CHAPTER EIGHT
INTRODUCTION TO ELECTRONIC COMMERCE
E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or
data, over an electronic network, primarily the internet. These business transactions occur either as business-to-
business (B2B), business-to-consumer (B2C), consumer-to-consumer or consumer-to-business. The terms e-
commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to
the transactional processes that make up online retail shopping.
In the last decade, widespread use of e-commerce platforms such as Amazon and eBay has contributed to substantial
growth in online retail. In 2007, e-commerce accounted for 5.1% of total retail sales; in 2019, e-commerce made up
16.0%.
How does e-commerce work?
E-commerce is powered by the internet, where customers can access an online store to browse through, and place
orders for products or services via their own devices.
As the order is placed, the customer's web browser will communicate back and forth with the server hosting the
online store website. Data pertaining to the order will then be relayed to a central computer known as the order
manager -- then forwarded to databases that manage inventory levels, a merchant system that manages payment
information (using applications such as PayPal), and a bank computer -- before circling back to the order manager.
This is to make sure that store inventory and customer funds are sufficient for the order to be processed. After the
order is validated, the order manager will notify the store's web server, which will then display a message notifying
the customer that their order has been successfully processed. The order manager will then send order data to the
warehouse or fulfillment department, in order for the product or service to be successfully dispatched to the
customer. At this point tangible and/or digital products may be shipped to a customer, or access to a service may be
granted.
Platforms that host e-commerce transactions may include online marketplaces that sellers simply sign up for, such as
Amazon.com; software as a service (SaaS) tools that allow customers to 'rent' online store infrastructures; or open
source tools for companies to use in-house development to manage.
Objectives of E-Commerce
The various objectives of the e-commerce can be laid down as follows:
1. Development of Business-Relationship:
The business development can be done through the e-commerce being the primary and the basic object. As their
direct contact in between the company and the consumer, their business relationship will be enhanced. Hence the
area of the market can be increased.
2. Better-Customer Service:
As it is done round the clock, the customer will always have online help regarding the products. As all the
information is furnished to the customer, it becomes easy to him to choose the best product among all other
alternatives. As even the service can also be done through the net immediately, the customer service will be
ballooned. By highlighting the customer service, the companies are trying to subjugate a lion-share in the market.
3. Getting more Customers:
In these days it becomes the mandate of the companies to double its customers, and this can be done by rendering
the value add service and maintaining the quality. Hence, it is also one of the primary objectives of the companies
which supply impetus for the robust growth in sales and overall profit.
Important features of E-Commerce
E-Commerce has pertain key features which are explained as follows:
1. E-Commerce is Technology-Enabled:
Traditional commerce is taking place since times immemorial but E-commerce is result of integration of digital
technology with business processes and commercial transactions. The technological foundations of E-commerce are
internet, WWW and various protocols.
2. Technology Mediated:
In E-commerce buyers and sellers meet in cyber space rather than physical place. Hence E-commerce does not
involve face to face contact.
3. Universality:
COMMERCE II CHAPTER 8 INTRODUCTION TO E-COMMERCE NOTES PREPARED BY MR. A. AMBIA Page 1
, Buying and selling take place through websites in E-Commerce. The websites can be accessed from anywhere
around the globe at any time therefore it possess the feature of universality.
4. Intercommunication:
E-commerce technology ensures two way communications between buyer and seller. On one hand by using E-
commerce firms can communicate with customers through E-commerce enabled websites. On the other end,
customers can also fill order forms, feedback forms and can communicate with business operating firms.
5. Delivery of Information:
E-commerce serves as the best channel of communication. E-commerce technologies ensure speedy delivery of
information at very low cost and considerably increase information density as well.
6. Electronic Completion of Business Processes:
By using E- commerce we can perform business transactions like accounting and inventory through computers at
global level.
7. Virtual Communities:
Virtual Communities are online communities created by means such as chat rooms and specifically designed sites
like, where people can interact with each other having common interest using the internet.
8. Inter-Disciplinary in Nature:
Implementation of E-Commerce needs a lot of knowledge of managerial, technological, social and legal issues.
Besides this, understanding of consumer behaviour, marketing tools and financial aspects is as crucial as designing
interactive E- Commerce websites.
9. Customization:
With the use of E-commerce technology, the world is moving from mass-production to mass-customization. Product
customization ensures that goods are tailor made as per the requirements and preferences of customers.
Like Dell Computers Website www(dot)dell(dot)com enables the consumers to mention configuration of a
Computer and then the product is made available and delivered as per the configuration ordered by the customer.
Main types of E-Commerce
The major different types of E-Commerce are:
I. Business-to-Business (B2B);
II. Business-to-Consumer (B2C);
III. Business-to-Government (B2G);
IV. Consumer-to-Consumer (C2C);
V. Mobile Commerce (M-Commerce).
Types of e-commerce
Business-to-business (B2B) e-commerce refers to the electronic exchange of products, services or information
between businesses rather than between businesses and consumers. Examples include online directories and product
and supply exchange websites that allow businesses to search for products, services and information and to initiate
transactions through e-procurement interfaces.
In E-Commerce B2B, transactions are usually carried out through Electronic Data Interchange or EDI. EDI is an
automated format of exchanging information between businesses over private networks. EDI is composed of
standards that enable businesses’ computers to conduct transactions with each other, without human intervention.
For Example- Manufacturers and wholesalers are B2B companies.
Business-to-consumer (B2C) is the retail part of e-commerce on the internet. It is when businesses sell products,
services or information directly to consumers. The term was popular during the dot-com boom of the late 1990s,
when online retailers and sellers of goods were a novelty.
Today, there are innumerable virtual stores and malls on the internet selling all types of consumer goods. The most
recognized example of these sites is Amazon, which dominates the B2C market.
Consumer-to-consumer (C2C) is a type of e-commerce in which consumers trade products, services and
information with each other online. These transactions are generally conducted through a third party that provides an
online platform on which the transactions are carried out.
Online auctions and classified advertisements are two examples of C2C platforms, with eBay and Craigslist being
two of the most popular of these platforms. Because eBay is a business, this form of e-commerce could also be
called C2B2C -- consumer-to-business-to-consumer.
COMMERCE II CHAPTER 8 INTRODUCTION TO E-COMMERCE NOTES PREPARED BY MR. A. AMBIA Page 2
INTRODUCTION TO ELECTRONIC COMMERCE
E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or
data, over an electronic network, primarily the internet. These business transactions occur either as business-to-
business (B2B), business-to-consumer (B2C), consumer-to-consumer or consumer-to-business. The terms e-
commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to
the transactional processes that make up online retail shopping.
In the last decade, widespread use of e-commerce platforms such as Amazon and eBay has contributed to substantial
growth in online retail. In 2007, e-commerce accounted for 5.1% of total retail sales; in 2019, e-commerce made up
16.0%.
How does e-commerce work?
E-commerce is powered by the internet, where customers can access an online store to browse through, and place
orders for products or services via their own devices.
As the order is placed, the customer's web browser will communicate back and forth with the server hosting the
online store website. Data pertaining to the order will then be relayed to a central computer known as the order
manager -- then forwarded to databases that manage inventory levels, a merchant system that manages payment
information (using applications such as PayPal), and a bank computer -- before circling back to the order manager.
This is to make sure that store inventory and customer funds are sufficient for the order to be processed. After the
order is validated, the order manager will notify the store's web server, which will then display a message notifying
the customer that their order has been successfully processed. The order manager will then send order data to the
warehouse or fulfillment department, in order for the product or service to be successfully dispatched to the
customer. At this point tangible and/or digital products may be shipped to a customer, or access to a service may be
granted.
Platforms that host e-commerce transactions may include online marketplaces that sellers simply sign up for, such as
Amazon.com; software as a service (SaaS) tools that allow customers to 'rent' online store infrastructures; or open
source tools for companies to use in-house development to manage.
Objectives of E-Commerce
The various objectives of the e-commerce can be laid down as follows:
1. Development of Business-Relationship:
The business development can be done through the e-commerce being the primary and the basic object. As their
direct contact in between the company and the consumer, their business relationship will be enhanced. Hence the
area of the market can be increased.
2. Better-Customer Service:
As it is done round the clock, the customer will always have online help regarding the products. As all the
information is furnished to the customer, it becomes easy to him to choose the best product among all other
alternatives. As even the service can also be done through the net immediately, the customer service will be
ballooned. By highlighting the customer service, the companies are trying to subjugate a lion-share in the market.
3. Getting more Customers:
In these days it becomes the mandate of the companies to double its customers, and this can be done by rendering
the value add service and maintaining the quality. Hence, it is also one of the primary objectives of the companies
which supply impetus for the robust growth in sales and overall profit.
Important features of E-Commerce
E-Commerce has pertain key features which are explained as follows:
1. E-Commerce is Technology-Enabled:
Traditional commerce is taking place since times immemorial but E-commerce is result of integration of digital
technology with business processes and commercial transactions. The technological foundations of E-commerce are
internet, WWW and various protocols.
2. Technology Mediated:
In E-commerce buyers and sellers meet in cyber space rather than physical place. Hence E-commerce does not
involve face to face contact.
3. Universality:
COMMERCE II CHAPTER 8 INTRODUCTION TO E-COMMERCE NOTES PREPARED BY MR. A. AMBIA Page 1
, Buying and selling take place through websites in E-Commerce. The websites can be accessed from anywhere
around the globe at any time therefore it possess the feature of universality.
4. Intercommunication:
E-commerce technology ensures two way communications between buyer and seller. On one hand by using E-
commerce firms can communicate with customers through E-commerce enabled websites. On the other end,
customers can also fill order forms, feedback forms and can communicate with business operating firms.
5. Delivery of Information:
E-commerce serves as the best channel of communication. E-commerce technologies ensure speedy delivery of
information at very low cost and considerably increase information density as well.
6. Electronic Completion of Business Processes:
By using E- commerce we can perform business transactions like accounting and inventory through computers at
global level.
7. Virtual Communities:
Virtual Communities are online communities created by means such as chat rooms and specifically designed sites
like, where people can interact with each other having common interest using the internet.
8. Inter-Disciplinary in Nature:
Implementation of E-Commerce needs a lot of knowledge of managerial, technological, social and legal issues.
Besides this, understanding of consumer behaviour, marketing tools and financial aspects is as crucial as designing
interactive E- Commerce websites.
9. Customization:
With the use of E-commerce technology, the world is moving from mass-production to mass-customization. Product
customization ensures that goods are tailor made as per the requirements and preferences of customers.
Like Dell Computers Website www(dot)dell(dot)com enables the consumers to mention configuration of a
Computer and then the product is made available and delivered as per the configuration ordered by the customer.
Main types of E-Commerce
The major different types of E-Commerce are:
I. Business-to-Business (B2B);
II. Business-to-Consumer (B2C);
III. Business-to-Government (B2G);
IV. Consumer-to-Consumer (C2C);
V. Mobile Commerce (M-Commerce).
Types of e-commerce
Business-to-business (B2B) e-commerce refers to the electronic exchange of products, services or information
between businesses rather than between businesses and consumers. Examples include online directories and product
and supply exchange websites that allow businesses to search for products, services and information and to initiate
transactions through e-procurement interfaces.
In E-Commerce B2B, transactions are usually carried out through Electronic Data Interchange or EDI. EDI is an
automated format of exchanging information between businesses over private networks. EDI is composed of
standards that enable businesses’ computers to conduct transactions with each other, without human intervention.
For Example- Manufacturers and wholesalers are B2B companies.
Business-to-consumer (B2C) is the retail part of e-commerce on the internet. It is when businesses sell products,
services or information directly to consumers. The term was popular during the dot-com boom of the late 1990s,
when online retailers and sellers of goods were a novelty.
Today, there are innumerable virtual stores and malls on the internet selling all types of consumer goods. The most
recognized example of these sites is Amazon, which dominates the B2C market.
Consumer-to-consumer (C2C) is a type of e-commerce in which consumers trade products, services and
information with each other online. These transactions are generally conducted through a third party that provides an
online platform on which the transactions are carried out.
Online auctions and classified advertisements are two examples of C2C platforms, with eBay and Craigslist being
two of the most popular of these platforms. Because eBay is a business, this form of e-commerce could also be
called C2B2C -- consumer-to-business-to-consumer.
COMMERCE II CHAPTER 8 INTRODUCTION TO E-COMMERCE NOTES PREPARED BY MR. A. AMBIA Page 2
