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Dr. (Mrs.) Jyoti Rattan &Dr. (Mrs.) Jyoti Rattan &Dr.Vijay RattanDr.Vijay Rattan

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Meaning and ExamplesMeaning and Examples

Electronic commerce means the buying andElectronic commerce means the buying andselling of products and services throughselling of products and services through

computer networks.computer networks.EE--commerce is used everywhere in everyday life.commerce is used everywhere in everyday life.

It ranges from credit card authorization,It ranges from credit card authorization,travel reservations, wire fund transferstravel reservations, wire fund transfersacross the globe, retailing, electronicacross the globe, retailing, electronicbanking etc.banking etc.

By 2003, total U.S. eBy 2003, total U.S. e--commerce sales tocommerce sales toconsumers were estimated to have reachedconsumers were estimated to have reached$108 billion, or 6% of consumer retail$108 billion, or 6% of consumer retail

spending. Some of the model success storiesspending. Some of the model success storiesof eof e--commerce are the ecommerce are the e--companies,companies,booksellerbooksellerAmazon.com; auction networkAmazon.com; auction networkeBay; and Priceline.com, etc.eBay; and Priceline.com, etc.

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Some Definitions of ESome Definitions of E--commerce:commerce:

A few definitions of eA few definitions of e--commerce quoted according to acommerce quoted according to aUnited Nations report of Electronic Commerce andUnited Nations report of Electronic Commerce and

DevelopmentDevelopment are:are:1. Electronic commerce is the carrying out of business1. Electronic commerce is the carrying out of business

activities that lead to an exchange of value acrossactivities that lead to an exchange of value acrosstelecommunication networks.telecommunication networks.

2. Electronic commerce, defined simply, is the2. Electronic commerce, defined simply, is the

commercial transaction of services in an electroniccommercial transaction of services in an electronicformat.format.

3. Electronic commerce is about doing business3. Electronic commerce is about doing businesselectronically. It is based on the electronicelectronically. It is based on the electronicprocessing and transmission of data, including text,processing and transmission of data, including text,sound and video. It encompasses many diversesound and video. It encompasses many diverseactivities including electronic trading of goods andactivities including electronic trading of goods andservices, . traditional activities ...and newservices, . traditional activities ...and newactivities ... (European Commission).activities ... (European Commission).

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EE--business helps in achieving thebusiness helps in achieving thefollowing goals:following goals:

1. Reach new markets.1. Reach new markets.2. Create new products or services.2. Create new products or services.

3. Build customer loyalty.3. Build customer loyalty.

4. Enrich human capital.4. Enrich human capital.

5. Make the best use of existing and5. Make the best use of existing andemerging technologies.emerging technologies.

6. Achieve market leadership and6. Achieve market leadership andcompetitive advantage.competitive advantage.

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Main Reasons for the Spread of EMain Reasons for the Spread of E--commerce:commerce:

1.1. Digital convergenceDigital convergence, i.e., meaning that due to, i.e., meaning that due todigital revolution almost all digital devicesdigital revolution almost all digital devices

can communicate with one another.can communicate with one another.2. Todays e2. Todays e--commerce is available tocommerce is available to anyoneanyone,,

anywhereanywhere in the world,in the world, anytimeanytime 24/7 (2424/7 (24hours a day, 7 days a week).hours a day, 7 days a week).

3. Helps in changes within organizations.3. Helps in changes within organizations.4. People have a4. People have a widespread access to IT andwidespread access to IT andPCsPCs..

5. E5. E--commerce helps incommerce helps in reducingreducing operating costsoperating costsandand increasingincreasing profit margins due to globalprofit margins due to global

operations.operations.6. Demand for6. Demand for customized productscustomized products and servicesand services

increasing.increasing.

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ADVANTAGES AND LIMITATIONS OF EADVANTAGES AND LIMITATIONS OF E--COMMERCECOMMERCE

AdvantagesAdvantages::

EE--commerce has several advantages:commerce has several advantages:

1.1. Lower CostLower Cost:: Using the Internet is cost effective.Using the Internet is cost effective.

2.2. EconomyEconomy:: EE--commerce is economical as there is nocommerce is economical as there is norental of physical store space, insurance, orrental of physical store space, insurance, or

infrastructure investment.infrastructure investment.3.3. Higher MarginsHigher Margins:: EE--commerce means higher margins.commerce means higher margins.

For example,For example, the cost of processing a conventionalthe cost of processing a conventionalairline ticket is $8 but as per an estimate processingairline ticket is $8 but as per an estimate processingthe same ticket (called ethe same ticket (called e--ticket) over the Web coststicket) over the Web costs

$1$1..4.4. Better Customer ServiceBetter Customer Service:: EE--commerce means bettercommerce means better

and quicker customer service.and quicker customer service.

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5.5. Quick Comparison ShoppingQuick Comparison Shopping::Automated onlineAutomated onlineshopping assistants calledshopping assistants called hopbotshopbots scour Net storesscour Net storesandand find deals on everything from applefind deals on everything from apple--sauce tosauce to

printer ribbonsprinter ribbons..6.6. Productivity GainsProductivity Gains:: EE--commerce means productivitycommerce means productivity

gains. For example,gains. For example, the IBM, which incorporated thethe IBM, which incorporated theWeb into every practice, figured the total costWeb into every practice, figured the total costsavings in 1999 alone was close to $1 billionsavings in 1999 alone was close to $1 billion..

7.7. TeamworkTeamwork:: EE--commerce helps people work together.commerce helps people work together.EE--mail is one example of how people collaborate tomail is one example of how people collaborate toexchange information and work on solutions.exchange information and work on solutions.

8.8. Knowledge MarketsKnowledge Markets:: EE--commerce helps createcommerce helps createknowledge markets.knowledge markets. Small groups inside big firmsSmall groups inside big firmscan act as think tanks to look for new trends andcan act as think tanks to look for new trends andproductsproducts..

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9.9. Convenience, and ControlConvenience, and Control:: Online stores areOnline stores arealwaysalways open, no traffic jams, no crowds, andopen, no traffic jams, no crowds, andcustomers do not have to carry heavycustomers do not have to carry heavyshopping bags.shopping bags.

10.10. Swapping Goods and ServicesSwapping Goods and Services:: OfferingOfferinggoods or services through barter is gaining ingoods or services through barter is gaining inpopularity through sites like WebSwap,popularity through sites like WebSwap,

BarterTrust.com, and Ubarter. The barterBarterTrust.com, and Ubarter. The barterhouse keeps a modest commission tohouse keeps a modest commission toexpedite the exchange.expedite the exchange.

11.11. CustomizationCustomization:: With information aboutWith information about

consumer tastes and preferences, digitalconsumer tastes and preferences, digitalproducts can be easily customized andproducts can be easily customized andmatched to individual needs. These are easymatched to individual needs. These are easyto reorganize, revise, or edit.to reorganize, revise, or edit.

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Limitations of ELimitations of E--commerce:commerce:

In spite of numerous advantages and benefits,In spite of numerous advantages and benefits,

there are still problems and drawbacks tothere are still problems and drawbacks toconsider before plunging into the Webconsider before plunging into the Webbusiness such as:business such as:

1.1. SecuritySecurity:: Security continues to be a problemSecurity continues to be a problemfor online businesses.for online businesses. In a 2000 EconomistIn a 2000 Economistarticle, 95 percent of Americans expressedarticle, 95 percent of Americans expressedreluctance to give out their credit cardreluctance to give out their credit cardnumbers via the Internetnumbers via the Internet..

2.2. System and Data IntegritySystem and Data Integrity:: Data protectionData protection

and the integrity of the system that handlesand the integrity of the system that handlesthe data are serious concerns.the data are serious concerns. Danger ofDanger ofComputer viruses and hackers still thereComputer viruses and hackers still there..

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3.3. System AdjustabilitySystem Adjustability:: If the company expectsIf the company expects 22million customers and 6 million show upmillion customers and 6 million show up, problems, problemsare there and even loss of customers.are there and even loss of customers.

4.4. EE--Commerce is Tough CompetitionCommerce is Tough Competition:: Small retailersSmall retailerscannot compete with ecannot compete with e--commerce giants on price orcommerce giants on price orproduct offering.product offering.

5.5. Consumer Search Is Not Efficient or CostConsumer Search Is Not Efficient or Cost--EffectiveEffective::Buyers oftenBuyers often do not trade directly with tradersdo not trade directly with traders butbut

new types of intermediariesnew types of intermediaries are essential to eare essential to e--commerce. All these intermediaries add tocommerce. All these intermediaries add totransaction costs.transaction costs.

6.6. Fulfillment ProblemsFulfillment Problems:: Too many unexpected ordersToo many unexpected ordersmay face fulfillment problems. This shakes customermay face fulfillment problems. This shakes customer

confidence in ability of econfidence in ability of e--commerce to deliver.commerce to deliver.7.7. Customer Relations ProblemsCustomer Relations Problems:: With lots of unhappyWith lots of unhappy

customers, there iscustomers, there is greater pressure on egreater pressure on e--businessbusinessto meet or exceed customer expectations on serviceto meet or exceed customer expectations on service..

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8.8. Products People Wont Buy OnlineProducts People Wont Buy Online:: In someIn someitems the customer wants toitems the customer wants to sit onsit on (like(likefurniture),furniture), feelfeel the texture of the fabric, etc.the texture of the fabric, etc.

9.9. Corporate VulnerabilityCorporate Vulnerability:: Web farmingWeb farming: The: Theidea of extracting business intelligence fromidea of extracting business intelligence fromthe competitions Web pages is called Webthe competitions Web pages is called Webfarming which is also a danger.farming which is also a danger.

10.10. Lack of Trained Manpower for Handling ELack of Trained Manpower for Handling E--CommerceCommerce:: There is aThere is a shortage of eshortage of e--literateliteratepeoplepeople in the workplace. Few managers havein the workplace. Few managers haveee--commerce skills, Internet experience, andcommerce skills, Internet experience, and

foresight.foresight.11.11. High Risk of Internet StartHigh Risk of Internet Start--UpUp:: UnlikeUnlike

established normal companies, Internetestablished normal companies, Internetstartstart--ups are still on a shaky wicket.ups are still on a shaky wicket.

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