Define E-Commerce Systems

Introduction

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.

Types of E-Commerce

The major different types of e-commerce are business-to-business (B2B); business-to-consumer (B2C); consumer-to-consumer (C2C).

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-frastructure and e-markets. E-frastructure 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);

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);

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

Content management software for the facilitation of Web site content management and delivery (e.g., ProcureNet); and

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

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

The more common B2B examples and best practice models are IBM, Hewlett Packard (HP), Cisco and Dell. Cisco, for instance, receives over 90% of its product orders over the Internet.

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).

B2C E-Commerce

Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering 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. Some of the Indian B2C e-commerce firms are futurebazaar.com (from Big Bazaar), thehindushopping.com, indiaverta.com, fabmart.com and so on. Other B2C examples involving information goods are Travelocity and Expedia.

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 (e.g., Quicken).

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 Web site 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.

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 Internet Relay Chat) and other file exchange and later money exchange models; and classified ads at portal sites such as Sulekha.com and justdial.com classifieds.

Consumer-to-business (C2B) transactions involve reverse auctions, which empower the consumer to drive transactions. A concrete example of this when competing airlines gives a traveler best travel and ticket offers in response to the traveler’s post that she wants to fly from one place to another as in www.priceline.com.