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What Is E-commerce

Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. It also pertains to “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact”.

E-commerce is usually associated with buying and selling over the internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Though popular, this definition is not comprehensive enough to capture recent developments in this new and revolutionary business phenomenon. A more complete definition is: e-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals.

The major different kinds of e-commerce are: Business-to-Business (B2B), Business-to-Consumer (B2C), Business-to-Government (B2G), Consumer-to-Consumer (C2C), and Mobile Commerce (M-commerce).

1. What Is B2B E-commerce

B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses. About 80% of e-commerce is of this type, and most experts predict that B2B e-commerce will continue to grow faster than the B2C segment. The B2B market has two primary components: e-infrastructure and e-markets.

E-infrastructure is the architecture of B2B, primarily consisting of the following.

•Logistics: transportation, warehousing and distribution (e.g., Procter and Gamble).

•Application service providers: deployment, hosting and management of packaged software from a central facility (e.g., Oracle and Linkshare).

•Outsourcing of functions in the process of e-commerce, such as Web-hosting, security and customer care solutions (e.g., outsourcing providers such as eShare, NetSales, iXL Enterprises and Universal Access).

•Auction solutions software for the operation and maintenance of real-time auctions in the internet (e.g., Moai Technologies and OpenSite Technologies).

•Content management software for the facilitation of Website content management and delivery (e.g., Interwoven and ProcureNet).

•Web-based commerce enablers (e.g., Commerce One, a browser-based, XML-enabled purchasing automation software).

E-markets are simply defined as websites where buyers and sellers interact with each other and conduct transactions.

Most B2B applications are in the areas of supplier management (especially purchase order processing), inventory management (i.e., managing order-ship-bill cycles), distribution management (especially in the transmission of shipping documents), channel management (i.e., information dissemination on changes in operational conditions), and payment management (e.g., Electronic Payment Systems[1] or EPS).

2. What Is B2C E-commerce

Business-to-Consumer e-commerce, or commerce between companies and consumers, involves gathering customers' information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network.

It is the second largest and the earliest form of e-commerce. Its origins can be traced to online retailing (or e-tailing). Thus, the more common B2C business models are the online retailing companies such as Amazon.com, Drugstore.com, Beyond.com, Barnes and Noble, and ToysRus. Other B2C examples involving information goods are E-Trade and Travelocity.

The more common applications of this type of e-commerce are in the areas of purchasing products and information, and personal finance management, which pertains to the management of personal investments and finances with the use of online banking tools.

B2C e-commerce reduces transactions costs (particularly search costs) by increasing consumer access to information and allowing consumers to find the most competitive price for a product or service. B2C e-commerce also reduces market entry barriers since the cost of putting up and maintaining a website is much cheaper than installing a “brick-and-mortar” structure for a firm. In the case of information goods, B2C e-commerce is even more attractive because it saves firms from factoring in the additional cost of a physical distribution network. Moreover, for countries with a growing and robust Internet population, delivering information goods becomes increasingly feasible.

3. What Is B2G E-commerce

Business-to-Government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures and other government-related operations. This kind of e-commerce has two features: first, the public sector assumes a pilot/leading role in establishing e-commerce; and second, it is assumed that the public sector has the greatest need for making its procurement system more effective.

Web-based purchasing policies increase the transparency of the procurement process and reduce the risk of irregularities. To date, however, the size of the B2G e-commerce market as a component of total e-commerce is insignificant, as government e-procurement systems remain undeveloped.

4. What Is C2C E-commerce

Consumer-to-Consumer e-commerce or C2C is simply commerce between private individuals or consumers. This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers. It perhaps has the greatest potential for developing new markets.

This type of e-commerce comes in at least three forms:

•Auctions facilitated at a portal, such as eBay, which allows online real-time bidding on items being sold in the web.

•Peer-to-peer systems, such as the Napster model (a protocol for sharing files between users used by chat forums similar to IRC), and other file exchange and later money exchange models.

•Classified ads at portal sites, such as Excite Classifieds and eWanted, Pakwheels.com (an interactive, online marketplace where buyers and sellers can negotiate and that features “Buyer Leads&Want Ads”).

There is little information on the relative size of global C2C e-commerce. However, C2C figures of popular C2C sites such as eBay and Napster indicate that this market is quite large. These sites produce millions of dollars in sales every day.

(1) Advantages of C2C Sites

Consumer to Consumer e-commerce has many benefits. The primary benefit to consumers is reduction in cost. Buying ad space on other e-commerce sites is expensive. Sellers can post their items for free or with minimal charge depending on the C2C websites. C2C websites form a perfect platform for buyers and sellers who wish to buy and sell related products. The ability to find related products leads to an increase in the visitor to customer conversion ratio. Business owners can cheaply maintain C2C websites and increase profits without the additional costs of distribution locations. A good example of a C2C e-commerce website is Esty, a site that allows consumers to buy and sell handmade or vintage items and supplies including art, photography, clothing, jewelry, food, bath and beauty products, quilts, knick-knacks, and toys.

(2) Disadvantages of C2C Sites

There are a couple of disadvantages to these types of sites as well. Doing transaction on these types of websites requires cooperation between the buyer and seller. It has been noted many times that these two do not cooperate with each other after a transaction has been made. They do not share the transaction information which may be via credit, debit card or Internet banking. This can result in online fraud since the buyer and seller are not very well versed with each other. This can lead to lawsuit being imposed on either ends or also on the site if it has not mentioned the disclaimer in its terms and conditions. This may also hamper the C2C website's reputation. Companies which handle consumer to consumer e-commerce websites seem to have becoming very cautious to prevent online scams.

5. What Is M-commerce

M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology—i.e., handheld devices such as cellular telephones and Personal Digital Assistants (PDAs).

As content delivery over wireless devices becomes faster, more secure and scalable, some believe that m-commerce will surpass wireline e-commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users.

Industries affected by m-commerce are as follows.

•Financial services, including mobile banking (when customers use their hand-held devices to access their accounts and pay their bills), as well as brokerage services (in which stock quotes can be displayed and trading conducted from the same hand-held device).

•Telecommunications, in which service changes, bill payment and account reviews can all be conducted from the same hand-held device.

•Service/retail, as consumers are given the ability to place and pay for orders on the fly.

•Information services, which include the delivery of entertainment, financial news, sports figures and traffic updates to a single mobile device.

6. Is E-commerce the Same as E-business

While e-commerce and e-business can be used interchangeably, they are distinct concepts. In e-commerce, Information and Communications Technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals).

In e-business, on the other hand, ICT is used to enhance one's business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. A more comprehensive definition of e-business is “the transformation of an organization's processes to deliver additional customer value through the application of technologies, philosophies and computing paradigms of the new economy.”

Three primary processes are enhanced in e-business:

1) Production processes, which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others.

2) Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers' purchase orders and payments, and customer support, among others.

3) Internal management processes, which include employee services, training, internal information-sharing, videoconferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient.