E-COMMERCE

What is Ecommerce?

E-commerce is the activity of buying or selling of products on online services or over the
Internet.
Electronic commerce draws on technologies such as mobile commerce, electronic
funds
transfer, supply chain management, Internet marketing, online transaction processing,
electronic
data interchange (EDI), inventory management systems, and automated data collection
systems.
Modern electronic commerce typically uses the World Wide Web for at least one part
of the
transaction's life cycle although it may also use other technologies such as e-mail.

Some limitations of eCommerce

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1. Huge technological cost

Since everything is online, it requires the use of creative resources and also a
large amount of investment. The costs have become very high due to an
excessive 4G and 5G data usage for online work.Also, a huge investment is
required for using advanced and high-speed internet connectivity. Advanced
technology has given the business better productivity, posing an advantage in the
long run.

1. Security

This is one of the most common issues that many e-commerce businesses and
customers face. There are many websites that are not capable of authenticating
transactions nor have those features.This may lead to numerous fraudulent
activities and threaten the business. Also, many businesses need to save various
customer information like customer’s name, address, contact number, email id,
age, etc.

2. Employee cost

Employee cost is also a limitation of e-commerce business. For any business,

whether online or offline, having dedicated employees is crucial. You need a
professional team to execute different tasks and fulfill the organization’s
objective.Whether your startup is small or big, you need employees to yield great
results. Therefore you will have to incur costs on hiring and paying employees’
remuneration.

3. Huge advertising cost

In order to promote your business, a lot of money has to be spent advertising

initially. Advertising has the potential to increase your reach, and this way, you
can reach maximum people. However, advertising in several mediums can be
expensive.Advertising costs can pose a disadvantage if the business cannot make
the deal convertible. Various advertising mediums have varied costs, and many
online advertising portals usually charge on a pay-per-click basis.

4. High shipping cost

Shipping can be a major challenge for most e-commerce businesses. When you
are delivering B2C orders, shipping can pose a major challenge and
disadvantage.Often, shipping cost involves a large part of your profit which may,
in turn, decrease your overall margin. Shipping cost, however, usually depends
upon the size and weight of the product. It can cost higher in B2C orders as
compared to B2B orders.

5. Cost of packaging

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Packaging, whether Primary, Secondary, or Tertiary, involves a lot of costs. The
cost depends upon the nature of the product. It may cost a lot if the package is
bulky and large.Heavy items may even involve a higher shipping cost, increasing
the overall cost of transporting the product. B2C transactions have a lower
packaging cost since a few products are being dispatched.

Electronic Data Interchange (EDI) – is the exchange of business documents between any
two trading partners in a standard or structured, machine-readable form. EDI is used to
electronically transfer documents such as purchase orders, invoices, and shipping bills,
and communicate with one another. EDI helps to eliminate the paper-based system,
reduces data entry tasks, and improves the business cycle.

EDI Documents

Following are the few important documents used in EDI –

 Invoices
 Purchase orders
 Shipping Requests
 Acknowledgment
 Business Correspondence letters
 Financial information letters

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Components of Electronic Data Interchange EDI

 Standard Document Format – A standard format agreed upon by both parties which do
not require complicated hardware or software to access information. Both parties
communicate directly through a business application.

 Translator and Mapper – A translator is used to convert the raw data into meaningful
information according to specifications provided by a mapper. A mapper is used to
create conversion specifications. It compiles the specification and then gives instructions
to the translator on how to convert the data.

 Communication Software – Communication software is used to transmit data and

convert business documents into a standard format. It follows a standard communication
protocol which is incorporated into the software.

 Communication Network – A communication network provides a direct link between

trading partners who are willing to exchange business documents through Electronic
Data Interchange EDI.
 Modem – It is a hardware device that transmits data from one computer to
another.
 VAN – A network that connect the computer system of one
organization to another.
 Point to Point link – A direct communication link between two computers.


 Business partners – The exchange of EDI documents is typically between two different
companies, referred to as business partners or trading partners. For example, Company A may buy
goods from Company B. Company A sends orders to Company B. Company A and Company B
are business partners

Features of EDI

 Robust, proven integration with your business system. EDI is among the
highest-value integrations in the accounting systems environment because this
eliminates time-consuming, error-prone manual effort that would otherwise be
necessary to get orders, invoices, and other EDI data in and out of the accounting
system
 A simple, seamless user experience. Business users in departments like
customer service and shipping need to process EDI transactions efficiently and
accurately, without having to become EDI experts.
 Scalability for specific needs. One should look for an EDI software provider that
allows to implementation of only the features needed now, with the option to add
more capabilities (e.g., support for remote warehouse ) on-demand in the future.
 The lowest total cost of ownership. A low initial cost doesn’t mean that TCO will
be low also. Monthly network charges can vary widely, for example. Likewise,
many providers charge for updating trading partner mapping specifications, which
change all the time.
 Easy onboarding of new trading partners. Growing companies need to onboard
new EDI trading partners quickly and smoothly. One should make sure an EDI
provider offers prebuilt templates and rules to make onboarding and compliance
with major retailers and other partners quick and painless.

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 Web-based and managed services options

EDI for small businesses, and even large companies, is more and more commonly
web-based. Choosing EDI ―in the cloud, compounds the advantages of a
web-based accounting/ERP system, like faster time-to-value, reduced IT
complexity, ubiquitous access to data, and fewer firewall, security, and
connectivity worries.

Advantages of an EDI System

Following are the advantages of having an EDI system.

 Reduction in data entry errors. - Chances of errors are much less while using a
computer for data entry.
 The electronic form of data - It is quite easy to transfer or share the data, as it is
present in electronic format.
 Paperwork reduction - As a lot of paper documents are replaced with electronic
documents, there is a huge reduction in paperwork.
 Cost Effective - As time is saved and orders are processed very effectively, EDI
proves to be highly cost-effective.
 Expedite transmission -Information is transmitted from one organization to
another organization efficiently and swiftly.
 Data Validation-Data validation is automatically done.
 Low cost-Lower administrative, resource, and maintenance costs.
 Faster processing-With the help of EDI, business processes can be executed at a
much faster rate as compared to the traditional method of sending information.
 Building long-term relationships-EDI helps in building long-term relationships
with trading partners and hence helps in business growth.
 Reduction in error-EDI has discarded manual data entry and paperwork. So there
are minimal chances of error.

Drawbacks of EDI

 Expensive-Setup and maintenance of some of the formats of EDI are expensive.

 Initial setup is time consuming-Initial cost to setup EDI is time-consuming.
 EDI standard changes-The business processes depending on the EDI standard
format. If any of the standard format changes then the business process has to be
changed accordingly.
 System electronic protection-An EDI enabled system needs electronic protection
from viruses, hacking, malware, and other frauds.
 Staff training cost-Staff needs the training to run EDI-enabled software.
Investment has to be done in training.
 Proper backup should be maintained as the whole data depends on EDI. In case
of any crash of t h e EDI system, proper backup has to be maintained and an
extra cost is required for it.

IMPLEMENTING EDI
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It has defined six steps to successfully implement EDI technology in an organization:

 Complete understanding of EDI: The depth of knowledge a company acquires on

EDI depends on the internal efforts spent. If no external consultants are hired then
the level of knowledge should be high.

 Agreed on standards with business partners: After finding a suitable business

partner, agreements should be made concerning standards, transactions to be
exchanged, message syntax, file transfer protocol, etc.
 Modifying existing systems: The host computer applications should be modified
so that EDI information is incorporated or integrated directly into the
applications. Good EDI software should provide an application interface for many
different applications.

 Translate data: Various translation modules are required to translate transactions

into EDI messages according to the EDI standard being used. The translation is
required of the data into the EDI format as well as the translation of data from an
EDI package into a format compatible with the in-house application.
 Prepare communications: A network connection to various trading partners is
required via either a Value Added Network (VAN) or a direct connection.
 Management and audit of the whole process: Consistent management and
auditing of the entire process must be established and maintained. The tasks
include archiving transactions, inspecting error logs, and ensuring the security of
the system.

Advantages to Organizations
 E-commerce helps organizations to reduce the cost to create process, distribute, retrieve and
manage paper-based information by digitizing the information.
 E-commerce improves the brand image of the company.
 E-commerce helps organizations to provide better customer services.
 E-commerce helps to simplify business processes and makes them faster and more efficient.
 E-commerce reduces the paperwork.
 E-commerce increases the productivity of organizations. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request
comes from a customer and it uses a just-in-time manufacturing way.

Advantages to Customers
 It provides 24x7 support. Customers can enquire about a product or service and place orders
anytime, anywhere from any location.
 E-commerce application provides users with more options and quicker delivery of products.
 E-commerce application provides users with more options to compare and select the cheaper
and better options.
 E-commerce provides options for virtual auctions.
 It provides readily available information. A customer can see the relevant detailed information
within seconds, rather than waiting for days or weeks.
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 E-Commerce increases the competition among organizations and as a result, organizations

provide substantial discounts to customers.

Advantages to Society
 Customers need not travel to shop for a product, thus less traffic on the road and low air
pollution.
 E-commerce helps reduce product costs, so less affluent people can also afford the products.
 E-commerce has enabled rural areas to access services and products that are otherwise
unavailable to them.
 E-commerce helps the government to deliver public services such as healthcare, education,
and social services at a reduced cost and in an improved manner.

DISADVANTAGES /LIMITATIONS OF E-COMMERCE

Disadvantages of e-Commerce for Customers
 Unable to personally examine the products
 Product suitability
 Privacy and security in online purchases
 Fraud with credit cards
 Delays in receiving products
 Inability to identify fraud
 Quality Concerns
 Hidden cost
 Lack of personal interaction
 Website fraud.
Disadvantages of e-Commerce to Business
 Update hardware and software regularly
 Website maintenance at a periodic interval
 Higher costs and expertise ( Technical workforce ) for electronic commerce infrastructure
 The readiness of the site
 Outstanding logistics needs
 Security and credit card issues
 Fraudulent orders
 Sufficient internet services
 Cultural Differences

E-Commerce or Electronic Commerce means buying and selling of goods, products, or services over the
internet.

The major differences between Electronic commerce (E-commerce) and traditional commerce are as
follows −
E-commerce Traditional commerce

It is cost-effective. It is less cost-effective than E-commerce.

No or minimal role of middlemen. Middlemen have a role to play in traditional

commerce.

Less overhead or operating cost. High overhead or operating costs than E-

commerce

More effective CRM. Standard CRM.

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E-commerce Traditional commerce

The size of the business is easily The size of the business is not easily expandable.
expandable.

The new product is easily introduced. The introduction of new products is not easy.

No physical inspection of goods by buyers. Physical inspection of goods by buyers.

24*7 accessibility. The limited time of accessibility.

High qualified staff is required. High qualified staff is not required.

Screen-to-face customer interaction. Face-to-face customer interaction.

The chances of fraud are very high. The chances of fraud are less compared to E-
commerce.

The Rise of Mobile Commerce

Mobile commerce was first born in 1997 when two mobile device-enabled Coca-Cola vending were installed
in Finland. Mobile commerce gained speed over the next two decades, as more users began conducting
transactions from their mobile devices and websites evolved to provide a better user experience.
Today, both consumers and business buyers turn to mobile devices for product research and coupons, with
engagement on social media becoming increasingly popular.

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