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Electronic commerce (also referred to as EC, e-commerce or ecommerce) consists primarily of the distributing, buying, selling, marketing, and servicing of products or services over electronic systems such as the Internet and other computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions. It can involve electronic funds transfer, supply chain management, e-marketing, online marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. It typically uses electronic communications technology such as the Internet, extranets, e-mail, e-books, databases, catalogues and mobile phones. According to Forrester Research (as cited in Kessler, 2003), electronic commerce generated sales worth US $12.2 billion in 2003. Historical development The meaning of the term "electronic commerce" has changed over the last 30 years. Originally, "electronic commerce" meant the facilitation of commercial transactions electronically, usually using technology like Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), where both were introduced in the late 1970s, for example, to send commercial documents like purchase orders or invoices electronically. The 'electronic' or 'e' in e-commerce or e-business refers to the technology/systems; the 'commerce' refers to be traditional business models. e-commerce is defined as the complete set of processes that support commercial/business activities on a network. In the 1970s and 1980s, this would also have involved information analysis. The growth and acceptance of credit cards, Automated Teller Machines (ATM) and telephone banking in the 1980s were also forms of e-commerce. However, from the 1990s onwards, this would include enterprise resource planning systems (ERP), data mining and data warehousing. In the "dot com" era, it came to include activities more precisely termed "Web commerce" -- the purchase of goods and services over the World Wide Web via secure servers (note HTTPS, a special server protocol which encrypts confidential ordering data for customer protection) with e-shopping carts and with electronic payment services, like credit card payment authorizations. Today, it encompasses a very wide range of business activities and processes, from e-banking to offshore manufacturing to e-logistics. The ever growing dependence of modern industries on electronically enabled business processes gave impetus to the growth and development of supporting systems. This includes backend systems, applications and middleware. Examples are broadband and fiber-optic networks, supply-chain modules, material planning modules, customer relationship modules, inventory control systems and financial accounting/corporate finance modules. When the Web first became well-known among the general public in 1994, many journalists and pundits forecast that e-commerce would soon become a major economic sector. However, it took about four years for security protocols (like HTTPS) to become sufficiently developed and widely deployed. Subsequently, between 1998 and 2000, a substantial number of businesses in the United States and Western Europe developed rudimentary Web sites. Although a large number of "pure e-commerce" companies disappeared during the dot-com collapse in 2000 and 2001, many "brick-and-mortar" retailers recognized that such companies had identified valuable niche markets and began to add e-commerce capabilities to their Web sites. For example, after the collapse of online grocer Webvan, two traditional supermarket chains, Albertsons and Safeway, both started e-commerce subsidiaries through which consumers could order groceries online. The evolution of e-commerce in the early 2000s onwards saw multinational (MNCs) or transnational (TNCs) companies establishing regional shared services centers, regional data centers and regional call centers. Today, this is not only a crucial part of a company's long-term corporate strategy in cost containment, but also in maintaining and winning market share in a borderless, global marketplace. Technical and organizational aspects In many cases, an e-commerce company will survive not only based on its product, but by having a competent management team, good post-sales services, well-organized business structure, network infrastructure and a secured, well-designed website. Such factors include: Naturally, the e-commerce vendor must also perform such mundane tasks as being truthful about its product and its availability, shipping reliably, and handling complaints promptly and effectively. A unique property of the Internet environment is that individual customers have access to far more information about the seller than they would find in a brick-and-mortar situation. Customer-Oriented A successful e-commerce organization must also provide an enjoyable and rewarding experience to its customers. Many factors go into making this possible. Such factors include: Problems Even if a provider of E-commerce goods and services rigorously follows these seventeen "key factors" to devise an exemplary e-commerce strategy, problems can still arise. Sources of such problems include: Product suitability Certain products/services appear more suitable for online sales; others remain more suitable for offline sales. Many successful purely virtual companies deal with digital products, including information storage, retrieval, and modification, music, movies, office supplies, education, communication, software, photography, and financial transactions. Examples of this type of company include: Google, eBay and Paypal. Virtual marketers can sell some non-digital products and services successfully. Such products generally have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit through a standard letterbox - such as music CDs, DVDs and books - are particularly suitable for a virtual marketer, and indeed Amazon.com, one of the few enduring dot-com companies, has historically concentrated on this field. Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets -- in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number. Purchases of pornography and of other sex-related products and services fulfill the requirements of both virtuality (or if non-virtual, generally high-value) and potential embarrassment; unsurprisingly, provision of such services has become the most profitable segment of e-commerce. Products unsuitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings - most notably clothing - and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Acceptance Consumers have accepted the e-commerce business model less readily than its proponents originally expected. Even in product categories suitable for e-commerce, electronic shopping has developed only slowly. Several reasons might account for the slow uptake, including: Getting your business on the Web A trend for businesses in the 21st century is to offer their products and services electronically, a practice known as electronic commerce, commonly referred to as "e-commerce". Major companies, such as Nike, Adidas, Future Shop, Sears, and other major retailers all offer their products online. Their mindset is that this offers quick, easy, and efficient service. There are advantages to engaging in e-commerce. First, providing fast and efficient service leads to a competitive advantage, and presents the opportunity to reach out to a larger target market. With the expansion of the Internet and a greater thirst for information and knowledge, global competition is becoming fierce, so gaining a competitive advantage is vital to the global and domestic strategy of a firm. There are three steps to analyze when looking at the creation of an online business: Consideration, Implementation, and Finalization. Consideration How does a business know whether they should engage in such a practice? Despite the obvious advantages to e-commerce, it does not always meet the long term needs of a company. If the market for the product is quite small, then there is no need to engage in e-commerce as it will be less difficult to gain competitive advantage and would only result in unnecessary costs and expenses. Secondly, if the company wishes to remain domestic and not expand its services, then a company would be better suited to follow the normal processes of adversiting than participating in e-commerce. Finally, a company must consider whether the business would even succeed or thrive in the e-commerce environment. For example, selling food online would not be a viable venture, as the ultimate costs (wastage, storage, transportation) would outweigh the benefits. However, if a company believes that their product has great market potential outside of their domestic realm, and feel that they can participate in e-commerce, then some time must be taken to lay down the floor plan for the business. Some aspects to consider are: Implementation The key to successfully starting and creating an online business is choosing the right Web host. Try to find one that offers guarantees, is flexible, responds to your concerns, and quite simply is one that offers the services that you want and need. Once you have found the right Web host for you and created an account, the next step is start building your site. This is going to be the bread and butter of your business. Having an attractive yet simple site will have a great impact. Ensure that it projects the right image and is directed to the right target market for your product. It should be easy to navigate and have a solid search option. Also clarify what sorts of policies you will implement, such as return policies, acceptance or rejection of credit cards, check-out, and any other payment options such as cheques or money orders. Finding the right merchant account to help you accept credit cards is important. If you are selling products, there are many types of software out there to help you create an effective and efficient ordering system. Look at the features that you will need for your site and compare them to the software that is available. Some may be expensive and others will be free. Finalization Now that you have created the website and are ready to begin, the next important step is to market your online business. The options are numerous and can include: A key step is developing some sort of PR strategy. Your customers are the most important aspect of your business. Make them happy. This can include offering links on your site to answer Frequently Asked Questions (FAQs), shipping quickly, designing a system for easy returns, as well as any other type of customer service. It is also important to constantly change and maintain the freshness of your site. This includes altering colors and creating new displays. Another noteworthy option is to include some sort of statistical counter so that you find out where your customers are logging in from and what they do on your site. Test any advertisements that you create to see how effective they are. Literature Financial Software Entities using electronic commerce See also | |||||||
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