UNIT I

INTRODUCTION TO E-COMMERCE

LESSON 1:
INTRODUCTION TO E-COMMERCE

Internet has become an important medium for doing global

business based on the state of the art technology. Electronic
commerce has two major aspects: economical and technological.
The stress of this course will show you how to get started in
the complex and exciting world of Electronic Commerce. New
standards and new facilities are constantly emerging and their
proper understanding is essential for the success of an
operation, and especially for those who are assigned a duty to
select, establish, and maintain the necessary infrastructure.

What is e-Commerce?
E-commerce 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.
Definition of E-Commerce from Different Perspective
1. Communications Perspective
EC is the delivery of information,products/services, or
payments over thetelephone lines, computer networks
orany other electronic means.
2. Business Process Perspective
EC is the application of technology towardthe automation
of business transactionsand work flow.
3. Service Perspective
EC is a tool that addresses the desire offirms, consumers,
and management tocut service costs while improving
thequality of goods and increasing thespeed of service
delivery.
4. Online Perspective
EC provides the capability of buyingand selling products
and information onthe internet and other online services.
Benefit of e-Commerce
Access new markets and extend service offerings to
customers
Broaden current geographical parameters to operate globally
Reduce the cost of marketing and promotion
Improve customer service
Strengthen relationships with customers and suppliers
Streamline business processes and administrative functions
Scope of E-Commerce
Marketing, sales and sales promotion
Pre-sales, subcontracts, supply
Financing and insurance
Commercial transactions: ordering, delivery, payment
Product service and maintenance

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Co-operative product development

Distributed co-operative workingUse of public and private
services
Business-to-administrations (e.g. customs, etc)
Transport and logistics
Public procurement
Automatic trading of digital goods
Accounting
Dispute resolution

History of E-commerce
The history of e commerce is a history of how Information
Technology has transformed business processes. Some authors
will track back the history of e commerce to the invention of
the telephone at the end of last century. EDI (Electronic Data
Interchange) is widely viewed as the beginning of ecommerce if
we consider ecommerce as the networking of business
communities and digitalization of business information.
Large organizations have been investing in development of
EDI since sixties. It has not gained reasonable acceptance until
eighties. EDI has never reached the level of popularity of the
web-based ecommerce for several reasons:
High cost of EDI prohibited small businesses and
medium-sized companies from participating in the
electronic commerce;
Slow development of standards hindered the growth of
EDI; and
The complexity of developing EDI applications limited its
adaptation to a narrow user base.
The Internet and the Web
The Internet was conceived in 1969, when the Advanced
Research Projects Agency (a Department of Defense
organization) funded research of computer networking. The
Internet could end up like EDI without the emergence of the
World Wide Web in 1990s. The Web became a popular
mainstream medium (perceived as the fourth mainstream
medium in addition to print, radio and TV) in a speed which
had never been seen before. The Web users and content were
almost doubled every a couple of months in 1995 and 1996.
The web and telecommunication technology had fueled the
stock bubble in the roaring 90s and eventually pushed
NASDAQ over 5,000 in 2000 before it crashed down to 1,200 in
2002.
XML and Web Services Besides the availability of technical
infrastructures, the popularity of the Web is largely attributed to
the low cost of access and simplicity of HTML authoring,
which are the obstacles of EDI development. The Internet and
the Web have overcome the technical difficulty of EDI, but it

has not solved the problem of slow development of e

commerce standards.
XML, as a meta markup language, provides a development tool
for defining format of data interchange in a wide variety of
business communities. Web Services offers a flexible and
effective architecture for the implementation. There is no doubt
that XML and the Web Services will shape the course of e
commerce in years to come
Concepts of Electronic Commerce
Electronic commerce is narrowly defined as buying and selling
products/services over the Internet. The concept has been
broadened to include all business activities of a sales cycle. The
distinction between E-commerce and E-business has become
blurred. Ecommerce and Electronic Commerce has been used
interchangeably, Electronic Business, however, has not been a
widely accepted terminology.
David Kosiur described the Components of Electronic
Commerce in three dimensions (Processes, Institutions and
Networks) in his 1997 book Understanding Electronic Commerce. We expand Institutions as E-commerce Players,
Networks as Technologies and add Markets as the fourth
dimension of E-commerce.
E- Commerce In Action

How e-Commerce Works

The consumer first moves through the internet to the
merchants web site. At the web site, the consumer is briefly
given an introduction to the product or services the merchant
offers. It is at this point that the consumer makes the decision
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to visit the web store by clicking on a link or button located on

the web page (e.g., Buy Now, Shop Online, or an image of a
shopping cart button are common entry points into a web
store). After choosing to visit the web store, the consumer is
typically connected to an online transaction server located
somewhere else on the internet which runs software commonly
referred to as a shopping cart application. The shopping cart
application has been setup by the merchant to display all
products and services offered, as well as calculate pricing, taxes,
shipping charges, etc.
From there, the consumer decides that he wants to purchase
something, so he enters all pertinent credit card information
and a sales order is produced. Depending on the ecommerce
implementation, the sales order can now take two totally
different paths for confirming to the consumer that the order is
officially placed.
Scenario 1
The consumers credit card information goes directly through a
private gateway to a processing network, where the issuing and
acquiring banks complete or deny the transaction. This generally
takes place in no more than 5-7 seconds and the consumer is
then informed that the order was received, the credit card was
authorized, and that the product will ultimately be shipped.
Scenario 2
The consumers entire order and credit card information is
electronically submitted back to the merchants server (usually
via email, FTP, or SSL connection) where the order can be
reviewed first and then approved for credit card authorization
through a processing network. The consumer then receives an
email shortly afterwards, confirming the order being received,
the credit card being authorized, and status on when the
product will exactly be shipped.
In both scenarios, the process is transparent to the consumer
and appears virtually the same. However, the first scenario is a
more simplistic method of setting up a shopping cart application and does not take into consideration any back office issues
that may delay shipment (i.e., items out of stock, back orders,
orders submitted after office hours or during holidays, etc.).
ManageMores eCommerce Manager relies on the second
scenario to handle all of its ecommerce orders. This second
scenario keeps the consumer accurately informed throughout
the entire ordering process.
For the sake of this tutorial, we will assume an ecommerce
implementation that uses the second scenario mentioned
above.
There are several basic steps you will need to accomplish before
becoming Commerce Enabled.
Getting a Merchant Bank Account
Web Hosting
Web Design Considerations
Registering a Domain Name
Obtaining a Digital Certificate
Let us review each step in more detail below:

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Getting a Merchant Bank Account

In order to be able to accept credit cards, you must apply for an
account with a credit card merchant account provider. This can
be relatively easy or somewhat difficult, depending on which
country you live in, and the type of business you are running.
In the past, many businesses would sign up for credit card
processing through their own commercial banking institutions.
However, the internet has now made it simple to shop around
for the best credit card discount rates from an endless amount
of merchant account providers worldwide. A simple web
search on credit card processor should be enough to get you
started. Depending on how you process credit cards (especially if
you plan on using Scenario 1 from the introduction), you may
need to find a merchant account provider that specializes in
internet payment transactions.
When choosing a merchant account provider, the following
should also be noted:
1. In order for credit card authorization to be automatic from
within ManageMore, you must ensure that your merchant
account provider has credit card processors that connect with
IC Verify, PC Charge, or AuthorizeNet (i.e.
Intellicharge Interface) software. These products are sold
separately from ManageMore and eliminate the need for
merchant terminal devices or separate time consuming steps
to approve credit cards.
2. Your merchant account provider must allow you to handle
non-swiped credit card transactions. This refers to
transactions where the customer is not present and only the
credit card number and expiration date are being used for
approving the charges.
3. When choosing a merchant account provider, you should
do a little research on the companys reputation, years in
business, and company size. Constantly changing to a new
merchant account provider when your old one goes out-ofbusiness can be costly and time consuming.
4. Avoid merchant account providers that ask for a nonrefundable fee before you get approved.
5. Avoid merchant account providers that require 1 or 2 year
contract terms. Since there are so many merchant account
providers available, it doesnt make sense to lock your
company into a commitment for any period of time.]
6. Expect merchant account providers to have some form of a
sign up fee after being approved only. These fees can come
in the form of an application fee, processing fee, software
fee, etc. Typically expect to pay around $100 to $500 for
getting an account setup to accept credit cards and
sometimes electronic checks.
7. You should be able to find a merchant account provider
that can offer you discount credit cards rates ranging from
1.75% to 2.75% and no more than .25 cent per transaction.
If not, contact Intellisoft regarding our merchant account
provider affiliates and the free Intellicharge Interface just for
signing up with them.
8. You will need a dedicated phone line or data line for
processing credit cards and electronic checks. Note: If your
computer or local area network is already connected to the

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internet, a separate data line will not be necessary if you use

the Intellicharge Interface for electronic payment.
Web Hosting
Web hosting is a very important step in this process, as this is
how you gain a presence on the internet in the first place. There
are actually two scenarios that can be used for web hosting.
Scenario1 involves setting up and maintaining your own web
server, while Scenario 2 involves farming out all web hosting
administration to an ISP. (Scenario 1 will not be discussed
further in this article as it pertains to larger organizations which
are not concerned with the high expense of running their own
web server, hiring permanent IT staff, dealing with security,
etc.)An Internet Service Provider (ISP) is a company that
provides you with internet access and limited hard drive space
on their web servers for hosting your web site. You will need to
setup an account for internet access with the ISP of your choice.
The following should be noted when searching for an Internet
Service Provider:
1. Always try to find an ISP that can provide a local telephone
number for you to connect to the internet.
2. Choose an ISP that is known for having few interruptions of
service.
3. Choose an ISP that is known for good technical support and
has knowledgeable people familiar with ecommerce sites.
4. Choose an ISP that consistently has fast connection speeds.
5. As with any company you do business with, make sure the
ISP is reputable.
Now, here is the part that gets a bit tricky to understand. The
online transaction providers that offer the actual web store itself
can sometimes be hosted by your same ISP or may require a
completely different provider, referred to as a Commerce Service
Provider (CSP). Many small businesses tend to choose CSPs
for creating a web store because it gives them the flexibility of
choosing a provider that offers competitive pricing and the best
shopping cart application for their needs. Online transaction
providers will usually provide one shopping cart solution they
feel is better than the many others that exist and differ by price,
appearance, layout, functionality, and ease of use.
The following should be noted when dealing with shopping
cart applications:
1. Online transaction providers will either sell or rent you the
use of an online shopping cart application for your
business. Be forewarned that purchasing an online
shopping cart application is very expensive. Most
businesses will rent these online web store programs rather
than committing to such a steep investment.
2. Rental pricing for the use of shopping cart programs vary
depending on number of transactions generated a month,
number of products listed on the shopping cart
application, and the sophistication of the shopping cart
application itself.
3. There are a lot of online transaction providers out there,
and they all have varying packages. Deciding on a providers

package that fits your needs is perhaps the most important

aspect.
In the case of ManageMore, the eCommerce Manager module
was designed to work with specific shopping cart applications
for proper retrieval and processing of web orders. If you plan
on using ManageMores eCommerce Manager module for the
back end office, it will be a requirement for your online transaction provider to use one of the following shopping cart
applications:
SoftCart 4.x by Mercantec
SoftCart 5.x by Mercantec
For a list of known online transaction providers that offer the
shopping cart applications mentioned above, please contact
Intellisoft.
Web Design Considerations
With little knowledge of HTML and a lot of patience, you can
probably create your own corporate web site with the help of
products like Microsoft FrontPage or DreamWeaver.
However, when adding a web store to your web site, you may
want to seek the help of professional web designers to make
the look and feel of your web store consistent with the rest of
your corporate web site. Most shopping cart applications, like
SoftCart by Mercantec, allow its templates to be modified just
for this purpose. In many cases, the same ISP or CSP you
choose can provide web design and consultation.
Registering a Domain Name
If your business already has a corporate web site implemented,
then you probably already have a domain name and dont need
to read this section.Domain names are the names for
computers on the Internet that correspond to IP (Internet
protocol) numbers to route information to addresses on the
Internet network. Domain names serve as a convenient way of
locating information and people on the Internet. In layman
terms, will it be important to you, for customers to find your
web site by typing 123.123.456.456 or by typing something
simple to remember like www.mybiz.com? Registering a
domain name is one of the most important decisions you can
make for your online identity. Your domain name says who you
are to your clients, your peers - the whole world.The basics for
registering a domain name are:1. Contact a domain name
registrar on the internet to register for a domain name. There
are many to choose from, just do a web search on domain
name registrar to get you started. 2. Select a unique domain
name you would like others to use for finding your web site.
One place to go for checking availability of a domain name is
www.whois.net3. Expect a registration fee of $10 - $100
annually for the central registrar to keep your domain name
active on the internet.There are many other questions that arise
when considering a domain name for your business that go
outside the scope of this tutorial

store will require you to have SSL before you can use their
services. Thankfully, for most people obtaining a digital
certificate is not a problem. For a minimal fee, one can usually use
the certificate owned by the web hosting company where your
page resides. If you are a larger company, however, you may
want to get your own digital certificate. A certificate costs about
$125.00 and can be obtained from Thawte or Verisign.
Conclusion
Commerce can be a very rewarding venture, but it should not be
undertaken lightly. There is a lot of information to absorb. Here
are some additional tips on creating a successful Online Store:
If you know nothing about web design, it is probably a
good idea to hire a designer
Marketing your site is very important on the web. Here are
some useful tips:
i
Submit your site to as many search engines as possible
ii Try finding web sites with similar themes and make
deals to create reciprocal links
iii Put your URL in the signature file of your email and the
header of all business correspondence
iv Word of mouth is very powerful on the Net; tell all of
your friends about your page
Investigate the web sites that are possible rivals and
formulate a strategy for competing against them
If you anticipate a lot of growth in the amount of orders
coming through your site, figure out how you are going to
cope with the increased load before you get swamped (In
other words, consider ManageMore eCommerce Manager
for your back end office control of web orders)
Now that you know the basics, you should be able to make
some informed decisions about how to proceed. Remember that
you can ask for further advice from the ecommerce company
that you decide to employ.

Notes

Obtaining a Digital Certificate

A digital certificate, also known as a SSL Server Certificate,
enables SSL (Secure Socket Layer encryption) on the web server.
SSL protects communications so you can take credit card orders
securely and ensure that hackers cannot eavesdrop on you. Any
ecommerce company that provides you with an online web
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