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E-Commerce Rashedul Hasan Electronic commerce • Electronic commerce consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. • Ecommerce is the purchasing, selling, and exchanging of goods and services over computer networks such as the Internet through which transactions or terms of sale are performed electronically. History • The meaning of electronic commerce has changed over the last 30 years. Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. History • The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK. • Online shopping was invented in the UK in 1979 by Michael Aldrich and during the 1980s it was used extensively particularly by auto manufacturers such as Ford, Peugeot-Talbot, General Motors and Nissan. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. New and Old Ways of Purchasing an Item Traditional Electronic Sales Cycle Commerce Commerce Step (Multiple (Single Media Medium Employed) Employed) Acquire Product magazines, Web pages Information flyers, catalogs Request item printed forms, e-mail letters New and Old Ways of Purchasing an Item Sales Cycle Traditional Electronic Step Commerce Commerce (Multiple (Single Media Medium Employed) Employed) Check catalogs, Catalogs online catalogs prices Check product phone, fax [online catalogs] availability and confirm price New and Old Ways of Purchasing an Item Sales Cycle Traditional Electronic Step Commerce Commerce (Multiple (Single Media Medium Employed) Employed) Generate order printed form e-mail, Web pages Send order fax, mail e-mail (buyer); New and Old Ways of Purchasing an Item Sales Cycle Traditional Electronic Step Commerce Commerce (Multiple (Single Media Medium Employed) Employed) Check inventory printed form, online database, at warehouse phone, fax Web pages Generate printed form online database invoice New and Old Ways of Purchasing an Item Sales Cycle Traditional Electronic Step Commerce Commerce (Multiple (Single Media Medium Employed) Employed) Receive product Shipper Shipper, Download Send payment Mail EDI (buyer); Reasons Why Your Business Needs An eCommerce Website • More and more people are looking for your products and services in the Internet. • If your customers cannot find you in the Internet, they will purchase from your competitor who has an eCommerce web site instead. • Customers can purchase your products 24 hours a day, 7 days a week from any part of the world. Reasons Why Your Business Needs An eCommerce Website • Acquiring of customers is a lot more cost- effective than hiring a flock of sales reps to push your product. • Your customers expect it. • Significantly lower advertising cost compared to traditional print, tv or radio ads. Reasons Why Your Business Needs An eCommerce Website • Improve customer service • Establish relationship with customers. • Online spending is increasing every year. Planning for e-commerce • Direct sales Many businesses use e-commerce for the direct selling of goods or services online. For some businesses such as those selling software or music, the actual sale and delivery of goods can be made online. However, for most the supply of goods will continue to require a physical delivery. Planning for e-commerce • Pre-sales You can use your website for pre-sales activities . exploiting the widespread use of the internet to generate sales leads. At its most basic this can be through the use of 'brochureware' - having an online version of your promotional materials on your site. Other options include email campaigns or online advertising to attract visitors to your own website where you can promote your products. Planning for e-commerce • Post-sales support You can also use the internet to automate aspects of your customer support to reduce the number of routine customer service calls. This can be achieved by using your site to answer the most frequently asked questions, or by putting technical information online. However you decide to use e-commerce, it is important to define your expectations from the outset. What level of sales are you hoping to make? How many sales leads are you looking to generate? What percentage reduction in customer telephone calls are you expecting to achieve? Ensure that targets are put in place so that you can measure the success, or otherwise, of your e-commerce facility. Advantages of Ecommerce • Being able to conduct business 24 x 7 x 365 . E-commerce systems can operate all day every day. Your physical storefront does not need to be open in order for customers and suppliers to be doing business with you electronically. • Access the global marketplace . The Internet spans the world, and it is possible to do business with any business or person who is connected to the Internet. Simple local businesses such as specialist record stores are able to market and sell their offerings internationally using e-commerce. • Speed. Electronic communications allow messages to traverse the world almost instantaneously. There is no need to wait weeks for a catalogue to arrive by post: that communications delay is not a part of the Internet / e-commerce world. Advantages of Ecommerce • Market space. The market in which web-based businesses operate is the global market. It may not be evident to them, but many businesses are already facing international competition from web-enabled businesses. • Opportunity to reduce costs. The Internet makes it very easy to 'shop around' for products and services that may be cheaper or more effective than we might otherwise settle for. Eliminating wholesalers and achieving a cheaper price is very much possible now a days. Advantages of Ecommerce • Allowing customer self service and 'customer outsourcing'. People can interact with businesses at any hour of the day that it is convenient to them, and because these interactions are initiated by customers, the customers also provide a lot of the data for the transaction that may otherwise need to be entered by business staff. This means that some of the work and costs are effectively shifted to customers; this is referred to as 'customer outsourcing'. Advantages of Ecommerce • A new marketing channel. The Internet provides an important new channel to sell to consumers. Peterson et al. (1999) suggest that, as a marketing channel, the Internet has the following characteristics: • the ability to inexpensively store vast amounts of information at different virtual locations • the availability of powerful and inexpensive means of searching, organizing, and disseminating such information • interactivity and the ability to provide information on demand • the ability to provide perceptual experiences that are far superior to a printed catalogue, although not as rich as personal inspection • the capability to serve as a transaction medium • the ability to serve as a physical distribution medium for certain goods (e.g., software) • relatively low entry and establishment costs for sellers No other existing marketing channel possesses all of these characteristics. Disadvantages • Time for delivery of physical products . It is possible to visit a local music store and walk out with a compact disc, or a bookstore and leave with a book. E-commerce is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. In some cases there are ways around this, for example, with electronic files of the music or books being accessed across the Internet, but then these are not physical goods. Disadvantages • Physical product, supplier & delivery uncertainty . When you walk out of a shop with an item, it's yours. You have it; you know what it is, where it is and how it looks. In some respects e-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or not they are legitimate businesses and are not just going to take your money. It's pretty hard to knock on their door to complain or seek legal recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive. Disadvantages • Perishable goods . Forget about ordering a single gelato ice cream from a shop in Rome! Though specialized or refrigerated transport can be used, goods bought and sold via the Internet tend to be durable and non-perishable: they need to survive the trip from the supplier to the purchasing business or consumer. This shifts the bias for perishable and/or non-durable goods back towards traditional supply chain arrangements, or towards relatively more local e-commerce-based purchases, sales and distribution. In contrast, durable goods can be traded from almost anyone to almost anyone else, sparking competition for lower prices. In some cases this leads to disintermediation in which intermediary people and businesses are bypassed by consumers and by other businesses that are seeking to purchase more directly from manufacturers. Disadvantages • Limited and selected sensory information. The Internet is an effective conduit for visual and auditory information: seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses: we can see pictures of the flowers, but not smell their fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it in person. And, taking into account our other senses, we can't test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does not convey the richness of experiences of the world. This lack of sensory information means that people are often much more comfortable buying via the Internet generic goods - things that they have seen or experienced before and about which there is little ambiguity, rather than unique or complex things. Disadvantages • Returning goods. Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop. • Privacy, security, payment, identity, contract. Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (eg credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply. Disadvantages • Personal service . Although some human interaction can be facilitated via the web, e-commerce can not provide the richness of interaction provided by personal service. For most businesses, e-commerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using e-commerce approaches. If your only feedback is that people are (or are not) buying your products or services online, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing online customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing Internet-based change. Disadvantages • Size and number of transactions. E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to be conducted online. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens online from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered to you in Australia. The delivery costs also mean that buying individual items from a range of different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together. Ecommerce can be broken into four main categories: • Business-to-Consumer (B2C), • B2B (Business-to-Business), • Business-to-Government (B2G) • Consumer-to-Consumer (C2C). Ecommerce offers a wider choice of services and types of making transactions. Business-to-consumer • Business-to-consumer (B2C) describes activities of businesses serving end consumers with products and/or services. • An example of a B2C transaction would be a person buying a pair of shoes from a retailer. The transactions that led to the shoes being available for purchase, that is the purchase of the leather, laces, rubber, etc. as well as the sale of the shoe from the shoemaker to the retailer would be considered (B2B) transactions. Business-to-consumer • B2C (Business-to-Consumer) is basically a concept of online marketing and distributing of products and services over the Internet. It is a natural progression for many retailers or marketer who sells directly to the consumer. The general idea is, if you could reach more customers, service them better, make more sales while spending less to do it, that would the formula of success for implementing a B2C e- commerce infrastructure. • For the consumer, it is relatively easy to appreciate the importance of e-commerce. Why waste time fighting the very real crowds in supermarkets, when, from the comfort of home, one can shop on-line at any time in virtual Internet shopping malls, and have the goods delivered home directly. Who should use B2C E- Commerce? • Manufacturers - to sell and to retail the business buyers • Distributors - to take orders from the merchants they supply • Publisher - to sell subscriptions and books • Direct Sales Firms - as another channel to reach the buyers • Entertainment Firms - to promote new products and sell copies • Information Provider - to take payment for downloaded materials • Specialty Retailers - Niche marketers of products ranging from candles, coffees, specialty foods, books use it to broaden their customer reach. • Insurance Firms - On-line rate quotes and premium payments have made it easier for this industry to attract and retain customers. In fact, virtually any business that can deliver its products or provide its services outside its doors is a potential user. • Business-to-business • Business-to-business (B2B) is a term commonly used to describe commerce transactions between businesses, as opposed to those between businesses and other groups, such as business-to-consumers (B2C) or business-to-government (B2G). More specifically, B2B is often used to describe an activity, such as B2B marketing, or B2B sales, that occurs between businesses and other businesses. • The volume of B2B transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical supply chain there will be many B2B transactions involving subcomponent or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windshields, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction. Business-to-business • It is intended to bring "Just In Time" concept to a greater height which allow businesses to coordinate with its business associate for real time transaction and improving efficiency and productivity for both organizations. Because Time is money; people are money, good management of both means more money for the business and less expenditure on others. • B2B also offers unique benefits such as less human intervention, less overhead expenses, fewer inadvertent errors, more efficiency, more advertising exposure, new markets and new physical territories equate to an intelligent method of mutual business. It is a win-win situation for both buyer and seller. Currently there are 2 main issues to deal with when conducting a B2B E- commerce • Supply Chain Management - to co-ordinate The fields of competition turned to efficiency in manufacturing. In the 80's, concepts like Lean Manufacturing, Design for Manufacturability, Just-in-Time, and Stockless Production emerged. If properly managed, the operating costs of such systems can be substantially reduced. Reduction in costs can be in the form of reduced inventory cost, obsolescence, transportation and other logistics costs, overhead and direct labor costs. All have pointed out potential savings in costs that could amount to billions when companies can engage in supply chain integration efforts. Currently there are 2 main issues to deal with when conducting a B2B E- commerce • Electronic Procurement System - using Internet technologies to handle product distribution to the buyer and from supplier while at the same time removing the complexity of multi-level paper and processing which are labor intensive. This allows the business to run more efficiently and allows purchasing professionals to have more time to focus on complex acquisitions and supplier negotiation. Besides reducing cost and hassle, it must be designed expressly for casual use by untrained employees and it must also provide extensive management controls, reporting, and integration with existing systems.
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