efficient logistics systems are an important component of Customer care
and service
C6: Customer franchise
 Image, trust and branding – long-term investment in quality, corporate
communications and Customer care and service
 Safeguards including fraud protection and dispute resolution
 Safe shopping icons, e.g. Webtrader
C7: Customer care and service
 Creating assortments at competitive prices in an accessible format
 Fast and reliable deliveries at times convenient to the shopper
 Availability of help; return and refund facilities

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  For the ‘bricks’ retailer store personnel are crucial
 For the e-retailer click-through telephone help, bulletin boards and chat
rooms make the experience more interactive and add community.
 Addressing customer concerns, particularly for credit card security, e.g.,
displaying the ‘padlock’ secure site logo.

12.6 E-TAILING IN INDIA

In India, e tailing has substantially grown and still penetrating in the market
owing to internet accessibility and smart phone availability. In addition, e- banking
services and digital wallets have fuelled the e-tailing trends in India. Hence, e-
retailers are strategizing the approaches to gain the Indian market by Omni-
channels method, celebrity endorsement, social media marketing and digital
influencers.

Fig 12.3: Indian Retail Industry Trends

Source: KONNECTED to consumers; Economist Intelligence Unit, accessed in
April 2018; Media articles; Indian Retail Industry: Growth, Trends, Challenges,
and Opportunity, India Retailing, 16 November 2017; Deloitte analysis.

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Indian Retail Industry Trends
As per the recent reports and analysis, the e-tailing market has been taken
over by electronics and apparel. So, game changer events in E-tailing industry in
India as are internet penetration, usage of mobile, advent of social commerce,
adoption of technology, omni-channels and digital wallets. The following are
the major categories of products sold in e-tailing.

Fig 12.4: E-Retail Market by Value in India

*Source: Industry discussions, KPMG in India analysis

Key E-tailers in India

Following are key E-tailers in India, as brief of all are explained below:
1. Amazon: Amazon is an American multinational conglomerate technology
company based in Seattle, with 750,000 employees. It deals in e-
commerce, artificial intelligence, digital streaming and cloud computing.
Amazon was founded by Jeff Bezos in July 1994 in Bellevue. The company
initially started as an online marketplace for books but later diversified
in selling electronics, software, video games, apparel, furniture, food,

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 toys, and jewellery. Amazon when talked in terms revenue is the largest
internet company and one of the world’s most valuable company. Amazon
offer different products, some of which are as following –
1) Consumer Devices – Echo Devices, Fire Stick, Fire TV, Kindle E- Reader
2) Streaming Services – Amazon Prime, Amazon Music, Twitch and audible
subsidiaries
3) Cloud Computing services – Amazon web Services
4) Artificial Intelligence – Alexa (virtual Assistance)
5) Online payment portal – Amazon Pay

2. Flipkart: Flipkart is an Indian e-commerce company based in Bengaluru,

India. It was founded by Sachin Bansal and Binny Bansal in 2007, both
ex-employee of Amazon. Just Like Amazon, the company started with
focus on online book sales, and later expanding into other product such
as consumer electronics, fashion, home essentials & groceries, and lifestyle
products. Flipkart plays a dominant role in the sale of apparel after its
strategic acquisitions of Myntra and Jabong.com. Its main rival is Amazon
and Snapdeal. Flipkart also owns PhonePe, a mobile payment service.
In August 2018, U.S.-based retail chain Walmart acquired a 77%
controlling stake in bidding war with Amazon for US$16 billion, valuing

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 it at $20 billion. Flipkart has launched video streaming named Flipkart
Video in competition with Amazon Prime video services.

3. Snapdeal: Snapdeal is an Indian e-commerce company based in New

Delhi, India. It was founded by Kunal Bahl and Rohit Bansal on 4 February
2010 as a daily deals platform, but later expanded in September 2011 to
become an online marketplace and later became one of the India’s largest
market place. Over the years Snapdeal have done multiple number of
acquisitions to strengthen their market intelligence, presence and upgrade
their technological platform like mobile payment service freecharge.com.
In April 2017 Snapdeal was actively in talks with Flipkart for the merger
after Softbank, one of the major investors in Snapdeal wanted the company
to merge. But finally, the deal was scraped due to reservation on Flipkart’s
terms by other investors. This breakdown of deal was followed by Snapdeal’s
founders taking a decision to continue operating Snapdeal as an independent
company with Snapdeal 2.0 as their new version and vision.

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 IndiaMART: IndiaMART InterMESH Ltd. is an Indian e-commerce
company that provides B2c, B2B and customer to customer sales services via its
web portal. The company has headquarter in Noida, Uttar Pradesh, India. The
group was founded in 1996 by Dinesh Agarwal and Brijesh Agrawal. Its main
rival is Alibaba, a Chinese giant which deals in similar business model. Over the
last 10 years, IndiaMART has become the largest e-commerce platform for
businesses with about 60% market share. It handles more than 95,000 product
categories ranging from machine parts, electrical components, medical equipment
and textile products to cranes.

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4. Bookmyshow.com: BookMyShow is the leading show ticketing portal
and retailer in India. Bookmyshow is operated by Bigtree Entertainment
Private Limited. Bigtree Entertainment Pvt Ltd. was founded in 1999 by
Ashish Hemrajani. In 2007, sensing growth of multiplexes and the
increased popularity of plastic money, Ashish launched BookMyShow.
Bookmyshow instantly became a brand and was a quick success taking
the market by storm, bringing Cinema biggies like PVR, INOX and
Cinepo lis o n t he port al. Again, t o gain early mo ver advant age
Bookmyshow mobile app was launched, foreseeing consumers favouring
mobile over computer. Now Bookmyshow is the largest ticketing platform,
offering tickets for movie, games, live events, plays and concerts.
BookMyShow has expanded its operations to New Zealand, UAE,
Indonesia and Sri Lanka.

5. Firstcry: FirstCry is an Indian online store which deals in baby product

retailing. Firstcry was founded by Supam Maheshwari in 2010, when he
realises choices for baby products in India online were quite limited and
he used to buy a lot of them for his son only on his business trips abroad.
Thus, he discovered an opportunity for such platform and conceptualized
FirstCry.com. He is also the founder of Xpressbees which today is one of
the largest logistic companies in India. FirstCry acquired BabyOye in
2016, a brand that was owned by the Mahindra Group. The merged entity
now does business under the name - FirstCry.com, a FirstCry Mahindra

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 Venture. Firstcry also operates total of 380 offline stores and franchises
stores. It is Asia’s largest online shopping store for kids & baby products.

6. Paytm Mall: Paytm is a Noida based Indian e-commerce payment portal

and financial technology company. One97 Communications parent
company of Paytm was founded in August 2010 by Vijay Shekhar Sharma.
In February 2017, Paytm launched its Paytm Mall app which use B2C
model which allows consumers to shop from registered sellers. To ensure
customer trust and quality, product is passed from registered sellers to
Paytm-certified warehouses and channels. Paytm Mall has set up various
fulfilment centres across India and ensure fast deliveries partnered with
various couriers. Paytm Mall app which use B2C model which allows
consumers to shop from registered sellers.

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7. Alibaba Group: Alibaba Gro up Holding Limit ed is a Chinese
multinat ional technolo gy company which exclusively deals in e-
commerce, retail, Internet, and technology. Jack Ma along with his team
of 17 friends and students found Alibaba.com on 4 th April 1999. The
company operates largest B2B (Alibaba.com), C2C (Taobao), and B2C
(Tmall) marketplaces in the world. Its online sales and profits surpassed
all US retailers (including Walmart, Amazon, and eBay) combined since
2015. Just like Amazon, Alibaba also operates in different field as
following –
1) E-Commerce and Retail Service Platforms
2) Internet Services
3) Cloud Computing and artificial intelligence technology
4) Financial technology and online payment platforms
5) Entertainment Services

8. E-bay: E-bay is an American multinational e-commerce corporation

operating in about 33 countries as of 2018 that facilitates C2C and B2C

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 multi-billion-dollar sales through its website. It is based in San Jose,
California and was founded by French-born Iranian-American computer
programmer Pierre Omidyar in 1995. People buy and sell a variety of
goods and services worldwide on E-Bay website which is an online
auction and shopping website. E-bay is known for various acquisitions,
some of major are Paypal, Craigslist, Skype, stubHub etc.

12.7 SUMMARY
Electronic retailing (E-tailing) is the sale of goods and services through
the Internet. E-tailing can include business-to-business (B2B) and business-to-
consumer (B2C) sales of products and services. It requires companies to tailor
their business models to capture Internet sales, which can include building out
distribution channels such as warehouses, Internet webpages, and product
shipping centres. Notably, strong distribution channels are critical to electronic
retailing as these are the avenues that move the product to the customer.
Electronic retailing includes a broad range of companies and industries.
There are two types of e-tailing model pure play e-retailers and brick
and click e-retailers. Pure play e-retailers only do the electronic transactions
whereas, brick and click e-retailers do transactions in both online and offline

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mode. Various Advantages of E-tailing for retailers are location utility, less
expensive, high Reach, 24*7 business, feedback. Disadvantages of E-tailing
for retailers are lack of infrastructure, lack of technological expertise, complex
logistic management, customers’ expectations, lack of personal touch, high
competition etc. Advantages of e-tailing for buyers are time utility, place utility,
convenience utility and option utility. Disadvantages of E-tailing for buyers
are customers may be uncertain regarding the quality of the products and services
offered online, fear regarding online fraud and loss of money, every time not
every product is available, lack of technological know-how etc.
E-tailing has two types of business models: Inventory based and
marketplace based model respectively. Inventory based model includes the e-
tailing activities where inventory of products and services is owned by e-tailers
and it is directly sold to customers, and Marketplace based model provides a
platform where buyers and sellers do the transactions in efficient, transparent
and trusted environment. Here, buyers can compare the prices and accordingly
place the orders to the authorized sellers on the website.
E-retail mix is defined as the different techniques and tools e-retailers
use to provide values for customers. In 1990 Lauterborn proposed 4 Cs namely
Convenience for the customer; Customer value and benefits; Cost to the
customer; and Communication. However, with paradigm shift, more Cs added
in the list i.e., Customer relationships; Computing and category management
issues; Custo mer franchise and Custo mer care and service. Custo mer
relationship is emphasis on long-term relationship with consumers and follows
continuous interaction with them. Therefore, customer relationship merged with
communication and finally there are 7 Cs.
In India, e tailing has substantially grown and still penetrating in the
market owing to internet accessibility and smart phone availability. In addition,
e- banking services and digital wallets have fuelled the e-tailing trends in India.
As per the IBEF 2018 report, India will reach to US $ 200 billion market in
2034 which is more than USA’s market. Hence, e-retailers are strategizing the
approaches to gain the Indian market by Omni-channels method, celebrity
endorsement, and social media marketing and digital influencers.
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12.8 GLOSSARY
 Brick and click (Click-and-mortar) e-retailers- Retailers who do the
both online and offline transactions i.e., through internet and physical
outlets. For example, Dell.
 E-tailers: E-tailers are simply retailers who use the internet to sell their
goods/services to their customers, rather than actual stores.
 E-tailing: E-tailing also known as electronic retailing is the selling of
retail goods on the Internet. It is synonymous with business-to-consumer
(B2C) transactions.
 Pure Play (Virtual) e-retailers- Retailers that only do the electronic
transactions and do not have any physical outlet for the customers. For
example- Amazon & Flipkart.
 Retailers: Retailer is known as any person or business that sells goods.
They don’t manufacture their own items typically. They purchase goods
from a manufacturer or a wholesaler and quantities.

12.9 SELF ASSESSMENT QUESTIONS

1. Give the brief of E-tailing trends in India.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Brief on the E-tailing key players in India.
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
3. State the disadvantages of E-tailing for the retailers and buyers
respectively.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. Explain the E-tailing models
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

12.10 LESSON END EXERCISE

1. Fill in the blanks:
a. ………….is an online auction and shopping website.
b. Alibaba Group Ho lding Limit ed is a …………………………….
company which exclusively deals in e-commerce, retail, Internet, and
technology.
c. Paytm Mall has set up various fulfilment centres across India and
ensure…………......
d. Amazon initially started as an online marketplace for but
e. later diversified in selling electronics, software, video games, apparel,
furniture, food, toys, and jewellery.

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 f. E-retail mix is defined as the different techniques and tools… use t o
provide values for customers.
g. The e-retailer can enhance…………. using Customer Relationship
Management (CRM).
2. What are the various ways of communication and customer relationships
components of 7C’s.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What are the 7C’s of retail mix?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

12.11 SUGGESTED READINGS

 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Girdhar Joshi, “Information technology for retail”, Oxford University
Press, 2009.
 ht t p ://www.zenit hresearch.o rg.in/images/ st o ries/pdf/ 2011/July/
9%20SUMAN%20E- tailing_Paper.pdf
 http://www.techopedia.com/definition/14351/electronic-retailing-e-
tailing

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 http://www.bobyhermez.com/2012/02/concept-and-issues-in-e-tailing/
 http://www.articlesbase.com/online-business-articles/introduction-to-
electronic-retailing- 1058777.html
 http://www.practicalecommerce.com/articles/236-Integrating-Bricks-
and-Mortar-with- eCommerce
 h t t p : / / w w w. it c in f o t e c h . c o m / u p lo a d s / g u i / k n o w l e d g e c e n t r e /
multi_channel_retailing.pdf
 http://retail-guru.com/use-merchandise-management-to-streamline-
retail-sourcing- buying-and-merchandising/
 htt p://www.chillibreeze.com/articles_vario us/E-tailing.asp http://
www.economywatch.com/business-and-economy/e-retailing-india.html

*************

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Lesson No. 13 UNIT III
ELECTRONIC COMMERCE APPLICATIONS
B2B E-COMMERCE: CONCEPT, CHARACTERISTICS AND
MODELS, ONE TO MANY SELL SIDE E-MARKETING

STRUCTURE
13.1 Introduction
13.2 Objectives
13.3 Business-to-Business e-commerce (B2B EC) - Concept
13.4 B2B Components and Nobles
13.5 B2B Marketing: One to many sell-side e-marketplaces
13.6 Summary
13.7 Glossary
13.8 Self-Assessment Questions
13.9 Lesson End Exercise
13.10 Suggested Readings

13.1 INTRODUCTION
E-commerce plays a significant role in how companies execute their
business in the marketplace. Information technology (IT) is thereby not only
revolutionizing the way that companies do business with consumers, but also
the way that they do business with each other. Experts even predict that business-

314
to-business (B2B) transactions will exceed those of business-to-consumer (B2C)
e-commerce. This makes sense, when we consider that a company selling, for
instance, a book does not only interact with the consumer but also with the
publisher who printed the book. The publisher, in turn, needs to interact with
the paper and ink suppliers, the maintenance firm that keeps the printing presses
running, the authors who submit their manuscripts online, and so forth.
Further, IT also influenced the value chain in many industries. And the
resulting changes in the value chain have made companies more dependent
upon business partners than ever before. One of the key enablers for the
development of new B2B e-commerce models is electronic data interchange
(EDI). EDI is a standard format that is used to exchange business data including
price or product identification number. With EDI technology, sellers, shippers,
carriers, customs agents, and customers, all can send and receive documents
electronically, thereby saving both time and money for the transactions. Finally,
B2B information exchange has become so critical that it is one of the top metrics
that customers in many industries use to measure partner performance.

13.2 OBJECTIVES
After reading this lesson, you will be able to:
 explain the concept of B2B e-commerce;
 understand the types of B2B E-Marketplaces and Services;
 understand the components of B2B

13.3 BUSINESS-TO-BUSINESS E-COMMERCE (B2B EC)

Business-to-business e-commerce (B2B EC), also known as eB2B
(electronic B2B), or just B2B, refers to transactions between businesses
conducted electronically over the Internet, extranets, intranets, or private
networks. Such trans- actions may take place between a business and its supply
chain partners, as well as between a business and a government, and with any
other business. In this context, a business refers to any organization, private,
public, for profit, or non- profit. In B2B, companies aim to computerize trading

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transactions and communication and collaboration processes in order to increase
efficiency and effectiveness. B2B EC is very different and more complex than
B2C. It is much more difficult to sell to a company than to individuals.
Key business drivers for electronic B2B are the need to reduce cost, the
need to gain competitive advantage, the availability of a secure Internet platform
(i.e., the extranet), and the private and public B2B e-marketplaces. In addition,
there is the need for collaboration between business partners, the need to reduce
transaction time and delays along the supply chain, and the emergence of
effective technologies for inter- actions and systems integration. Several large
companies have developed efficient B2B buying and selling systems.
13.3.1 The Basic Types of B2B Transactions and Activities
The number of sellers and buyers and the form of participation used in
B2B determine the five basic B2B transaction activity types:
1. Sell-side. One seller to many buyers.
2. Buy-side. One buyer from many sellers.
3. Marketplaces or exchanges. Many sellers to many buyers.
4. Supply chain improvements.
5. Collaborative commerce.
The last two categories include activities other than buying or selling
inside organizations and among business partners. They include, for example,
removing obstacles from the supply chain, communicating, collaborating,
sharing information for joint design and planning, and so forth.

13.3.2 The Basic Types of B2B E-Marketplaces and Services

The following are the descriptions of the basic types of B2B e-
marketplaces.
a. One-to-Many and Many-to-One: Private E-Marketplaces
In one-to-many and many-to-one markets, one company does either all
the selling (sell-side market) or all the buying (buy-side market). Because

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 EC is focused on a single company’s buying or selling needs, this type
of EC is also referred to as company-centric EC.
b. Many-to-Many: Public Exchanges (or E-Marketplaces)
In many-to-many e-marketplaces, many buyers and many sellers meet
electronically to trade with one another. There are different types of
such e-marketplaces, which are also known as exchanges (trading
communities or trading exchanges). We will use the term exchanges in
this book. Exchanges are usually marketplaces owned and run by a third
party or by a consortium. They are described in more detail in Section
4.7. Public e-marketplaces are open to all interested parties (sellers and
buyers). Alibaba.com is an example of an exchange.
c. Supply Chain Improvers and Collaborative Commerce
B2B transactions are conducted frequently along segments of the supply
chain. Therefore, B2B initiatives need to be examined in light of other
supply chain activities such as procurement of raw materials, fulfilling
orders, shipments, and logistics. For example, Liz Claiborne, Inc. (retail
fashion company) digitized its entire supply chain, reaping substantial
results.
d. Collaboration
Businesses deal with other businesses for purposes beyond just selling
or buying. One example is that of collaborative commerce, which
includes communication, joint design, planning, and information sharing
among business partners.
e. Market Size and Content of B2B
The U.S. Census Bureau estimates B2B online sales to be about 40% of
t he t o t al B2B vo lu me d epending o n t he t ype (e. g., 49% in
manufacturing). Chemicals, computer electronics, utilities, agriculture,
shipping and warehousing, motor vehicles, petrochemicals, paper and
office products, and food are the leading items in B2B. According to the
authors’ experience and several sources, the dollar value of B2B

317
comprises at least 85% of the total transaction value of all e-commerce,
and in some countries, it is over 90% for a total of about $20 trillion
worldwide.
B2B EC is now in its sixth generation. This generation includes
collaboration with suppliers, buyers, government, and other business
partners via extensive use of mobile computing; use of blogs, wikis,
and other Web 2.0 tools; deployment of in-house social networks; use
of public social networks such as LinkedIn and Facebook; and increased
use of intelligent systems. In addition, the sixth generation is capitalizing
on mobile computing, especially tablets and smartphones.
The B2B field is very diverse, depending on the industry, products and
services transacted, volume, method used, and more. The diversity can
be seen in Figure where we distinguish five major components: Our
company, which may be manufacturer, retailer, service provider, and so
forth, is shown in the center. It has suppliers (on the left) and retailers
(on the right). Our company operations are supported by different
services (bottom), and we may work with several intermediaries. The
solid lines show the flow of information.

Fig 13.1 : B2B network

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13.4 B2B COMPONENTS
The various components of B2B commerce include:
a. Parties to the Transaction: Sellers, Buyers, and Intermediaries
B2B commerce can be conducted directly between a customer and a
manufacturer or it can be conducted via an online intermediary. An online
intermediary is a third-party entity that brokers the transactions between
the buyer and seller; it can be either virtual or click-and-mortar. Some
of the electronic intermediaries for individual consumers mentioned in
Chapter 3 also can be used for B2B by replacing the individual consumers
with business customers. Aggregations of buyers or sellers are typical
B2B activities conducted by intermediaries.
b. Types of Materials Traded: What Do Firms Buy?
Two major types of materials and supplies are traded in B2B markets:
direct and indirect. Direct materials are materials used in making
products, such as steel in a car or paper in a book.
Indirect materials are items, such as office supplies or light bulbs, which
supp o rt o p erat io n and p ro duct io n. They no r mally are used in
maintenance, repair, and operation (MRO) activities. Collectively, they
are also known as non- production materials.
c. B2B Marketplaces and Platforms
B2B transactions are frequently conducted in marketplaces such as
Alibaba.co m. B2B market places can be classified as vert ical or
horizontal. Vertical marketplaces are those for one particular industry
or industry segment. Examples include marketplaces specializing in
electronics, cars, hospital supplies, steel, or chemicals. Horizontal
marketplaces are those in which trading is in a service or a product that
is used in many types of industries. Examples are office sup- plies,
cleaning materials, or paint. Alibaba.com is an example of a horizontal
marketplace. The types of materials traded and the types of B2B trans-

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 actions are used to define the B2B marketplaces. One way of classifying
these markets is:
• Strategic (systematic) sourcing and indirect materials = MRO hubs
(horizontal markets for MRO)
• Systematic sourcing and direct materials = Vertical markets for direct
materials
• Spot buying and indirect materials = Horizontal markets for spot sourcing
• Spot sourcing and direct materials = Vertical markets
The various characteristics of B2B transactions are presented in summary
form in Table 13.2.

Parties to transactions Types of transactions

Direct, seller to buyer or buyer to seller Spot buying
Via intermediaries Strategic sourcing
B2B2C: A business sells to a business, but
delivers to individual consumers
Types of materials sold Direction of trade
Direct materials and supplies Vertical
Indirect (MROs) Horizontal
Number and form of participation Degree of openness
One-to-many: sell-side (e-storefront) Private exchanges, restricted
Many-to-one: buy-side Private exchanges, restricted
Many-to-many: exchanges Public exchanges, open to all
Many, connected: collaborative, supply chain Private (usually), can be public

Table 13.2 : Characteristics of B2B transaction

d. Service Industries Online in B2B
In addition to trading products between businesses, services also can be
provided electronically in B2B. Just as service industries such as travel,
banking, insurance, real estate, and stock trading can be conducted

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 electronically for individuals (as discussed in Chapter 3), they also can
be conducted electronically for businesses. The major B2B services are:
• Travel and hospitality services. Many large corporations arrange their
travel electronically through corporate travel agents. For instance,
American Express Global Business Travel offers several tools to help
corporate travel managers plan and control their employees’ travel. In
addition to traditional scheduling and control tools, American Express
offers the following EC-based tools (amexglobal- businesstravel.com/
total-program-management):
– TrackPoint enables locating a traveler in real time.
– Travel Alert provides travel advisories and updates, such as weather
conditions and delays.
– Info Point (businesstravel.americanexpress.com/ info-point) is a
website that includes detailed information about countries and cities
around the world.
– Meetings and Events (amexglobalbusinesstravel. com/meetings-and-
events
– Expedia (expedia.com), Travelocit y (travelocity.com), Orbitz
(orbitz.com), and other online travel services provide similar services
for both B2C and B2B.
 Real estate. Commercial real estate transactions can be large and
complex. Therefore, the Web might not be able to replace existing human
agents completely. Instead, the Web can help businesses find the right
properties, compare properties, and assist in negotiations. Some
government-run foreclosed real estate auctions are open to dealers only
and are conducted online.
 Financial services. Internet banking can be an efficient way of making
business payments, transferring funds, or performing other financial
transactions. For example, electronic funds transfer (EFT), which
provides for electronic payments, is popular with businesses, as are

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 electronic letters of credit. Transaction fees over the Internet are less
costly than any other alternative method. To see how payments work in
B2B, see Chapter 11. Businesses can also purchase insurance online,
from both pure online insurance companies and click-and-mortar ones.
 Banking and online financing. Business loans can be solicited online
from lenders. Because of the economic downturn, it is difficult for some
business owners (even those with excellent credit scores) to obtain loans;
therefore, they may turn to companies like Biz2Credit (biz2credit.com),
a company that helps small businesses grow. Biz2Credit is an online
credit marketplace that matches loan applicants with over 1200 lenders.
Several sit es, such as Garage Techno lo g y Vent ur es and LLC
(garage.com), provide information about venture capital. Institutional
investors use the Internet for certain trading activities.
 Other online services. Consulting services, law firms, medical services,
and others sell enterprise knowledge and special services online. Many
other online services, such as the purchase of electronic stamps (similar
to metered postage, but generated on a computer), are available online.
Recruiting and staffing services can also be done online.

13.4.1 The Benefits and Limitations of B2B

The benefits of B2B are for buyers, sellers, or for both, and they depend
on which model is used. In general, though, the major benefits of B2B (the
beneficiaries are marked after each benefit: S = seller, B = buyer, J = joint) are
that it:
• Creates new sales opportunities (S)
• Eliminates paper and reduces administrative costs (J)
• Expedites processing and reduces trading cycle time (J)
• Lowers search costs and time for buyers to find products and vendors
(B)
• Increases productivity of employees dealing with buying and/or selling

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 (J)
• Reduces errors and improves quality of service (J)
• Makes product configuration easier (B)
• Reduces marketing and sales costs (S)
• Reduces inventory levels and costs (J)
• Reduces purchasing costs by cutting down on use of intermediaries (B)
• Enables customized e-catalogs with different prices for different
customers (J)
• Increases production flexibility, permitting on demand delivery (S)
• Reduces procurement costs (B)
• Facilitates customization via self-configuration (J)
• Provides for efficient customer service (B)
• Increases opportunities for collaboration (J)
• Web-based EC is more affordable than traditional EDI (J)
• Allows more business partners to be reached than with EDI (J)
• Reaches a more geographically dispersed customer base (S)
• Provides a better means of communication with other media (J)
• Provides 24/7 coverage of the shop front (J)
• Helps equalize small enterprises (B)
B2B EC development has limitations as well, especially regarding
channel conflict and the operation of public exchanges. Furthermore, personal
face-to-face interactions may be needed but are unavailable.
Implementing e-B2B might eliminate the distributor or the retailer, which
could be a benefit to the seller and the buyer (though not a benefit to the
distributor or retailer). In previous chapters, such a phenomenon is referred to
as disintermediation. The benefits and limitations of B2B depend on such

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variables as who buys what items, and in what quantities; who are the suppliers;
how often a company buys, and so forth.

13.5 B2B MARKETING: ONE TO MANY SELL-SIDE E-

MARKETPLACES

An e-marketplace has the functionality to create organisational value

by increasing efficiencies in business-to-business (B2B) transaction processing
in the supply chain. However, an e-marketplace represents more than a
mechanism for transaction processing. The B2B e-marketplace brings together
the e-marketplace vendor, buyers and suppliers in a network relationship where
digital communication is fundamental to the success of the e-marketplace and
the business relat ionships formed. Promo tion and marketing o f t he e-
marketplace are essential for the growth of the e-marketplace and expansion of
the client base. The e-marketplace technology bridges the gap between the
buyers’ and suppliers’ technology and integrates procurement information
systems, creating a transaction network in which the participants exchange
service dependent upon their relationship in the e-marketplace. The interactions
between organisational actors and the e-marketplace technology create resource
integrations and network connections.
a. Sell-Side Models
In the B2C model, a manufacturer or a retailer electronically sells directly
to consumers from a storefront (or webstore). In a B2B sell-side e-
marketplace, a business sells products and services to business customers
electronically, frequently over an extranet. The seller can be a raw
material producer selling to manufacturers, or a manufacturer selling to
an intermediary such as a wholesaler, a retailer, or an individual business.
Intel (intel.com), Exxon (exxon.com), Cisco Systems, Inc. (cisco.com),
and Dell (dell.com) are examples of such sellers. Alternatively, the seller
can be a distributor selling to retailers or businesses (e.g., W.W. Grainger,
Inc.; grainger.com). In either case, sell-side e-marketplaces involve one

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 seller and many po tential buyers. In this model, both individual
consumers and business buyers might use either the same private sell-
side marketplace (e.g., dell.com) or a public marketplace.
The one-to-many model has three major marketing methods:
(1) selling from electronic catalogs with fixed prices;
(2) selling via forward auctions; and
(3) one-to-one selling, usually under a negotiated long-term contract.
Such one-to- one negotiation is familiar: The buying company
negotiates the price, quantity, payments, delivery, and quality
terms with the selling company.
b. B2B Sellers
Seller s in t he sell-side market place may be click- and- mo rt ar
manufacturers or intermediaries (e.g., distributors or wholesalers). The
intermediaries may even be pure online companies (e.g., Alibaba.com).
c. Sales from Catalogs: Webstores
Companies can use the Internet to sell directly from their online catalog.
A company might offer one catalog for all customers or a customized
catalog for each large customer (possibly both). For example, Staples
(staples.com), an office-supply vendor, offers its business customers a
personalized software catalog of about 100,000 products at different
pricing schemes. Many companies use a multichannel marketing strategy
where one channel is e-commerce. In selling online to business buyers,
manufacturers might encounter a similar problem to that of B2C sellers,
namely conflict with the regular distribution channels, including
corporate dealers (channel conflict). To avoid conflicts, some companies
advertise online, but sell only in physical stores.
Benefits and Limitations of Online Sales from Catalogs
Successful examples of the B2B online direct sales model include
manufacturers, such as Dell, Intel, IBM, and Cisco, and distributors,

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 such as Ingram Micro (ingrammicro.com) that sells to value-added
retailers; the retailer adds some service along with the product. Sellers
that use this model can be successful as long as they have a solid
reputation in the market and a large enough group of loyal customers.
While the benefits of direct online sales are similar to that of B2C, there
are limitations also. One of the major issues facing direct sellers is finding
buyers. Many companies know how to advertise using traditional
channels, but are still learning how to contact would-be business buyers
online. (Note: This is where Alibaba.com and similar companies provide
help.) In addition, B2B sellers may experience channel conflicts with
their existing distribution systems. Another limitation is that if traditional
electronic data interchange (EDI)—the computer-to-computer direct
transfer of business documents—is used, the cost might be passed on to
the customers, and they could become reluctant to go online. The solution
to this problem is transferring documents over extranets and using an
Internet-based EDI. Finally, the number of business partners online must
be large enough to justify the system infrastructure and operation and
maintenance expenses.
d. Comprehensive Sell-Side Systems
Sell-side systems must provide several essential functionalities that
enable B2B vendors to execute sales efficiently, provide outstanding
customer service, allow integration with existing IT systems, and provide
integration with non-Internet sales systems.
e. Selling via Distributors and Other Intermediaries
Manufacturers can sell directly to other businesses, and they do so if
the customers are large buyers. However, manufacturers frequently use
intermediaries to distribute their products to a large number of smaller
buyers. The intermediaries buy products from many other manufacturers
and aggregate those products into one catalog from which they sell to
customers or to retailers. Many of these distributors also are selling
online via webstores.

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 Some well-known online distributors for businesses are Sam’s Club
(samsclub.com), Avnet (avnet.com), and W.W. Grainger (grainger.com).
Many e-distributors sell in horizontal markets, meaning that they sell to
businesses in a variety of industries. However, some distributors sell to
businesses that specialize in one industry (vertical market), such as
Boeing. Most intermediaries sell at fixed prices; however, some offer
quantity discounts, negotiated prices, or conduct auctions.
f. Distributors’ Catalogs
Webstores are used by manufacturers (e.g., Gregg’s Cycles) or by
distributors. Distributors in B2B are similar to retailers in B2C. They
can be general or they can concentrate on one area, much like Toys “R”
Us (toysrus.com) in B2C.
g. Self-Service Portals
Portals are used for several purposes, one of which is to enable business
partners to conduct self-service, as is shown in the following example.
Example: Whirlpool B2B Trading Portal
Whirlpool (whirlpool.com) is a large global manufacturer of home
appliances. The company needs to operate efficiently to survive in an
extremely competitive market. It must collaborate with its business
partners along the selling segments of the supply chain and provide
them with outstanding customer support.
The company sells its products via all types of retailers and distributors
(25% of which are small), located in over 170 countries. Until 2000, the
small retailers had entered their orders from Whirlpool manually. This
process was slow, costly, and error prone.
Therefore, Whirlpool developed a B2B trading partner portal (for the
small retailers), which enabled self-ordering, therefore reducing the
transaction cost considerably.
The system was tested with low-volume items and then extended to

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 larger volume items. In addition, more features were added. Adding the
portal has increased Whirlpool’s competitive advantage.

13.6 SUMMARY
Business-to-business electronic commerce includes the use of exchanges,
Internet-based marketplaces in which companies can purchase or sell a variety
of products, some generic across industries and others specific to a given
industry. the proliferation of exchanges since 1999 provides managers with
numerous choices for purchasing and selling office supplies, maintenance and
repair equipment, and surplus inventory as well as steel, paper, plastics, energy,
and a host of other industry products. Business managers and IT professionals
need to be aware of the costs and benefits of using exchanges and how exchanges
may affect companies operating at various points on the supply chain. Greater
understanding of the role of B2B e-marketplaces will enable organisations to
develop their strategic planning, decision-making, design and management of
business processes and increase their presence in national and international
markets. Additionally, it can help e-marketplace providers develop an e-
marketplace that addresses adoption and participation issues whilst producing
a level of co-created value for all the active participants.

13.7 GLOSSARY
 B2B: A type of commerce transaction that exists between businesses
 B2C: It is the model involving business and consumers over the internet
 C2C: E-Commerce involves electronically-facilitated transactions
between individuals, often through a third party.
 E-tailers: E-tailers are simply retailers who use the internet to sell their
goods/services to their customers, rather than actual stores.
 E-tailing: E-tailing also known as electronic retailing is the selling of
retail goods on the Internet. It is synonymous with business-to-consumer
(B2C) transactions.
 Pure Play (Virtual) e-retailers- Retailers that are only do the electronic

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 transactions and do not have any physical outlet for the customers. For
example- Amazon & Flipkart.

13.8 SELF ASSESSMENT QUESTIONS

1. Describe the B2B marketplaces.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Describe the major types of B2B models.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Discuss the models and characteristics of the sell-side marketplace,
including auctions.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. Describe sell-side intermediaries.
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________

13.9 LESSON END EXERCISE

1) ________ are transactions between businesses conducted electronically
over the Internet, extranets, intranets, or private networks.
2) ________ refers to e-commerce that focuses on a single company's
buying needs or selling needs.
3) B2B commerce can be conducted directly between a customer and a
manufacturer or it can be conducted indirectly via ________.
4) ________ are many-to-many e-marketplaces, usually owned and run by
a third party or a consortium, in which many buyers and many sellers
meet electronically to trade with each other.
5) ________ are third-party exchanges open to all interested parties.
6) ________ is the purchase of goods and services as they are needed,
usually at prevailing market prices.
7) An ________ is an online third party that brokers a transaction online
between a buyer and a seller; it may be virtual or click-and-mortar.
8) ________ are markets that deal with one industry or industry segment.
9) ________ are materials used in the production of a product.
10) ________ are markets that concentrate on a service, product, or material
that is used in all types of industries.

13.10 SUGGESTED READINGS

1. Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
2. Girdhar Joshi, “Information technology for retail”, Oxford University
Press, 2009.

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3. ht t p ://www.zenit hresearch.o rg.in/images/ st o ries/pdf/ 2011/July/
9%20SUMAN%20E- tailing_Paper.pdf
4. http://www.techopedia.com/definition/14351/electronic-retailing-e-
tailing
5. http://www.bobyhermez.com/2012/02/concept-and-issues-in-e-tailing/
6. http://www.articlesbase.com/online-business-articles/introduction-to-
electronic-retailing- 1058777.html
7. http://www.practicalecommerce.com/articles/236-Integrating-Bricks-
and-Mortar-with- eCommerce
8. h t t p : / / w w w. it c in f o t e c h . c o m / u p lo a d s / g u i / k n o w l e d g e c e n t r e /
multi_channel_retailing.pdf
9. http://retail-guru.com/use-merchandise-management-to-streamline-
retail-sourcing- buying-and-merchandising/
10. htt p://www.chillibreeze.com/articles_vario us/E-tailing.asp http://
www.economywatch.com/business-and-economy/e-retailing-india.html

*********

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Lesson No. 14 UNIT III
ELECTRONIC COMMERCE APPLICATIONS
E-AUCTIONS: ONE FROM MANY E-PROCUREMENT
FROM BUY SIDE

STRUCTURE
14.1 Introduction
14.2 Objectives
14.3 E-Auctions
14.4 One-from-many: E-procurement at buy-side e-marketplaces
14.5 Reverse auctions at buy-side E-Marketplaces (E-Tendering)
14.6 Other E-Procurement methods
14.7 Summary
14.8 Glossary
14.9 Self-Assessment Questions
14.10 Lesson End Exercise
14.11 Suggested Readings

14.1 INTRODUCTION
Online auctions are among the most influential e-business applications.
Their impact on trading in the B2B (business to business), as well as in the
B2C (business to consumer) and C2C (consumer to consumer) areas is both

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remarkable and inevitable. Although there have been considerable efforts in
setting up market places, online trading still lays in its early stages. Quite a few
companies have started projects of their own, trying to improve their purchasing
and sales channels. If a supplier has more than one item to sell (e.g. a fixed
number of tulip bulbs), he may use the Dutch auction format. The price for one
product constantly decreases over a period of time. Whenever a bidder submits
a bid, he gets one item for the price valid at that time. The auction is finished
when all items are sold. The use of electronic resources allows not only to
invite bidders throughout the world to participate in the auction simultaneously,
but also allows to set up more complex and, dependent on the particular situation,
more specific auction formats. Long term auctions may last up to four weeks,
where the bidders repeatedly have a look at the current situation. However, it
turns out that such kinds of auctions are mainly of interest during the closing
phase. Short term auctions concentrate on these last few hours immediately.
They may even be as short as 30 minutes, provided that the participants are
explicitly invited beforehand. Further auction formats like multi-round biddings
have been defined. In a multi-round bidding, each bidder is forced to submit
exactly one bid per round. Only after the round has ended, all bidders are
informed about their competitors’ bids and the next round begins.

14.2 OBJECTIVES
After reading this lesson, you will be able to:
 describe e-auctions
 discuss e-tendering
 explain e-procurements

14.3 E-AUCTIONS
Online auction is an electronic commerce (EC) technology for trading
merchandise and services across a global e-marketplace using web-services.
This technology has become an increasingly prevalent mechanism for both
sectors, consumers as well as amongst retailers, such as businesses and

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consumers (B2C). These days with the development of information technology,
Internet auction has become more popular and has been accepted by clientele.
The popularity of electronic auction is a result of improved EC development
thus gaining wide spread approval. The Internet provides almost perfect market
information and infrastructure for executing auctions at lower administrative
costs. Online auctions provide flexibility of cost, based on supply and demand,
subject to specific competitive conditions. As an effect, online auctions
coordinate demand and supply through market clearing prices, allowing a
maximum number of products to be sold.

14.3.1 Features of an online auction system

In several seminars with major industrial purchasers it became soon
apparent that complete e-Procurement strategies are a time-consuming task to
define and implement. On the one hand, aligning a whole purchasing department
with electronic procurement is tiresome and brings an extra load of work. On
the other hand, the desired effects of more efficient purchasing processes pay
off only in the long run. However, it also became apparent that identifying the
commodities with high purchase volume and buying them via auctions could
significantly reduce the prices spent for these commodities, and, what is most
important, leads to a high and immediate return on investment. From that point
of view, an initial set of requirements for online auctions was defined: It was
evolved and enhanced during the following period. In the following, the most
important of these features have been described. Also other technical issues of
interest, such as flexibility, ease of use, security, performance, robustness and
compatibility to existing systems, both on the buyer’s as well as the supplier’s
side have been discussed.
a. The software is capable for online auctions, both the normal English
format and the reverse format, thus allowing to auction goods for buyers
and demands for suppliers.
b. An intuitive graphical user interface is accessible through the web
without any installation necessary. Being able to support access to online

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 auctions without any installation proved a great success factor, since it
is often rather difficult to install new software within company networks.
c. Auctions are running in real-time. This means that clients always have
current information visible. This is especially important for short time
(approx. 30 minutes) auctions, where the frequency of bids is relatively
high.
d. An auction may consist of several slots, allowing the buyer to split the
material desired among several suppliers. This allows to prevent a
dependency on a single supplier only, as well as to split for different
delivery points.
e. Different auctions may depend on each other. For example, depending
on the results of simultaneous auctions, the buyer purchases percentages
of competing materials. The auction system must reflect this dependency,
e.g. by additional messages that describe which of the competing
materials will be bought.
f. Persons may participate in an auction in different roles: the auctioneer,
the bidders, the originator of the auction (buyer in reverse auctions,
seller in the normal auctions), and guests shall be admitted. In particular,
the role of guest is useful to show potential and not fully convinced
participants how online auctions work, without revealing any information
on auction details (neither currency, nor value, nor the buyer, nor the
kind of traded goods).
g. Different roles get different information at hand. Only the auctioneer
can co-relate the bids to their bidders during the auction. Bidders appear
to each other anonymously, but know how many competitors there are.
Furthermore, bidders see their ranking. External observers following
the auction see percentage values instead of real currency.
h. Reverse auctions may have a historic and a target value. The historic
value describes what the buyer paid for the auction goods so far, whereas
the target value describes what he would like to pay this time. If the

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 auction result hits the target value then the buyer is obliged to sign the
contract. If the target prize is not hit the buyer is free to choose.
i. The auction times may vary. Very short auctions may have an auction
time as short as 15 minutes. Typical auction times are 1-3 hours,
consisting of a main part and an extension part.
j. The auction time is extended whenever a bid arrives shortly before the
auction end. This allows all other bidders to react. The provided reaction
time may vary, e.g. starting from 3 minutes as an initial extension down
to a few seconds at the very end.
k. A login mechanism is imperative. Passwords are distributed through
safe channels, among them PGP-encrypted emails.
l. A report on the auction result is provided for all participants. This report
allows the participants to reflect the auction result. The winner has
evidence of his success. other bidders have evidence that they have been
over-bidden and perhaps should think about the pricing structure of their
product.
14.3.2 The Benefits of Auctions on the Sell-Side
Many companies use forward auctions to liquidate their sur- plus
products or capital assets. In such a situation, items are usually displayed on an
auction site (private or public) for quick clearance. Forward auctions offer the
following benefits to B2B sellers:
a. Revenue generation. Forward auctions support and expand online and
overall sales. Forward auctions also offer businesses a new venue to
quickly and easily dispose of excess, obsolete, and returned products.
b. Cost savings. In addition to generating new revenue, conducting e-
auctions reduces the costs of sell ing the auctioned items, which helps
increase the seller’s profits.
c. Increased “stickiness.” Forward auctions give websites increased
“stickiness,” namely, potential buyers stay there longer. Stickiness is a

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 characteristic that measures customer loyalty to a site that eventually
results in higher revenue.
d. Member acquisition and retention. Registered members of auctions
can invite their business contacts. In addition, auction software aids
enable sellers to search and report on virtually every relevant auction
activity. Such information can be analyzed and used for business strategy.
Forward auctions can be conducted in two ways. A company can conduct
its forward auctions from its own website or it can sell from an intermediary
auction site, such as liquidation.com or ebay.com.

14.3.3 Auctioning from the Company’s Own Site

For large and well-known companies that frequently conduct auctions,
it makes sense to build an auction mechanism on the company’s own website.
Why should a company pay a commission to an intermediary if the intermediary
cannot provide the company with added value? Of course, if a company decides
to auction from its Using Intermediaries in Auctions
Several intermediaries offer B2B auction sites (e.g., see assetnation.com
and liquidation.com). Some companies specialize in government auctions while
others focus on sur- plus stock auctions (e.g., govliquidation.com). An
intermediary can conduct private auctions either from the intermediary’s or
from the seller’s sites. Alternatively, a company can conduct auctions in a public
marketplace, using an intermediary (e.g., eBay, which has a special “business
exchange” for small companies).
Using an intermediary to conduct auctions has many benefits. The first
is that no additional resources (e.g., hardware, bandwidth, engineering resources,
or IT personnel) are required. There are no hiring costs for using corporate
resources. B2B auction intermediary sites also offer fast time-to-market as they
are capable of running the auction immediately. Without the intermediary, it
can take weeks for a company to prepare an auction site in-house. Another
benefit of using intermediaries relates to payments, which are handled by the
intermediary.

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Examples of B2B Forward Auctions
The following are examples of B2B auctions:
 Whirlpool Corp. sold $20 million in scrap metal in a single auction via
equipmentone.com; the sale price received was 15% higher than prior
e-auctions.
 Sam’s Club (samsclub.com) auctions thousands of items (especially
electronics) at Sam’s Club Auctions (auctions.samsclub.com). Featured
auctions include the cur- rent bid, the number of bids, and the open and
close date. They liquidate overstock items, returns, and out of style goods.
 Yahoo! conducts both B2C and B2B auctions in Hong Kong, Taiwan,
and Japan.

14.4 ONE-FROM-MANY: E-PROCUREMENT AT BUY-SIDE

E-MARKETPLACES
The term procurement refers to the purchase of goods and services by
organizations. Procurement is usually done by purchasing agents, also known
as corporate buyers. The buyer’s purchasing department sometimes has to enter
the order information manually into its own corporate information system.
Furthermore, manually searching web- stores and e-malls to find and compare
suppliers and products can be slow and costly. As a solution, large buyers can
open their own marketplaces called buy-side e-marketplaces, and invite sellers
to browse and offer to fulfill demand.

14.4.1 Inefficiencies in Traditional Procurement Management

Procurement management refers to the process of planning, organizing,
and coordinating of all the activities pertaining to the purchasing of the goods
and services needed by an organization. It involves the B2B purchase and sale
of supplies and services, as well as t he flo w o f required info rmatio n.
Approximately 80% of an organization’s purchased items, mostly MROs,
constitute 20–25% of the total purchase value. In this case, much of the buyers’
time is spent on clerical activities, such as entering data and correcting errors
in paperwork.
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 The procurement process may be lengthy and complex due to the many
activities performed. The following are the major activities that may be included
in a single purchase:
 Search for items using search engines, catalogs, virtual fairs and
showrooms, and sellers’ sales presentations.
 Learn details of items and buying terms using com- parison engines and
quality reports, and research industry report and vendors’ information.
 Negotiate or join group purchasing using software support (if available).
 Determine when and how much to order each time. Authorize corporate
buyers.
 Join business-oriented social networks such as linkedin.com
 Sign agreements or contracts using e-contract management (e.g., from
Ariba, Inc. ariba.com; a SAP company); arrange financing, escrow
insurance, etc.
 Create specific purchasing order(s) using a com- puterized system.
 Arrange packing, shipments, and deliveries using electronic tracking,
RFID, etc.
 Arrange invoicing, payments, expense management, and purchasing
budgetary control using soft- ware packages
For high-value items, purchasing personnel need to spend considerable
time and effort on procurement activities. However, the purchasers may not
have time to do a quality job since they are busy with the many items of small
value such as MROs.
Other inefficiencies, ranging from delays in deliveries to the high cost
of rush orders, also may occur in conventional procurement. This situation is
called maverick buying, which occurs when a buyer makes unplanned purchases
of items needed quickly, resulting in buying at non-prenegotiated, and usually
higher, prices.

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 To correct the situation(s) that may result from traditional procurement,
companies must reengineer their procurement systems, implement new
purchasing models, and, in particular, introduce e-procurement.
Procurement methods
Companies use different methods to procure goods and services
depending on factors such as what and where they buy, the quantities needed,
and how much money is involved. Each method has its own process benefits
and limitations. To minimize the inefficiencies described earlier, companies
automate activities in the process. This is the major objective of e-procurement.
Examples of companies utilizing efficient methods are Walmart (walmart.com),
Dell (dell.com), and Starbucks (starbucks.com) to name a few. The major
procurement methods include the following:
Buy directly from the catalogs of manufacturers, wholesalers, or retailers,
and possibly by negotiation.
 Buy at private or public auction sites in which the buying organization
is one of many.
 Conduct bidding in a reverse auction system where suppliers compete
against each other. This method is used for high-value items or when
large quantities are involved.
 Buy from the catalog of an intermediary (e-distributor) that aggregates
sellers’ catalogs.
 Buy from the company’s own internal buyer catalog. Such catalogs
usually include agreed-upon prices of items from many suppliers. This
is part of desktop purchasing, which allows the users to bypass the
procurement department.
 Join a group-purchasing system that aggregates participants’ demands,
creating a large volume. Then the group may negotiate prices or initiate
a tender.

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14.4.3 E-Procurement Concepts
E-procurement (electronic procurement) is the online purchase of
supplies, materials, energy, work, and services. It can be done via the Internet
or via a private network such as an electronic data exchange (EDI). Some
activities done by e-procurement include enabling buyers to search for products
and suppliers, comparing prices, facilitating reverse auctions for buyers, and
automating paperwork and documentation. Some of these activities are done in
private marketplaces, others in public exchanges.
The Goals and Process of E-Procurement
As stated earlier, e-procurement frequently automates activities in the
purchasing process from multiple suppliers via the Web for better execution
and control. Improvements to procurement have been attempted for decades,
usually by using information technologies. Using e-procurement results in a
major improvement. Essentially, e-procurement automates the process of
auctions, contract management, vendor selection, and management.
Example: Volvo’s E-Procurement
Volvo is a premium Swedish car manufacturer (now owned by a Chinese
company). The company operates in dozens of countries worldwide. The
company has more than 30 purchasing centers on six continents. In the past,
this has resulted in inconsistent purchasing practices, lack of collaboration
among the centers, and inefficient and inconsistent procurement processes. To
overcome the problems, management decided to use a unified e-procurement
system. They selected Ariba’s Sourcing and Ariba’s Contract Management solutions
(Ariba is a B2B SAP company). The system assures standardization of the
purchasing processes, sharing of best practices activities, and streamlining of the
contracting pro- cess and its management. All these systems are digital. The e-
procurement resulted in a greater cohesion among the sourcing centers, better use
of best practices, and reduced cost of procurement while its effectiveness increases.

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14.4.4 Types of E-Procurement
Four major methods of e-procurement are available: (1) Buy at buyer’s
own website, (2) buy at sellers’ store, (3) buy at exchanges, and (4) buy at
others’ e-market sites.

Fig. 14.1: Types of e-procurement

Source : Turban et.al (2017
The seven main types of e-procurement are as follows: (1) e-sourcing,
(2) e-tendering, (3) e-reverse auctioning, (4) e-informing, (5) Web-based ERP
(enterprise resource planning), (6) e-market sites, and (7) E-MRO (maintenance,
repair, and operating).

14.4.5 The Benefits and Limitations of E-Procurement

E-procurement has the ability of improving supply chain management,
and providing real-time information on what is going on in the supply chain
(known as visibility of the sup- ply chain), starting with the customers’ needs.

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14.4.5 The Benefits of E-Procurement
By automating and streamlining the procurement process, corporate
purchasing buyers can focus on more strategic activities that result in:
• Increasing the productivity of purchasing agents, providing them with
more nonroutine time and reducing job pressures, possibly reducing
purchasing departments’ overhead.
• Lowering purchase per item prices through activities such as product
standardization, reverse auctions, volume discounts, and consolidation
of purchases from fewer suppliers.
• Improving information flow and its control (e.g., price comparisons).
• Reducing the frequency and cost of maverick buying.
• Improving the payment process, and sellers’ savings due to expedited
payment cycle.
• Establishing more efficient and collaborative partner relations due to
information sharing.
• Improving the manufacturing process for the suppliers.
• Ensuring delivery on time and fewer stock-outs.
• Reducing the skill requirements and training needs of purchasing agents.
• Reducing the number of suppliers.
• Streamlining and expediting the purchasing process.
• Controlling inventories more effectively at the buyers’ end.
• Streamlining invoice reconciliation and dispute resolution.
• Reducing the administrative processing cost per order by as much as
90% by reducing purchasing overheads and intermediary fees.
• Finding new suppliers that can provide goods and services faster and/or
less expensively (e.g., by going global and use online price comparisons).
• Integrating budgetary controls into the procurement process (e.g., ariba.com).

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• Minimizing human errors in the buying or shipping processes.

14.4.7 The Limitations and Challenges of E-Procurement

Unfortunately, e-procurement practices have some limitations and risks
such as:
 The total cost (TCO) may be too high.
 It may be subject to hacker attacks.
 It may be difficult to get suppliers to cooperate electronically.
 The system may be too complex
 It may be difficult to have internal and external integration (sometimes
it involves different standards).
 The technology may change frequently.
Pro curement is an extremely important success facto r fo r many
companies. Therefore, it is important to learn about the future of e-procurement
as well.
14.4.8 Selecting an Appropriate E-Procurement Solution
Having many procurement methods, consultants, and software makes
the selection of the right method(s) difficult. Ariba, Inc. (ariba.com) provides
an innovative score sheet that companies use to evaluate vendors based on the
described success factors. The success factors are grouped by cost reduction,
increased agility, managing co mplete commerce, and fulfilling tactical
requirements. When organizations make such decisions, these decisions may
be influenced by factors such as: Who is buying? What are you buying? How
much information do you need to make the decisions? What is the reputation
of the vendor(s)? What testimonials are available

14.5 REVERSE AUCTIONS AT BUY-SIDE E-

MARKETPLACES (E-TENDERING)
A major method of e-procurement is using reverse auctions. A reverse
auction is a process in which many sellers (suppliers) compete to fulfill orders

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requested by one buyer. Recall from our earlier discussion that a reverse auction
is a tendering system where suppliers are invited to bid on the fulfillment of an
order, and the lowest bid wins. In B2B usage of a reverse auction, a buyer may
open an e-market on its own server (or use an independent auctioneer such as
eBay) and invite potential suppliers to bid on the items. This “invitation” to
such reverse auctions is a form or document called a request for quote (RFQ).
Traditional tendering usually implies one-time sealed bidding, whereas an e-
reverse auction opens the process to competing sequential bidding.
Governments and large corporations frequently mandate reverse
auctions, which may provide considerable savings because more suppliers are
participating in a more competitive process. The electronic process is faster
and administratively much less expensive. It also can benefit suppliers in finding
RFQs. Reverse auctions are very important B2B mechanisms in e-procurement.

14.5.1 The Major Benefits of Reverse Auctions

The major benefits of the technology to a buyer are:
(a) lower cost of items purchased,
(b) reduction of administrative costs of procurement,
(c) reduction of corruption and bribes, and
(d) decrease in time to receive the goods, which may result from the
suppliers’ ability to produce their products and services faster (see closing
case).
For suppliers, savings comes from a reduction in:
(a) time required to find customers,
(b) administrative costs, and
(c) time needed by managers to conduct manual bids.

14.5.2 Conducting Reverse Auctions

As the number of reverse auction sites increases, suppliers may not be
able to monitor all relevant open RFQs manually. This problem has been

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addressed with the introduction of online directories that list open RFQs.
Another way to solve this problem is through the use of monitoring software
agents. Software agents also can aid in the bidding process itself.
Alternatively, third-party intermediaries may run the electronic bidding,
as they do in forward auctions (e.g., see Opentext Corporation; opentext.com).
Auction sites such as ebay.com, and liquidation.com also belong to this category.
Conducting reverse auctions in B2B can be a fairly complex process. This is
why using an intermediary may be beneficial.
The reverse auction process is demonstrated in Figure below:

Fig 14.2 : Revenue Auction Process

Source : Turban et. al (2017)
As shown in the figure, the first step for the would-be buyer is to post
bid invitations. When bids arrive, contract and pur- chasing personnel for the
buyer evaluate the bids and decide which one(s) to accept.

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14.5.3 E-Tendering by Governments
Most governments must conduct tendering when they buy or sell goods
and services. Doing this manually is slow and expensive. Therefore, many
governments are moving to e-reverse auctions for their purchasing.

14.5.4 Group Reverse Auctions

To increase their bargaining power and get price discounts, companies,
like individuals, can buy in a group, and the group can use a reverse auction to
get an even better deal than a quantity discount. B2B reverse auctions can be
done in a private exchange or at an aggregator’s site for a group of buying
companies. Such group reverse auctions are popular in South Korea and
usually involve large conglomerates. For example, the LG Group operates
the LG MRO Auction for its member companies, and Samsung Group
operates the Samsung iMarketKorea (imarketkorea.com), which provides
procurement services and MRO goods. Samsung’s iMarketKorea’s revenue
comes primarily from B2B transactions. This practice is popular in the
healthcare industry in the United Kingdom, the United States, and other
countries where hospitals are banding together to buy their supplies at a
quantity discounted low prices.

14.6 OTHER E-PROCUREMENT METHODS

Other innovative e-procurement methods have been implemented by
companies. Some common ones are described below:
a. Desktop Purchasing
Desktop purchasing refers to purchasing by employees without the
approval of supervisors and without the involvement of a procurement
department. This usually is done by using a purchasing card (P-card).
Desktop purchasing reduces the administrative cost and the cycle time
involved in purchasing urgently needed or frequently purchased items
of small dollar value. This approach is especially effective for MRO
purchases. The desktop purchasing approach can be implemented by

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 collaborating with external private exchanges. For instance, Samsung
Electronics of South Korea, a huge global manufacturer, and its
subsidiaries, have integrated its iMarket- Korea (imarketkorea.com) with
the e-procurement systems of its buying agents. This platform can also
be linked easily with group purchasing,
b. Group Purchasing
Many companies, especially small ones, are moving to group purchasing.
With group purchasing, orders from several buyers are aggregated so
that better prices due to larger quantities purchased can be negotiated.
This model is similar to the one we described for B2C. For B2B group
purchasing in China, see Young (2015). Two sub-models are in use:
internal aggregation and external (third-party) aggregation.
c. Internal Aggregation of Purchasing Orders
Large companies, such as GE, spend many millions of dollars on MROs
every year. These companies aggregate the orders from their subsidiaries
and various departments (sometimes there are hundreds of them) for
quantity discounts. They can cut administrative costs by 20%.
d. External Aggregation for Group Purchasing
Many SMEs would like to enjoy quantity discounts but have difficulty
finding others to join a group purchasing organization to increase the
procurement volume. Finding partners can be accomplished by an
external third party such as BuyerZone (buyerzone.com), the Healthcare
Supply Chain Association (supplychainassociation.org), or the United
Sourcing Alliance (usa-llc.com). The idea is to provide SMEs with better
prices, larger selections, and improved services by aggregating demand
online and then either negotiating with suppliers or conducting reverse
auctions. The external aggregation/group-purchasing process is shown
in Figure below:

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 Fig : Group Purchasing
Several large companies, including large CPA firms and software
companies such as EDS Technologies (edstechnologies.com) and Ariba, Inc.
(ariba.com), provide external aggregation services, mainly to their regular
customers. Yahoo! also offers such services. A key to the success of these
companies is a critical mass of buyers.
e. Buying from Other Sources
When buying small quantities, purchasers often buy from an e-distributor.
Another option for e- procurement is to buy at a B2B exchange using
one of several available methods. In all of these options, one may
automate some actions in the process, such as the generation of a
purchasing order (e.g., see esker.com and ariba.com).
f. Acquisition via Electronic Bartering
Bartering is the exchange of goods or services without the use of money.
The basic idea is for a company to exchange its surplus for something
that it needs. Companies can advertise their surpluses in classified ads
and may find a partner to make an exchange, but in many cases, a
company will have little success in finding an exact match on its own.
Therefore, companies usually ask an intermediary to help. A bartering
intermediary can use a manual search-and match approach or it can create

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 an electronic bartering exchange. With a bartering exchange, a company
submits its surplus to the exchange and receives points of credit, which
the company can then use to buy items that it needs. Popular bartering
items are office spaces, idle facilities and labor, products, and even
banner ads.

14.7 SUMMARY
E-procurement systems are a relatively recent development in the
business application area and the lack of benchmark has enabled reference
models to be developed, especially in new firms that are just beginning to learn
of these systems’ functionalities and their uses in their organisations. Based on
previous researchers, there are factors contributing to challenges in the
implementation of e-procurement such as technology, infrastructure and
legislation, environment; besides, resource constraints, and organizational and
management characteristics are also contributing factors to the success, or
otherwise, of an e-procurement implementation. External factors from the
industry, market, government, and technological change are beyond the control
of organisations. However, these barriers can be minimised and even completely
mitigated through careful planning and research. The technology barriers to
suppliers include understanding and commitment to specialist software and
the start-up fee required by the vendors that is usually beyond the financial
capabilities of SMEs or that they do not want to commit to such a high-priced
system. The declared support of such systems is generally from the larger
companies that would benefit more due to the large volume of trade and
numerous transactions. The usefulness and security issues of the system are
major concerns for potential adopters. The wide-spread use of e-procurement
systems also depends on the availability of supporting infrastructures such as
sufficient broadband coverage.
Inadequacies in government policies and legislation are areas to be
highlighted in the system. The standard procedure for governmental tendering
process which mandates the buying of printed tender documents in physical
offices by interested parties in person is a good example. This prohibits the use

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of e-tendering system and presents a huge setback for the government attempting
to establish and electronic government system. Lack of standards in the
development of e-procurement systems results in users of one system being
unable to communicate electronically with users of other different systems,
creating a diverse but fragmented e-procurement environment.

14.8 GLOSSARY
 Bid: A ‘bid’ is an offer by one party to enter into a legally binding
contract with another party, often used interchangeably with offers,
quotes, tenders, proposals and submissions.
 Accountability: ‘Acco unt ability’ means t hat public officers are
responsible for the actions and decisions that they take in relation to the
procurement process and outcomes.
 Online Payment: Payment through debit or credit card over internet.

14.9 SELF ASSESSMENT QUESTIONS

1. Define the procurement process.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Describe the inefficiencies of traditional procurement. List the major
procurement methods.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
3. Describe the inefficiencies of traditional procurement. List the major
procurement methods.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

14.10 LESSON END EXERCISE

1. Discuss the relationship of desktop purchasing with group purchasing
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Describe a buyer-operated procurement marketplace and list its benefits.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What are the major considerations for selecting an e- procurement
vendor?
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________

14.11 SUGGESTED READINGS

 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Girdhar Joshi, “Information technology for retail”, Oxford University
Press, 2009.
 ht t p ://www.zenit hresearch.o rg.in/images/ st o ries/pdf/ 2011/July/
9%20SUMAN%20E- tailing_Paper.pdf
 http://www.techopedia.com/definition/14351/electronic-retailing-e-
tailing
 http://www.bobyhermez.com/2012/02/concept-and-issues-in-e-tailing/
 http://www.articlesbase.com/online-business-articles/introduction-to-
electronic-retailing- 1058777.html
 http://www.practicalecommerce.com/articles/236-Integrating-Bricks-
and-Mortar-with- eCommerce
 h t t p : / / w w w. it c in f o t e c h . c o m / u p lo a d s / g u i / k n o w l e d g e c e n t r e /
multi_channel_retailing.pdf
 http://retail-guru.com/use-merchandise-management-to-streamline-
retail-sourcing- buying-and-merchandising/
 htt p://www.chillibreeze.com/articles_vario us/E-tailing.asp http://
www.economywatch.com/business-and-economy/e-retailing-india.html

**********

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Lesson No. 15 UNIT III
ELECTRONIC COMMERCE APPLICATIONS
B2B EXCHANGES; B2B PORTALS AND DIRECTORIES;
B2B IN WEB 2.0 AND SOCIAL NETWORKING

STRUCTURE
15.1 Introduction
15.2 Objectives
15.3 B2B Exchanges
15.4 B2B Portals and directories
15.5 B2B in web 2.0 and social networking
15.6 Summary
15.7 Glossary
15.8 Self-Assessment Questions
15.9 Lesson End Exercise
15.10 Suggested Readings

15.1 INTRODUCTION
B2B e-commerce covers a broad range of applications that allows
companies to form electronic relationships with their distributors, resellers,
suppliers, and other partners. The Internet allows B2B e-commerce players to
link their companies to the digital market easily and inexpensively. B2B also

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facilitates supply chain management. Supply chain management involves the
coordination of order generation, order taking, and order fulfillment/distribution
of products, services, or information. Electronic payment is a financial exchange
that takes place online between buyers and sellers. A successful digital market
possesses the capability for electronic payment, thus reducing operational and
processing costs, decreasing technology costs, and speeding up completion of
transactions. B2B e-commerce also can play an important role in procurement
management for purchasing companies. They can reduce purchase prices and
cycle time by taking advantage of the digital market’s liquidity and transparency.
Purchasing companies can eliminate redundant steps from the buying processes
through streamlined electronic workflow. A digital market typically offers a
wide variety of supplementary services as needed by the trading members,
such as authenticating buyers and sellers and streamlining procurement
workflow; electronic payment services, risk management, contractual and
settlement services; conflict resolution and legal services; and logistics services.
Therefore, a capable B2B digital market could lower purchasing costs, reduce
inventory and warehouse costs, enhance the efficiency of logistics and
procurement, lower marketing cost, and increase sales in the market.

15.2 OBJECTIVES
After reading this lesson, you will be able to:
 Describe the functions and services provided by B2B exchanges
 discuss B2B portals and B2B directories
 explain the role of B2B in web 2.0 and social networking

15.3 B2B EXCHANGES

The term B2B exchange, or simply exchange, implies the existence of a
marketplace with many potential buyers and many potential sellers. In addition
to being online trading venues, many exchanges provide support services such
as payments and logistics software and consulting services. They also act as
industry portals. Exchanges are known by a variety of names: e-marketplaces,

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trading exchanges, trading communities, exchange hubs, Internet exchanges,
Net marketplaces, and B2B portals. Despite their variety, all exchanges share
one major characteristic: Exchanges are electronic trading-community meeting
places for many sellers and many buyers, and possibly for other business
partners, as shown in Figure below.
At the center of every exchange, there is a market maker that operates
the exchange and, in some cases, may also own it. Exchanges can be horizontal,
serving many industries (e.g., ariba.com or alibaba.com), or vertical, serving
one or a few connected industries (e.g., supplyon.com for automotive; and
oceanconnect.com for refineries and shipping services). In an exchange, just
as in a traditional open-air marketplace, buyers and sellers can interact and
negotiate prices, quantities, and other terms.

Fig 15.1 : B2B exchanges

Source : Turban et. al (2017)

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15.3.1 Global Exchanges
Most large exchanges, such as Alibaba and Amazon Business operate in
many countries. Such activities, require special arrangement such as dealing
with country regulations, money transfers, language translation, and more.
15.3.2 Functions of and Services Provided by B2B Exchanges
The following are the major functions of B2B exchanges:
1. Matching buyers and sellers. The matching of buyers and sellers
includes such activities as:
 Presentation of product offering (e.g., the company’s catalogs)
 Aggregating and posting different products for sale— to meet buyers’
need
 Providing price comparisons
 Organizing bids (bartering) and (auctions)
 Providing sellers’ profiles and product information
 Matching suppliers’ offerings with buyers’ requests
 Supporting negotiations between buyers and sellers
 Providing directories of sellers
 Maintaining security, privacy, and anonymity
2. Facilitating transactions. Facilitating transactions by optimizing the
purchasing and sales processes, including the following activities:
 Allowing for efficient trading between participants
 Providing for B2B auctions
 Providing the trading platform with mechanisms such as arranging
payment, insurance, order fulfilment, and security
 Providing escrow services
 Arranging for group (volume) purchasing and other discounts

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  Defining terms and other transaction values, including negotiation
 Inputting searchable information, including industry news
 Granting exchange access to users and identifying company users eligible
to use exchange
 Collecting transaction fees and providing the necessary software and its
integration with buyers and/or sellers systems, including EDI, XML,
etc.
 Providing analysis and statistics of products’ transactions
 Registering and qualifying buyers and suppliers
The types of services provided by an exchange depend on the nature of
the exchange. For example, the services provided by a stock exchange are
completely different from those provided by a steel or food exchange or by an
intellectual property or patent exchange. However, most exchanges provide
the services illustrated above. Note that, some B2B exchanges may have
individuals as either sellers or buyers, in addition to corporations. An example
is localdirt.com, an online marketplace that connects thousands of farmers with
many buyers, promoting efficient trading of local produce.

15.3.3 Ownership of B2B Exchanges

Exchanges, portals, and directories are usually owned by a third-party
operator. Both sellers and buyers prefer such an arrangement. Alternatively,
exchanges may be owned by a few very large sellers or buyers. This kind of
arrangement is referred to as a consortium.

15.3.4 Third-Party Independent Exchanges

Third-party exchanges are electronic intermediaries. The intermediary
not only presents catalogs, but also tries to match buyers and sellers and
encourages them to make trans- actions by providing electronic trading tools
and rooms.
Example 1: Intercontinental Exchange Group (ICE)

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 The Intercontinental Exchange (theice.com) is an Internet- based global
network of B2B exchanges (23 regulated exchanges and 6 central clearing
houses) that operates marketplaces that trade commodities contracts and over-
the-counter (OTC) energy and commodity features as well as related financial
products. While the company’s original focus was energy products, recent
acquisitions have expanded its activity into “soft” commodities (grains, sugar,
cotton, and coffee), foreign exchange, and equity index features. ICE is linked
electronically to all its customers (members). Trading is global and is done 24/
7. Currently, ICE is organized into three business lines:
• ICE Markets: Futures, options, and OTC markets. Energy futures are traded
via ICE Futures Europe; soft commodity futures/options are handled by ICE
Futures U.S.
• ICE Services: Electronic trade confirmations and education.
• ICE Data: Electronic delivery of market data, including real-time trades,
historical prices, and daily indices.
ICE offers market participants a range of trading and risk management services
globally:
1. Benchmark futures contracts
2. Risk management via a global central counterparty clearinghouse
3. Integrated access to global derivatives markets
4. Leading electronic trading platform
5. Transparency and regulation
6. Independence governance
Intercontinental Exchange owns several pioneering exchanges such as
ChemConnect.
Example 2: The Receivables Exchange
The Receivables Exchange is a website where businesses seeking
financing can sell their receivables to those who are willing to loan them money.

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(The receivables are used as collateral for the loans.) The process involves
auctions and is managed by The Receivables Exchange, LLC. (recx.com).
Example 3: SolarExchange.com
SolarExchange.com is a global solar marketplace facilitating B2B online
auctions for solar-related materials and finished goods. This exchange is a global
community where suppliers collaborate with buyers from anywhere in the world.
According to the company, their service portfolio “spans the solar supply chain,
delivering procurement management, risk management, online auctions, price
indexes, human resource sourcing and a knowledge base serving the solar
industry.”
The major benefits, according to the company, are:
 Connect with the global solar trading community
 Reduce costs by automating solar procurement and sale activities
 React rapidly to changing market conditions for greater competitive
advantage
 Extend your market reach through access to new trading partners and
suppliers
 Lower operating costs and improve margins
 Promote your brand to increase awareness and drive commerce activities
 Source global talent

15.3.5 Consortium Trading Exchanges (CTE)

A consortium trading exchange (CTE) is an exchange formed and
operated by a group of major companies in one industry. They can be suppliers,
buyers, or both. The major declared goal of CTEs (also called consortia) is to
provide services that support trading activities. These services include links to
the participants’ back-end processing systems as well as collaborative planning
and design services. Examples of consortia exchanges are avendra.com in the
hospitality industry and Ocean Connect oceanconnect.com in the shipping

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industry. It must be noted that some consortia have hundreds of members in the
same industry.

15.3.6 Dynamic Pricing in B2B Exchanges

The market makers in both vertical and horizontal exchanges match
supply and demand in their exchanges, and this matching determine prices,
which are usually dynamic and are based on changes in supply and demand.
Dynamic pricing refers to the rapid movement of prices over time and possibly
across customers. Stock exchanges are a prime example of dynamic pricing.
Another good example of dynamic pricing occurs in auctions, where prices
vary all the time.
The typical process that results in dynamic pricing in most exchanges
includes the following steps:
1. A company posts a bid to buy a product or an offer to sell one.
2. An auction (forward or reverse) is activated.
3. Buyers and sellers can see the consecutive bids and offers but usually
do not see who is making them. Anonymity often is a key ingredient of
dynamic pricing (e.g., in stock markets).
4. Buyers and sellers interact with bids and offers in real time.
5. Sometimes buyers join together to obtain a volume discount price (group
purchasing).
6. A deal is struck when there is an exact match between a buyer and a
seller on price, volume, delivery date, and other variables, such as
location or quality.
7. The deal is finalized, and payment and delivery are arranged

15.3.7 Advantages, Limitations, and the Revenue Model of

Exchanges
Exchanges have several benefits, for buyers and sellers, including making
markets more efficient, providing opportunities for sellers and buyers to find

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new business partners, reducing the administrative costs of ordering MROs,
and expediting trading processes. They also facilitate global trade and create
communities of informed buyers and sellers.
Despite these benefits, beginning in 2000, exchanges started to collapse,
and both buyers and sellers realized that they faced the risks of exchange failure
or deterioration. The potential benefits and risks of B2B exchanges for buyers
and for sellers are summarized in Table below. As the table shows, the benefits
outnumber the risks.
For buyers For sellers
Potential One-stop shopping, huge New sales channel
gains Search and comparison shopping No physical store is needed
Volume discounts Reduced ordering errors
24/7 ordering from any location Sell 24/7
Make one order from several Community participation
suppliers
Huge, detailed information Reach new customers spending
only little cost
Access to new suppliers Promote the business via the
exchange
Status review and easy reordering An outlet for surplus inventory
Community participation Can go global more easily
Fast delivery Efficient inventory management
Less maverick buying Better partner relationship
management
Better partner relationship Loss of direct CRM and PRM
management
Potential Unknown vendors; may not be More price wars
risks reliable
Loss of customer service quality Competition for value-added
(inability to compare all services) services
Must pay transaction fees; possible
loss of customers to competitors

Table 15.3.7 : Advtanges for Buyers & Sellers

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15.3.8 Revenue Models
Exchanges, like all organizations, require revenue to survive. Therefore,
an exchange’s owners, whoever they are, must decide how they will earn
revenue. The potential sources of revenue for exchanges include transaction
fees, membership fees, service fees, advertising fees, and auction fees (paid by
the sellers and/or buyers). In addition, for a fee, exchanges offer software,
computer services, management consultation, and so forth.
The major sources of revenue are shown below:
 Sales. Companies generate revenue from selling products or services
on their websites. An example is when Net-a-Port er, Starbucks,
Amazon.com, or Godiva sells a product online.
 Transaction Fees. Commissions are based on the volume of transactions
made. For example, when a homeowner sells a house, he or she typically
pays a transaction fee to the broker. The higher the value of the sale, the
higher the total transaction fee. Alternatively, transaction fees can be
levied per transaction. With online stock trades, for example, there is
usually a fixed fee per trade, regardless of the volume.
 Subscription Fees. Customers pay a fixed amount, usually monthly, to
get some type of service. An example would be the fee you pay to an
Internet access provider (fixed monthly payments).
 Advertising Fees. Companies charge others for allowing them to place
a banner on their sites.
 Affiliate Fees. Companies receive commissions for referring customers
to certain websites. A good program is available at Amazon.com.
 Licensing Fees. Another revenue source is licensing fees. Licensing
fees can be assessed as an annual fee or a per usage fee. Microsoft
receives fees from each workstation that uses Windows NT, for example.
 Other Revenue Sources. Some companies allow people to play games
for a fee or to watch a sports competition in real time for a fee.

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15.4 B2B PORTALS AND DIRECTORIES
When an individual or a group want to start a company of a particular
product or service a big question comes first in the mind that whether this
product or service will work. Naturally question arises because large number
of products and services are available today and customers have a big choice to
choose. Changing the customer mind to switch to our product is big challenge.
The reason is simple how your product or service is best from the competitor
you have to prove. Deep researches must be made and the product or service
has to be launched in the market. But unless it is advertize to large group of
people, its quality features are highlighted, people would not come to know.
For this, funds are required to advertise. Apart from newspaper, television,
radio, b2b portals and directory are the best source to expand the information
of product worldwide today.

15.4.1 B2B Portals

B2B portals are digital solutions platforms that allow businesses to
interact with each other in a digital ecosystem. They facilitate the exchange of
services, products, and information, thereby enhancing the efficiency and
effectiveness of business operations. As digital channels, they can
 drive sales and B2B Commerce with transactions and automated
workflows
 improve communication and collaboration with interactive features and
functionality
 deliver modern and personalized experiences to increase customer loyalty
 create a centralized, secure space for knowledge management
 provide tools and automated processes to boost productivity
One of the most valuable aspects of a B2B portal is providing features,
functionality, and a secure space for the many actors around a business-to-
business model: managing relationships and interacting with suppliers, partners,
dealers, customers, and more. Because the B2B customer journey is complex,

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standard platforms or communication channels may fall short to your needs.
Types of B2B portals is already discussed in lesson 6.

15.4.2 B2B Directory

B2B Directory is a major tool available today to all kind of business
enterprises. Whether it is a small business unit or big firms, major business
enterprise today make use of online B2B portals. Such b2b marketplaces are
the cheapest medium through which business expansion is done. Large number
of people comes to know about different products and services available at a
time. B2B directories categorize the different products or services systematically
and make a list. Customer have to select the appropriate product and can further
contact the company through mail, phone call and carry out further transactions.
The significance of B2B directory is as below:
1. Marketing
Marketing of product could be easily done all across the globe. This
helps people to know about your product or service more easily. What
is the specialty of your product, how it is best from the competitor’s
product could be made understood to large people at a time. Innovation
is the big tool of marketing and how innovatively one market its product
on global b2b marketplace is a big challenge.
2. Product categorization.
B2B directories classify the products and services as per their categories.
For instance, jewellery, cosmetics and many more, also products as per
age are mentioned in the directory. At the click of particular product
from product catalogue, list comes and selection could be made. Various
trade offers are also posted by which more customers can contact.
3. Online buying and Selling.
Whether an individual want to purchase a car or sell furniture or anything
today, web directories help them more to sell or purchase. As today
businesses are more virtual, it is a best tool we can say to do any task.

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 Things which are not possible manually are possible online. Here
companies generate buying leads, selling leads, different trade leads.
Also bidding could be done for certain products.
4. Quick Access to Information
As time is most valuable, such directories save lots of time and money. Just at
a click to particular list, information could be easily accessed. Fast
business deals takes place. Say a manufacturer want to buy a particular
raw material. He can access the b2b directory and select appropriate
raw material and many more. Not only could this it could be looking for
a hotel at a particular location be also available through web directory.
5. Research and Analysis.
Researchers and analysts often use business directories to gather data
about specific industries or regions. This data can be useful for market
research, competitive analysis, and other business-related studies.
6. Verification and Legitimacy.
Consumers and other businesses can use directories to verify the
legitimacy and credibility of a particular business. Listings often include
details like the business’s registration, licenses, and contact information.
In short, all information may be related to sports, entertainment,
knowledge are all categorized on such directories. A B2B directory
enables you to generate more leads at no additional expenditure. These
directo ries, such as Yello w Pages, White pages o r membership
directories, can become an excellent source of sales leads. Thus, business
to business directories are major tool of information in this fast growing
world. One can compare its product and service with the competitor
and can make necessary changes to survive in competition.

15.5 B2B IN WEB 2.0 AND SOCIAL NETWORKING

Although a large number of companies conduct social networking
activities that target individual consumers (B2C), there also is increasing activity

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in the B2B arena. However, the potential in B2B is large, and new applications
are added daily. The opportunities of B2B social networking depends on the
companies’ goals and the perceived benefits and risks involved.

15.5.1 E-Communities in B2B

B2B applications may involve many participants: buyers and sellers,
service providers, industry associations, and others. In such cases, the B2B
market maker needs to provide com- munity services, such as chat rooms,
bulletin boards, and possibly personalized Web pages.
E-communities connect employees, partners, customers, and any
combination of the three. E-communities offer a powerful resource for e-
businesses to leverage online discussions and interactions in order to maximize
innovation and responsiveness. It is therefore beneficial to study the tools,
methods, and best practices of building and man- aging B2B e-communities.
Although the technological support of B2B e-communities is basically the same
as for any other online community, the nature of the community itself and the
information provided by the community are different.
B2B e-communities are mostly communities of transactions and, as such,
members’ major interests are trading and business-related information gathering.
Many of the communities are associated with vertical exchanges; therefore,
their needs may be specific. Communities also support partner-to-partner
collaboration and networking. However, it is common to find generic services
such as classified ads, job vacancies, announcements, industry news, and so
on. The newest variation of these communities is the business-oriented or
professional social network such as linkedin.com.
15.5.2 The Opportunities of Social Commerce in B2B
Companies that use B2B social networking may experience the following
advantages:
• Use the network to advertise to large audiences and create brand
awareness.

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 • Discover new business partners and sales prospects.
• Enhance their ability to learn about new technologies, competitors,
customers and the business environment.
• Generate sales leads via “contacts,” especially on linkedin.com and by
tweeting (twitter.com) or engaging on Facebook.
• Post questions and facilitate discussions on linkedin.com by searching
the “Help Center,” asking the community a question through the “Help
Forum,” or by using the posting module on your homepage to ask your
network a question. Post questions on the question and answer forums
on other social networks.
• Improve participation in industry association activi ties (including
lobbying).
• Create buzz about upcoming product releases.
• Drive traffic to their Facebook page and other social sites and engage
visitors there (e.g., provide games, prizes, competitions). Word of mouth
also may also increase traffic.
• Create social communities to encourage discussions among business
partners (e.g. customers and suppliers) about their products.
• Use social networks, such as facebook.com and linkedin.com to recruit
new talent.
More uses of B2B social networking are seen in enterprise social
networks, which are private social networks within enterprise.

15.5.3 The Use of Web 2.0 Tools in B2B

Many companies are using blogs, microblogs, wikis, RSS feeds, video
ads, podcasts, and other tools in B2B EC. For example, Eastern Mountain Sports
(ems.com) uses blogs (blog.emsoutdoors.com), RSS feeds, and wikis to
communicate and collaborate with their suppliers and distributors. Thousands
of other companies are using (or experimenting with) these tools.

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Example: Orabrush Inc.
Orabrush Inc. (orabrush.com) is a startup company that makes tongue
cleaners that reduce bad breath. The company created funny YouTube videos
targeting Walmart employees. In a short time, the company had over 160,000
subscrib ers on YouTube, and more than 39 million views. In addition, the
company advertised on Facebook at a cost of $28, result ing in 300,000 fans.
This publicity convinced some Walmart buyers to try the product, and Orabrush
landed a huge con- tract with Walmart.

15.5.4 B2B Games (Gamification)

Virtual games, or gamification, refer to virtual games designed to
support B2B training and decision-making. Players compete against each other
and make market predictions.

15.5.5 Virtual Trade Shows and Trade Fairs

Virtual trade shows and fairs are gaining popularity. They are primarily
B2B oriented.
Virtual trade shows are an application of virtual worlds. A virtual trade
show, also known as a virtual trade fair, is the online analogy of a physical
trade show. These are temporary or permanent showplaces where exhibitors
present their new products to potential customers. For a large number of screen
shots of virtual trade show, conduct a Google search for “Virtual Trade Show.”
Example: MarketPlace365
Market Place365 (marketplace365.com) is a vendo r t hat gives
companies tools to build virtual trade shows and attract traffic to the shows.
Social media can be used to support exhibits even in physical trade
shows

15.5.6 Social Networking in B2B

Businesses can use B2B social networking to improve knowledge
sharing, collaboration, and feedback. Furthermore, social networking sites may

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also prove beneficial in aiding troubleshooting and problem-solving efforts.
Companies (especially small ones) are using social networks and Yahoo!
Answers (answers.yahoo.com) and specialized groups within LinkedIn; for
example, for problem-solving. B2B participants need to look into social
networking as part of their overall EC strategy, otherwise they may miss an
opportunity to reach the B2B audience and differentiate themselves from the
competition.
By the end of 2013, social networking was playing a much more
important role in B2B. Both small and large businesses are using social networks
quite successfully to find and retain new business. Other applications include:
• Several companies globally use social networks for vari ous networking
functions.
• Some businesses have found new customers via social networks.
• Some companies include social networking activity to both acquire and
retain customers in the marketing budget.
The main uses of social networks are keeping in contact with business
contacts; meeting with special interest groups; learning useful business
intelligence; and organizing, man- aging, and connecting with customer groups.
Social media use among B2B marketers is already very high. However,
many do not calculate the return on investment for social media. In 2013, Twitter
and LinkedIn were the most-used social networks in B2B. By 2022, LinkedIn
and Facebook were at the top.

15.5.7 Using Twitter in B2B

Twitter is used extensively in B2C mainly as a communica tion tool for
customer service advertising campaigns, customer engagement platforms, CRM,
and market research. Similar uses are evidenced in B2B. The applications
include the monitoring of conversations for identifying business opportunities,
enabling small businesses to engage with potential customers, making contacts
with potential custom ers, and customers discovering potential suppliers.

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Examples of Other Activities of B2B Social Networks
The following are examples of some social network-oriented B2B
activities:
• Location-based services. These may provide opportunities for B2B.
• Corporate profiles on social networks. LinkedIn and Facebook include
substantial information on companies and their individual employees.
In fact, employee profiles can be part of a company’s brand. For example,
as early as 2014, IBM had over 300,000 employees registered on
LinkedIn; Microsoft had approximately 134,000 as of early 2014. In
addition, some sites feature company pro- files, with comments by
employees and customers.
The Future of B2B Social Networking
Marketing users are developing social media and search tools. Products
such as Google’s OpenSocial may increase interest in social networking.
Businesses must embrace social networking to better understand their
customers and business partners.

15.6 SUMMARY
B2B exchanges offer digital transaction services that heighten eBusiness
performance making it safer and more secure. The B2B market is composed of
websites were buyers and sellers come together vertically and horizontally to
communicate, bid, advertise, transact, and procure.B2B portals are digital
solutions platforms that allow businesses to interact with each other in a
digital ecosystem. They facilitate the exchange of services, products, and
information, thereby enhancing the efficiency and effectiveness of business
operations. The Business-to-Business (B2B) Directory is envisioned as a
database of payees. It will allow payers to find the information needed to make
payments to their payees electronically. B2B Directory is a major tool available
today to all kind of business enterprises. Whether it is a small business unit or
big firms, major business enterprise today make use of online b2b portals. Such

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b2b marketplaces are the cheapest medium through which business expansion
is done. Large number of people comes to know about different products and
services available at a time. B2b directories categorize the different products
or services systematically and make a list. Customer have to select the
appropriate product and can further contact the company through mail, phone
call and carry out further transactions. Businesses can use B2B social networking
to improve knowledge sharing, collaboration, and feedback. Furthermore, social
networking sites may also prove beneficial in aiding troubleshooting and
problem-solving efforts. Companies (especially small ones) are using social
networks and Yahoo! Answers (answers.yahoo.com) and specialized groups
within LinkedIn; for example, for problem-solving. B2B participants need to
look into social networking as part of their overall EC strategy, otherwise they
may miss an opportunity to reach the B2B audience and differentiate themselves
from the competition.

15.7 GLOSSARY
 Knowledge portals. These portals enable easy access to knowledge by
company employees and facilitate collaboration.
 Board portals. These portals support decision- making.
 Internet: It is a worldwide system of computer network through which
the users at any place can interact and make transaction.
 Spam The electronic equivalent of junk mail.
 Spam site Pages that trick search engines into offering biased search
results so that the ranking of certain pages is inflated.
 Search advertising Placing online ads on Web pages that show results
from querying a search engine.
 Search engine A computer program that can access data- bases of
Internet resources

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15.8 SELF-ASSESSMENT QUESTIONS
1. List some of the opportunities for corporations to use social networking
in B2B EC.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Discuss the strategies for B2B social networking.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Define e-communities in B2B.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. Describe some of the applications of B2B in social networks.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________

15.9 LESSON END EXERCISE

1. List some Web 2.0 social software for B2B applications.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. List the major functions of exchanges and the services they provide.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What is dynamic pricing? How does it work?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. Define B2B exchanges and list the various types of exchanges.
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
5. What are some of the benefits of social networking for B2B EC?
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

15.10 SUGGESTED READINGS

 E-Commerce – Cutting Edge of Business, Kamlesh K Bajaj, Debjani
Nag, Tata McGraw Hill, 1/e, 2003.
 Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction
to electronic commerce and social commerce. Springer.
 Global Electronic Commerce- Theory and Case Studies, J Christopher
Westland, Theodre H K Clark, University Press.
 E-Commerce – an Indian perspective, P T Joseph, Prentice Hall, 2/e,
2005.
 E-Commerce Concepts, Models, Strategies, C S V Moorthy, Himalaya
Publications.
 Electronic Commerce, Gari P Schneider, Thomson Course Technology,
4/e, 2004

*********

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Lesson No. 16 UNIT IV
INNOVATION ELECTRONIC COMMERCE SYSTEM
ELECTRONIC GOVERNMENT AND ITS KEY
COMPONENTS, E-GOVERNMENT, GOVERNMENT TO
CITIZENS; GOVERNMENT TO GOVERNMENT, GOVT TO
EMPLOYEE AND INTERNAL EFFICIENCY AND
EFFECTIVENESS

STRUCTURE
16.1 Introduction
16.2 Objectives
16.3 Concept and Scope of E-Government
16.4 Government-to-Citizen (G2C)
16.5 Government-to-Business (G2B)
16.6 Government-to-Government (G2G)
16.7 Government-to-Employee and Internal Efficiency and Effectiveness
16.8 Summary
16.9 Glossary
16.10 Self-Assessment Questions
16.11 Lesson End Exercise
16.12 Suggested Readings

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16.1 INTRODUCTION
Due to the rapid rise of the internet and digitization, Governments all
over the world are initiating steps to involve IT in all governmental processes.
This is the concept of e-government . This is to ensure that the Govt.
administration becomes a swifter and more transparent process. It also helps
saves huge costs. The term consists of the digital interactions between a citizen
and their government (C2G), between governments and other government
agencies (G2G), between government and citizens (G2C), between government
and employees (G2E), and between government and businesses/commerce’s
(G2B). E-government delivery models can be broken down into the following
categories: This interaction consists of citizens communicating with all levels
of government (city, state/province, national, and international), facilitating
citizen involvement in governance using information and communication
technology (ICT) (such as computers and websites) and business process re-
engineering (BPR).

16.2 OBECTIVES
After going through this lesson, you will be able to:
 understand the scope of E-government
 understand the key components of E-govt.
 explain the features of various E. govt components

16.3 CONCEPT AND SCOPE OF E-GOVERNMENT

In today’s digital age, the terms “e-government” and “e-governance”
are often used interchangeably, but they have distinct meanings and implications.
Both concepts revolve around the use of technology in the realm of governance,
but they differ in their scope and focus. E-government (short for electronic
government) is the use of technological communications devices, such as
computers and the Internet, to provide public services to citizens and other
persons in a country or region. E-government offers new opportunities for more
direct and convenient citizen access to government and for government provision

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of services directly to citizens. E-government is also known as e-gov, electronic
government, Internet governance, digital government, online government,
connected government. As of 2019, the OECD still uses the term digital
government, and distinguishes it from e-government in the recommendation
produced there for the Network on E-Government of the Public Governance
Committee. Several governments have started to use the term digital government
to a wide range of services involving contemporary technology, such as big
data, automation or predictive analytics. E-government refers to the use of
information technology in general, and e-commerce in particular, to improve
the delivery of government services and activities in the public sector, such as
providing citizens with more convenient access to information and services,
and providing effective delivery of government services to citizens and
businesses as well as improving the performance of government employees. It
also is an efficient and effective way for governments to interact with citizens,
businesses, and other entities and to improve governmental business transactions
(such as buying and selling goods and services), and to operate effectively
within the governments themselves.

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 Fig 1 : Types of e-governance

16.3.1 Advantages of E-government

 The e-government’s ultimate objective is offering enhanced portfolio
of public services in an efficient and cost-effective way to citizens.
 The e-government also could provide more transparency for the
government because it enables the public to be informed about what
government is working on and the policies which are enforced.
 The primary benefit would be replacing and optimizing the Paper Based
System while implementing electronic government. That could save lots

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 of time, money and also environment in return due to reducing paper
consumption.
 The implementation of e-go vernment could also promote bett er
communications between government and business sectors. For example
e-procurement as a subsidiary of e-government services could facilitate
communication between G2G and B2B that this will allow smaller
businesses to compete with bigger companies in public tenders. Hence
the benefit of e-government could be creating open and transparent
market and a stronger economy.

16.3.2 Disadvantages of e-government

E-go vernment is not all about advantages but it also has so me
disadvantages, too.
 The primary disadvantages of e-government is the absence of public
Internet access for all citizens, reliability of the published information
on the web by the governmental agencies, and also capabilities of
government and its agencies which can affect public opinions potentially.
 Higher surveillance and monitoring, once government implement e-
government, people will be compelled to communicate with it on a wider
scale electronically.
 As the government receives more and more information about its citizens,
this could possibly lead to a lack of privacy for civilians.
 Being t o o co st ly: Implementing, maint aining and o pt imizing e-
government is not cheap and requires to spend lots of money.
 Inaccessibility for all: e-government couldn’t be accessible by all
including those who are living in distant regions, or have low rates of
literacy and income on the poverty line.

16.4 GOVERNMENT-TO-CITIZEN (G2C)

The government-to-citizens (G2C) category includes all the interactions
between a government and its citizens that take place electronically. G2C can

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involve dozens of different initiatives. The basic idea is to enable citizens to
interact electronically with the government from anywhere and at any time.
G2C applications enable citizens to ask questions of government agencies and
receive answers, pay taxes, receive payments and documents, and schedule
services, such as employment interviews and medical appointments. For
example, in many U.S. states, residents can renew driver’s licenses, pay traffic
tickets, and make appointments for vehicle emission inspections and driving
tests all online. The major features of government websites are: information on
how to contact the government, public notices to citizens, links to other sites,
educational material, publications, statistics, legal notes, and databases. The
major areas of such G2C activities are social services, tourism and recreation,
public safety, research and education, downloadable forms, discovery of
government services, tax filing, information about public policy, and advice
about health and safety issues. G2C is now available on mobile/wireless devices
in many countries and local governments. Another area of G2C activity takes
place by solving citizens’ problems. The government (or a politician) can use
CRM-type software to assign inquiries and problem cases to appropriate staff
members (as shown on ict.govt.nz). Subsequently, workflow CRM software
can be used to track the progress of the problems’ resolution. It must be noted
that over 20 countries block some websites for political, social, or other reasons
(e.g., China, North Korea, Iran, Syria).
Two popular examples of G2C are:
a) Electronic Voting: Vo ting pro cesses may be subject to errors,
manipulation, and fraud. In many countries, there are attempts to “rig”
the votes; in others, the losers want a recount. Voting may result in
major political crises, as has happened in several countries. Fully
electronic voting systems have raised considerable controversy because
of a variety of relevant factors, such as the proprietary nature of the
software. Typical issues are the difficulties in selling the systems to
voters, complex auditing, and the lack of experience in some steps of
the process.

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 Fig 16.4 : Electronic Voting Process
b) Electronic Benefits Transfer: One e-government application that is
not new is the electronic benefits transfer (EBT). It has been available
since the early 1990s and is now in use in many countries. The U.S.
government transfers billions of dollars in benefits to many of its citizens
on a regular basis. Beginning in 1993, an attempt was made to deliver
benefits to recipients’ bank accounts. However, more than 20% of
payments go to citizens who do not have a bank account. To solve this
problem, the government initiated the use of smart cards. Benefit
recipients can load the money they receive onto the cards and use the
cards at auto- mated teller machines (ATMs), point-of-sale locations,
and grocery and other stores, just like other prepaid value cards. The
advantage is not only the reduction in processing costs but also the
reduction of fraud. With biometrics coming to smart cards and PCs,
officials expect a subst antial reduct io n in fraud. EBT has been
implemented in all states since 2004. For more information on EBT in

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 government, see fns.usda.gov/ebt/general-electronic-benefit-transfer-
ebt-information. In several developing countries (e.g., India, Brazil),
governments are using mobile payments to transfer benefits to citizens.

16.4.1 Government to Citizen G2C Initiatives

A. Computerisation of Land Records: The computerization of land
records is implemented by the department of land resources Government
of India in collaboration with the National Informatics Centre NIC and
it has following objectives:
 Ensuring on-demand availability of a computerized copy of ownership,
tenancy and crop and updated Records of Rights (RoR) to land owners
 Ensuring transparency, accuracy and speedy resolution of disputes.
 To realize easy and low-cost reproducibility of basic land records by
means of durable preservation of old records.
B. Bhumi Project: The Bhumi project was developed and undertaken by
the Karnataka state government with the aim to computerize all land
records in the state. Its important features are:
 Software was created to print land records at any time.
 Online updating of land record certificates for farmers.
 Biometric user authentication through fingerprints.
 The software is also used to generate soil reports, size of land holding
and type of crops, etc.
C. Gya ndoo t: Gyando o t is an int ernet -based g2c service po rt al
implemented in the Dhar district of Madhya Pradesh in January 2000.
 Gyandoot was used to link the government and citizens directly through
kiosks that provided access to a variety of government services to the
citizens such as registering a complaint, application submission for loans,
and issuance of certificates.
 Gyandoot was the pioneer of the idea of rural telecentres in India.

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D. Lokvani Project Uttar Pradesh: Lokvani project was launched in the
year 2004 with the objective to help the citizens to file their complaints
related to government services in an easy and efficient manner and to
seek the redressal of their grievances within 15 days of filing the
complaint. Other services offered under Lokvani are online land records,
employment opportunities, information about various government
schemes, issuance of various certificates, death/birth registration, etc.
E. FRIENDS Project Kerala: it is an important mission mode initiative
of the Kerala government. FRIENDS stands for Fast Reliable Instant
Efficient Network for Disbursement of Services.
 FRIENDS was launched in June 2000 in Thiruvananthapuram.
 FRIENDS provides a single window facility to citizens for purposes
such as paying taxes and other dues to the state government in a hassle-
free manner through the FRIENDS Janasevana Kendras located at district
headquarters.
F. e-M itra: e-Mit ra is any government plat form o f the Rajast han
government which was set up in 2004. The e-Mitra platform provides
more than 600 services across all districts of Rajasthan including
payment of bills, digitally signed certificates, banking, e-Commerce,
telemedicine, and many more.
G. e-Seva: e-Seva is an integrated service delivery gateway of the
Government of Andhra Pradesh designed with an aim to provide e-
Business and Government to Citizen g2c services. It is a popular
government initiative primarily used to pay utility bills. All services of
e-Seva are provided on an online platform by connecting the consumers
to the respective government departments and also providing them with
online information at the Point of Service delivery.

16.5 GOVERNMENT-TO-BUSINESS (G2B)

Governments seek to automate their interactions with businesses.
Although we call this category government- to-business (G2B), the relationship

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works two ways: government-to-business and business-to-government. Thus,
G2B refers to activities where the government sells products to businesses or
provides businesses with services and vice versa. Government-to-business
(G2B) is a relationship between businesses and government, where government
agencies of various levels provide services or information to a business entity
via government portals or with the help of other IT solutions. Such assistance
from the government bodies’ side aims to facilitate swift and smooth business
operations, as well as a fair and transparent environment to do business. In the
G2B model, the initiative comes from a government agency, and businesses
are the target audience. In fact, businesses play the role of customers in the e-
commerce model, and government agencies are, figuratively speaking, the
customer support service. In the globalized world, governments who succeeded
in digitalizing their services and creating the most comfortable conditions for
businesses and more fair market value will receive more foreign direct
investment.
The range of the G2B services is broad. In given figure below, you can
see just a few of them:

Fig 16.2 : G2B Types of e-service

Source : Turban et. al (2017)

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 Key G2B activities are e-procurement, group purchasing and the
auctioning of government surpluses.
a) Government E-Procurement: Governments buy large amounts of
MROs maintenance, repair, and operations and other materials directly
from suppliers. In many cases, RFQ (or tendering) systems are mandated
by law. For years, these RFQs were done manually and the systems are
now moving online. These systems utilize reverse (buy-side) auction
systems and the governments provide all the support for such tendering
systems. For additional information about such reverse auctions, see
GSA Auctions(gsaauctions.gov).gsa.gov/portal/content/100747?utm_
so u r ce=FAS & u t m_ med iu m=p r in t r ad io & u t m_ t er m=g saau c t io n
s&utm_campaign=shortcuts. In the United States, for example, the local
housing agencies of HUD (Housing and Urban Development), which
provides housing to low-income residents, are moving to e-procurement.
Example 1: Procurement at GSA, The U.S. General Services
Administration (gsa.gov) uses technologies such as demand aggregation
and reverse auctions to buy items for various units of the federal
government (see also governmentauctions.org and liquidation.com).
Example 2: The U.S. SBA, The Procurement Marketing and Access
Network of the Small Business Administration (sba.gov) has developed
a service called PRO-Net (pro-net.sba.gov). It is a searchable database
that contracting officers in various U.S. government units can use to
find products and services sold by small, disadvantaged businesses, or
businesses owned by women.
b) Group Purchasing: Many government agencies also utilize online group
purchasing related aspect is quantity discount, where suppliers post prices
that get lower as quantities of orders increase. A similar method occurs
when government buyers initiate group purchasing by posting product
requests that other buyers may review and then join the groups.
c) Forward and Reverse E-Auctions: Many governments auction

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 equipment surpluses or other goods, ranging from vehicles to foreclosed
real estate. These auctions are now moving to the Internet. Governments
can auction from a government website or they can use third- party
auct io n sit es such as ebay. co m, bid 4asset s. co m, o r
governmentauctions.org. The U.S. General Services Administration
(GSA) in the United States operates a property auction site online (see
gsaauctions.gov), where real- time auctions for surplus and seized goods
are conducted. Some of these auctions are restricted to dealers; others
are open to the public (see governmentauctions.org). More common is
the use of revere auctions for purchasing goods and services.

16.6 GOVERNMENT-TO-GOVERNMENT (G2G)

E-government also promotes collaboration and information exchange
between government agencies and departments. It aims to enhance inter-agency
coordination, data sharing, and the seamless delivery of services across various
government entities. The government-to-government (G2G) category consists
of EC activities between different units of governments, including those within
one governmental body. Many of these are aimed at improving the effectiveness
and the efficiency of government operations. There are several challenges
associated with G2G, including the need to ensure data security between
government agencies, the potential for duplication of effort and the need to
maintain interoperability between different government systems. In addition,
G2G can sometimes be seen as a way for governments to avoid accountability
to citizens, as it can make it more difficult for people to access information
about government activities. There are several benefits of G2G, including the
ability to improve the efficiency of government operations, the potential to
make government operations more transparent and the ability to provide citizens
with easier access to government services. Moreover, G2G can help build
trust and cooperation between different government agencies and might lead
to better outcomes for citizens.
Example of a successful G2G project is the Northeast Gang Information
System (NEGIS). NEGIS is a multi-jurisdictional database that tracks gang

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activity in the United States Northeast. Law enforcement agencies use the system
to exchange information on gang members, share intelligence and coordinate
investigations. NEGIS has been credited with helping to reduce gang violence
in the region.
Another example of G2G is the sharing of data on immigration between the
United States and Mexico. The two countries have set up a secure system for
exchanging information on immigration patterns and trends. This system has
helped both countries to better understand the flow of people across their shared
border and has led to improved cooperation on immigration policy.

16.6.1 Objectives for the implementation of G2G initiatives are

 Sup po rt ing and simplifying t he g o vernance pro cedure fo r t he
government.
 Making government administration more accountable and transparent.
 Reducing corruption in the government.
 Ensuring speedy administration of government services.
 Reducing government spending.

16.6.2 Need for Government to Government G2G Initiatives

In today’s digital world, the following are the most important needs to
shift to G2G:
 The ever-increasing amount of data with the governments.
 To reduce IT costs.
 To improve transparency.
 To ensure accountability in government departments.
 To speed up government functioning.
 To increase openness and make government functioning accessible to
the citizens.
 To be able to share data benefits easily with the citizens.

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  To increase the use of digital technology in government functioning.
 To effectively implement this Citizen Charter.

16.6.3 Importance of G2G Initiatives

G2G (Government-to-Government) initiatives play a crucial role in
India’s governance framework by facilitating collaboration, coordination, and
information sharing between different levels and branches of government. These
initiatives are important for several reasons:
 Policy Implementation: G2G initiatives help effectively implement
policies and programs across various government departments and levels.
 Streamlining Government Processes: They help develop and implement
standardized processes, digital platforms, and shared databases.
 Enhanced Service Delivery: They help integrate government services,
reduce paperwork, and enhance the overall citizen experience.
 Effective Resource Allocation: G2G initiatives facilitate better resource
allocation by enabling information sharing and collaboration between
different levels of government.
 Data Sharing and Analysis: It facilitates data and information sharing
between government departments.
 Collaborative Governance: G2G initiatives promote collaborative
governance by fost ering part nerships and collaboration between
government entities.
 Transparency and Accountability: These initiatives enhance transparency
in decisio n-making pro cesses and enable bett er monit oring and
evaluation of government programs and projects.
 Interoperability and Data Security: They promote the development of
co mmo n st andards, pro t o co ls, and secur e info rmat io n-sharing
mechanisms, which are crucial for effective collaboration and protection
of sensitive government data.

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  E-Governance and Digital Transformation: G2G initiatives are closely
linked to e-governance and digital transformation efforts.

16.6.4 Challenges Towards G2G Initiatives

Following are the challenges acting as hurdles in the implementation of
government-to-government initiatives:
 Data security issues.
 Vulnerability to Cyber Attacks.
 Maintaining interoperability among various government entities.
 Lack of knowledge or awareness.
 Poor Internet and digital infrastructure.
 Digital literacy.
 It can be used as an excuse to get rid of accountability.

16.7 GOVERNMENT-TO-EMPLOYEE AND INTERNAL EFFICIENCY

AND EFFECTIVENESS
Governments are introducing various EC initiatives internally. Two areas
are illustrated below:

16.7.1 Government-to-Employees (G2E)

Governments are just as interested, as private sector organizations are,
in providing services and information electronically to their employees.
Government-to-employees (G2E) applications refer to e-commerce activities
between the government and its employees. Such activities may be especially
useful in enabling efficient e-training of new employees, e-learning for
upgrading skills and communication and collaboration activities. Other typical
services are: e-payroll, e-human resources management, and e-recruiting. he
objective of G2E is agencies to be able to improve effectiveness and efficiency,
eliminating delays in processing and improving employee satisfaction and
retention. Internal efficiency and effectiveness, adopting commercial best

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practices in government operation in areas such as supply chain management,
financial management and kno wledge management . It is fo cused o n
encompassing the easy access and reach of government to their employees for
various services during or post service tenure Some of these are:

Fig 16.3 : G2C, G2G and G2B Initiative

All the models are inter-related and inter-linked with each other.
 e-Samarth: an Internet based GPF solution for Central Industrial
Security Force employees
e-Samarth, a web-based application, follows a very transparent approach
in providing a comprehensive resource of GPF-related information
through a website open to all account holders and accounting units. All
account holders will be able to get the information regarding their GPF
accounts directly from internet. The subscribers will be able to view the
current status of their request for GPF Withdrawal, Advances, Final
Payment, Deposit Linked Insurance Scheme (DLIS), and Transfer Out
and balances, etc. In e-Samarth application, a subscriber can view his/
her GPF details through a unique number only. It is therefore mandatory
to map all his/her existing account numbers through a Unique Key. It
has been decided that PAN (allotted by Income Tax Department) would
be treated as a Unique Key to map all the account numbers allotted to a
subscriber.

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  E-pension Himachal Pradesh – for retired personnel
E-Pension application is the result of major process re-engineering by
the Government of Himachal Pradesh, Department of Finance, Treasury
Accounts and Lotteries benefiting senior citizens. It involves complete
change in the pensio n disbursement syst em for HP Government
pensioners. The web interface enables the HP Government pensioners
to know the status and details of their monthly pension through Internet
where complete pension detail for the last 12 months is available. Pension
forms being submitted by the retiring Government servants were
modified in consultation with the AG-HP.
There were three systems of pension payment in the state:
 Payment by banks: In this system, the pensioners opened accounts
in bank branches of seven banks (SBI, SBoP, UCO, PNB, UBI, CBI,
BoI) authorized for pension payment. Pensioner’s pension accounts
were credited by the branches on 1st of every month on the basis of
entitlements authorized in the PPO. Pensioners were not required to
visit banks for getting pension. Calculation of entitlements was
responsibility of paying branch.
 Payment by banking treasuries: In banking treasuries separate bills
for each pensioner used to be prepared and passed by treasury. Passed
bills were then given to the pensioners who would then present these
bills at the bank branch attached to the treasury for getting payment.
 Payment by non-banking treasuries: In non-banking treasuries
separate bills for each pensioner used to be prepared and passed.
Cash was also disbursed to pensioners on the basis of passed bills
at the treasury.

16.7.2 Internal Efficiency and Effectiveness (IEE)

Governments have to improve the efficiency and effectiveness of their
o peratio ns in o rder to stay wit hin their budget s and avo id criticism.
Unfortunately, not all governments (or units within governments) are efficient

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or effective. Automation, including e-commerce, provides an opportunity to
significantly improve operations

16.8 SUMMARY
In conclusion, relationships of a business with government agencies
have a significant impact on the success of any company (and the economy, in
general). This is primarily determined by how professionally the work with
state bodies of various levels is organized and how well the processes are built
by the government bodies. Now we can see e-government taking shape in many
countries, and providing electronic services (aka e-services) to businesses has
become the new normal. However, there remains significant variation in the
extent to which local governments deliver such assistance and information to
companies. E-government primarily focuses on delivering government services
online as this concept play crucial role in modernizing governance and fostering
democratic practices in the digital era. In E-government G2B model of
interaction between government and business has been developing rapidly in
recent years, ensuring a wide use of digital technologies across the economies
and bringing benefits to everyone, from multinationals to small and medium-
sized businesses. And let’s consider that the state authorities borrowed this
model from e-commerce, so its development and implementation can be viewed
as s generous “return of debt” to the business community.

16.9 GLOSSARY
 G2C: It init iat ive is the relat ionship bet ween the Government
Administration and citizens.
 Procurement: It involves every activity involved in obtaining the goods
and services a company needs to support its daily operations.
 B2B: A type of commerce transaction that exists between businesses
 B2C: It is the model involving business and consumers over the internet
 Business License: These are permits issued by government agencies

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 that allow individuals or companies to conduct business within the
government’s geographical areas.
 E-Auctions: An e-Auction is a transaction between sellers and bidders
on goods or services online in an electronic marketplace.
 A(Accountable): Ensure that public service employees are held
accountable by creating efficient information management systems and
other performance monitoring tools.
 R(Responsive): Process streamlining speeds up the system’s response
time, making it more responsive.

16.10 SELF ASSESSMENT QUESTIONS

1. Explain key components of E-government. Explain their features.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Define G2C component of E-government.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Why was the Government to Government Initiatives framed?
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________

16.11 LESSON END EXERCISE

1. Write a note on G2C.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What is Scope of E-govt.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Give an example of G2B interactions.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

16.12 SUGGESTED READINGS

 Government To Government (G2G) - Objectives, Benefits & Examples,
IAS Preparation textbook.

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 G2B written by Maryana Kushnir from Snov.io https://snov.io
 Brown, A., J. Fishenden, and M. Thompson. Digitizing Government:
Underst anding and Implement ing New Digital Business Models
(Business in the Digital Economy). New York, NY: Palgrave Macmillan,
2014.
 Chan, C. M. L., R. Hackney, S. L. Pan, and T. C. Chou. “Managing e-
Go vernment Syst em I mplement at io n: A Reso urce Enact ment
Perspective.” European Journal of Information Systems, vol. 20, 2011.
 https://www.staffnews.in/2012/10/e-samartha-web-based-application-
gpf.html

*******

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Lesson No. 17 UNIT IV
INNOVATION ELECTRONIC COMMERCE SYSTEM
ELECTRONIC GOVERNMENT MANAGEMENT:
IMPLEMENTING OF E-GOVERNMENT,
TRANSPORTATION E-GOVERNMENT, E-GOVERNMENT
AND SOCIAL NETWORKING, M-GOVERNMENT

STRUCTURE
17.1 Introduction
17.2 Objectives
17.3 Implementing E-Government
17.4 Transformation to E-Government
17.5 E-Government and Social Networking
17.6 M-Government
17.7 Summary
17.8 Glossary
17.9 Self-Assessment Questions
17.10 Lesson End Exercise
17.11 Suggested Readings

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17.1 INTRODUCTION
Information and communication technologies (ICTs) are playing an
increasingly vital role in the daily lives of people, revolutionizing work and
leisure and changing the rules of doing business. In the realm of government,
ICT applications are promising to enhance the delivery of public goods and
services to citizens not only by improving the process and management of
government, but also by redefining the traditional concepts of citizenship and
democracy. The ICTs’ effect on societies are both far-reaching and uneven. On
the one hand, ICT is fuelling the transition from industrial-based economies to
knowledge-based societies. Ultimately, E-government aims to enhance access
to and delivery of government services to benefit citizens. More important, it
aims to help strengthen government’s drive toward effective governance and
increased transparency to better managing country’s social and economic
resources for development. Transformational Government that is encompasses
a new “virtual” business layer within government which allows an integrated,
government-wide, citizen-focused service to be presented to citizens across all
channels, but at no extra cost and without having to restructure government to
do so. In electronic government systems, government operations are supported
by web-based services. It involves the use of informatio n technology,
specifically the Internet, to facilitate the communication between the government
and its citizens. Government and its agents also have the opportunity to follow
citizens to monitor satisfaction with services they receive. Through ListServs,
RSS feeds, mobile messaging, micro-blogging services and blogs, government
and its agencies can share information to citizens who share common interests
and concerns. For example, it is often associated with a whole-of-government
viewpoint, which tries to foster cross-department collaboration and provide
one-stop-shop convenience in the delivery of services to citizens.

17.2 OBECTIVES
After going through this lesson, you will be able to:
 understand the concept of E-government implementation

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  find out advantages of E-government implementation
 explain what is transformation of e- government
 understand the relation between e-government and social networking
 understand meaning of M-government

17.3 IMPLEMENTING E-GOVERNMENT

The implementation of E-government facilitates citizen participation in
go vernance by increasing access channels to government. It broadens
opportunities for citizen participation, opening new channels of communication
between constituents and their representatives and bringing marginal groups
(i.e., women, physically challenged, indigenous peoples) into mainstream
participatory channels. However, as E-government initiatives have the potential
to democratize the delivery of basic services and “level” the effects of
development, these same initiatives can also further citizens distance from
government and even deepen existing disenfranchisement. Policy- makers, in
trying to achieve development goals through E-government, should consider
projects that would deliver the most benefits to the broadest number of people.
Like most other organizations, government entities want to become digital.
Therefore, one can find a large number of EC applications in government
organizations. For many practices and the government innovators network at
innovations and one of the major implementation inhibitors is the desire of
many governments to maintain control over the use and dissemination of data
and knowledge.

17.3.1 Advantages of E-government implementation

Advantages and benefits of E-government implementation are the same
for bo th developed and developing countries. However, E-government
applications have many benefits for citizens, business and government entities.
E-government applications allow people, businesses, and government sectors
to access to available government information 24 hours a day, 7 days a week,
which improves the quality of these services. Implementation of E- government

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can reduce cost and levels of organizational processes by streamlining and re-
organizing operating procedures. Moreover, use of E-government systems can
improve the performance of government agencies because they will be able to
deliver the public service effectively and efficiently for all customers. It has
great benefits regarding economizing and improving of governments’ service
operations, including efficiency, reduced transactional costs, increase the
transparency and increased services for citizens. E-government implementation
has many advantages such as:
 Improvement of efficiency of government agencies in data processing.
 Improvement of services through bett er underst anding of users’
requirements, thus aiming for seamless online services.
 Sharing information and ideas between all government agencies and
department to build one mega database.
 Assisting in reaching government’s economic policy objectives by
promoting productivity gains inherent in ICT and e-commerce.
 Improvement of transparency, accuracy and facilitating information
transfer between government and customers.
 Assisting in building trust between governments and citizens.
 Essential factor in good governance by using internet-based strategies
to involve citizens in the policy process, illustrating government
transparency and accountability.

17.3.2 Disadvantages of E-government implementation

In spite of some advantages gathered from successful E-government
implementation, there are also some disadvantages. Some of these disadvantages
are briefly discussed below and include lack of equality in public access to the
Internet, lack of trust and cyber-crime, hyper- surveillance, false sense of
transparency and accountability and costly infrastructure.
a) Lack of equality in public access to the Internet: There are users who
are illiterate (do not know how to read and write), who would need

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 assistance. An example would be the elderly (senior citizens). Generally,
senior citizens do not have much education and they would have to
approach a customer service officer for assistance. Bwalya et. al. echoes
the same sentiments that some of the disadvantages of E- government
implementation could be the likelihood of excluding citizens and
businesses that have no access to technology due to the digital divide
(e-exclusion).
b) Lack of trust and cyber-crime: Even though the level of confidence in
the security offered by government web sites are high, the public are
still concerned over security, fear of spam from providing email
addresses, and government retention of transaction or interaction history.
Similarly, despite the efforts of government agencies to ensure the safety
of citizen’s personal data, E-governance websites are still liable to attack
from hackers. Personal data can be exposed and there is less trust to
how the information is kept secure and whose hands it lands on. It could
be generally a lack of engagement due to the anticipated low levels of
trust by citizens of the E-government platforms.
c) Hyper surveillance: Even though developing countries attempt to
improve public services through E-government implementation, they
also turn to increase control over people through E-government.
Augmented contact between government and its citizens is bi- directional
(it goes both ways). Once E-government starts to develop and become
more sophisticated, citizens will be forced to interact electronically with
the government on a larger scale. This could potentially lead to a lack of
privacy for civilians as their government obtains more and more
information on them. There are very real concerns about turning over
much information to the government by the citizens or businesses. While
the government may see like a benevolent organization, it is possible
this may not be true in the future or that outside governments/or parties
could use this information to harm the citizens of this country and the
businesses.

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d) False sense of transparency and accountability: Those against E-
government argue that online governmental transparency is dubious
because the governments themselves maintain it. Information can be
added or removed from the public eye. To this day, very few organizations
monitor and provide accountability for these modifications. It is also
highlights sometimes that hidden agendas of government groups that
could influence and bias public opinions are among disadvantages of E-
government implementation.
e) Costly Infrastructure: An efficient E-government system requires all
citizens or at least the vast majority to have access to the Internet.
Therefore, Internet-enabled devices, hardware such as routers, and
connection infrastructure are essential to connect to government
websites. Additionally, public sector agencies need advanced servers
and security systems to cope with vast amounts of information and fire
walls for complex cyber threats. All these requirements constitute a costly
investment, far beyond the reach of less developed economies. It is
t ermed as t echno lo gical co st s. The co st s include infrast ruct ure
development, interoperability of the technologies, permanent availability
and preservation, education and training of operating and using the
technology, cost structures and benchmarking. The cost cannot only be
disadvantageous to the government, but also to the citizens and the
businesses who cannot afford.

17.3.3 Challenges of E-Government Implementation

There are several challenges and barriers that can delay progress of e-
government implementation. The variety and complexity of e-government
initiatives implies the existence of a wide range of challenges and barriers to
its implementation and management.
a) Technical Barriers: The implementation of e-government faces some
technological difficulties such as lack of shared standards and compatible
infrastructure among departments and agencies. Also, privacy and
security are critical barriers in implementation of e-government in citizen

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 concern. The guarantee by the government will not suffice unless
accompanied by technical solutions, transparency of procedures and
possibly independent auditing.
b) Organizational Barriers: The implementation of e-government is not
a pure t echnical issue o nly, but rather an organizational issue.
Organizational challenges include: Top management support, Resistance
to change to electronic ways, Collaboration and Lack of qualified
personnel and training.
c) Social Barriers: Social issues are mainly concerned with the usability
by a large variety of people. This implies that the interface must be
usable by all kinds of people within the government. Social obstacles
include many factors such as digital divide, culture, education and
income. In this area the first two factors will be illustrated.
 Digital Divide: The digital divide refers to the gap in opportunity
between those who have access to the Internet and those who do not.
Those who do not have access to the Internet will be unable to benefit
from e- government services. Thus, digital divide is “the gap between
those with access to computers and the internet and those without.”
Therefore not all people have the suitable access to computers and
Internet, whether due to a lack of income, necessary skills, or internet
access.
 Culture: The main barriers to the implementation of e- government are
not technical, but cultural implications of new technologies. Culture
was defined as a set of important assumptions, beliefs and values that
all members of a society share in common. Cultural differences and
individual behaviour patterns play a role in the acceptance and use of
new technology.
d) Financial Barriers: The lack of financial support is considered as
significant obstacle to the implementation of e-government in many
countries. It is necessary to ensure the availability of the existing and

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 expected budgetary resources in order to achieve the goals. The most
serious and significant barrier to the implementation of e-government
is a lack of money; e-government implementation is expensive. Since
every government budget is already overburdened with every possible
expense budget makers can fit into it, the suggestion to expend the
considerable sums that an excellent e-government will cost is a non-
starter, in budgetary terms, and in budgetary politics.

17.4 TRANSFORMATION TO E-GOVERNMENT

Digital transformation in government is the process of leveraging
technology to improve government operations and create a better overall
experience for citizens and businesses interacting with government offices.
The process aims to build a more transparent, efficient, and responsive public
sector that can satisfy citizens’ national and local requirements. Government
digital transformation can take many forms, including replacing outdated
systems or developing modern digital platforms. Both of these scenarios imply
the implementation of the latest technologies. The most prominent tech that
governments are using these days are:
 Hybrid cloud computing: This refers to one or more public and private
cloud services that function as separate but integrated entities, combining
the public cloud’s cost optimization, agility, and scalability with the
management and compliance of the private cloud.
 Data sharing: Many countries focus on providing access to public sector
data, including open government data, geo-data (e.g. maps), and
transportation data. Similarly, they also emphasize data sharing within
the public sector. In addition, countries are building on their open data
access policies and strategies to promote data access and sharing for AI.
Norway, for example, has established a national directory of data
supplied by different public agencies. The directory provides an overview
of the data that each agency possesses and also how it is shared across
government, as well as datasets that are made publicly available.

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  AI/ML technology: Artificial intelligence and machine learning promise
to make government services more agile, efficient, and user-friendly.
AI and ML can also help deliver personalized services to citizens. An
example can be found in Finland. Using the AuroraAI service model, a
network of different smart services and applications, organizations from
various sectors of society will provide resources for future service needs
and allow citizens to access high-quality, 24/7 digital services.

17.4.1 Benefits of digital transformation for government

The benefits of digital transformation in government include faster
decisio n-making wit h d at a- driven insight s, increased efficiency and
transparency, and a better experience for citizens. Let’s take a closer look at
each of them.
a) Faster decision-making with data-driven insights: Slow processes
and overreliance on manual work are often the underlying causes of
public sect o r inefficiency. By implement ing mo d ern so ft ware,
governments can replace outdated manual processes with automated
workflows and allow employees t o focus on high-priority tasks.
Moreover, real-time access to documents and data means caseworkers
can use mobile devices to check and update information. This ensures
that data is not stored and forgotten about but is actively used to allow
better decision-making at all levels.
b) Increased efficiency and transparency: Automated workflows increase
transparency by automatically notifying citizens as each step of a
government process is completed. Putting data in publicly searchable
databases also saves government organizations time and money that
would have been spent on responding to open data requests. Document
management automat io n can also eliminat e repet it ive tasks and
streamline wo rkflo ws, reducing the need for manual dat a ent ry.
Furthermore, thanks to centralized documents all departments can work
together with the same information. As a result, data and information

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 silo s are eliminat ed, facilit at ing seamless int erdepart ment al
collaboration.
c) Better experience for citizens: With digital savviness on the rise, more
and more people now expect organizations in the public sector to deliver
digital services in a virtual setting. By digitizing services such as license
and permit renewals, government sectors improve both process efficiency
and their reputation among people using their services.
17.4.2 Challenges
a) Legislation and (in)compatibility with digitization: The dynamic
nature of digital technologies can affect and cut across multiple
governmental sectors. The regulatory approach is no longer solely
determined by the sectoral authority specializing in telecommunications:
data protection, consumer protection, and competition regulatory
authorities all have responsibilities. Meanwhile, the push to accelerate
digital transformation has also uncovered challenges involving the
legislation’s compatibility with digitization efforts. Managing this
complex web of relationships requires a holistic view of digital policy.
Denmark is paving the way. Specifically, the Agency for Digital
Government reviews proposed legislation against seven principles and
submits its findings to the Danish parliament before a bill is considered.
b) Organizational silos: Many governmental agencies operate in silos,
wit h little cross-departmental communicatio n and co llabo ration.
Organizational silos are a constant concern because they affect every
part of a successful digital transformation, from strategy to funding to
implementation. Successful digital transformation requires coordinated
efforts across diverse teams and agencies to deliver cross-silo digital
initiatives.
c) Inadequate funds and resources: Undertaking digital transformation
calls for significant financial and human resources. Insufficient budgets
can be a symptom of siloed strategies and decision-making, but they

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 can also result from the perception of technology expenditure as an
operat io nal rat her than a st rategic investment. Even so, digit al
transformation does not really end with the implementation of new
technology, and the problem is that governments do not always have a
clear enough understanding of the objectives of the transformation to
ensure that the right changes are made or the necessary funds are
invested.

17.4.3 Trends of digital transformation in government

The following are some of the top digital transformation trends affecting
various industries, including local, state, and federal government agencies.
1. Cybersecurity
Government organizations retain much more data than the private sector
and frequently do so on less secure platforms. Hence government
agencies need to be incredibly diligent in ramping up their security
efforts. Protecting your organization’s information in a digitally
connected world requires an understanding of your organization’s
immediate supply chain and also the extended supply chains of third-
party vendors, customers, and service providers. For example, the US
Depart ment o f Ho meland Securit y and it s co mpo nent s lead in
strengthening cybersecurity resilience across the nation and sectors. With
a DevOps approach, the agency hopes to close gaps between contracting
partners and agencies as they address cyber security liabilities in their
IT equipment. This allows them to identify potential risks early on and
take action before they become a problem.
2. Omnichannel interactions
A unified omnichannel experience paves the way for a seamless exchange
of information between citizens and public services. Especially in the
COVID-19 pandemic, the ability to unify experiences across various
digital channels is a valuable tool for governments when it comes to
tracking the needs of their citizens and handling critical emergencies.

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 Under circumstances like these, government agencies cannot focus on
just one target audience group. Instead, the target pool is made up of the
citizens, who of course come from diverse backgrounds. A Total
Experience (TX) approach becomes critical if governmental departments
want to effectively coordinate among themselves and pool critical data
to open up avenues for data-driven opportunities. Eliminating a ‘one-
size-fits-all’ approach in favor of an omnichannel experience tailored to
each citizen’s specific demands will help build citizens’ trust in public
services.
3. Data harnessing
The United Kingdom will emerge as a clear leader when using data to
fuel economic growth for example in programs such as the North Sea
Transition Authority (NSTA) notably with respect to the data sharing
they are doing with oil and gas companies. This is helping to transform
the UK offshore energy industry. The Department for Environment, Food
& Rural Affairs (DEFRA) is also making globally game-changing moves
in the agricultural sector in the matter of data, by using blockchain
technology to track animal movements and working with farmers to
optimize their crops through the use of data and drones. The department
believes that making this information resource more accessible will be
crucial to unlocking its strategic objective of providing stakeholders
with evidence and informing future decision-making. Better data will
result in better decisions.
4. Automation
The internal process for documenting and preparing for public meetings
often involves manually routing paper documents through weeks-long
review and approval processes. To this end, many municipal governments
are implementing digital technologies to automate the management and
tracking of government records. Napa County, California, for example,
is adopting software to automate the processing of county documents

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 related to financial disclosures for elected officials. As a result, they
can focus on higher-priority work by replacing what was previously
manual and time-consuming with a digital alternative.
5. Going “mobile”
The growth of mobile devices and apps presents new opportunities for
the public sector. According to PEW research, nearly every person
surveyed across 18 advanced economies reports owning a mobile phone.
A median of 85% say they own a smartphone, while 11% own a mobile
phone that is not a smartphone and only 3% do not own a phone. The
proliferation of mobile phones is thus narrowing the digital divide with
respect to access to online services. And whereas eGovernment enables
anytime access to public e-services, the mobile government provides
”anytime, anywhere” services from any location.

17.5 E-GOVERNMENT AND SOCIAL NETWORKING

By employing social media tools, new business models, and embracing
social networks and user participation, government agencies can raise the
effectiveness of their online activities to meet users’ needs at a reasonable cost.
Such initiatives are referred to as Government 2.0. Government agencies around
the world are now experimenting with social media tools as well as with their
own pages and presence on public social network sites. Governments are using
Web 2.0 tools mainly for collaboration, dissemination of information, e-learning,
and citizen engagement. The web 2.0 technologies refer to a collection of SM
through which individuals are actively participating in creating, organizing,
editing, combining, sharing, commenting are rating web content as well as
forming a social media through interacting and linking to each other. Using
SM for political discussion may enhance the relationship between citizens and
their governments and provide a platform for the process by which public
concerns, needs and values are incorporated into governmental and corporate
decision making It is evident that the public participation through electronic
media may considerably benefit from the increased usage of internet by citizens

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and other stakeholders. The social media can be directly used by the government
to provide the means for the empowerment of citizens to participate actively in
the decision-making process of government administration, which would
actively engage the citizens, it would generate the acceptance and ownership
of the governmental decisions and their results and would build trust among
citizens and government administration. For example the SM channels could
be used for grassroots mobilization and exchange of ideas and information, by
providing the information directly to the citizens. This will decrease the further
disengagement of citizens while it would offer the possibility for encouraging
more active participation in debate and decision-making. One of the greatest
challenges for governments in using the possibilities of SM is the change of
behavior of government structures and government officials. The government
needs to understand the benefits of SM and to enable its officials the use of SM
in their daily work. The governmental officials need to be prepared and trained
for working in this environment, as there is a big risk for the government in not
being involved in the use of the benefits of SM respectively in losing the
opportunities for real engagement, innovation, change and transparency. Social
media use in government model.

17.5.1 Social Media Interaction Framework in Government

Social media applications provide a fast and convenient way to enable social
interactions between government and citizens. Based on the missions of the
Open Government Directive, Mergel (2013a) proposed a framework for
interpreting these interactions in the public sector, shown as in below Figure.
This framework also helps delimitate key elements constituting the phenomenon
of social media use in government. Three types of entities involve in social
media use in government:

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 Fig 17.1 : Social Media Interaction framework in government
 Government agencies and employees, who use social media tools for
government information and service delivery.
 Social media services, which extend the social capabilities of government
organizations.
 Citizens and other stakeholders, who engage in government business
via the social media tools.
For government, social media helps to achieve the objectives of the
open government init iative, including t ransparency, part icipat io n, and
collaboration, to create a culture of openness or to serve for other purposes, for
example, as the anticorruption tools., including improvement of public sector
transparency, improvement of policymaking, improvement of public services,
and improvement of knowledge management and cross-agency cooperation.
Citizens’ perceptions and attitudes toward government should be improved if
some of the above-mentioned objectives have been achieved with the use of
social media in government. They should be the ultimate goals for any
government or the outcomes for evaluating social media use in government.
These outcomes include trust in government, accountability, integrity, perceived
transparency, satisfaction, and others.

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 Fig 17.2 : Social Media use government services
There are three levels of social interactions via the use of social media:
one-way interaction, two-way interaction, and networking of codesign. One-
way pull is currently the most used technique for government, and social media
is primarily used as the social channel for information and service delivery or
for opinion listening and monitoring. This one-directional way of viewing social
media leaves out large portions of the possibilities social media applications
provide that can help government understand deeper levels of engagement
(Mergel, 2013a). Two-way interactions involve higher level of citizens’
participation, including online dialogue between agencies and citizens, sub-
mission of ideas and content, and consultation with relevant stakeholders
(AGIMO, 2009). For example, Twitter was used to enable the two-way
interactions between local authorities and citizens in the 2011 riots in England.
The highest level of engagement however is collaboration among the social
network supported by social media, such as the jointly development, design,
and delivery of government services and crowd sourcing solutions and
innovations.
This framework depicts us a general model of the phenomenon of social
media use in government, in which social media services can help achieve

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government missions and finally improve citizens’ perceptions toward the
government. However, most of current studies contribute to this framework by
focusing on the government and social media sides of the phenomenon. In this
study, we try to enrich this frame-work by adding the citizens’ shared
understandings on social media use in government.

17.6 M-GOVERNMENT
Mobile Government (m-Government) is the use of mobile technologies
within the government administration to deliver public services to citizens and
firms. It is quickly emerging as the new frontier of service delivery, and
transforming government by making public services more accessible to citizens.
Governments in developing countries are increasingly making efforts to provide
more access to information and services for citizens, businesses, and civil
servants through wireless devices. It is the implementation of e-government
applicat io ns using wireless plat fo rms and mo bile devices, especially
smartphones. It is done mostly in G2C. M-government uses wireless Internet
infrastructure and devices. It is a value-added service, because it enables
governments to reach a larger number of citizens (e.g., via smartphone or
Twitter) and it can be more cost-effective than wireline-based EC platforms. It
is very useful in disasters (e.g., emergency notifications), is fast (e.g., in
conducting surveys and polls), and it is convenient for citizens as well. In
addition, governments employ large numbers of mobile workers who are
supported by wireless devices.
At present, M-Government is offering services in the form of Short
Messaging Service (SMS), Multimedia Messaging Service (MMS) and mobile
payment application. The SMS service is getting popular day by day. This SMS
is an effective medium that provides citizens with low cost transaction and
ease of access to government agencies. It can be used anytime and anywhere as
a communication channel. With the features that are available in SMS, it
encourages the government to improve and extend the services to rural
communities by providing a simple and effective access to government

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information. The government can also increase its accountability by providing
cheaper and quick communication to individual citizens.

17.6.1 Benefits of M-Government

Mobile technology is significantly expanding governments capacity to
produce benefits and deliver outcomes for governments, citizens, businesses,
and to impact positively national overall economic growth. The most notable
progress will be in developing countries which have been historically limited
by poor or non-existent communications infrastructure that, in turn, have
constrained economic development and social improvements. The major benefits
of m-government are:
a) The mo st obvious benefit is t he increased sco pe o f delivery of
government information and services, both geographically and in terms
of the number of people served. Governments can reach a greater number
of citizens regardless of the country’s wired infrastructure or the citizens’
social status. This decreases the digital divide among countries and social
layers and benefits significantly to citizens and the government. It
provides citizens with an immediate access to certain government
information and services, on anywhere and anytime basis. It also allows
governments to send location and time sensitive information, such as
terrorism and severe weather alerts, to citizens quickly and directly.
b) M-government can increase efficiency and effectiveness of government
employees. With the help of mobile technology, government employees
can access the information needed in the real time manner and update
records on the spot. This not only reduces some burden of logistics, but
also facilitates them to make informed decisions and actions.
c) M-government opens up additional opportunities for citizen participation
in decision and rule-making, thus promoting democracy the easier
wireless internet access is at anytime and anywhere, and the cheaper
the cost of using mobile devices, the greater is the number of citizens to
express their points of view to government officials, law makers and

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 community representatives. Citizens can be more empowered to discuss
the issues of concern, make decisions about factors that affect their lives,
participate in formulating and implementing policies and take actions
to achieve the desired change. These advantages are especially important
in countries where ICT infrastructure is poor or even non-existent.
d) Better Access to Essential Services is also helpful because mobiles have
made access to health, education, agriculture and other services trouble-
free for the general public. In the same way, mobile phones are going
toward addressing serious health problems. Increased communication
can bring awareness about safe drinking water, birth control, maternal
health and malnutrition amongst many others.
e) Mobile technology enables Social Accountability as the governments
in developing countries are using mobile technology to promote the use
of SMS texts to enhance social accountability among the citizens. Mobile
Government can be a powerful tool, useful in extending access to existing
services, developing further innovative, inclusive services and increasing
citizen participation in all realms of the public sector. Mobiles can
dynamically foster civic engagement, facilitate transparent democracy,
reform the outdated educational systems and create advanced healthcare
infrastructure in developing countries. The use of mobile technology
can tackle the growing digital divide between low-income and high-
income countries.

17.6.7 Challenges of M-Government

Although m-government is very useful and important but there still exist
some obstacles to their wide diffusion that are discussed below:
a) Security and privacy
Security and privacy have been considered as main barriers to e-
government as these two issues are more of a problem for m-government
applications, while all info rmation o n t he internet is subject to
interception, wireless network signals are broadcast over the public

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 airwaves, making them more vulnerable to hacking and interception.
Also, as mobile devices are small and portable, they can be easily stolen
or lost, putting the data stored in them at constant risk of falling into
wro ng hands. Disclosing crit ical info rmation such as perso nal
information and tax information on wireless internet makes citizens more
concerned of privacy issues in m-government. In addition, location-based
information, along with other citizens’ personal information available
from traditional channels, poses greater potential for invasion of citizens’
privacy.
b) Accessibility
The wireless network, at its infancy right now, has limited coverage
area. As government agencies pursue plans to provide access to
government information and services via text to wireless access devices,
they should also facilitate the information to be more accessible for all
citizens via the web or other communication technologies. The current
speed of wireless web access is very slow and as a result not many
people use it. For example, in the USA, although 88% of cell phones
come with web-browsing capabilities, only 16.6% of these customers
used their web browsers to surf the internet (Sarker and Wells, 2003).
c) Usability
In spite of many advantages of mobility, mobile devices have a number
of inherent limitations such as:
 Small screens and small key pads
 limited computational power and memory
 short battery life
 complicated text input mechanisms
 higher risk of data storage and transaction errors
 lower display resolution

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  less surfing ability
 unfriendly user-interfaces
 limitations in graphical capabilities
For any m-government application to become a viable means of
government service, usability is a necessary condition, that is, m-government
applications can be reached easily with minimum effort if the device or website
is difficult to use, citizens will be reluctant to use m-government services, and
government employees’ productivity will decrease due to the time needed to
get the work done. For citizens who are 60 years or older, they are encountering
more usability barriers on m-government sites due to vision, cognition and
physical impairments that are associated with the normal aging process.
Therefore, special care must be taken in order to improve usability of m-
government websites for senior citizens.
d) Application Infrastructure
This issue is two-fold:
 e-government applications upon which m-government applications are
built
 different browser platforms for wired and wireless internet access.
M-government must be built on a sound e-government infrastructure,
that is, the backbone of digitalised government must be present to
leverage t he mo bile/wireless t echno lo gies fo r final delivery o f
government information and services. There are multiple platforms for
mobile/wireless applications ranging from Wireless Application Protocol
(WAP) and GSM to DoCoMo’s (Japan) I-Mode and the lack of standards
raise concerns about the interoperability.

17.7 SUMMARY
It is clear that implementation of E-government saves resources, effort
and money but it can also extensively increase service quality levels and reduce
time spent in government departments. In addition to effective planning and

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deployment of E-services, governments may consider enhancing their ICT
infrastructure and raise the level of human capital, including improvement of
the ICT literacy of citizens, to make use of the new technologies to realize the
full benefits of online and mobile services. This should go hand in hand with
capacity development of leadership in E-government and public servants as
facilitators of online public services. ICT performance will remain crucial not
only for developed countries for sustaining and enhancing their innovation
potential and long-term competitiveness, but also for middle- income and
developing countries in fostering structural transformations, increasing
efficiency as well as reducing the digital, economic, and social divides within
their territories and more advanced economies. Even today government agencies
are increasingly using social media to engage with citizens, share information
and deliver services more quickly and effectively than ever before. But as social
content, data and platforms become more diverse, agencies have a responsibility
to ensure these digital services are accessible to all citizens, including people
with disabilities.

17.8 GLOSSARY
 E-government: It is the use of technological communications devices,
such as computers and the Internet, to provide public services to citizens
and other persons in a country or region.
 Cybersecurity: Cybersecurity is the practice of protecting systems,
networks, and programs from digital attacks.
 Automation: It is the use of technology to perform tasks with reduced
human assistance.
 Hyper surveillance: Hyper surveillance is extends beyond the crime
control agents and police system as it has been documented in schools,
community organizations, and other places.
 Cybercrime: It is a type of crime involving a computer or a computer
network. The computer may have been used in committing the crime, or
it may be the target.

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  Social Barriers: Social barriers are related to the conditions in which
people are born, grow, live, learn, work and age or social determinants
of health that can contribute to decreased functioning among people
with disabilities.

17.9 SELF ASSESSMENT QUESTIONS

1. Define M-government. Explain its benefits.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. How social networking enhance E-government.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Describe various trends of digital transformation in E-government.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

17.10 LESSON END EXERCISE

1. Write a note on social networking.

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What is E-government transformation.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Define implementation of E-government.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

17.11 SUGGESTED READINGS

 P. Ngulube, The Nature and Accessibility of E-government in Sub
Saharan Africa. International Review of Information Ethics, (2007).
 E-government wikibooks URL: https://en.wikibooks.o rg/wiki/E-
government/
 M. Alshehri , S. Drew: Implementation of E-Government: Advantages
And Challenges
 B. Smith , E-government in Local Councils. Hunter’s Hill Council, 2002.

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 Bertot, J. C., Jaeger, P. T., & Hansen, H. (2012). The impact of polices
o n go vernment so cial media usag e: I ssues, challenges, and
recommendations. Government Information Quarterly.
 Social Representations of Social Media Use in Government by Baozhou
Lu.
 M-government: technologies, applications and challenges by Silvana
Trimi

*********

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Lesson No. 18 UNIT IV
ELECTRONIC LEARNING MANAGEMENT
e-LEARNING, CONCEPT, SOCIAL NETWORK AND E-
LEARNING IN VIRTUAL WORLD AND SECOND LIFE,
VIRTUAL INTERACTIVE SIMULATION, E-LEARNING
MANAGEMENT SYSTEM

STRUCTURE
18.1 Introduction
18.2 Objectives
18.3 Concept and Scope of E-Learning
18.4 Social networks and E-learning
18.5 Learning in virtual world and second life
18.6 Visual interactive simulation
18.7 E-learning management systems
18.8 Summary
18.9 Glossary
18.10 Self-Assessment Questions
18.11 Lesson End Exercise
18.12 Suggested Readings

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18.1 INTRODUCTION
A learning system based on formalised teaching but with the help of
electronic resources is known as E-learning. While teaching can be based in or
out of the classrooms, the use of computers and the Internet forms the major
component of E-learning. E-learning can also be termed as a network enabled
transfer of skills and knowledge, and the delivery of education is made to a
large number of recipients at the same or different times. Earlier, it was not
accepted wholeheartedly as it was assumed that this system lacked the human
element required in learning. The topic of e-learning is gaining much attention,
especially because that even first-rate universities such as MIT, Harvard, and
St anford in the United States and Oxfo rd in t he Unit ed Kingdom are
implementing it. For employers, it offers an affordable, time-efficient way to
train employees. In return, employees benefit from convenient training that
enhances their skills and knowledge. It’s also used by organizations to train
their partners and customers to increase adoption, retention, and ultimately,
revenue. The demand for eLearning solutions shows no signs of fading, with
the global market expected to reach $1 trillion by 2028. In this lesson, we will
take a closer look at what eLearning is, different eLearning types and tools,
and the benefits it offers in our organization. Elliott Maisie coined the term
“eLearning” in 1999, marking the first time the phrase was used professionally.
In the years since, eLearning’s reputation has gone from strength to strength.

18.2 OBECTIVES
After going through this lesson, you will be able to:
 understand the meaning of E-learning
 understand why social networks important for E-learning
 explain e-learning management systems features
 understand the concept of visual interaction simulation

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18.3 CONCEPT AND SCOPE OF E-LEARNING
E-Learning or electronic learning, is the delivery of learning and training
through digital resources. Although eLearning is based on formalized learning,
it is provided through electronic devices such as computers, tablets and even
cellular phones that are connected to the internet. This makes it easy for users
to learn anytime, anywhere, with few, if any, restrictions. Basically, eLearning
is training, learning, or education delivered online through a computer or any
other digital device. E-learning also is growing as a method for training and
knowledge creation in the business world and is becoming a major e-business
activity. Figure given below shows the forces that are driving the transition
from traditional education to online learning.

Fig 18.1 : Devices of e-learning

There are several definitions of e-learning, A working definition of e-
learning is the use of online delivery of educational materials and methods,

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using information technologies, for the purposes of learning, teaching, training,
or gaining knowledge at any time, and at many different locations. E-learning
is broader than the term online learning, which generally refers exclusively to
Web-based learning. E-learning includes m-learning (or mobile learning) that
is used when the material is delivered wirelessly to smart phones, tablets, or
other mobile devices. It is also synonymous with computer-based instruction,
computer-based training, online education, and other terms. It appears in a
variety of electronically supported learning and teaching activities, ranging
from virtual classrooms to mobile conferences. E-learning includes a variety
of methods of computer-facilitated learning ranging from self-study with DVDs
to online degrees offered by universities. E-learning may also include the use
of Web-based teaching materials and hypermedia, multimedia CD-ROMs,
learning and teaching portals, discussion boards, collaborative soft- ware, e-
mail, blogs, wikis, chat rooms, computer-aided assessments, educational
animation, simulations, games, learning management software, and more. But
there are so many factors that have facilitated eLearning in becoming the most
popular way to deliver training today. Some of these factors include:
 The Internet: Prior to the rise of the internet, many relied on printed
manuals, CD-ROMS and other restrictive methods for learning and
training. The rise of the internet allowed organizations to abandon one-
dimensional practices and utilize the flexibility of eLearning.
 Development of Multimedia: As eLearning progressed, the ability to
integrate elements such as images, videos, audio and graphics proved
to be a more reliable way of keeping learners engaged compared to
traditional learning.
 Affordable Digital Devices: Considering the first IBM computer cost
the equivalent of almost $5000 today, it’s understandable that eLearning
popularity rose as digital devices became more affordable. Mobile
learning also hugely facilitated the growth of eLearning.
 Well-Built Learning Management Systems: LMS’s have become more
sophisticated, moving from locally installed to cloud-based systems,

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 with organizations increasingly applying them to execute many forms
of training. There are many things to consider when choosing an LMS;
at a minimum ensure it has the functionality and support you need to
meet your objectives and those of your learners.

18.3.1 Benefits of E-Learning

In the Internet age, skills and knowledge need to be continually updated
and refreshed to keep up with today’s fast-paced business and technological
changes. This means that more people need to learn and frequently do so in
non-traditional ways. E-learning supports such learning due to the following
capabilities and benefits.
 Education: Students can learn at home and keep their regular jobs while
in school. Busy homemakers can earn degrees.
 Learning and training time reduction: E-learning can expedite training
time by up to 50%.
 Cost reduction: The cost of providing a learning experience can be
reduced by 50–70% when class- room lectures are replaced by e-learning
sessions. This includes reduced faculty cost, no classrooms, and less or
no travel time.
 Large number and diversity of learners: E-learning can provide
training to a large number of people from diverse cultural backgrounds
and educational levels, even though they are at different locations in
different time zones. Large companies such as Cisco Systems, Inc.
(cisco.com) provide online training courses to a large number of
employees, customers, and business partners.
 Innovative teaching: Ability to provide innovative teaching methods
such as special engagements, interaction with experts, interaction with
learners in other countries, and so forth.
 Measurement and assessment of progress: Ability to assess progress
in real time, find areas of difficulties, and design remedial work.

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  Self-paced and motivation learning: E-learning students usually are
self-paced and self-motivated. These characteristics may result in higher
content retention (25–60% higher than with traditional lecture-based
training).
 Richness and quality: E-learning enables the use of top instructors as
well as employing rich multimedia support. This may make learning
more enjoy- able. Difficult content can be made interesting and easy to
understand. Overall, the quality of learning may increase.
 Flexibility: E-learners are able to adjust the time, location, content, and
speed of learning according to their own personal schedules.
 Updated and consistent teaching material: It is almost impossible to
economically update the information in textbooks more frequently than
every 2 or 3 years; e-learning can offer real-time access to the most
updated knowledge. Delivery of e-learning may be more consistent than
that of material presented in traditional classroom learning, because
variations among teachers and teaching materials are minimized.
 Ability to learn from mobile devices: This helps learning in any place
and at any time as well as providing support to learners by teachers and
peers.
 Expert knowledge: In contrast with the knowledge of a single instructor
in the classroom, e-learning may include the knowledge of several experts,
each of whom prepares a teaching module in his or her area of expertise.
 Fear-free environment: E-learning can facilitate learning for students
who may not wish to join a face-to-face group discussion to interact
with peers or teachers.

18.3.2 Drawbacks and Challenges of E-Learning

Despite the numerous benefits for both the learners and the teaching
organizations, e-learning does have some draw- backs, such as the following:
 Need for instructor retraining: Some instructors do not have the

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 knowledge to teach by electronic means and may require training, which
costs money.
 Equipment needs and support services: Additional funds are needed
(by the teaching institute) to purchase e-learning systems that supplement
traditional ones. These are needed for e-learning creation, use, and
maintenance.
 Lack of face-to-face interaction and campus life- style: Many feel
that the intellectual stimulation that takes place through interaction in a
classroom with “live” instructors and peers cannot fully be replicated
with e-learning.
 Assessments and examinations: In the higher education environment,
one criticism is that professors may not be able to adequately assess
student work completed through e-learning. There is no way of knowing,
for example, who actually completed the assignments o r exams.
(Nevertheless, the same is true for any homework done outside the
classroom).
 Maintenance and updating: Although e-learning materials are easier
to update than traditionally published materials, there are practical
difficulties (e.g., cost, instructors’ time) in keeping e-learning materials
current. The content of e-learning material can be difficult to maintain
due to the lack of ownership of, and accountability for, website material.
The developers of online content might not be those who update it.
 Need for reliable wireline and wireless communication networks and
devices: Privacy needs to be protected as well as systems need to be
secured so that the communication between two must be fisible.
 Protection of intellectual property: It is difficult and expensive to
control the transmission of copyrighted works downloaded from the e-
learning platform.

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  Student retention: Without some human feedback and intervention, it
may be difficult to keep certain students engaged and energetic.

18.4 SOCIAL NETWORKS AND E-LEARNING

Since its inception, social networking has been interrelated with learning.
A new term, social learning, also known as e-learning 2.0, has been coined to
describe the learning, training, and knowledge sharing in social networks and/
or facilitated with social software tools. Social environments facilitate high-
tech-based training, making it possible for learners to share their experiences
with others. Thus, several companies already are using social media for training
and development purposes (e.g., see advancinginsights.com). Social learning
is based on social learning theory. Some students use Facebook, LinkedIn,
Pinterest, Twitter, and so forth to connect with other pupils.
For example, learners can study together, discuss topics or brainstorm online.
Unfortunately, the distractions found on some networks can make it difficult to
focus on learning. Some companies use social media to engage employees in
group learning via knowledge sharing.
Several social networks (or communities) are dedicated to learning and
training (e.g., see elearning.co.uk). An example of a social network for learning
is Learn Hub (learnhub.com), which is dedicated to international education.
Some scholars believe that the future of e-learning is social learning. Social
networking technology possesses the following capabilities that may facilitate
learning:
 Connect learners in a learning project. It enables people to connect in
real time for discussion, collaboration, and problem-solving.
 Make “social” part of the company’s learning strategy.
 Build the know-how of experts.
 Enable learners to engage. Generation X and Millennial workers use
Web 2.0 tools extensively for interacting among themselves and with
others. Organizations can reach out to this group and use social networks

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 for training.
 Use platforms such as Pinterest to develop creativity in design and to
use images to sharpen some learning skills.
 Provide relevant content prior to off-line meetings for voting, or
requesting supplements. This can enrich and facilitate classroom delivery.
 Link learners to relevant resources and let them rate and share opinions.
 Quickly identify the training needs and implementation issues of
individuals and groups.
 Have learners provide social support to each other.
 Improve and expedite learning-related communication (e.g., via Twitter).

18.4.1 Importance of Social Networks in E-learning

Almost every modern-day learner has a digital presence today. These
learners are highly familiar with the ins and outs of social media platforms and
are habitual of consuming information online. So, embracing social media and
incorporating its features into the teaching and learning processes can have a
positive impact on the learners. Instructors can provide video lectures, and
quizzes, tag learners, and have them participate in group discussions. In this
way, learners will not only gain knowledge in an interesting and engaging way
but will also get the flexibility to learn from wherever they want and whenever
they want.
The following are some of the top reasons why using social media in
eLearning has become extremely important today:
a) It Gives Learners A Sense Of Community And Belongingness
Being connected with like-minded people gives a sense of comfort and
belongingness. Creating a Facebook group creates a community to help
learners get to know their peers and share their thoughts and ideas. It
also helps the course facilitator better understand the needs and answer
any questions learners may have about the course. The presence of online

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 communities and study groups provide essential support to the learners
and ensure that they feel encouraged and motivated. In the absence of
face-to-face contact with their peers, it is easy for learners to fall behind
or feel a lack of enthusiasm. Social media effectively deals with all
these situations by making it possible for learners to have a strong
network of support and maintain a healthy interaction with others.
b) Social Media Is The Fastest Way To Contact People Or Share Crucial
Information
Another important reason to leverage social media in eLearning is that
it provides you with a quick and easy way to contact people. For
example, if you want to share an update regarding the upcoming lesson,
you can create a Facebook post or Instagram story about it. And just
like that, it will reach all your learners within minutes. In addition,
Facebook live and Instagram live allow instructors to share content,
educational videos, and material with learners in real-time, as well as
respond to questions instantly.
c) It Can Help You Make Your Approach More Student-Centric
Interactions on social media are flexible. Learners can ask questions
and present challenges to both the instructors and other learners who
take the course. Therefore, anyone who knows the answer can jump in
and answer the question or present a unique idea. In some instances,
having the ability to interact in a Facebook group is even better than
having a live instructor. In the classroom setting, there is only a certain
amount of time allotted for answering questions but asking questions
on Facebook offers more flexibility and does not have such time limits.
d) Social Media Is Easily Accessible
Another reason why social media can be beneficial for eLearning is the
fact that it is easily accessible on smartphones, PCs, and tablets, thereby
making it convenient for instructors to respond to the queries of the
learners at their convenience and without needing to log into a specific

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 platform. All they need to do is set up notifications! This is also true for
learners as they can see the comments of everyone else taking the course
and glean important insights from other people’s ideas. This improves
the overall interaction between learners and instructors.

18.5 LEARNING IN VIRTUAL WORLD AND SECOND LIFE

A virtual world is a computer-simulated representation of a world with
specific spatial and physical characteristics, and users of virtual worlds interact
with each other via representations of themselves called “avatars.” Modern
virtual worlds differ from traditional video games in their objective. Traditional
video games generally have some ultimate game objective, for example
defeating all the level bosses, saving the kingdom, or just winning the game.
Playing in a virtual world, by contrast, is an end in itself. The objective of
virtual worlds is to continue participating in the world, interact with other users,
and gaining more status or experience within the virtual world. Virtual worlds
solve many of the challenges faced by educational institutions. Today, hundreds
of colleges, universities, and other learning organizations from nearly every
country are either augmenting their current curriculum with a virtual learning
component or they are holding classes and entire programs exclusively in
immersive learning environments in Second Life.
Second Life’s persistent virtual environments enable students to work
together synchronously and then return, individually or as a team. The learning
space is always available, not just for geographically dispersed groups but even
those who meet regularly in the physical world. This is particularly useful when
students require more flexible schedules or need to work asynchronously on
the same project. Second Life amplifies learning beyond capabilities afforded
by teleconference calls and web presentation tools—but it also creates
opportunit ies fo r field trips inside virt ual organs, machines and other
environments that go far beyond the walls of traditional learning spaces. Training
simulations are also incredibly powerful in Second Life because they simulate
complex, processes in the physical world and avatars can take on different

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roles to enhance learning. Already, many prominent educational institutions
and organizations understand it and are creating virtual learning environments
to deliver a wide range of courses, field trips, and events including:
 Distance and Flexible Education
 Presentations and Discussions
 Historical Recreations
 Simulations and Role Playing
 Multimedia and Games Design
 Language Learning Practice
18.5.1 Benefits of Learning in Virtual World and Second Life
A. Hundreds of Learning Institutions are in Second Life Today
There is a reason why over 700 educational institutions from all over
the world are in Second Life today the advantages of learning in
immersive 3D environments are many. Learning in Second Life can cut
your costs and help you reach and retain more students. Dozens of highly
successful projects are proving that Second Life can be as effective as
traditional classrooms and for many students it’s an even more effective
learning environment. In a few words, Second Life as an educational
platform is engaging and it works. And it’s eco-friendly.
B. Engaging Learning Environment
Engagement is the “holy grail” when it comes to distance learning. If a
student is not in a classroom, how can the experience keep the students
attention and encourage participation? Second Life was designed as a
social networking platform to encourage social interaction. It enables
deeply immersive, meaningful, and memorable experiences. There are
many distance learning technologies, but we believe that Second Life is
the best because it actually feels like you are “there” when you are in
world, and it caters too many kinds of learners visual, auditory, and
experiential. Second Life also demands participation; if you walk away

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 from your computer, or discontinue using your keyboard or mouse for a
few minutes, your avatar slumps forward asleep and everyone else in
the virtual space can visibly see that you are not paying attention.
Students do not disengage or get bored when there are so many interesting
ways to explore and learn in Second Life it is a powerful simulation,
modelling, and data visualization tool.
C. Rich Inworld Learning Experiences Available Today

Figure 18.2 : Second-life VR platform

Second Life is the home to thousands of educational “virtual field trip”
destinations and resources. Inworld museums include the Smithsonian’s
Latino Virtual Museum, the Dresden Museum, the San Jose Tech
Museum of Innovation, and the U.S. Holocaust Museum. After visiting
the museums, you can blast off into space at the NASA Islands or explore

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 the Egyptian pyramids. Then, you can bring your class to one of hundreds
of libraries or government institutions in Second Life. And, if you teach
a language class, you, and your students, can visit one of hundreds of
islands where there are native speakers for an immersive language lesson.
The possibilities are endless.
D. Collaborate with Other Learning Organizations
We all know that learning today has expanded far beyond books and
lesso ns. In o ur glo bal so ciet y, lear ning inclu des creat ing new
understanding, respect, and appreciation for different people and cultures.
A powerful way to create bridges is to collaborate with one of the 700+
educat io nal institutions globally in Second Life. Many learning
institutions have created joint learning programs in Second Life with
great success. Using the various collaboration tools in Second Life, and
the Second Life Education email list, it is easy to connect with other
teachers and professors in Second Life who are open to collaborating,
sharing, and creating joint learning programs. Because Second Life
accommodates synchronous and asynchronous learning, time zones start
to melt away as do differences between people.
E. Reach More Students
You might be surprised to learn that many of your students are already
in Second Life and that your new Second Life program is simply a smart
way to be where your students already are. Whether a student is learning
from home, work, school, or a cafe, they can all still reach Second Life
with an Internet connection and join class. With Avaline, you can also
phone into classes or meetings. Additionally, Second Life is an ideal
learning environment for many disabled students as it provides greater
accessibility than traditional campuses, as proven by the Second Life
community Virtual Ability.
F. Learn “Green”
Taking care of the environment by reducing our carbon footprint is no

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 longer a nice idea it is mandate for businesses, governments, and
educational institutions from around the world. By reducing the need
for travel and meeting in a virtual classroom, schools can save millions
of carbon pounds from entering our environment. Although virtual
worlds require energy to power computers and servers the environmental
impact is minimal by comparison.

18.6 VISUAL INTERACTIVE SIMULATION

An effective technology for e-training and e-learning is visual interactive
simulation (VIS), which uses computer graphic displays to present the impact
of evaluating alternative solutions to problems. It differs from regular graphics
in that the user can manipulate the decision-making process and see the results
of the interventions. Some learners respond better to graphic displays, especially
when they are interactive. For example, VIS was used to examine the operations
of a physician clinic environment within a physician network in an effort to
provide high-quality medical care. The simulation system identified the most
important input factors that significantly affected performance. These inputs,
when properly managed, led to lower costs and a higher level of medical care.
VIS systems provide the following major potential benefits:
 Shorten learning time.
 Aid in teaching how to operate complex equipment.
 Enable self-paced learning, any place, anytime.
 Aid in memorization.
 Lower overall training costs.
 Record an individual’s learning progress and improve on it.
 Visual interactive simulation is closely related to virtual reality

18.7 E-LEARNING MANAGEMENT SYSTEMS

Before jumping into anything it is important to clarify the term e-

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Learning management system. So, Lets break down the terms to understand
their core components.
 e-Learning: Learning does not mean any depository for training. An e-
learning management system is like a one-stop-shop for all things related
to L&D in your organization.
 Management: It signifies that it is more than a platform that provides
access to online learning courses and other study materials. It is an
efficient system that entitles you to control the entire learning and
development process.
 System: Computing some of the work and eliminating human error to a
certain extent, an e-Learning management system helps make the
learning and development more systematic.
To put it simply, an e-learning management system sanctions you to
effectively generate and roll out L&D in your organization. The e-Learning
management system is an application that is used to manage, track, and report
learning programs. At present, a Learning management system (LMS) has spread
its roots in almost all the major industries, like schools, educational institutions,
the healthcare industry, the corporate industry, etc. It is functional in recognizing
the communication gap between the tutor and the learner by regularly checking
each individual’s progress on the basis of regular quizzes and assessments. E-
learning makes the whole learning process more fun with the help of video
tutorials, stories, and gamification. Learning management platforms have
successfully changed the learning perspectives of each and every individual all
over the globe. It has offered a broad scope for the consumers to select and
learn in whatever field they are interested in because all the data can now be
exchanged across the globe. A learning management system (LMS) (also known
as a course management system) consists of software applications for managing
e-training and e-learning programs including content, scheduling, delivery tips,
and so forth. Capterra Inc. Learning Management System Software (cap-
terra.com/learning-management-system-software) and similar systems exhibit
these capabilities:

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  Provide effective student–instructor interactions.
 Centralize and automate program administration.
 Enable the use of self-service and self-guided e-learning services.
 Create and rapidly deliver learning content modules.
 Provide a single point of access to all e-learning online materials.
 Help manage compliance requirements.
 Consolidate training initiatives on a scalable Web based platform.
 Support the portability of systems.
 Increase the efficiency and effectiveness of e-learning.
 Personalize content and enable knowledge reuse.
Many companies (e.g., Saba Software, Inc., SumTotal Systems,) provide
methodologies, software, hardware, and consultation about e-learning and its
management. Note that it is possible to control what the students are doing
when they self-study.
For example, according to Streitfeld (2013), teachers can find out when students
are skipping pages, not bothering to take notes, or failing to highlight significant
passages. One of the most effective tools for learning management is Blackboard
Inc. (blackboard.com; now combined with WebCT). A brief example for better
understanding are given below:
Example 1: Blackboard
Blackboard Inc. (blackboard.com) is the world’s largest supplier of
course management system software for educational institutions. How do
Blackboard products work? A textbook publisher places a book’s content,
teaching notes, quizzes, and other materials on a Blackboard in a standardized
format. Instructors can access modules and transfer them on to their university’s
Blackboard sites, which can be accessed by their students. A professor can
easily incorporate a book’s content into Blackboard’s software. As of 2009,
Blackboard also delivers corporate and government employee training programs

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worldwide which increases productivity and reduces costs.
Example 2: Moodle
An alternative to Blackboard is a mostly free open source system called
Moodle.

Fig 18.3 : Benefit of e-learning management software

18.7.1 Benefits of E-Learning Management Software

You can easily find many connections between learning management
systems in all industries. Any users who wish to adopt online learning must use
a Learning management platform. Even students can select learning programs
from various learning management platforms, and experts can offer learning
courses. It offers freedom to its users to learn any topic they want easily from
anywhere at a comparatively low price. So, given below are points that help to
understand what are the benefits to use e-learning management software:
a) Arrange And Safely Save Big Data: The e-learning management
platform allows you to collect all the important information in one
location. This feature also makes it easy to sustain and update all your

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 learning materials. Plus, most e-Learning management systems provide
advanced coded messages so that you don’t have to worry about data
getting into the wrong hands.
b) Monitor Learner Growth And Performance: Virtually, all e-learning
platforms offer in-built reporting and analytics. Thus, you will be able
to track several features of your online learning program. If the e-
Learning management system has a scarcity of reporting capabilities,
you can easily purchase plug-ins to improve its functionality. You can
easily track anything from learner engagement to e-learning test results.
This also implies that you can recognize patterns and trends in the form
of graphs and charts.
c) Upgraded Resource Allotment: There are several ways where a learning
management platform can help out in allotting online training resources
more productively. In addition to this, you can identify features of your
online training program that are not meeting your expectations. Low
learning engagement is an indication that you should re-examine an
online training activity. Plus, a learning management platform will help
your e-Learning team to update online training modules on a large scale.
Hence, you will have the power to keep the corporate learners updated
by using a single tool.
d) Customize The Online Training Experience: One can allot different
learning paths or resources for all company learners with the assistance
of an e-learning management system. By this everyone gets personalized
online training they need based on their learning goals. You can even
unlock the navigation to choose their online training activities. All these
features help in providing a more effective online training experience
and improve engagement.
e) Boost e-Learning Accessibility: Advanced learners look forward to on-
demand online training resources. Not to mention, we live in a digital
age where information is always at our fingertips, all thanks to our
smartphones, and wearable devices. As long as you can log in to the

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 system, you will have the opportunity to expand your knowledge and
skills.

18.7.2 Features of E-Learning Management System

There are some top features that you can contemplate in an e-Learning
management system as there is no one rule for all LMSs. Every company has
its own unique requirements and budget concerns. Here are some features
mentioned:
1. Reports And Analytics: You will be able to examine online training
initiatives to determine if they are on target. The LMS also provides
detailed analytics that allows for evaluating the performance at an
individual and group level.
2. Responsive Design: Some of the top e-Learning management platforms
have an accessible design. User-friendly online training gives everyone
the chance to benefit from online courses. Therefore, your e-Learning
management system should be responsive, in order to create a layout
that features all the breakpoints.
3. Built-in User Interface: Any system will be of no use if your e-Learning
team is not able to use the user interface and fails to navigate the learning
management platform. The LMS platform you select should have an in-
built user interface that lines up with your e-Learning team’s abilities.
4. Support Services: All learning management platforms offer distinct
support services. You should determine the assistance level that you
need based on your e-Learning team’s experience and the intricacy of
the tools.
5. E-Learning evaluation tools: One should assess the learners regularly
to identify the gaps that are necessary to be filled. Most of them provide
in-built e-Learning assessment tools, like learning templates.

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 Fig 18.4: Features of good e-learning management system
6. Gamification: Some users need extra incentives to engross themselves
in online training courses.
7. Certification Support: This is an important feature for organizations
that offer company policy and online training, and those that require
advanced certification features.
8. Localization: Plurilingual features are crucial for organizations that plan
to deliver global online training resources. Every individual on the team
should have the opportunity to develop their professional skills.

18.8 SUMMARY
The learning that doesn’t come from having to study a prescribed course,
but rather comes from sharing what you know and absorbing what you can
learn from others in a collaborative environment. E-learning is usually associated
with the former structured learning modules delivered through learning
management systems and e-learning software platforms. In the fast changing

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world of technology we rarely acknowledge that eLearning is also present in
the natural process of mastering new ways of communication via complex social
platforms. Relationships of a business with government agencies have a
significant impact on the success of any company. This is primarily determined
by how professionally the work with state bodies of various levels is organized
and how well the processes are built by the government bodies. Now we can
see e-government taking shape in many countries, and providing electronic
services to businesses has become the new normal. These kinds of learning are
essential to an all-round development of knowledge, and both LMS and social
networking software platforms will find a place in the learning and development
frameworks of businesses.

18.9 GLOSSARY
 E-Learning: It is the delivery of learning and training through digital
resources.
 Flexibility: It is the range of motion of muscle and connective tissues
at a joint or group of joints.
 Collaborate: To work jointly with others or together especially in an
intellectual endeavour.
 Virtual reality: It is a computer generated environment with scenes
and objects that appear to be real, making the user feel they are immersed
in their surroundings.
 Web based platform: The Web platform is a collection of technologies
developed as open standards by the World Wide Web Consortium and
other standardization bodies.

18.10 SELF ASSESSMENT QUESTIONS

1. Define E-Learning. Explain their features.
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
2. Explain various features of E-learning management systems.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Describe various ways to use social networks in E-learning.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

18.11 LESSON END EXERCISE

1. Write a note on social networks.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What is virtual world.
_________________________________________________________

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 _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. Write down the benefits of E-learning.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

18.12 SUGGESTED READINGS

 9 Ways To Use Social Networks In eLearning (2016) by Lily Wilson,
“Freelance Academic Writer at ThePensters”
 e-Learning Management System: List of Top e-Learning Management
Syst ems in 2023 by Sik andar Mo hammad , published o nline in
externlabs.com
 https://lecs-static-secondlife-com.s3.amazonaws.com/work/SL-Edu-
Brochure 010411.pdf
 Oishi, L. (2007). Surfing Second Life. Technology and Learning.

*********

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Lesson No. 19 UNIT IV
INNOVATIVE ELECTRONIC COMMERCE SYSTEM
COLLABORATIVE COMMERCE : ESSENTIALS,
ELEMENTS, PROCESSES, COLLABORATIONS HUBS,
BANNERS TO E-COMMERCE

STRUCTURE
19.1 Introduction
19.2 Objectives
19.3 Concept and essentials of collaborative commerce
19.4 Elements and process of collaborative commerce
19.5 Collaboration Hubs
19.6 Barriers to Collaborative Commerce
19.7 Summary
19.8 Glossary
19.9 Self-Assessment Questions
19.10 Lesson End Exercise
19.11 Suggested Readings

19.1 INTRODUCTION
To fuel business growth, companies must embrace their ecosystems of
suppliers, distributors, franchisees and even competitors just like Amazon did

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with its marketplace. Amazon understood the power of peer-to-peer early, adding
a seller marketplace for new and used goods. Even companies like Airbnb and
Uber are examples of this. For example, Home Depot partnered with Uber for
home Christmas tree delivery and Westin Hotels provide New Balance workout
gear for rental so travellers don’t have to pack as much. One interpretation
could even be crowdfunding, where otherwise unconnected individuals
collaborate to sponsor a commercial endeavour. Collaboration seems to be taking
on new life in business and it will be interesting to see the evolution of c-
commerce. Collaborative commerce is the growth and innovation engine of
today and tomorrow and launching your own marketplace is an ideal way to
get started. A marketplace business model gives leaders the flexibility to take
their ecommerce business in new directions and scale beyond the limitations
of their own operations, generating incremental revenue with little investment
and business exposure. Collaborative commerce may sound like a new term,
but it certainly isn’t a new concept. It’s a vision for sustained growth and
innovation that many digital businesses aspire to achieve, especially in today’s
competitive business environment. Engaging in collaborative commerce means
coming together with all of your commerce constituencies suppliers, partners,
distributors and even competitors to deliver more value to customers and achieve
better business outcomes in the process. One of the most important proof points
for the power of collaborative commerce is the success of online marketplaces.
Launching a marketplace enables a business to offer complementary products
and entirely new product categories from third-party sellers, including
competitors. Today, marketplaces make up around 50% of online sales globally.
Marketplaces give both direct-to-consumer (DTC) and B2B companies
opportunities to collaborate with other companies so everybody wins.

19.2 OBECTIVES
After going through this lesson, you will be able to:
 understand the concept of Collaborative commerce
 describe Collaboration Hubs

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  explain process of Collaborative Commerce
 find out Barriers to Collaborative Commerce
 understand elements of Collaborative Commerce

19.3 CONCEPT AND ESSENTIALS OF COLLABORATIVE

COMMERCE
Collaborative commerce, also known as C-commerce, is the use of
“digital technologies by different business parties for sourcing products, making
transactions or completing similar interactive business processes.” It is a new
focus for organizations attempting to become more profitable and competitive.
C-commerce involves the optimization of supply and distribution channels in
order to capitalize on the global economy and use new technology efficiently.
In collaborative commerce, organizations coordinate with each other to
maximize their efficiency and profitability. Companies may use or share the
same technological platforms or transact business with each other to create
products or services for consumers. It is the optimization of supply and
distribution channels to capitalize on the global economy by using new
technology efficiently. In collaborative commerce, organizations coordinate
with each other to maximize their efficiency and profitability. However, it can
also mean consumers get what they need from each other instead of companies.
It is a new focus for organizations attempting to become more profitable and
competitive. Collaboration promotes fresh views of suppliers, competitors, and
customers. A goal of collaborative commerce is for a business to move away
from production and sales, shifting towards the integration of various businesses.
Companies may use or share the same technological platforms or transact
business with each other and at times may integrate vertically to some degree.
Collaborative commerce involves companies transacting business with other
companies through electronic channels. Companies are embracing this form of
c-commerce as well, however. Patagonia has teamed up with eBay to buy and
sell used gear, while REI also takes and resells used equipment. Meanwhile,
companies like Apple offer trade-in programs for their products. Luxury brand

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Burberry integrates suppliers with customers to allow greater influence by
shoppers on product design and marketing ads but connecting their sales day
and social media activities. No matter whether your company sells to business
buyers or consumers, adopting a marketplace business model offers a range of
benefits. It lets you capture incremental sales without losing control of the
customer relationship and experience. It enables you to quickly expand product
assortment without the cost and risk associated with owned inventory, logistics,
fulfilment and customer care. It also offers opportunities to test new products,
explore new markets and attract new customers by leaning on third-party
suppliers and drop-ship partnerships for inventory and fulfilment. Collaborative
commerce through marketplaces also offers some opportunities specific to DTC
or B2B companies.
DTC companies benefit from the ability to:
 Secure a greater share of wallet by selling complementary products that
customers would have purchased from a competitor.
 Increase customer loyalty and lifetime value by becoming the one-stop-
shop for everything customers need at competitive prices.
 Gain deep customer insights into behaviours, buying trends, pricing,
brand awareness, and more, for a huge advantage in identifying new
business opportunities.
B2B companies benefit by being able to:
 Gain inventory visibility and price transparency across the network of
dealers and distributors.
 Understand end-customer behavior, preferences and buying patterns.
 Manage suppliers more effectively through a self-service portal.
If your organization operates in the B2B space, launching a marketplace
can also enable you to sell directly to customers by teaming up with your network
of distributors, dealers or franchisees to offer frictionless buying. This also
helps you gain inventory visibility and price transparency across your network

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of dealers and distributors, and also gain visibility into end-customer behavior.
This ability of having a real time communication between merchant and
customer during in person shopping benefits both merchant and customer. The
merchant can understand the customer behavior better, provide targeted offers,
gets an accurate picture of the demand and customers can benefit from finding
out the best deals, avoid standing in lines and can pay from anywhere and
using any pay instrument. The merchant may be an attended system where
there is a human accepting order/payment from the customer or an unattended
system where the merchant is a kiosk, vending machine or an ATM. A customer
ordering and paying for food while entering a drive way is an example of
attended system collaborative commerce while a customer purchasing a car
wash in an automatic car wash bay is an example of unattended system
collaborative commerce. The basic architecture behind this exciting world of
Collaborative commerce and how it plays a significant role to understand that
there are some components which are given below:
a) Data Acquisition/Location identification: A customer device/sensor
acquires the data thru various form factors such as zip code based search,
BLE (Bluetooth Low Energy) signal, Geo location or as simple as a QR
code scan. Once this connection between merchant and customer sensor/
device is established then the merchant can push the offers, customers
can get the menu or compare the deals.
b) Customer device / sensor: This can be a mobile phone, tablet or a
specialized sensor built to collect the data. Customers can view the menu,
browse the products offer and use the specific payment method to
complete the transaction.
c) Cloud Server: This is where the business logic behind merchant offers,
inventory, customer payments etc. is stored. Cloud server is the brain
behind this Collaborative commerce IoT platform and is usually API /
messaging based platform.
d) Payment Gateway: The cloud server is integrated with a Payment
gateway to complete the payment transaction.

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e) Merchant Point of Sale(PoS): The merchant PoS is where the orders
are received from the cloud server with the required details.

Fig 19.1 : Elements of collaborative commerce

Collaborative commerce (or c-commerce) can be regarded as the next
evolutionary step beyond the more basic process of electronic commerce. It is
an emerging area that is based on interactions enabled by Internet technology.
It offers many levels of coordination, collaborative interactions and cooperation
among or within organizations, and between individuals. C-commerce requires
the establishment of dynamic collaborative environments over the Internet. In
a collaborative environment, organizations and individuals can work together,
share sensitive information, protect their privacy, and collaborate on activities
and projects efficiently and effectively.

19.4 ELE M ENT S AN D PR OCES S OF COL LAB O RATIVE

COMMERCE

The elements of the processes of c-commerce vary according to

situations. For example, in many cases, c-commerce involves a manufacturer
(or an assembler) who collaborates with its suppliers, designers, and other
business partners, as well as with its customers and possibly the government.

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The major elements of the collaboration process are illustrated in Figure given
below. Notice that the collaboration process is based on the analysis of internal
and external data that are made visible via a visualization portal. On the lower
left side of the figure, we show the cyclical process of c-commerce. The people
involved in this cycle use the information in the dis- plays as well as the
interactions among the major groups of participants (shown on the right side of
the figure). The elements of c-commerce can be arranged in different
configurations, one of which is a hub.

Fig 19.2 : Elements & process of commerce

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19.5 COLLABORATION HUBS
A popular form of c-commerce is the collaboration hub, which is often
used by the members of a supply chain. A collaboration hub (c-hub) is the
central point of interaction and of a company’s supply chain. A single e-hub
can host multiple collaboration spaces in which trading partners transact,
collaborate, communicate, and share information. A collaboration hub is a type
of workspace designed to promote interaction, community, and teamwork. While
they can come in many different shapes, collaboration hubs are typically
characterized by flexible office layouts, integrated breakout spaces, and
adaptable meeting areas. Collaboration hubs are often at the heart of the hybrid
workplace model a style of working in which a company has a mixture of
employees working both remotely and in-office. By repurposing an existing
office layout as a dedicated collaboration space, a company can create an
environment ideal for work activities that can’t be done as effectively when
working remotely, such as project ideation, brainstorming, and planning.

19.5.1 Role of a Collaboration Hubs

1. The physical office space has undergone a dramatic transformation in
the past year. The sudden shift toward remote working in 2020 brought
with it enormous benefits to almost every aspect of how we work, from
rebalancing o ur personal and professional lives to fast-tracking
improvements in how we collaborate with distributed teams and satellite
offices around the world.
2. This change in the way we work has recast the traditional office in a
new light. The office no longer needs to be a place where we show up,
do our work, and then leave. Instead, it’s being reimagined as a
centralized space that supports the creative process at critical points in
a project timeline, that’s there when we need it, and that exists to reinforce
teamwork, socializing, and group productivity. In other words, it’s a
collaboration hub.
3. People love the flexibility of working remotely, but they miss the benefits

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 of sharing a physical space with colleagues. A collaboration hub fills
that gap. It’s a place to work side by side, think in new ways, and foster
emotional bonds between teams.

19.5.2 Essential Aspects of a Collaboration Hubs

Whether your teams work remotely or not, your company shouldn’t have
to adapt to fit around an office and the office should fit around your company.
We Work designs office space solutions with flexibility in mind, creating
customized collaboration hubs to suit the way your company works.
A. Tools for efficient work
Unlike a traditional office, a collaboration hub doesn’t require row after
row of assigned desks and computers. Hybrid teams can be equipped
with the tools and software they need to do their job no matter where
they are, so it’s the role of a collaboration hub to provide workers with
the tools they don’t have at home. Depending on the type of work your
team does, that could mean anything from photography studios and recording
booths to resource libraries, prepress equipment, and printing facilities.
B. Clear responsibilities
A coherent and well-communicated team structure enables managers to
take full advantage of the collaboration hub in both the physical and
digital space. Individuals should be free to use the workplace on an ad
hoc basis, but for a collaboration hub to be truly effective, activity-
based project work should be directed and driven by team leaders.
C. Easy to get to
The clue is in the name: A collaboration hub needs to be central to where
employees live. Busy, long, and crowded commutes are one of the biggest
barriers to returning to the office, so a well-located workspace that’s
convenient to get to is a vital aspect of a successful collaborative space.
D. Meeting rooms
Face-to-face interaction is freshly prioritized in a collaboration hub, so

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 it is important to have a variety of places to meet with colleagues and
clients. These should be easily reconfigured to accommodate any number
of people, while enabling social distancing, and can range from informal
breakout spaces to more professional meeting rooms.
E. Flexibility
The way that teams collaborate changes over the course of a single
project, or as new projects are launched and old ones are phased out. An
effective collaboration hub can quickly react to the changing needs of
the business and its employees, perhaps using movable walls and
versatile furniture to accommodate new ways of working as they arise.
F. Wide customization
No two businesses are alike, and every company has specific needs and
quirks. The fundamental difference between a dedicated collaboration
hub and a generic office comes down to customization the ability of the
space to fit around a company’s way of working.

19.6 BARRIERS TO COLLABORATIVE COMMERCE

Despite the many potential benefits, and with the exception of some
very large companies, c-commerce adaptation is moving ahead slowly. Reasons
cited in various studies include technical factors involving a lack of internal
integration and standards. Other reasons include network security and privacy
concerns, and some distrust over who has access to and control of information
stored in a partner’s database. Internal resistance to information sharing and to
new approaches and lack of company skills to conduct c-commerce are also
possible factors. Identifying the barriers to successful collaboration is usually
the first step in removing any hurdles and driving better collaboration that has
more impact. There are several barriers to collaboration that commonly occur
across different organisations.
1. Lack of time: Even though effective collaboration often saves time, a
lack of time is often a key reason why collaboration does not occur. In-

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 house legal teams are always busy and simply do not have the time to
set up the mechanisms for effective collaboration. Even if there is an
easy route to collaborate, the daily rush of operational matters can still
stymie collaborative effort.
2. Lack of scope and focus: Collaboration is quite a high-level term and
an intention to collaborate more often can be so woolly that it is
meaningless. For example:
 Who should we collaborate with?
 How should we collaborate?
 What should we collaborate on?
 Where should we start?
Not having a focus for collaboration can be a barrier too. It’s much
easier to focus on a set goal, perhaps a project or improving an inefficient
process, and using collaboration as a working style to achieve that goal.
Having scope, fo cus and specific objectives gives momentum to
collaboration and generally leads to activity, rather than vague intentions.
3. Organisational culture: So me o rganisatio nal cultures pro mo te
collaboration better than others. There are a range of influences on culture
that can make collaboration more difficult. For example, collaboration
may be less straightforward than it should be where:
 There is a strong risk culture.
 All time is recorded, and non-chargeable time is (unofficially) frowned
upon.
 Cost centres are encouraged to compete against each other.
4. People and politics: Sometimes it’s not the culture of your organisation,
but an issue with a function, a team, an individual or a relationship that
hampers collaboration. Personal preferences and office politics can also
prove to be a barrier as not everyone is keen on collaboration.

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5. Tools and facilities: There may be a real desire to collaborate, but the
tools you use or the facilities you have access to could be the stumbling
block. Perhaps you don’t have an effective meeting space, or your online
collaboration toolset is too clunky, slow or difficult to use. Fortunately, if
the tool or facility is the barrier, there is usually a clear path to a remedy.
6. Confidentiality: The need for co nfidentiality, o r concerns o ver
confidentiality, is a real barrier to collaboration, particularly when
working with third parties or those outside your organisation. If it is
unclear or there is the potential for confidentiality rules to be broken,
then people will be reluctant to collaborate. This is clearly a major issue
for in-house legal teams where most of the work will be highly
confidential and sensitive.
7. Proximity: It can be a challenge to collaborate across different locations
and time zones. Although there are many excellent remote collaboration
tools, some people still find virtual collaboration less successful than
face to face meetings and find the lack of proximity challenging.
Overcoming Barriers To Collaboration
Personal politics and organisational culture are not going to change
overnight, but by taking a clear, process-led approach to collaboration that
incorporates feedback from those involved, you can reap dividends.
1. Prioritise a high value activity to collaborate on: Firstly, identify what
you want to achieve then make it specific. For example, perhaps:
 There is a department you work with closely where you could work
better together.
 There is a working group with a specific aim.
 Your team has a long-standing objective to reach or output to produce
that requires closer collaboration between you all.
2. Get feedback from those involved and identify potential barriers:
Work out what you are going to do and then identify:

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  Who will be involved in the process.
 The collaboration style required.
 The tools that you have available.
As part of this process, make sure you get feedback from everybody
involved about how you can work together better. When you talk to
others, make sure you identify any barriers or potential issues. Involving
everybody and canvassing opinion is not only critical for getting
information to help plan your collaboration, but also helps drive the
buy-in of the participants.
3. Provide clarity and try and remove any barriers before you start:
Before you begin, explain how your collaborative project will work.
There may be some obvious barriers you can remove. For example,
making sure there is an online tool that works for everybody and is
intuitive to use. Perhaps some of those involved are addicted to email,
so you may need an online tool where users can email documents into a
collaboration space. You can also:
 Set some ground rules and expectations.
 Give out roles.
 Suggest everybody’s time commitment.
4. Get started: In truth, most of the barriers to collaboration will not emerge
until you start collaborating, so you need to get up and running first.
5. Iterate as you go: Assess how everything is working as you go and
continually think whether you need to make any changes. There is plenty
of room to experiment here. The key to finding the optimum way to
collaborate is to be flexible, iterative and inclusive, and to ensure that
things don’t fizzle out.

19.7 SUMMARY
This lesson help you to understand that the Collaborative commerce (c-
commerce) refers to a planned use of digital technology by business partners.

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It includes planning, designing, researching, managing, and servicing various
partners and tasks, frequently along the supply chain. C-commerce can be
conducted between different pairs of business partners or among many partners
participating in a collaborative network. Collaboration with Web 2.0 tools and
in social networks adds a social dimension that could improve communication,
participation, and trust. There are many new tools, some of which are being
added to traditional collaboration tools. Better collaboration may improve supply
chain operation, knowledge management, and individual and organizational
performance. The cost of customer acquisition is rising, so it is essential that
companies find cost-effective ways to reach new customers. This is driving a
need to discover new strategies to find and retain customers. Creating
collaborative relationships could play a big part in this. When companies work
together, the economies of scale can be significant, from sharing stock and
marketing activities through to shared logistics. Nowadays, the new generations
of telecommunication technology such as the current 3G technology and the
anticipated 4G technologies integrates the wire or wireless Internet with the
wireless telecommunication network. This allows the business process to be
executed truly anywhere and anytime. Collaborative commerce no double will
be one of the business models if that ever happens. But the types of collaboration
may be present in many different formats. Since the collaborative commerce
business model allows multiple organisations to weave a collaborative network,
each collaborator should have the ability to manage the resulting dynamic
business relationship. This is especially true when the collaborative community
is expanded to a cyberspace marketplace. Gaining agreement on how to share
costs and benefits can also prove problematic. Finally, global collaboration
may be complicated by additional barriers ranging from language and cultural
misunderstandings to insufficient budgeting.

19.8 GLOSSARY
 Collaborative: involving two or more people working together for a
special purpose

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  Flexibility: the range of motion of muscle and connective tissues at a
joint or group of joints.
 Integration: integration is a method of adding or summing up the parts
to find the whole.
 Knowledge management: is the process of organizing, creating, using,
and sharing collective knowledge within an organization.
 Data Acquisition: Data acquisition is the process of converting real-
world signals to the digital domain for display, storage, and analysis.
 Payment Gateway: It is a technology used by merchants to accept debit
or credit card purchases from customers. The term includes not only the
physical card-reading devices found in brick-and-mortar retail stores
but also the payment processing portals found in online stores.

19.9 SELF ASSESSMENT QUESTIONS

1. Define collaborative commerce.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. Describe some examples of c-commerce.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

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3. Describe some major barriers to c-commerce. How can a company
overcome these limitations
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________

19.10 LESSON END EXERCISE

1. Write a note on collaboration hub.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
2. What are the elements of collaborative commerce.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
3. What are the essentials of collaborative commerce?
_________________________________________________________
_________________________________________________________
_________________________________________________________

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 _________________________________________________________
_________________________________________________________

19.11 SUGGESTED READINGS

 Collaborative Commerce Is the New Business Imperative by Amit Shah
(2021).
 What is a co llabo rat io n hub? By St eve Ho gar t y ht t ps://
www.wework.com/ideas/workspace-solutions/flexible-products/what-is-
a-collaboration-hub
 Beard, M. E-Commerce: A Collaborative Approach [Kindle Edition].
Seattle, WA: Amazon Digital Services LLC, 2014.
 Carr, D. F. “How Social Should Social Collaboration Be?” Forbes Tech,
2015.
 Ferreira, J., et. al. (2002). Directions in Collaborative Commerce:
Managing the Extended Enterprise New York: Deloitte Research
 NerveWire Inc. (2002). Collaborative Commerce: Compelling Benefits,
Significant Obstacles. Newton, MA: NerveWire, Inc
 Identifying and overcoming barriers to collaboration by The Centre for
Legal Leadership uk.practicallaw.thomsonreuters.com

**********

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Lesson No. 20 UNIT IV
INNOVATIVE ELECTRONIC COMMERCE SYSTEM
C2C ELECTORONIC COMMERCE, C2C APPLICATIONS

STRUCTURE
20.1 Introduction
20.2 Objectives
20.3 C2C E-Commerce
20.4 Business models for C2C E-commerce
20.5 Working of C2C E-commerce
20.6 Factors that impact C2C E-commerce
20.7 C2C Applications
20.8 Summary
20.9 Glossary
20.10 Self-Assessment Questions
20.11 Lesson End Exercise
20.12 Suggested Readings

20.1 INTRODUCTION
There was a time when C2C ecommerce platforms almost didn’t exist.
Buyers used to doubt the quality they might receive online and sellers weren’t
sure if they would be able to make a sale online. But during the pandemic, C2C

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ecommerce has made a global impact in the ecommerce world. Nowadays,
millions of people sell their unwanted goods online. And to enable them to
sell directly to buyers, more and more entrepreneurs are creating C2C
ecommerce stores. However, there are a lot of business owners who still
have no idea about the benefits of this business model and the best C2C
ecommerce platforms out there. A newspaper’s classified ads section or an
in-p erso n auct io n ho use are also examples o f C2C businesses. C2C
companies facilitate consumer relationships, helping buyers and sellers
locate and engage with each other. They’re especially useful for niche
markets. For example, if you’re selling a used car, you may not know anyone
interest ed in its specific make and mo del The C2C business mo del is
typically associated with e-commerce and online selling platforms like
Craigslist or Etsy. Some C2C platforms, including Offer Up, prioritize
mobile commerce via apps. However, C2C can refer to any business that
creates a market between consumers. However, a C2C marketplace can
help you connect with your target customer and make the sale. The C2C
model allows customers to access hard-to-locate products and find the best
price among competing sellers. C2C stands for “consumer to consumer” or
“customer to customer”; it’s a business model that fosters commerce between
private individuals, usually in an online environment. C2C companies act as
intermediaries to foster engagement and help consumers reach bigger audiences.
Whether a C2C platform focuses on goods or services, this e-commerce category
facilitates transactions between people.

20.2 OBECTIVES
After going through this lesson, you will be able to:
 understand the concept of C2C ecommerce
 describe C2C business model
 explain various C2C applications
 understand pros and cons of C2C ecommerce

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20.3 CONSUMER-TO-CONSUMER E-COMMERCE
Consumer-to-consumer (C2C) ecommerce is a commerce model in which
one consumer sells his goods or services to other consumers online. It is one of
the four pivotal ecommerce business models, the other three being B2B
(business-to-business), C2B (consumer-to-business), and B2C (business-to-
consumer). The transaction that is made between two customers is led by a
third party, basically by online actuation, social media platform, or ecommerce
website, that looks after transaction status, payments, and other aspects. It helps
sellers as well as buyers to find each other by charging a small fee or
commission. Consumer-to-consumer (C2C) EC, which is sometimes called
person-to-person (P2P) e-commerce, refers to electronic transactions conducted
bet ween and amo ng individuals. These t ransact io ns can also include
intermediaries, such as eBay (ebay.com) or social network sites that organize,
manage, and facilitate the C2C transactions. C2C activities may include
transactions resulting from classified ads, music and file sharing, career and
job matching money lending lendingclub. com, and personal matchmaking
services. C2C EC has given online shopping and trading a new dimension.
Although this sort of trading is prevalent in the off-line world (newspaper
classified ads, garage sales, etc.), it was not expected to succeed online because
of problems regarding trust due to the anonymity of the traders, especially
those who are in different locations. This problem was solved by using a third-
party payment provider (e.g., paypal. com) and escrow or insurance services
pro vided by eBay and o t hers. The purpo se o f business st rat egy and
accompanying eCommerce platform is to enable one party to sell directly to
potential buyers without spending a considerable amount of money building
and maintaining an online storefront. This allows the seller to keep more of
their profits because they aren’t expending the capital to create infrastructure
associated with a traditional business. Of all business models, C2C most closely
resembles a marketplace, where a business can be started with minimal costs.
The buyer may also get more competitive prices if sellers on the same C2C
platform compete. The most common term for these types of eCommerce

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platforms is “marketplace.” The idea of a marketplace mirrors real-world
examples like flea markets, where a building owner will offer booths to sellers
in exchange for a percentage of the profits.
Examples of C2C E-Commerce
The C2C business model provides a way to sell products via online
auctions or classified advertisements, offering a platform and facilitating credit
card transactions. But there are other ways to create a C2C online environment.
 EBay is an excellent example where consumers sell items to other
consumers online, starting as a true customer-to-customer environment.
It was the first customer-to-customer auction site on the web, even though
Buy It Now listings currently eclipse those of timed auctions. EBay
makes money by charging sellers fees for the privilege of connecting
them to potential buyers, so it works as both online auctions and classified
advertisements C2C platforms.
 Buyers have multiple options for paying such as credit card, PayPal, or
bank debits that buyers and sellers can link to a bank account. This
ability to accept a variety of payment options is one reason sellers choose
eBay over other sites. The seller then utilizes eBay’s shipping software
to create labels and then ships using one of the three major package
carriers.
 Craigslist takes a much more altruistic approach. In most cases, it works
as a free marketplace for consumers to connect with other consumers at
the local level via a third-party business. Craigslist charges to post job
ads to cover its expenses, but its primary purpose is to create a free C2C
eCommerce marketplace.
 Amazon offers the largest marketplace on the web. Buyers pay via credit
card transactions or PayPal, and sellers receive payments facilitated by
Amazon to their own bank account or PayPal account. Amazon charges
one of the highest rates of any C2C site on the web, but sellers continue
to use it because of Amazon’s reach and promotional features.

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20.3.1 Advantages of C2C E-Commerce
Social networks have become a popular place for C2C activities such as
selling products and services via classified ads at craigslist.org or facebook.com
and other social net- works. People are sharing or selling music, bartering,
selling virtual properties, and providing personal services. So, C2C E-Commerce
websites are a specialized type of eCommerce platform with several advantages
over the traditional B2C marketplace. A C2C business:
1. Needs no inventory
Since a C2C platform is just the intermediary taking a cut of the C2C
transaction, inventory is a non-issue. This avoids tying up capital in
inventory and eliminates the need for storage and shipping facilities. It
also does away with shipping costs associated with a business-to-
business business model. (Get a better B2B eCommerce definition here.)
Just charge a listing and/or final value fee without the risk of having
inventory like when they sell products on brick-and-mortar stores.
2. Needs fewer staff
A business without inventory needs no packers, shippers, or drivers. It
gives many individuals and small business owners a low-cost way to
sell their goods and services.
3. Creates sellers out of buyers
Buyers who become familiar with a website as a buying platform may
recognize it as a legitimate place to become a seller. This is when it
becomes a true customer-to-customer experience, where consumers sell
products to other customers when once they were simply the buyer.
4. Gets to choose their level of involvement
User agreements dictate just how involved a C2C platform is involved
with the customer-to-customer business transaction. For example,
Kickstarter’s user agreement states that it cannot be held responsible
for the contract between the creator and their backers.

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5. Is not responsible for forgeries
Tiffany and Co. took eBay to court, claiming that eBay profited from forgeries
of their high-end merchandise. Courts decided that C2C sites like eBay
are not legally responsible for forgeries sold on their site.

20.3.2 Disadvantages of the C2C E-Commerce

C2C sales transactions provide consumers and sellers with a wide range
of freedoms, but they also have significant drawbacks. As a result, there’s a
lack of quality assurance. There is a risk that C2C platforms may not be able to
control product quality because they do not make or sell things themselves.
1. Credit card payments can be challenging
Credit card transactions can be difficult on some C2C platforms. Some
platforms may not support or be able to process credit cards. However,
options like PayPal and Venmo are mitigating these challenges.
2. Lack of quality control
C2C transactions may lack qualit y control. Since the sellers are
co nsumers, t here is o ft en lit t le r eco u rse fo r po o r ly made o r
misrepresented products. Additionally, because the buyers are also
consumers, payment guarantees can be hard to enforce.
3. C2C platforms can be vulnerable to scams
C2C platforms can be rife with scams as opportunists find ways to take
advantage of others. Buyers must be wary of sellers who can’t answer
detailed questions about items for sale. They should also avoid any seller
that pressures them to buy immediately. C2C platforms must enforce
rigorous policies to ensure buyers and sellers feel safe using their C2C
marketplace. Many platforms implement comprehensive selling policies
that, if violated, result in the users being banned.

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 Fig 20.1 : C2C Platform
20.4 BUSINESS MODELS FOR C2C ECOMMERCE
Several e-commerce platforms make it easier for consumers and sellers
to find exactly what you’re looking for. A minor listing charge or commission
on the final sale is how most C2C platforms make money.
The following are some of the most common C2C venues:
 It is possible to advertise a product for sale at a predetermined price and
allow numerous purchasers to compete for the item until one person
wins. There may not be many other exciting bids, in which case the
item’s price may rise much higher than if the seller had advertised it at
a fixed price.
 Many online platforms connect consumers and sellers who want to trade
authentic goods from second hand furniture to artwork and anything in
between and join them. Many of these systems are available in online
and app formats to facilitate in person transactions.
 These services can be exchanged via online C2C platforms such as hiring
a dog trainer, a web designer, a handyperson or renting someone’s holiday
house.

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As a result, C2C online payment systems have been created to streamline the
payment process for C2C transactions on other platforms. These companies
may charge a minor fee for transferring earnings into one’s bank account to
generate revenue.

20.5 WORKING OF C2C E-COMMERCE

Every platform has its own features, but here’s a general outline of how
C2C e-commerce works:
Step 1: Registration
Buyers and sellers must register for an account by providing their name,
email address, and other relevant information to get started buying and selling.
This often includes connecting or setting up a method for paying sellers or
collecting and processing payments from customers, which may include
registering for additional payment services like PayPal, Venmo, Apply Pay,
and CashApp. For sellers, the more payment options available, the more
convenient it is for potential customers to make purchases.
Step 2: Listing items for sale
As a seller, a crucial part of the process is listing your items with a
description, photos, and video of what you’re selling. Research your competitors
on the platform and other similar platforms to find out how they describe and
price items similar to what you’re offering. Improving on descriptions, images,
or videos can help a listing stand out from the competition.
Step 3: Searching and browsing
Each C2C platform has its own internal search engine driven by
algorithms to display items most relevant to the user’s search intent, just like
Google and Bing, except on a narrower scale. As on search engines like Google,
users enter keywords or phrases for what they’re looking for, and the platform
returns results that it hopes will eventually lead to a transaction between a
seller and a buyer.

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Step 4: Making a purchase
Most platforms allow customers to make purchases by clicking a “buy
now” button or by adding items to a cart and then completing a checkout process.
Some C2C sales proceed as auctions, as on eBay. However, eBay also allows
sellers to simply list items with a fixed price or as a hybrid listing that begins
as an auction, then allows customers to “buy now” if they don’t want to wait
for the auction to end, or if they don’t want to compete in an auction and
potentially pay more for the item. The customer then chooses shipping speed
(if multiple options are offered) and payment method to complete the sale.
Typically, C2C e-commerce platforms allow buyers to use services for free
while earning revenue through fees collected from sellers for each sale.
Additional revenue often comes from advertising.
Step 5: Shipping
Options for shipping often range from the speediest “expedited”
offering—which usually has the highest price—to possibly a mid-range speed
and price or a standard shipping rate and speed. Some platforms offer local
pickup as an option, and sellers on some sites like Craigslist and Facebook
Marketplace tend to offer local pickup as the only option. Shipping options
will depend on the item size and weight as well as the distance—whether the
package is going across town or to another continent.
Step 6: Feedback
Customers tend to feel confident when buying from a well-known brand
that has a strong reputation and a customer service department. However, finding
trustworthy information about an individual seller on Amazon or Etsy can be
hard. Feedback left by previous customers often provides a sense for what it’s
like to deal with the seller, if the products are described accurately, what the
packaging is like, and how easy it is to resolve any issues that may come up. To
gain customer trust, platforms also have an interest to make sure the feedback
is fair and accurate, but they also want to focus on positive comments to
encourage sales. So, it’s important as a buyer to learn to read between the lines

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and read reviews with a grain of salt. It’s also important for buyers to do their
part by leaving fair and accurate feedback.
20.6 FACTORS THAT IMPACT C2C E-COMMERCE
1. Pricing and fees: If prices and fees are unreasonable or there’s a lack
of transparency or consistency, sellers will find other platforms where
they can predict and earn wider profit margins. Fewer sellers means
fewer items for customers means fewer customers means fewer sellers,
becoming a catch-22.
2. Competition: Keeping sellers and a greater selection of products on
the virtual market keeps competition among sellers healthy and prices
down, which attracts more customers, making it worthwhile for sellers
to do more business there.
3. Customer service: One of the most important parts of any business is
ensuring exceptional customer service. Although platforms urge both
parties to resolve any conflicts amicably, some buyers and sellers just
aren’t going to be able to work things out on their own. A C2C
marketplace like Amazon has its own customer service policies and
procedures in place to step in and resolve conflicts when necessary.
4. Marketing and promotion: Word of mouth and loyal customers only
happen after marketing and promotion have brought them to an online
store in the first place. Listing items is a start, but driving traffic, sales,
and revenue requires getting the word out about your products and where
people can find them. The right kind of marketing for your business
will be different from the next person’s, but doing nothing is not an
option. Even optimizing your listings for search can go a long way.
5. Understand your target audience: Selling to everyone can be selling
to no one. Know who you’re selling to and understand what they want,
how your products serve a need and/or help them solve a problem.
Understand what’s important to them and their pain points. Meet
customers where they are with the right message and the right product
at the right time and in the right place.
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6. Provide high-quality products or services: Not only does this mean
customers are more likely to return to buy again, but you can believe in
what you’re selling and stand by it. Seeking cheaper, lower-quality goods
and services to sell is likely to backfire in the form of dissatisfied
customers, more complaints and refunds, less profit, and more headaches
to deal with.

20.7 C2C APPLICATIONS

To earn money, C2C websites and other platforms charge merchants to
create product listings, provide promotional features and facilitate credit card
transactions. Items acquired via a category or auction system are often used in
these C2C transactions. With the rise of social media, the potential for C2C
growth will continue to expand. As a result, the C2C market is expanding at a
fast pace. Because of social media’s power to bring people together online,
C2C business is born out of this trend. They may trade knowledge and things
and even engage in the purchasing and selling of goods in this circumstance.
C2C’s potential will continue to expand and develop because of the medium’s
penetrating capability. Many websites facilitate C2C activities between
individuals. Here are some of the applications that described below:
1. C2C Auctions
A very successful example of a C2C application is participation in
auctions. In dozens of countries, selling and buying on auction sites is
growing rapidly. Most auctions are managed by intermediaries.
Consumers can visit auctions at general sites such as ebay.com or
auctionanything.com, or they can use specialized sites. In addition, many
individuals conduct their own auctions with the use of special software.
For example, ProcurePort.com provides software to create C2C reverse
auction communities online.
2. Selling and Buying in C2C
In addition to auctions, eBay enables individuals to sell goods to other
individuals at fixed prices. Amazon.com and Etsy do the same. Hundreds

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 of other sites facilitate C2C trading including those that use classified
ads. A type of business model that facilitates interaction between
customers. Customer to customer businesses provides individuals with
a place to converse, exchange and interact with other people. Many C2C
businesses have online operations, online auctions and classified such
as Ebay and Craig’s List are examples of very successful customer to
customer business models. These sites don’t look to directly sell goods
to their members, instead the customers are exchanging with other
customers.
3. Person-to-Person Money Lending
P2P lending is also known as “social lending” or “crowd lending.” It
has only been around since 2005, but the crowd of competitors already
includes Prosper, Lending Club, Upstart, and Funding Circle. People
use the Internet for direct person-to-person money lending. It enables
individuals to obtain loans directly from other individuals, cutting out
the financial institution as the middleman. Websites that facilitate P2P
lending have greatly increased their adoption as an alternative method
of financing. P2P lending websites connect borrowers directly to lenders.
Each website sets the rates and the terms and enables the transaction.
Mo st sit es have a wide range o f int er est rat es based o n t he
creditworthiness of the applicant. First, an investor opens an account
with the site and deposits a sum of money to be dispersed in loans. The
loan applicant posts a financial profile that is assigned a risk category
that determines the interest rate the applicant will pay. The loan applicant
can review offers and accept one. (Some applicants break up their
requests into chunks and accept multiple offers.) The money transfer
and the monthly payments are handled through the platform. The process
can be entirely automated, or lenders and borrowers can choose to haggle.
People who wish to lend money through a P2P lending site need to
consider the possibility that their borrowers will default on their loans,
just as conventional banks do. Research on P2P lending platforms has

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 indicated that defaults are much more common than those facing
traditional financial institutions, sometimes in excess of 10%.
4. Classified Ads
Internet-based classified ads have several advantages over newspaper
classified ads. They cover a national, rather than a local, audience, and
can be updated quickly and easily. Most of them are free or charge very
little. This greatly increases the supply of goods and services available
and the number of potential buyers. One of the most successful sites of
C2C classified ads is craigslist.org. Classified ads also include apartments
for rent and corporate housing across the USA. Freeclassifieds.com
allows you to buy or sell anything for free. Many newspapers also offer
their classified ads online. In some cases, placing an ad in the classified
section of one website automatically directs it into the classified sections
of numerous partners (known as cross-posting). Classified ads appear
on thousands of websites, including popular social networks such as
facebook.com and linkedin.com.
5. Personal Services
Numerous personal services are available on the Internet (lawyers, handy
helpers, tax preparers, investment clubs, dating services). Some are
located in the classified ad section, but others are listed on specialized
websites (e.g., hireahelper.com) and directories. Some are offered free;
others charge a fee. Be very careful before looking for any personal
services online. Fraud or crime could be involved (e.g., a lawyer online
may not be an expert in the area professed or may not even be a lawyer
at all).
6. File-Sharing Utilities: Napster and Others
It all started in 1999. By logging onto services such as Napster, people
were able to download files that others were willing to share for free.
Such P2P networks enabled users to search other members’ hard drives
for a particular file, including data files created by users or copied from

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 else- where. Digital music and games were the most popular files
accessed. Movies, TV shows, and videos followed shortly thereafter.
Napster had over 60 million members in 2002 before it was forced to
stop its service due to copyright violations. The Napster server, and
others that followed, functioned as a directory that listed the files being
shared by other users. Once logged onto the server, users could search
the directory for specific songs and locate the file owner. They could
then directly access the owner’s computer and download the songs they
had chosen. Napster also included chat rooms to connect its millions of
users. However, a U.S. federal court found Napster to be in violation of
copyright laws because it enabled people to obtain music files without
paying royalties to the creators of the music.

20.8 SUMMARY
To put it simply, the business model known as “consumer-to-consumer”
(C2C) relies on third-party organisations to help connect buyers and sellers of
goods and services directly. It is a sale and purchase transaction between
two customers and the business that acts as a third party play no role in
this. To facilitate such relationships, a C2C platform serves as a conduit
for buyers and sellers to connect. Many e-commerce platforms, such as
eBay, Quikr, OLX, and Countloot allow selling goods and services directly
t o co nsumers. Bo t h buyers and sellers benefit when who lesalers and
retailers are eliminated from the equation. There is a small fee for C2C
platforms to transfer money into one’s bank account. Regarding traditional
co mpany models like brick-and-mort ar ret ailers, C2C eliminates many
difficulties consumers have when interacting with them. C2C platforms
may not be able to guarantee the quality of their products. Buyers may be
suspicious of a seller ’s listing if they encounter unusual payment methods
or a lack of information. Consumers now have more options and can use third
parties at lower costs.

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20.9 GLOSSARY
 Money Lending: It is a legal process to lend money from any bank or
private lender.
 E-Commerce: Ecommerce is a method of buying and selling goods
and services online.
 Cybersecurity: Cybersecurity is the practice of protecting systems,
networks, and programs from digital attacks.
 Cybercrime: It is a type of crime involving a computer or a computer
network. The computer may have been used in committing the crime, or
it may be the target.
 Auctions: A public sale at which items are sold to the person who
offers to pay the most money
 Website: a place connect ed t o the Int ernet, where a company,
organization, etc. puts information that can be found on the World Wide
Web.
 Inventory: Inventory refers to all the items, goods, merchandise, and
materials held by a business for selling in the market to earn a profit.
 C2C: C2C stands for “consumer to consumer” or “customer to customer”

20.10 SELF ASSESSMENT QUESTIONS

1. Explain various examples of C2C E-commerce government.
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2. What are the advantages of C2C E-commerce.

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 _________________________________________________________
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3. Describe the major e-commerce applications.
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20.11 LESSON END EXERCISE

1. Write a note on C2C E-commerce
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2. Describe working of C2C E-commerce.
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3. Define C2C model.
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20.12 SUGGESTED READINGS

 “Bu rber ry: A Mo del fo r Successful Techno lo g y Int egr at io n”
ResearchGate.
 Collaborative Commerce Is the New Business Imperative by Amit Shah
(2021).
 https://www.the-future-of-commerce.com/2023/04/17/what-is-c2c-
customer-to-customer-definition/
 https://www.clarity-ventures.com/ecommerce/what-is-consumer-to-
consumer-ecommerce/the-many-applications-of-c2c-ecommerce

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