Chapter one: An Overview to E-commerce

1.1 E-commerce Vis-à-vis Related Concepts

Before involving ourselves to the details of the course digital marketing /e-commerce, it would be
logical and quite helpful to students of the course to be very clear with the related and even
sometimes interchangeably used terms/concepts.
Commerce is the exchange of valuable goods or services, has been conducted for thousands of
years. The process of buying and selling products across a telecommunications network is often
called electronic commerce, and the electronic marketplace is sometimes called a market space.

Electronic business (e-business)- is the application of information and communication

technologies (ICT) in support of all the activities of business.
The component of e-commerce of particular interest to marketers is e-marketing—the strategic
process of creating, distributing, promoting, and pricing goods and services to a target market over
the Internet or through such digital tools as fax machines, computer modems, telephones, and CD-
ROMs. E-marketing is the means by which e-commerce is achieved.
According to Judy Strauss and his co-authors of “E-marketing” 3rd edition, e-marketing is the
application of a broad range of information technologies for:
a) Transforming marketing strategies to create more customer value through more effective
segmentation, targeting, differentiation, and positioning strategies;
b) More efficiently planning and executing the conception, distribution, promotion, and
pricing of goods, services, and ideas; and
c) Creating exchanges that satisfy individual consumer and organizational customers’
objectives.
E-marketing affects traditional marketing in two ways:
a) First, it increases efficiency in traditional marketing functions.
b) Second, the technology of e-marketing transforms many marketing strategies. The
transformation results in new business models that add customer value and/or increase
company profitability.
Just as e-commerce is the major function of the Internet, e-marketing is an integral component of
e-commerce. A closely related but somewhat narrower term than e-marketing is online
marketing. While e-marketing can involve non-computer digital technologies ranging from fax

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machines to telephones, online marketing refers to marketing activities that connect buyers and
sellers electronically through interactive computer systems.
Online marketing means using the power of online networks, computer communications and
digital interactive media to reach your marketing objectives. Online marketing will not replace
traditional forms of marketing anyway. Instead, it will both add to and subtracts form today’s
marketing mix. It will add more interactivity. But it will subtract costs. It will add more customer
choices. But it will remove marketing’s dependence on paper. It will add “information value” to
goods and services.
E-purchasing means companies decide to purchase goods, services, and information from various
online suppliers. Smart e-purchasing has already saved companies millions of dollars or pounds

Definition of E-commerce (EC)

Electronic commerce (e-commerce) is often thought simply to refer to buying and selling using
the Internet. It is the use of the internet and the web to transact business. More formally it is focused
on digitally enabled commercial transaction between and among the individual and organization
There are different perspectives in defining electronic commerce. These are:
1. Communication perspective: according to communication perspective, electronic commerce
is the delivery of goods, services, information, or payments over computer networks or any
other electronic means.
2. Business Process Perspective: according to this perspective, electronic commerce is the
application of technology toward the automation of business transaction and workflow.
3. Service perspective: it considers electronic commerce as a tool that addresses the desire of
firms, consumers, and management to cut service costs while improving the quality of goods
and increasing the speed of service delivery.
4. An online perspective – the buying and selling of products and information online.

1.3 THE DIFFERENCE BETWEEN E-COMMERCE AND E-BUSINESS

There is a debate among consultants and academics about the meaning and limitations of both e-
commerce and e-business. Some argue that e-commerce encompasses the entire world of
electronically based organizational activities that support a firm’s market exchanges—including a
firm’s entire information system’s infrastructure. Others argue, on the other hand, that e-business

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encompasses the entire world of internal and external electronically based activities, including e-
commerce.
To many people, the term “electronic commerce” means shopping on the part of the Internet called
the World Wide Web (the Web). However, electronic commerce (or e-commerce) also includes
many other activities, such as businesses trading with other businesses and internal processes that
companies use to support their buying, selling, hiring, planning, and other activities.
We think that it is important to make a working distinction between e-commerce and e-business
because we believe they refer to different phenomena. For purposes of this text, we will use the term
e-business to refer primarily to the digital enablement of transactions and processes within a firm,
involving information systems under the control of the firm. For the most part, in our view, e-
business does not include commercial transactions involving an exchange of value across
organizational boundaries.
In this text, the term electronic commerce (or e-commerce) is used in its broadest sense and includes
all business activities that use Internet technologies. Internet technologies include the Internet, the
World Wide Web, and other technologies such as wireless transmissions on mobile telephone
networks.
The Scope of E-commerce
E-commerce is the exchange of information across electronic networks, at any stage in the supply
chain, whether within an organization, between businesses, between businesses and consumers, or
between the public and private sector, whether paid or unpaid. These definitions show that
electronic commerce is not solely restricted to the actual buying and selling of products, but also
includes pre-sale and post-sale activities across the supply chain. Thus, e-commerce is
characterized by several attributes:
a) It Is About Exchanges of Digitalized Information Between Parties. This information
exchanges can represent communication between two parties, coordination of the flows of
goods and services, or transmission of electronic orders. These exchanges can be between
organizations, individuals, or both.
b) It is Technology-Enabled. E-commerce uses technology-enabled transactions. The use of the
Internet browsers in the WWW to make these transactions is perhaps the best known example
of technology-enabled customer interfaces. However, other interfaces such as ATMs,
electronic data interchange (EDI) between business-to-business partners, and electronic

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 banking by phone also fall in the general category of e-commerce. Businesses used to manage
such transactions with customers and markets strictly through human or face-to-face
interactions; in e-commerce, such transactions can be managed using technology.
c) It is Technology-Mediated. Furthermore, e-commerce is moving away from simply using
technology-enabled transactions to a more technology-mediated relationship. Purchases in the
“marketplace” at Wal-Mart are technology-enabled, in that we have a human using a cash
register that is performing PC-based order processing. The difference now is that transactions
in “marketplace” are managed or mediated not so much through human contact but largely by
technology—and, in that sense, so is the relationship with the customer.
d) It includes intra-and inter-organizational activities that support the exchange. The scope of
electronic commerce includes all electronically based intra-organizational activities that
directly or indirectly support marketplace exchanges. In this sense, e-commerce affects both
how business organizations relate to external parties—customers, suppliers, partners, and
competitors
Dimensions of Electronic Commerce
E-commerce can be Pure or partial depending based on the degree of digitization of the product or
service sold, the process of the transaction and the delivery agent.

a) Traditional e-commerce - where products or services are physical, the process of the
transaction is physical and the delivery agent is physical. For example a corner shop stocks
newspapers that are bought with cash over the counter and are taken away by the customer out
of the shop. However, in reality in today’s world, it is very rare that a business is truly traditional
because of the use of EPOS systems for payment (electronic point of sale systems).
Traditionally, business has been conducted in physical buildings, often referred to today as
brick-and-mortar marketplace.
b) Pure e-commerce- where products or services are digital, the process of the transaction is digital
and the delivery agent is digital. For example, software update services of companies like
Microsoft, Cisco, Symantec; downloading of electronic books; peer-to-peer file sharing would
also be considered pure e-commerce. The pure digital organizations are referred as Click- and-
Click.

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 c) Partial e-commerce- where either one or two of the dimensions are physical. For example, in
the case of booksellers Amazon (use Internet to order physical book from Amazon), the products
(books) are physical, the process is digital and the delivery agent is physical. The digital-physical
organizations are referred as Click- and- Mortar.

SEVEN UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY

i. Ubiquity- Internet/web technology is available everywhere at work, at home, and elsewhere via
mobile devices at any time. Availability of internet everywhere is known as a market space which
is beyond traditional boundaries and removed from temporal and geographic location. Having this
feature e-commerce results in reduction of transaction costs (cost of participating in the market)
and cognitive energy (mental effort required to complete task).
ii. Global Reach: permits commercial transactions to cross cultural and national boundaries for
more cost effectively and conveniently than traditional commerce. In contrast, most traditional
commerce is local or regional—it involves local merchants or national merchants with local
outlets. Television and radio stations, and newspapers, for instance, are primarily local and
regional institutions.
iii. Universal Standards- One strikingly unusual feature of e-commerce technologies is that the
technical standards of the Internet, and therefore the technical standards for conducting e-
commerce, are universal standards—they are shared by all nations around the world. In
contrast, most traditional commerce technologies differ from one nation to the next. For instance,
television and radio standards differ around the world, as does cell telephone technology. The
universal technical standards of the Internet and e-commerce greatly lower market entry costs—
the cost merchants must pay just to bring their goods to market. At the same time, for consumers,
universal standards reduce search costs—the effort required to find suitable products. And by
creating a single, one-world market space, where prices and product descriptions can be
inexpensively displayed for all to see, price discovery becomes simpler, faster, and more accurate.
And users of the Internet, both businesses and individuals, experience network externalities—
benefits that arise because everyone uses the same technology. With e-commerce technologies, it
is possible for the first time in history to easily find many of the suppliers, prices, and delivery
terms of a specific product anywhere in the world, and to view them in a coherent, comparative
environment. Although this is not necessarily realistic today for all or many products, it is a
potential that will be exploited in the future

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iv. Richness- Information richness refers to the complexity and content of a message (Video, audio,
and text messages are possible). Traditional markets, national sales forces, and small retail stores
have great richness: they are able to provide personal, face-to-face service using aural and visual
cues when making a sale. Prior to the development of the Web, there was a trade-off between the
number of different audiences one could each with any form of communication (reach) and the
amount of information that could be conveyed in that communication (richness): the larger the
audience reached the less rich the message
Mass advertising (such as television commercials) reaches many millions of consumers, but the
message is quite limited, often only providing brand recognition. In-store consultations about the
nature of a product provide a high richness of communication but can only reach a small number
of buyers at any one time.
E-commerce technologies have changed the traditional tradeoff between richness and reach. The
Internet and the Web can deliver, to an audience of millions, “rich” marketing messages with text,
video, and audio, in a way not possible with traditional commerce technologies such as radio,
television, or magazines.
v. Interactivity: technology that allows two-way communication between merchant and consumer.
vi. Information Density: The total amount and quality of information available to all market
participants, consumers, and merchants alike. The Internet and the Web vastly increase information
density. E-commerce technologies reduce information collection, storage, processing, and
communication costs. At the same time, these technologies increase greatly the currency, accuracy,
and timeliness of information—making information more useful and important than ever. As a
result, information becomes more plentiful, less expensive, and of higher quality.
vii. Personalization/Customization
E-commerce technologies permit personalization: merchants can target their marketing messages to
specific individuals by adjusting the message to a person’s name, interests, and past purchases. The
technology also permits customization— changing the delivered product or service based on a user’s
preferences or prior behavior.
Benefit and Limitation of Electronic commerce
Benefits to organizations
▪ Expands market to national and international markets

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▪ decrease the cost of creating, processing, distributing, storing, and retrieving paper-based
information
▪ supply chain inefficiencies can be minimized with electronic commerce
▪ Pull type processing allows for inexpensive customization of products and services and provides
a competitive advantage for companies who implement this strategy.
▪ Electronic commerce allows for many innovative business models that provide strategic
advantages and/or increase profits.
▪ It reduces the time between the outlay of capital and the receipt of products and services
▪ EC lowers telecommunications costs
▪ EC enables companies to interact more closely with customers, even if through intermediaries.
Benefits to Consumers
▪ 24hrs in 7days service of transaction and service
▪ Provides more choices
▪ EC frequently provides less expensive products with quick comparison
▪ consumers can locate relevant and detailed product information in seconds
▪ EC makes virtual auctions possible
▪ EC facilitates competition
Benefits to Society
▪ More individuals work at home and do less traveling for work or shopping
▪ Lower prices allow less affluent people to improve their standard of living
▪ Public services can be delivered at lower cost
Limitations of Electronic commerce
Technical Limitation
▪ System security, reliability, standards, and some communication protocols are still evolving
▪ telecommunication bandwidths are insufficient
▪ Software development tools are still evolving and changing rapidly
▪ Some EC software might not fit with some hardware or it may be incompatible with certain
operating systems or components
Non-Technical Limitation
▪ The cost of developing EC in-house can be very high and mistakes made due to lack of
experience may result in delays.

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▪ Security and privacy are important in the B2C area
▪ Customers do not trust an unknown, faceless, seller, paperless transactions, and electronic
money.
▪ Some customers like to touch items such as cloths, so they know exactly what they are buying
▪ Legal issues are not yet refined
▪ Many people are looking for EC to stabilize before they enter into it
▪ EC does not have enough support service
▪ There could be a breakdown in human relationships
▪ Internet access is still expensive and/or inconvenient for many potential customers.

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