LESSON 1: INTRODUCTION TO E-COMMERCE

UNIT I 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.

Financing and insurance Commercial transactions: ordering, delivery, payment Product service and maintenance

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

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

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.

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 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

11.676 .1

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

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:

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
2

11.676.1

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

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

11.676.1

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 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 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
4

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

11.676.1