What is E-Commerce?

What is E-Commerce?

1. What is E-Commerce?

There exists no exact definition of e-commerce. Generally it is described

as any kind of business transaction where information is exchanged

electronically.

To some people it means shopping at a website and buying products online,

to other people it means just designing a web page in a way to increase the

customers' interest. It does not necessarily describe a process of ordering

and paying online.

Electronic trading, in which a supplier provides goods or services to a

customer in return for payment is just one special case of electronic

commerce.

Other equally valid examples include internal transactions within a single

company

or provision of information to an external organisation without any charge.

E-commerce is concerned with attracting new customers and therefore it

involves advertising, public relations and collecting information for and

about customers.

It's not enough to get an online order for a product, it's also necessary

to have this product and to deliver it to the customer. So e-commerce

includes, besides of interacting with customers electronically, all the

things a "normal" business would also need.

Categories of E-Commerce

There are 3 categories of e-commerce:

- business-to-business (B2B)

- business-to-consumer (B2C)

- business-to-administration

- consumer-to-administration

An example in the business-to-business category would be a company that

uses an electronic way for ordering from its suppliers, receiving invoices

and

making payments.

The business-to-consumer category means selling things to consumers via

Internet. It is the most well-known form of e-commerce.

The business-to-administration category covers all transactions between

companies and government organisations.

The same category exists for consumers and administration, though it is

rather seldom.

As the B2C category is the most popular one, we will talk about it.

Advantages of E-Commerce

The following list describes of what may be the main advantages of e-

commerce:

- lower transaction costs (if an e-commerce site is organised well, you

won't even need any office equipment – however, it is rather seldom)

- availability (people from everywhere and at any time of the day can visit

your site, get information and put orders)

- large quantity of information (a company can build a very large catalogue

with a lot of information on the web – just think of Amazon with it's 3

Mio. articles)

- providing "up-to-date" information (you can update your site quickly and

make important information available in time)

- comparing prices and products

- quickness (the customers' orders and enquiries can be handled

immediately)

Disadvantages of E-Commerce

There are a lot of hard aspects about e-commerce as the recent failures in

this branche show:

- making people to visit your site (getting traffic to come to your web

site)

- how do you make yourself different from a (large) competition

- getting people to buy something at your site (people usually feel VERY

uneasy about buying via Internet)

- you still need money (capital) to maintain your system and provide an

effective customer support

So e-commerce does not mean that you can make profits easier than in a

"normal" business. You have to manage all the activities concerned with

marketing, finance, distribution, purchase and public relations.

These problems are the most relevat ones as competition grows all the time

and people still try to avoid buying online. Stories about hackers using

your credit card number or even large companies making losses in trying

themselves in e-commerce – all this makes people even more sceptical about

buying anything online.

However, this problems are also common in the old economy. So there are a

few other hard aspects about e-commerce:

- legality (concerning international e-commerce companies; business

contracts are defined differently by law in every country)

- ownership (the copyright problem is a very big one)

- privacy and security

What is Popular With E-Commerce?

Here you can see a list of products most popular with B2C e-commerce in

Austria.

There were about 700.000 people who bought something via Internet in

Austria in the year 2000.

Regardless of the rather bad development of the technology stock markets

during the past few months, the number of people using internet to purchase

products is likely to rise even more this year.

If we turn to the practical side of the whole thing, what are the most

relevant details about

Building an E-Commerce Site

First of all, you need what your:

- suppliers (this is not different from a normal company – without good

suppliers and efficient ways of purchasing goods you cannot offer

products)

- prices (as price comparisons are very easy on the internet, you must have

more competitive prices than the competition)

- customer relations (it means communicating with your (potential)

customers efficiently – via e-mail, forums, chat-rooms, FAQ-pages, ... –

try to provide as much information as possible)

- fulfillment and service (as for every other company in the "real" world

you must provide quick and correct handling of the customers orders as

well as an effective online-service)

will be.

Implementing an E-Commerce Site

Now you can step on to creating your site.

Generally there are 3 possibilities how you can do this:

- enterprise computing (E C means that you have to purchase your own

software and hardware and hire your own team of developers and supporters

just to create and maintain your site – big firms which are very

frequently visited by customers would usually do this).

- virtual hosting services (VHS means that all the facilieties required

(such as the necessary hard- and software, security, ...) is provided and

maintaned by another firm, for payment, of course. Usually it is a

company specialised in providing VHS).

- simplified e-commerce (Here you just pay a company specialised in

developing e-commerce systems to create a simple site for you. You must

already have the necessary hard- and software. The basic functions of a

simplified e-commerce system include displaying a product catalogue,

allowing users to browse through it and allowing them to buy items from

it).

Most of the B2C e-commerce companies use one of these systems. And there

are too many who just implement the simplified solution and forget about

offering online customer support and help and even keeping the site up-to-

date.

A lack of customer support is only one of the reasons why e-commerce is in

a crisis now.

Trends for the future

As you can see on the graph the purchase rates are rising steadily. A

recent study found out that most e-commerce website owners are generally

optimistic. Three-quarters say their online market is expanding, while two-

thirds say their ability to attract new customers is improving. Half of

those polled say they are also seeing increased loyalty from past

customers. So, as the customers get used to e-commerce, it becomes more

popular. It may not replace the common way to buy and sell products but for

most companies it offers new ways to reach their customers.

E-Commerce

Categories of E-Commerce

Benefits of E-Commerce

* lower transaction costs

* availability

* large quantity of information

* providing "up-to-date" information

* comparison of prices and products

* quickness

Disadvantages of E-Commerce

* hard to make yourself "visible"

* hard to differ from competition

* hard to make people buy something

* money

* legality

* ownership

* privacy and security

Products People Buy via Internet

Consumer Spending at European Sites 1997-2002

-----------------------

electronic

sales

post-sales

support

customer

contact

e-mail

fax, EDI

security

payment

multi-media

document

exchange

business

business

consumer

administration

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