e commerce and its benefits

Introduction to E-Commerce

  This is an age of Information Technology where the computer and communication technologies together play a very vital role in all spheres of human endeavour. The best known example that has touched all of us is the computerized railway reservation system. Here the computer located in different towns are interconnected through a special network of railway and the computes communicate with each other. Similarly airline reservation system , hotel room reservation system etc. allow us to make suitable reservations from anywhere in the world. Another influence of the information technology can be seen in the banking sector where we could withdraw the money at any time from any of the branches or Automatic Teller Machine make payments through credit cards etc.

We can find so many other example of information technology around us. Advent of internet that has made the dramatic impact on the society by bringing people from all over the world together and making most of these application come alive. Internet has changed the way people communicate with each other in an efficient and cost effective manner through the features of e – mail, news groups, chat rooms and internet based conferencing.

 With its all pervasive influence, IT is about to bring in the way we do shopping and business. IT enables complex business operations to be performed by effective using the electronic networks like internet and computers. When the business is performed on the electronic media, it is called electronic business (E-Business) or electronic commerce (E-Commerce).

Meaning

E-Commerce or Electronic Commerce is a general term for any type of business or commercial transaction that involves the transfer of information across the internet. This covers a range of different type of business from consumer based sites like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchange trading goods or services between corporations

“ Electronic commerce encompasses the use of technologies, processes and management practices that enhance organizational competitiveness through strategic use of electronic information. E-Commerce, which is selling of products on the internet, represents only the “front-end” of E-Business goes beyond E-Commerce by integrating it tightly with business operation to improve performance, create value and enable new relationship between business and consumers.”(MIS     Magazine,  May 1999)

According to David Baum, “Electronic commerce is a dynamic set of technologies, applications and processes that link enterprises, consumers and communities through electronic transactions and the electronic exchange of the goods, services and information.”

Example of E-Commerce

There are several examples of electronic commerce covering a wide spectrum of application areas in industry. Given below a few areas in which E-Commerce is taking place and these give some idea of the current status of E-Commerce activity.

On line trading in stock exchange instead of traditional floor trading. Trading in dematerialized share. 

Electronic shopping for various types of product Filling tax return electronically. In supermarkets all over the world currently money transfer take place electronically. Integrated financial networks used by the banks enable the customers to copy out their banking transactions electronically.

Following are some specific examples of E-Commerce:

Amazon.com : It is a world’s largest bookstore and is an excellent example of E-Commerce service. An internet user has the facility to search for books, journals etc. based on keywords or title. The user can order the books online and use a credit card for paying the cost of the books. Amazon.com also locates the books from publisher and other booksellers and supplies the items.

Scope of E-commerce

E-Commerce encompasses all activities of business, starting from developing manufacturing , marketing and selling the products, obtaining information through market intelligence, assessing the market, grooming the market , providing pre and post sale support, procuring material facilitating contacts between traders, supporting shared business processes etc. In the broadest terms e-commerce includes any form of business/trading that is carried out using the electronic medium. It could involve goods or services. The transactions could takes place between:

One organization and another

An organization and an individual

An organization and a statutory or legislative body

Thus e-commerce encompasses all activities that are carried out by a manufacturing and business firms except those activities that are to be physically carried out, such as manufacturing, packing and shipping. It is not essential that all the above activities are to be carried out on the internet from the beginning. The store can select some activities to start with and then gradually expand the activities it carries out on the internet. E-commerce can also be applied in the field of

1)   Education

2)   Personnel training

3)   Entertainment

4)   Banking and financial transactions

5)   Essential services etc.

9.5 Basic models & Essentials to establish E-Commerce

The basic business models are of two types.

Business-Consumer model

Business-Business model

1.Business to Consumer Model

This model cover all transactions done between consumer and trader just as marketing of goods, ordering for the goods and making payments etc.

Purpose of this model is to enable the consumer to locate and purchase desired goods or service over the internet when the customer is interested in making the purchase.

For the merchants this model ensures the higher revenue by enabling them to access broad market.

2.Business to Business Model

This model covers the interactions between the business houses. Taking the example of automobile industry , the broad areas of activity in this industry can be through off as: market survey, product development , market building , product production , product distribution or supply chain management, coordination of sales, financial planning and management, procurement and inventory management,

personnel management etc. involve the firm dealing with other firms that can be done with help of internet. This model being encompassing all transactions with all parties involved, the information system tend to be much more complex than simple order supply transactions.

Essentials of E-Commerce

Enterprise large or small tend to develop their Web presence in stages. Once a web presence is created then the enterprise wants to use that site to enhance customer service and to produce revenue. It is at the latter stage that E-Commerce comes into play.

A server provider’s hosting customers will go through the same evolution described in the preceding module. It is not enough just pick off the high end client who represents the highest per client revenue there simply enough of them. Furthermore the future opportunity is to provide a platform that can move a client along the range from low to high function as client sophistication and needs evolve. Many small and medium sized businesses are struggling with the high cost of entry to

E-Commerce. Creating a complete online selling environment can require considerable time, money and technical expertise. Many businesses follow the following three steps to establish an effective E-Commerce.

Step one: Develop a content site and handle transaction off-line.

Step two: Develop an on-line catalog and handle transaction off-line.

Step three: Develop an on-line catalog and handle transaction on-line.

Hardware required                                                  Software required

Processor                                                                        Operating system

Modem                                                                             HTML, Java, IIS

Mouse                                                                               Java   script,   SQL

Server

Scanner                                                                           Window

Environment

Others: 1) DHTML 2) XML 3) VBS Script etc.

9.6 Impact of E-Commerce on business and consumers

E-Commerce provides the following benefits to sellers as well as consumers.

(A) Benefits to Business

1.Reduction in cost: E-Commerce helps a business by reducing the cost by the following means:

E-Commerce helps to reduce inventory costs by allowing the company to access and utilize their supplier’s data base. This allow for the just in time inventory control by providing the knowledge about the inventory.

E-Commerce helps us to reduce cost of the procurement and the payments. By putting the catalogue on the net supplier can receive order on the net and payment can be received by the net which help the businessmen to reduce the cost regarding the above.

Human resource costs are reduced as the need for training and workers is reduced.

2.Improve customers satisfaction: Customer satisfaction can be ensured by following ways

The customers can be controlled by providing the information about the product at their home.

By delivering the product to the customers at home

By getting the payment on the net.

By providing the demonstration of the product on the net.

3.Improve management

By improving the reporting and information system By ensuring the better control techniques

By improving sales and marketing services

(B) Benefits to Customers

From the consumer point of view E-Commerce has following benefits:

Consumer can access to the original firm rather than access to the dealer or middleman.

Consumer have global choice regardless of their geographical location.

The shopping decision will be much easier as the consumer can reach several shops, compare the quality and prices in a short time.

Saving of time and convenience

E-COMMERCE AND MARKETING MIX

The selection of an e-commerce marketing mix is likely to involve the application of established marketing management principles as the basis for defining how electronic technologies are to be integrated into a firm’s existing operations. In many organizations, e-commerce marketing mix proposals will be based around enhanching existing offline activities by utilizing the Internet to provide new sources of information, customer supplier interaction and/or alternative purchase transaction channels.

PRODUCT AND PRICING

It will be necessary to determine whether the Internet provides an opportunity for product enhancement. Such opportunities include improving customer service and broadening the product line. As far as pricing is concerned, thought must be given to whether offline and online prices will be different and the potential implications of any price variance for existing offline customers. When the move to e-commerce involves new distribution costs, consideration should be given to delivery charges. Tesco, for example, imposes a delivery charge for its home shopping service.

PROMOTION

The first issue to be addressed when considering promotional mix decisions given the important role of the Internet in making information available to customers-is the design of a company’s webside. Some large companies will decide that this is an activity over which they wish to retain absolute control. In this situation the firm will hire a team of employees to manage the website creation process. However, there are a variety of other approaches that may be adopted. The design process may be contracted out to a major consulting firm, such as IBM, or to one of the many specialist Internet agencies that have been formed in recent years. Firms with limited financial resources may wish to use a web-authoring package. One of the more expensive, but highly popular, authoring software packages is Drumbeat 2000 produced by Macromedia (www.macromedia.com). This product, besides containing a plethora of design options, also has features such as a shopping cart function; secure credit card transactions and an integrated database system. For those firms that do not feel able to run their own Internet operation, another option is to join an existing website, which acts as host for a number of organizations. These hosting services usually provide a choice of basic website templates to suit different types of business. The firm is provided with software by the hosting service, which permits it to customize a template and thus develop its own visual identity. An example of a hosting service is Mindspring.com (www.mindspring.com) The company provides software for a firm to build a product catalogue and storefront, which is then featured on the Mind spring site.

The degree to which a company already has a strong offline market presence will strongly influence the scale of an e-commerce promotional plan. Thus, for example, when

Tesco, the largest UK supermarket chain, began to offer an online grocery purchasing service; the promotional launch campaign was quite simple. As the company already had strong brand recognition in the market, the main aim of its promotional activity was to register awareness for its website address. This was achieved by using traditional channels such as some television advertising, mail shots to Tesco loyalty card holders and in-store merchandising displays. For new entrants with no offline presence, building brand recognition can be expensive. However, the Internet has also given rise to some novel approaches to promotion.

 DISTRIBUTION

The commonest distribution model in the majority of offline consumer goods markets is to delegate both transaction and logistics processes (e.g. major brands such as Coca-Cola being marketed via supermarket chains). This can be contrasted with the online world where absolute delegation of all processes is a somewhat rarer event. The reason for this situation is that many firms, having decided that e-commerce offers an opportunity for revising distribution management practices, perceive cyberspace as offering a way to regain control over transactions by cutting out intermediaries and selling direct to their end-user customers. This process, in which traditional intermediaries may be squeezed out of channels, is, as we have already seen, usually referred to as disinter mediation. Hence, for those firms engaged in assessing the e-commerce distribution aspects of their marketing mix, there is a need to recognize that the technology has the following implications.

*        Distance ceases to be a cost influencer because online delivery of information is substantially the same no matter what the destination of the delivery.

*        Business location becomes an irrelevance because the e-commerce corporation can be based anywhere in the world.

*        The technology permits continuous trading, 24 hours a day, 365 days a year.

Once all the issues associated with the e-commerce marketing mix have been resolved, these variables will provide the basis for specifying the technological infrastructure that will be needed to support the planned e-commerce operation. In some cases the firm will decide to manage all of these matters in house but, in others, the firm may outsource a major proportion of its e-commerce operations to specialist subcontractors.

            KEY SUCCESS FACTORS IN E-COMMERCE

Several factors have a role in the success of any e-commerce venture. They may include :

*        Providing value to customers: Vendors can achieve this by offering a product or product-line that attracts potential customers at a competitive price, as in non-electronic commerce.

*        Providing service and performance: Offering a responsive, user-friendly purchasing experience, just like a flesh-and-blood retailer, may go some way to achieving these goals.

*        Providing an attractive website: The tasteful use of colour, graphic, animation, photographs, fonts and white-space percentage may aid success in this respect.

*        Providing an incentive for customers to buy and to return: Sales promotions to this end can involve coupons, special offers, and discounts. Cross-linked website and advertising affiliate programs can also help.

*        Providing personal attention: Personalized we sites, purchase suggestions, and personalized special offers may go some of the way to

substituting for the face-to-face human interaction found at a traditional

point of sale.

*        Providing a sense of community: Chat rooms, discussion boards, soliciting customer input, loyalty schemes and affinity programs can help in this respect.

*        Providing reliability and security: Parallel servers, hardware redundancy, fail-safe technology, information encryption, and firewalls can enhance this requirement.

*        Providing a 360-degree view of the customer relationship: Ensuring that all employees, suppliers, and partners have a complete view, and the same view, of the customer. However, customers may not appreciate the big brother experience.

*        Owning the customer’s total experience: E-tailers foster this by treating any contacts with a customer as part of a total experience, an experience that becomes synonymous with the brand.

*        Streamlining business processes, possibly through re-engineering and information technologies.

*        Letting customers help themselves: Provision of a self-serve site, easy to use without assistance, can help in this respect.

*        Helping customers do their job of consuming: E-tailers can provide such help through ample comparative information and good search facilities. Provision of component information and safety-and-health comments may assist e-tailers to define the customers’ job.

*        Constructing a commercially sound business model: If this key success factor had appeared in textbooks in 2000, many of the dot.coms might not have gone ruined.

*        Engineering an electronic value chain in which one focuses on a “limited” number of core competencies - the opposite of a one-stop shop. (Electronic stores can appear either specialist of generalist if properly programmed.)

*        Operating on or near the cutting edge of technology and staying there as technology changes (but remembering that the fundamentals of commerce remain indifferent to technology).

*        Setting up an organization of sufficient alertness and agility to respond quickly to any changes in the economic, social and physical environment.