Introduction to E-Commerce | E-Commerce - B Com PDF Download

Introduction

E-commerce Skills and Resources In today's digital age, the Internet and information and communications technologies (ICT) are crucial for economic growth and productivity. Internet-based technologies can enhance productivity, reduce costs, and create new market opportunities. Using the Internet and email for business is now commonplace. However, a lack of technical and management skills in ICT can be a barrier.

There are various resources available to help improve e-commerce skills, ranging from basic abilities like word processing and Internet navigation to more complex skills such as website design and database management. It's important to identify the skills needed and find the appropriate resources to develop those skills.

Resources for broadening understanding of the e-commerce environment and developing technical skills include:

• Online resources
• Books and magazines
• Seminars
• Training courses

Meaning of E-Commerce

E-Commerce, short for Electronic Commerce, is a modern business approach aimed at meeting the needs of organizations, vendors, and customers by reducing costs, enhancing the quality of goods and services, and speeding up delivery times. It involves the paperless exchange of business information using various methods such as:

• Electronic Data Exchange (EDI)
• Electronic Mail (e-mail)
• Electronic Bulletin Boards
• Electronic Fund Transfer (EFT)
• Other Network-based technologies

At its core, e-commerce is about leveraging the internet to conduct business more efficiently and effectively. This encompasses activities like buying, selling, and transferring ownership or rights to goods and services through a computer-mediated network without the use of paper documents.

E-commerce encompasses a wide range of online business activities for products and services, involving electronic interactions rather than physical exchanges. It includes various processes such as procurement, order entry, transaction processing, payment authentication, inventory control, and customer support, all facilitated by electronic means like computers, telephones, and other devices.

E-commerce can be categorized into three main types:

• Business to Business (B2B)
• Business to Consumer (B2C)
• Consumer to Consumer (C2C)

The term e-commerce is used to describe business conducted over the Internet using various applications reliant on the Internet, including e-mail, instant messaging, shopping carts, and more. It enables firms and individuals to engage in business activities over electronic networks, primarily the internet, across all major market segments.

Examples of E-Commerce include:

• Purchasing a book online.
• Reserving a hotel room via the Internet.
• Ordering a computer through a business's interactive telephone system.
• Buying office supplies online or through electronic auctions.
• Retailers ordering merchandise using EDI networks or suppliers' extranets.
• Manufacturing plants ordering components from other plants within the company using intranets.
• Withdrawing funds from ATMs.
• Accepting credit cards for online sales.
• Driving information through a company's intranet.
• Selling to consumers on a pay-per-download basis through websites.

Types of E-Commerce Transactions

E-commerce encompasses various business activities, including:

• Business-to-Business (B2B): Transactions between businesses.
• Business-to-Consumer (B2C): Sales from businesses to individual consumers.
• Extended Enterprise Computing: Also known as "newly emerging value chains," this involves collaboration and integration across different enterprises.
• D-Commerce: Commerce conducted through digital means.
• M-Commerce: Mobile commerce, involving transactions via mobile devices.

Definitions of E-Commerce

While e-commerce is a crucial part of e-business, focusing on the trading aspect, it is important to recognize that e-commerce goes beyond just online shopping. Here are some definitions that highlight different aspects of e-commerce:

• Vladimir Zwass: E-commerce involves sharing business information, maintaining relationships, and conducting transactions through telecommunications networks.
• Turban, Lee, King, and Chung: E-commerce refers to business transactions conducted via telecommunications networks, particularly the Internet.
• P. Timmers: E-commerce is about doing business electronically.
• Anita Rosen: E-commerce encompasses a wide range of online business activities for products and services.
• MK, Euro Info Correspondence Centre: E-commerce involves business transactions where parties interact electronically rather than through physical exchanges.
• Thomas L. Mesenbourg: E-commerce is associated with buying and selling over the Internet or conducting transactions involving the transfer of ownership or rights to goods or services through computer-mediated networks.
• Emmanuel Lallana, Rudy Quimbo, Zorayda Ruth Andam: E-commerce involves using electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between organizations and individuals.

In summary, e-commerce is a broad concept that includes various forms of online business activities, not just limited to online shopping.

Features of E-Commerce

E-commerce involves buying and selling goods and services over electronic systems, particularly the Internet and mobile applications. It encompasses various processes like creating, marketing, servicing, and paying for these goods and services. E-commerce is not limited to businesses; governments and the general public can also engage in these transactions. Below are the distinctive features of e-commerce technology:

1. Ubiquity:

• E-commerce is available almost everywhere and at all times, thanks to the Internet and Wi-Fi hotspots.
• Consumers can access e-commerce platforms from various devices, including computers, gaming systems, and mobile phones, both at home and on the go.
• Even without a Wi-Fi connection, individuals with data-enabled cell phones can access e-commerce services.

2. Global Reach:

• E-commerce technology expands market potential to the size of the global online population.
• It transcends cultural and national boundaries, allowing worldwide access to products and services.
• E-commerce websites can offer multilingual support and attract visitors from around the globe.

3. Universal Standards:

• E-commerce operates on technical standards shared by all nations, fostering a common online environment.
• The Internet and communication applications are essential for developing business relationships and ensuring secure and successful transactions.

4. Richness:

• E-commerce allows the use of various media, including text, images, and audio, to convey information.
• For instance, a blog post with a product video and purchase links exemplifies information richness.

5. Interactivity:

• E-commerce technologies facilitate two-way communication between merchants and consumers, enhancing the shopping experience.
• Features like product viewing from different angles, virtual shopping carts, and streamlined checkout processes are part of this interactivity.

6. Personalization:

• E-commerce technologies enable personalized marketing messages based on individual preferences and behaviors.
• For example, recommending products based on a user’s browsing history enhances the shopping experience.

7. Information Density:

• E-commerce reduces the costs associated with storing, processing, and communicating information while improving accuracy and timeliness.
• It allows for the quick gathering and dissemination of customer information, streamlining processes.

8. Social Technology:

• E-commerce leverages social media and networking applications for content sharing and e-marketing.
• Users can easily share content with a single click, enhancing visibility and engagement.

9. User-Generated Content:

• Social networks utilize e-commerce technologies to enable users to share content with a global audience.
• Consumers can promote products or services by sharing personal experiences or recommendations.
• Businesses can benefit from word-of-mouth advertising through user interactions on social networks.

Functions of E-Commerce

1. Search Engine Optimization (SEO)

• Generate unique and relevant content that aligns with your site's focus, using appropriate keywords.
• Optimize every page with an H1 tag reflecting the page's focus, along with H2 tags for important sections.
• Incorporate keywords in page titles, use internal linking to connect related content, and create friendly URLs.

2. Selecting New Products

• Understand customer preferences and sell products that meet their needs, rather than focusing on what you want to sell.
• Identify your value proposition and capitalize on your niche to attract customers.

3. Merchandising New Products

• Use high-quality images to showcase products, including hero photos for bestsellers.
• Promote new releases through newsletters and feature them prominently on your website.
• Market to customers based on their past purchases to encourage repeat sales.

4. Customer Service

• Prioritize customer satisfaction by ensuring timely and accurate order deliveries.
• Address issues promptly by reshipping damaged or incomplete orders and maintaining customer loyalty, even at a loss.

5. Monitoring your KPIs / Analytics

• Regularly review analytics reports to identify top-selling items and adjust product listings accordingly.
• Implement strategies to reduce cart abandonment by remarketing and incentivizing customers to complete their purchases.

Scope of E-Commerce

Online shopping has become a part of everyday life in India, with a wide variety of e-commerce options available to consumers. The growth of the e-commerce industry in India has been remarkable, as more people are realizing the advantages of shopping online. There is significant potential for online businesses in the future, provided they understand and cater to the needs of Indian consumers. Here are some reasons that assure the bright future of E-commerce in India:

• Increasing domain registrations
• Growing number of internet users
• Easier access to the internet
• Rising awareness of the internet, even in rural areas
• Increasing number of cyber cafes
• Growing necessity for E-commerce

1. Cash on Delivery (COD): COD has been a game-changer for the Indian e-commerce sector. It addresses the lower penetration of credit cards and builds trust among consumers who are still wary of online shopping. Currently, COD is the preferred payment method for about 55-60% of online transactions in the fashion and lifestyle categories. Efficiently managing COD is crucial for the success of e-commerce businesses in India.
2. Delivering Experiences: Focusing on customer experience is vital for gaining trust and confidence in e-commerce. This includes every interaction a customer has, from placing an order to customer service and delivery. Providing a reliable and consistent delivery experience is essential for customer satisfaction and brand reputation. The more customers trust the delivery service, the more likely they are to make repeat purchases and recommend the brand.
3. Growing the Base: India currently has over 130 million online users, with about 10% engaging in online transactions. This number is expected to surpass 300 million in the next few years, with a larger percentage of users likely to make online purchases. This expanding user base presents vast opportunities for e-commerce businesses to establish and grow their presence.
4. Growing Opportunities: The e-commerce industry is rapidly evolving and transforming the retail landscape in India. It is projected to account for 8-10% of the total retail sector in the coming years. This growth is contingent on e-commerce companies continuing to innovate, build robust technological infrastructures, and prioritize excellent customer service.
5. Online Travel Segment: The online travel segment has experienced a Compound Annual Growth Rate (CAGR) of 55.5% from 2007 to 2012, driven by increasing disposable incomes, a surge in domestic travel demand, and the overall growth of the tourism industry. Domestic travel has been a significant contributor, followed by railway tickets, international air tickets, hotel bookings, and bus tickets.
6. E-Tailing: E-tailing involves the online sale of consumer goods such as clothing, electronics, home appliances, and jewelry. Despite intense competition due to low entry barriers, major players like Amazon, Flipkart, Snapdeal, Jabong, and Myntra are leading the market. This segment is expected to grow as consumers face time constraints and seek the variety offered by e-tailing sites, although price competition will remain fierce.
7. Online Financial Services: This segment includes activities such as applying for insurance, paying bills and premiums, and other financial transactions. Online insurance policies tend to be cheaper, with premiums ranging from 40% to 60% less expensive. The convenience of online portals has also encouraged more customers to opt for online bill payments.
8. Classifieds: The classifieds segment is in a promising phase with significant growth potential. Online advertising is more cost-effective than traditional methods and is not limited by geographic constraints. The growth is primarily driven by online job listings (60% of the segment), online matrimony services, B2C classifieds, and B2B classifieds. Major players in the job market include Naukri, TimesJobs, and Monster, while Jeevansathi and Shaadi dominate the matrimonial space.

Benefits of E-Commerce

1. Increased Sales and Reduced Costs: E-commerce can boost sales and lower expenses. Effective online advertising can disseminate a small company's promotional message globally.
2. Targeting Niche Markets: E-commerce enables firms to reach specific market segments that are geographically dispersed.
3. Virtual Communities: The internet facilitates the creation of virtual communities, which serve as ideal target markets for particular products or services.
4. Global Reach: E-commerce businesses have access to customers worldwide, effectively becoming virtual multinational corporations.
5. Reduced Paper-Based Information Costs: The costs associated with creating, processing, distributing, storing, and retrieving paper-based information have decreased.
6. Customized Products and Services: E-commerce allows for the customization of products and services to meet customer requirements.
7. Lower Inventories and Overheads: E-commerce facilitates 'pull'-type supply chain management, reducing inventories and overheads by delivering through Just-In-Time (JIT) manufacturing.
8. Cost-Effectiveness of the Internet: The internet is more economical than value-added networks (VANs), and sending faxes or emails via the internet is cheaper than direct dialing.
9. Digital Delivery of Products: Software, music, and video products can be downloaded or emailed directly to customers in digital format.
10. Anytime Communication: Businesses can contact customers or suppliers at any time, and vice versa.
11. 24/7 Access: Customers can shop or conduct transactions round the clock, year-round, from almost any location.
12. Wide Range of Products: Customers have access to a wide range of products and an international selection of suppliers.

Limitations of E-Commerce

Most of the disadvantages of e-commerce stem from the newness and rapidly developing pace of the underlying technologies. Some of the key disadvantages of are given below:

1. Return on investment: Calculating the return on investment for e-commerce initiatives can be challenging due to the complexity of measuring various factors and the evolving nature of online business.
2. Talent acquisition: Many companies struggle to recruit and retain employees with the necessary technological, design, and business process skills required to establish and maintain an effective e-commerce presence.
3. Integration issues: Integrating existing databases and transaction-processing software designed for traditional commerce with the software needed for electronic commerce can be difficult.
4. Cultural and legal obstacles: Businesses may face cultural and legal challenges that hinder their ability to conduct electronic commerce.
5. System security and reliability: There is often a lack of sufficient system security, reliability, standards, and communication protocols in e-commerce systems.
6. Rapid technological change: The fast pace of technological advancement in e-commerce can create a constant feeling of needing to catch up and not being left behind.
7. Pressure to innovate: Companies feel pressured to innovate and develop new business models to exploit emerging opportunities, which can sometimes lead to detrimental strategies. The ease of copying business models over the Internet also increases this pressure.
8. Increased competition: E-commerce businesses face heightened competition from both national and international competitors, often leading to price wars and unsustainable losses.
9. Compatibility issues: Older technology and business systems may have compatibility problems with newer web-based and Internet infrastructures, leading to the need for costly and disruptive investments in new systems or infrastructure.
10. Technical knowledge: Individuals participating in the digital economy need a basic level of technical knowledge regarding computing equipment and Internet navigation.
11. Internet access costs: Costs associated with accessing the Internet, whether through dial-up or broadband, can be a barrier.
12. Computing equipment costs: The initial cost of purchasing computing equipment and the ongoing need to update technology to remain compatible with changing Internet requirements can be significant.

Opportunities and Challenges of E-commerce for Industries

E-commerce has become a crucial part of India's trade facilitation policy, especially after the economic reforms in 1991. These reforms highlighted the need to improve international trade through policy and procedural changes, which laid the groundwork for India's trade and fiscal strategies. This period also witnessed a technological revolution marked by the extensive use of the Internet, web technologies, and their applications. E-commerce has transformed and continues to transform the way business is conducted globally.

Opportunities:

There is an increasing awareness among Indian businesses about the opportunities presented by e-commerce. It offers a new platform for connecting with consumers and conducting transactions, with virtual stores operating 24/7.

a) Global Trade:

• E-business plays a significant role in the globalization of business, alongside factors like reduced trade barriers and the globalization of capital markets.
• Indian e-business has been growing at a compounded annual growth rate of 30% since FY09 and is projected to reach $18 billion (around Rs 1,116,00 crore) by FY15.

b) Virtual Businesses:

• Companies now have the capability to operate as virtual E-Businesses, using electronic means for transactions instead of traditional face-to-face interactions.

c) Lower Search Costs:

• The Internet reduces search costs and enhances price transparency. E-business is highly cost-effective as it lowers expenses related to marketing, processing, inventory management, and customer care.

d) Round the Clock Operations:

• Customers can conduct transactions or inquire about products/services at any time and from any location.

e) Greater Economic Efficiency:

• Electronic business achieves greater economic efficiency (lower costs) and faster exchanges (high-speed, accelerated, or real-time interactions).

Growth of E-commerce in India:

• The e-commerce market in India has expanded by 34% over the past decade, growing from approximately USD 600 million in 2011-12 to projected figures of USD 9 billion by 2016 and USD 70 billion by 2020.
• According to Forrester, the Indian e-commerce market is expected to grow at a compound annual growth rate (CAGR) of over 57% between 2012 and 2016, making it the fastest-growing market in the Asia-Pacific region.

Challenges:

Despite the promising growth of e-commerce in India, several challenges need to be addressed:

a) Lack of Trust in Online Payments

• Many Indian consumers are still wary of making online payments due to concerns about security and the reliability of online merchants.
• This lack of trust leads to a preference for cash on delivery (CoD), which is a less convenient option for e-commerce companies.

b) High Return Rates

• E-commerce businesses in India face the challenge of high return rates, which can be as high as 30%.
• This is partly due to the inability of customers to physically inspect products before purchase, leading to dissatisfaction with the received items.

c) Role of Social Media and Messaging Apps

• Social media platforms like Facebook and Instagram, along with messaging apps such as WhatsApp, play a crucial role in driving online sales in India.
• These platforms are often used for product discovery and customer engagement, influencing purchasing decisions.

d) Influence of Search Engines

• Search engines are a significant source of traffic for e-commerce websites, with around 40% of online shoppers discovering products through search engine results.
• This highlights the importance of search engine optimization (SEO) for online retailers.

e) Growth of Mobile Commerce

• The increasing use of smartphones is driving the growth of mobile commerce in India.
• Mobile devices are becoming the primary means through which consumers access e-commerce platforms, making mobile optimization crucial for online retailers.

f) Standardization of Postal Addresses

• Postal addresses in India are often not standardized, leading to confusion and delays in deliveries.
• When placing online orders, customers may receive calls from logistics companies seeking clarification on address details due to this lack of standardization.

g) Logistics Challenges in Smaller Towns

• Logistics remains a significant challenge in many smaller towns across India, where accessibility can be difficult.
• The preference for cash on delivery further complicates logistics operations, as it requires more intricate handling and delivery processes.
• Various logistics providers, including international companies, private Indian firms, and government-owned postal services, are working to improve the logistics infrastructure, but challenges persist.

h) Competitive Pressure and Customer Acquisition Costs

• Overfunded competitors are increasing the cost of customer acquisition for e-commerce companies in India.
• Some investors are willing to spend excessively to gain market share, creating a highly competitive environment.
• This competition benefits consumers by providing them with a wide range of choices but poses challenges for individual e-commerce businesses trying to establish themselves.

Future Scope and Growth of E-commerce

The growth of e-commerce is expected to be driven by two main factors: changes in macro-economic parameters and segment-specific factors.

a) Macro-economic Factors

i) Personal Disposable Income

• According to the International Monetary Fund (IMF), personal disposable income in India is expected to rise.
• This increase indicates a higher purchasing power and improved standard of living for the population.
• As disposable income grows, the demand for goods and services is likely to increase.
• The time-saving benefits offered by e-commerce will further contribute to the sector's growth.

ii) Internet Penetration

• Internet penetration in India has been increasing at a compound annual growth rate (CAGR) of 30% since 2007.
• The growing internet user base is expected to continue, leading to more digital media advertisements.
• Increased advertising will boost the trial and repeat rates for online retailing, driving growth in both travel and non-travel segments through enhanced customer acquisition.

iii) Demand for Debit and Credit Cards

• The demand for debit and credit cards has been steadily rising in recent years.
• Most banks now offer online banking and debit card facilities with new accounts.
• The Reserve Bank of India's (RBI) financial inclusion drive is expected to increase the number of bank accounts and, consequently, debit cards.
• This, combined with rising disposable income, will lead to more online transactions.

b) Segment-Specific Factors

i) Online Travel Segment

• The growth of the tourism industry and increasing demand for domestic travel will positively impact the e-commerce sector.
• Travel websites offering additional features like hotel booking and package tours will attract more users.
• The convenience of evaluating, comparing, and selecting offers online will further drive growth in this segment.

ii) Online Retail Segment

• In tier 2 cities, the absence of showrooms and high transportation costs hinder access to global brands.
• This limitation increases the demand for online shopping as consumers seek access to a wider range of products.

Conclusion

E-commerce is a growing force in today's economy, offering convenience and access to a wide range of products and services. Its future looks promising, especially in countries like India, where internet access is increasing. However, challenges such as trust issues, high return rates, and logistics need to be addressed. Overall, as technology advances and consumer habits evolve, e-commerce will continue to transform how we shop and conduct business.