UNIT I E-COMMERCE

INTRODUCTION TO COMMERCE

•      Commerce is basically an economic activity involving trading or the buying and selling of goods.

For e.g. a customer enters a book shop, examines the books, select a book and pays for it. To fulfill the customer requirement, the book shop needs to carry out other commercial transactions and business functions such as managing the supply chain, providing logistic support, handling payments etc.

As we enter the electronic age, an obvious question is whether these commercial transactions and business functions can be carried out electronically.

In general, this means that no paperwork is involved, nor is any physical contact necessary. This often referred to as electronic commerce (e-commerce).

The earliest example of e-commerce is electronic funds transfer. This allows financial institutions to transfer funds between one another in a secure and efficient manner.

Later, electronic data interchange (EDI) was introduced to facilitate inter-business transactions.

E-COMMERCE

•  “E-Commerce or Electronic Commerce, a subset of E-Business, is the purchasing, selling and exchanging of goods and services over computer networks (such as Internet) through which transactions are performed”.

•      “E-Commerce can be defined as a modern business methodology that addresses the needs of organizations, merchants and consumers to cut costs while improving the quality of goods and services and increasing the speed of service delivery by using Internet”.

•  E-Commerce takes place between companies, between companies and their customers, or between companies and public administration.

MEANING

The term e-commerce or electric commerce refers to a comprehensive system of trading that uses networks of computers for buying and selling of goods, information and services. In simple words, e-commerce refers to buying and selling of goods, information and services through electronic means.

Thus, e-commerce includes buying and selling of

1. Goods- e.g. digital cameras, music systems, clothes, accessories

2. Information-e.g. subscription to some law site may give access to some court cases

3.  Services-e.g. matrimonial services through shaadi.com, placement services through naukri.com

CONCEPTS OF E COMMERCE

Electronic commerce is an emerging model of new selling and merchandising tools in which buyers are able to participate in all phases of a purchase decision, while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalogue). The processes in electronic commerce include enabling a customer to access product information, select items to purchase, purchase items securely, and have the purchase settled financially. It is an emerging concept that describes the process of buying and selling or exchanging of products, services; and information via computer networks including the Internet.

E-commerce is basically, doing business-as-usual, but across the Internet. You advertise your products or services on your Web site, as you would in any other media like newspapers, TV or brochures. Advertising on your Web site can be done in two ways.

FEW EXAMPLES OF E-COMMERCE ARE:

eBay : Buy and sell electronics, cars, fashion apparel, collectibles, sporting goods, digital cameras, baby items, coupons, and everything else on eBay.
Alibaba : Find quality Manufacturers, Suppliers, Exporters, Importers, Buyers, Wholesalers, Products and Trade Leads from our award-winning International Trade Site.

Amazon.com, an online bookstore started in 1995 grew its revenue to more than 600$ million in 1998.

Microsoft Expedia, an integrated online travel transaction site helps to choose a flight, buy an airline ticket, book a hotel, and rent a car etc. in only a few minutes.

Online shopping

Online Shopping occurs when a customer buys through a digital platform.

If you buy something online from, for example, retail giant Amazon, you are online shopping.

Internet Banking

We also call it online banking. Nearly all banks today offer services through their website.

We can transfer money, apply for an overdraft facility, and pay off our credit cards online. An overdraft facility is an arrangement with the bank in which your account may be in debit.

We can also apply for loans and even mortgages on some websites.

Electronic payments

Some companies have an online electronic payments service which allows you to perform transactions digitally. They say their service is extremely safe and effective.

Pay Pal, for example, is a global online payments system that supports online money transfers. It is an electronic alternative to traditional paper methods like money orders and checks (UK: cheques).

Purchasing tickets online

This E-commerce service helps consumers purchase tickets for concerts and movies. We can even buy bus, subway (UK: underground) and train tickets online.

There is no need go to a ticket office and stand in line. We can purchase the tickets online from the comfort of our homes.

Online Auctions

People can place bids and acquire products at competitive prices online.

E-COMMERCE VS TRADITIONAL COMMERCE

• E- Commerce is about the sale and purchase of goods or services by electronic means, particularly over the internet. In a pure e-commerce system, transactions take place via electronic means. In this case, you will access a cyber bookstore and download a digital book from a server computer.

• In a physical or traditional commerce system, transactions take place via contact between humans usually in a physical outlet such as a bookstore.

For e.g. if you want to buy a book, you will go to a physical bookstore and buy the physical book from a salesman.

• E-Commerce is more suitable for standard goods, intangible goods; whereas traditional commerce is more suitable for non standard goods, perishable goods, and expensive goods.

• Complex products such as cars are better served by integrating e-commerce and physical commerce.

Difference between Traditional Commerce and  E-commerce

BASIS FOR COMPARISON	TRADITIONAL COMMERCE	E-COMMERCE
Meaning	Traditional commerce is a branch of business which focuses on the exchange of products and services, and includes all those activities which encourages exchange, in some way or the other.	E-Commerce means carryng out commercial transactions or exchange of information, electronically on the internet.
Processing of Transactions	Manual	Automatic
Accessibility	Limited Time	24×7×365
Physical inspection	Goods can be inspected physically before purchase.	Goods cannot be inspected physically before purchase.
Customer interaction	Face-to-face	Screen-to-face
Scope of business	Limited to particular area.	Worldwide reach
Information exchange	No uniform platform for exchange of information.	Provides a uniform platform for information exchange.
Resource focus	Supply side	Demand side
Business Relationship	Linear	End-to-end
Marketing	One way marketing	One-to-one marketing
Payment	Cash, cheque, credit card, etc.	Credit card, fund transfer etc.
Delivery of goods	Instantly	Takes time

E-BUSINESS

• “E-Business is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners”.

• E-Business means connecting critical business systems directly to customers, vendors and suppliers- via the Internet, Extranet and Intranets.

• Therefore it means using electronic information to boost performance and create value by forming new relationships between and among businesses and customers.

• One of the first to use the term was IBM, in October 1997, when it launched a campaign built around e-business.

E-Business enables organizations to accomplish the following goals:-

•      Reach new markets.

•      Create new products or services.

•      Build customer loyalty

•      Make the best use of existing and emerging technologies.

•      Achieve market leadership and competitive advantage.

•      Enrich human capital.

Needs of E-Commerce

For consistently increasing the graph of business to new heights it must possess two things, first reaching new customers with steadily rate and second effectively communicate, interact with the existing ones. And if you are running an offline business then surely you already aware of these two requirements that company growth is not accomplished easily without winning the hearts of both new as well as existing customers. In accordance with that if you create an online retail store of your offline business you can win both hearts and minds of your customers at the same time, which is the ultimate pathway to profits.

As we already know that today’s world wide web is no longer just limited to finding information, sending emails or connecting with people but it is expanding their reach by offering services and products at customer’s doorsteps. In such a scenario where more and more buyers prefer making most of their purchases online, an e-commerce website of your business is the need of the hour. Thus if you want to hit the bottom lines of your business you must get in on the action

Here’s why you need to integrate an e-commerce website as part of your business model-

1. 80% of Web Population Has Made a Purchase Online

“You can’t wait for customers to come to you. You have to figure out where they are, go there and drag them back to your store.”- Paul Graham, Y COMBINATOR“

People are going online, they are leaving the traditional way of shopping from bricks and mortar store and started purchasing online. Hence in order to sell your products and to earn great revenue, you can’t wait for them to come at your store. You have to do what your competitors are already doing by allowing your customers to purchase your offered products and services when and where they want.

2. Wider Audience Reach

E-commerce website allows your business to sell you’re offered products and services to your online customers all over the world. These websites break the barrier of the geographical location of the business and offer you a vast spectrum of audience and hence the possibility of better overall sales.

3. Purchase Decisions Are Influenced By E-Commerce

“A searchable and convenient catalog that makes purchasing easy, with plenty of product reviews to encourage that sale.“

When customers prepare their mind to purchase something, they start by searching it on internet. And as you already know that your website is your online showroom, where your customers can easily check out your offered products and examine all the reasons that it is right for them. Now imagine that if you had an e-commerce website then the same product was just a few clicks away from being theirs and you’ll get money for it without physically opening or going to your store. A well managed, eye-catchy e-commerce website can influence your customers purchase decisions, by showcasing your products and offered services at your best you can get great revenues.

4. E-commerce Provides Convenience

“E-Commerce means you can fit into your customer’s busy lives, allowing them to shop  the products  where, how and when they want”

Interested customers can browse your entire product gallery just by lying on the bed watching a movie. You can also sell them recommending products that relate to the ones they are browsing. An E-commerce site saves customers’ time, makes prize comparisons easy, offers a wide variety of items to purchase and also vanishes the headache of fighting through crowded stores. This facility which is combined with quick payment, checkout, order tracking, and quick shipping process wins the heart of customers.

5. Search Engines Help You To Gain New Customers

“Everyone knows what search engines are. But relatively few know how to use them effectively.” —                  Marc Ostrofsky

One of the main factors in the success of one’s business is located. If you’re brick and mortar store is not in good location, your revenue which directly depends on the visibility of your business will never beat your expectations. Besides that, an eCommerce website offers you prime locations with less trafficked areas. With search engines, you can forget the stress of your business location which is affecting your sales and revenue directly, because here your skills to rank in searches engines determine how noticeable your business is. Potential customers, who haven’t driven past your stores or heard about you from someone else, have the ability to find you online. Every day someone is searching for something relevant to your stores products and eCommerce site gives you the ability to get found by and sell your products to them directly through the web.

6. Store Promotions Becomes Easy with E-commerce

On big festive days or on some special occasions every store has certain promotions to do and they hunt for ways to spread their hottest deals, offers to everyone. In that case, your e-commerce site will act for you like your free promotional partner to market your special deals. These online promotions will help your business flourish both for short term with big sales margins and for the long term as you encounter new customer sign-ups giving you the chance to approach these potential customers later for new deals.

7. E-commerce Can Expand your Brand Name

“When people use your brand name as a verb, that is remarkable.”- Meg Whitman, President & CEO. Hewlett Packard

Initially, when today’s big names of the e-commerce market such as Flipkart, Myntra, Amazon, Snapdeal, Paytm, Jabong, ShopClues, Ebay etc was started they were just viewed as normal superstores selling their products online rather than a serious online store. At that time nobody would have even thought that the buying and selling online will become so easy and trend in the World. After their huge sales, these sites along with the product they sell become the brand itself.

8. The Ability To Earn on Holidays As Well

“If you make a sale, you can make a living. If you make an investment of time and good service in a customer, you can make a fortune” – Jim Rohn

With your 24*7 running an e-commerce website, you’ll give your potential customers the opportunity to purchase from you not just during regular hours but throughout the day and even night. Whether it is Sunday or a national holiday, your e-store is always open for your customers. This will help you to increase your customers and make more sales.

9. Boost Conversion Rates

“Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.”- W. Edwards Deming

No matter how popular your brand is, if your conversion rate is low, then profits will be low. Having an eCommerce website helps you to increase your conversion rate since people get a chance to immediately buy from you rather than wait to visit the store.

10. Easier to set up

An e-commerce platform is definitely much easier to set up and run than an actual physical store. There are many good website development and management platforms which can easily do this task for you at reasonable rates. It is not just easier but also a lot cheaper.

Advantages of E-Commerce to Customers

•      Reduced Prices:- Costs of products are reduced since the stages along the value chain are decreased. For instance, intermediaries can be eliminated by the company directly selling to the customers instead of distributing through a retail store.

•      24-Hour Access:- Online businesses never sleep as opposed to brick and mortar businesses. E-Commerce allows people to carry out businesses without the barriers of time.

•      Global Marketplace:- Consumers can stop anywhere in the world. Currently according to World Trade Organization (WTO) there are no custom duties put on products bought and traded globally electronically. This also provides wide selection of products and services to consumers.

•      More Choices:- Provides consumers with more choices. For e.g. before making any purchase, customer can study about all the major brands and features of any item. It also provides consumers with less expensive products and services by allowing them to shop in many places.

 

Advantages of E-Commerce to Businesses

(The advantage is a condition or circumstances that puts one in a favourable. A benefit is an advantage or profit gained from something)

•      Increased potential market share:- The internet enables businesses to have access to international markets thereby increasing their market share. Companies can also achieve greater economies of scale.

•      Low cost Advertising:- Advertising on the internet costs less than advertising on print or television depending on the extent of advertisement.Advertising on the internet itself is less costly since there is less cost   associated with it in terms of printing and limited television spots.

•      Low barriers to Entries:- Anyone can start up a company on the internet. Start-up costs are a lot lower for companies since there is less need for money for capital.

Benefits of E-Commerce

E-Commerce is gaining popularity because it offers the following benefits.

1.           Global Market: E-Commerce enables business firms to reach out to customers all over the world who have an access to internet. Thus, the whole world becomes a potential market for business enterprises.

2.           Lower Transaction Cost: E-Commerce reduces the cost of business transactions substantially. For instance, the number and cost of customer service representatives in a bank can be reduced by using net banking.

3.           Higher Margins: An e-commerce firm can earn higher margins as the transaction costs are reduced to a great extent.

4.           24X7 working: A website is open all 24 hours, 7 days in a week it can, thus, take orders, keep an eye on delivery of goods and receive payments at any time. A business firm can provide information about its products and services to customers around the clock.

5.           Wide Choice: For the consumers, the whole world becomes a shop. They can look at and evaluate the same product at different websites before making a purchase decision.

6.           Customer Convenience: Customers can shop from home or office. They don’t need to stand in long queues to talk to a salesman. They can read details regarding model numbers, prices, features etc. of the product from the website and purchase at their own convenience. Payments can also be made online.

7.           Direct Contact between Business and Consumer: E-Commerce enables business firms to establish a direct contact with their customers by eliminating middlemen.

8.           Customer Satisfaction: E-Commerce allows quick response and redressal to consumer complaints. This helps in increasing customer satisfaction.

Challenges of e-commerce

Each new year brings new technology for ecommerce companies and online retailers. And while that can mean exciting new growth opportunities, it can also present challenges for businesses that aren’t armed with the knowledge, the personnel, or the cash flow to maximize their results. 

1. Finding the right products to sell

1.          Shopping cart platforms like Shopify have eliminated many barriers of entry.  Anyone can launch an online store within days and start selling all sorts of products.

2.          Amazon is taking over the eCommerce world with their massive online product catalog.  Their marketplace and fulfillment services have enabled sellers from all over the world to easily reach paying customers.

3.          Let’s not forget about Aliexpress.  They’ve simplified product sourcing by giving access to Chinese manufacturers within a couple of clicks.

4.          All of this has made it very difficult for retailers to source unique products unless you they decide to manufacture your own.

2. Attracting the perfect customer

1.          Online shoppers don’t shop the same way as they used to back in the day.  They use Amazon to search for products (not just Google).  They ask for recommendations on Social Media. They use their smartphones to read product reviews while in-store and pay for purchases using all sorts of payment methods.

2.          Lots has changed including the way they consume content and communicate online.  They get easily distracted with technology and social media.

3.          Retailers must figure out where their audience is and how to attract them efficiently without killing their marketing budget.

3. Generating targeted traffic

1.          Digital marketing channels are evolving.  Retailers can no longer rely one type of channel to drive traffic to their online store.

2.          They must effectively leverage SEO, PPC, email, social, display ads, retargeting, mobile, shopping engines and affiliates to help drive qualified traffic to their online store.  They must be visible where their audience is paying attention.

4. Capturing quality leads

1.          Online retailers are spending a significant amount of money driving traffic to their online store.  With conversion rates ranging between 1% to 3%, they must put a lot of effort in generating leads in order to get the most out of their marketing efforts.

2.          The money is in the list.  Building an email subscribers list is key for long term success.  Not only will help you communicate your message, but it will also allow you to prospect better using tools such as Facebook Custom Audiences.

3.          Not all leads are created equally.  Retailers must craft the right message for the right audience in order to convert them into leads with hopes of turning them into customers.

5. Nurturing the ideal prospects

1.          Having a large email list is worthless if you’re not actively engaging with subscribers.

2.          A small percentage of your email list will actually convert into paying customers.  Nonetheless, retailers must always deliver value with their email marketing efforts.

3.          Online retailers put a lot of focus on communicating product offering as well as promotions, but prospects need more than that.  Value and entertainment goes a long way but that requires more work.

6. Converting shoppers into paying customers

1.          Driving quality traffic and nurturing leads is key if you want to close the sale.  At a certain point, you need to convert those leads in order to pay for your marketing campaigns.

2.          Retailers must constantly optimize their efforts in converting both email leads as well as website visitors into customers.  Conversion optimization is a continuous process.

7. Retaining customers

1.          Attracting new customers is more expensive than retaining the current ones you already have.

2.          Retailers must implement tactics to help them get the most out of their customer base in increase customer lifetime value.

8. Achieving profitable long-term growth

1.          Increasing sales is one way to grow the business but in the end, what matters most is profitability.

2.          Online retailers must always find ways to cut inventory costs, improve marketing efficiency, reduce overhead, reduce shipping costs and control order returns.

9. Choosing the right technology & partners

1.          Some online retailers may face growth challenges because their techonology is limiting them or they’ve hired the wrong partners/agencies to help them manage their projects.

2.          Retailers wanting to achieve growth must be built on a good technology foundation.  They must choose the right shopping cart solution, inventory management software, email software, CRM systems, analytics and so much more.

3.          In addition, hiring the wrong partners or agencies to help you implement projects or oversee marketing campaigns may also limit your growth.  Online retailers must choose carefully who to work with.

10. Attracting and hiring the right people to make it all happen

1.          Let’s face it, online retailers may have visions and aspirations but one true fact remains, they need the right people to help them carry out their desires.

2.          Attracting the right talent is key in order to achieve desirable online growth.  Also, having the right leader plays an even bigger role.

3.          Retailers should be out there getting their name out within the online community by attending                    e-commerce conferences, speaking at events and networking.  Employees want to work for companies that care about them and their future.  Having a sense of purpose is key.