E-Commerce

Refer also : https://www.slideshare.net/UtomoPrawiro/introduction-to-

e-commerce-32601602
What is E-commerce?
• Process of buying, selling, or exchanging products, services, and
information through computer networks.
• The concept of e-commerce is all about using the Internet to do
business better and faster.

• How it is differentiated from E-business?

• E-business is a broader form of EC, that also includes:
• Servicing customers
• Collaborating with business partners
• Carry out transactions electronically within an organization
Dimension of E-commerce
Traditional Commerce
• All the dimensions are physical in nature
• Perform all business transaction offline
• Buy and sell products through physical agent representatives.
Pure E-commerce
• All the dimensions are digital in nature
• Pure online (virtual) organizations
• Buy and sell products online.

Example product: music, software, ebook

Hybrid Approach
• A combination of digital and physical dimensions.
• Primary business carried out in the physical world
• Provide some services online

Amazon will sell you books online, but these must be stored in large warehouses and physically
delivered through the post."
The process of E-commerce
The process of E-commerce
• A consumer uses Web browser to connect to the home page of a
merchant's Web site on the Internet.
• The consumer browses the catalog of products featured on the site
and selects items to purchase. The selected items are placed in the
electronic equivalent of a shopping cart.
• When the consumer is ready to complete the purchase of selected
items, she provides a bill-to and ship-to address for purchase and
delivery
The process of E-commerce

• When the credit card number is validated and the order is completed
at the Commerce Server site, the merchant's site displays a receipt
confirming the customer's purchase.

• The Commerce Server site then forwards the order to a Processing

Network for payment processing and fulfilment.
Classification of E-commerce by Nature of
Transaction
• Business to Business (B2B):
• All the participants are businesses or other
organization. In this case, one business sells products
or services to another business.
• Business to Consumer (B2C):
• The businesses sell their product to consumers
(Individual shoppers), who are the end-users of its
products or services.
• Business to Business to Consumer (B2B2C):
• A business provide some service to the client
business.
• The client business maintains its own customers, to
whom the service is finally provided.
• Consumer to Business (C2B):
• Individuals can sell products or provide
services through the internet to
organizations.
• Consumer to Consumer (C2C):
• An individual can sell products or services
directly to another individual.
• Mobile Commerce (M-Commerce):
• E-commerce in a wireless mobile
environment – It can be B2B or B2C
• Location Commerce (L-Commerce):
• M-commerce transactions targeted to
individuals in specific locations at specific
times.
• Intrabusiness E-commerce
• This includes all internal organizational activities among various departments
and sections in an organization
• Collaborative commerce (C-commerce):
• Individuals or groups collaborate online.
E-commerce is interdisciplinary
• Encompasses several disciplines:
• Computer Science
• Consumer Behavior
• Management Information System
• Business Laws and Ethics
• Economics
• Accounting and Auditing
• Network Security
Benefits of E-commerce
• Point of view of organizations:
• Can expand the market place beyond geographic boundaries
• Reduce overheads of paper based information processing
• Lower communication cost
• Allows reduced inventories and overhead
• No need of physical company set-ups.
• Point of view of Consumers:
• Allow shopping 24 hours a day
• Allow shopping From any geographic location
• Provide a wide variety of choices
• Allow quick product and price comparisons before making final selection.
• Allow quick delivery of products.
• Virtual auctions are possible
• Customers can easily select products from different providers without moving
around physically
• Point of view of society:
• Less travelling for shopping
• Less traffic, less pollution.
• Enable people to have access to products which otherwise were out of their
reaches.
DISADVANTAGES OF E-COMMERCE
• Unable to examine products personally
• Not everyone is connected to the Internet
• There is the possibility of credit card number theft
• Mechanical failures can cause unpredictable effects on the total
processes.
Technical issues:
• Lack of standardization
• Security becomes a very big issue
Getting it to work
• A big challenges to organizations
• How to put together all tools and technologies and get competitive advantage
in implementing EC.
• Setting up the required connectivity through networking is most important
• Most of the EC Transaction carried out through:
• Internet
• Intranet
• Extranet
Major concern to many
• How to transform themselves to take advantage of E-

Commerce ?
• A company selling cookware's
• A company selling toys
• A company selling food items.
• A company selling books
Electronic Payment system
• Basic requirements
• All electronic payment system must possess the following desirable properties
• Widely recognized and accepted
• Convenient to use
• Hard to tamper with
• Based on well established security principles
 Question
• How do you determine where you purchase an item from online?
- (best price, security, recommendations, site design, brand, etc. ?)
E-Commerce Framework
• What is Framework?
• framework provides a standard way to build and deploy something.

• Frameworks is the one which includes support facilities, features, tool sets,
and other required things that bring together all the different components to
enable development of a project or system.

• A framework is a real or conceptual structure intended to serve as a support

or guide for the building of something that expands the structure into
something useful.
• What is Ecommerce Framework?
• The term e-commerce framework is related to software frameworks for e-
commerce applications. They offer an environment for building e-commerce
applications quickly.

• E-Commerce frameworks are flexible enough to adapt them to your specific

requirements.

• As result, they are suitable for building virtually all kinds of online shops and
e-commerce related (web) applications.
An e-commerce framework must

• allow replacing all parts of the framework code

• forbid changes in the framework code itself
• contain bootstrap code to start the application
• be extensible by user-written code

E-Commerce frameworks should

• define the general program flow

• consist of reusable components

They provide an overall structure for e-commerce related applications.

Open Source Ecommerce Platforms
• OpenCart
• PrestaShop
• Magento Community Edition
• Zen Cart
• Spree Commerce
• Drupal Commerce
• osCommerce
• simpleCart
• WooCommerce
• WP e-Commerce
• Jigoshop
Generic Framework of Ecommerce
• E-Commerce application will be built on the existing technology
infrastructure

• Kalakota and Whinston’s E-commerce framework

Four key building blocks:
– Common business services infrastructure
– Message and information distribution
– Multimedia content and network publishing
– The Information Superhighway Infrastructure (I-way )
Two supporting pillars:
– Public policy
– Technical Standards
The Information Superhighway Infrastructure
(Telecom, cable, TV, Internet, Wireless)
Common Business Services infrastructure
• The common business infrastructure for electronic commerce consists
of four main elements:

• –Security (HTTPS ensure its integrity and safety)

–Authentication
–Encryption
–Electronic Payments
 Messaging and Information Distribution
Infrastructure
• Second building block of supporting framework for e-commerce.
Includes email, instant messaging, Voice over IP (VoIP) - deliver voice
communications over the internet, FTP

• E-mail is still largest use in this area.

Multimedia content
• Multimedia content is stores in the form of electronic documents.
Examples of materials transported in this way include:
– Video
– Audio
– Text/Electronic documents
– Graphics & Photos
– Realtime/Non-realtime applications

Example:
Movies=video + audio
Digital games=music + video + software
Electronic books=text + data + graphics + music + photographs + video
Network Publishing Infrastructure
It Includes,
• Data communications circuits over which information travels.
Includes:
• – Packet-switched networking
• – Packets contain overhead information including addressing
• – They are also routed, like mail
• – All of this flows across Internet backbones
 The Information Superhighway Infrastructure
• The Information Superhighway- the
foundation-for providing the highway system
along which all e-commerce must travel the
two pillars
• I-way will be a mesh of interconnected data
highways of many forms, Include wireless
access, cable access and DSL (Digital
subscriber line, is a family of technologies that
are used to transmit digital data over
telephone lines) .
Public Policy:
Public policy is one of two supporting pillars for ecommerce.
• Public policy issues include:
– universal access,
– privacy,
– information pricing,
– information access.
• Privacy issues include what information is private and/or who should
have the right to use/sell information about Internet users:
– Requesting personal information on visiting a web site
– Creating customer profiles
– Leaving electronic footprints when visiting a web site
Technical Standards
• Standardization is the second supporting pillar for eCommerce.
• Standards are critical for electronic interaction.
• Secure Electronic Transaction (SET) – Securing Payments
• Other application standards include
• File Transfer Protocol (FTP)
• The File Transfer Protocol (FTP) is a standard network protocol used for the transfer of computer files between a client and
server on a computer network. FTP is built on a client-server model architecture and uses separate control and data
connections between the client and the server.
• Hypertext Transfer Protocol (HTTP)
• HTTP (Hypertext Transfer Protocol) is the set of rules for transferring files (text, graphic images, sound, video, and other
multimedia files) on the World Wide Web. As soon as a Web user opens their Web browser, the user is indirectly making use of
HTTP. HTTP is the protocol that web browsers and web servers use to communicate with each other over the Internet.
• Post office protocol (POP)
• Post Office Protocol (POP) is an application-layer Internet standard protocol used by local e-mail clients to retrieve e-mail from
a remote server over a TCP/IP connection. Email clients are, Microsoft outlook, Mozilla Thunderbird, Windows live mail..etc.
• Multimedia internet mail extension (MIME)
• MIME (Multi-Purpose Internet Mail Extensions) is an extension of the original Internet e-mail protocol that lets people use the
protocol to exchange different kinds of data files on the Internet: audio, video, images, application programs..etc.
Consumer Oriented Ecommerce Applications
Ecommerce Focusing on Consumer Market Place

(i) Personal Finance and Home Banking Management

(ii) Home Shopping
(iii) Home Entertainment
(iv) Micro transactions of Information
1. Personal Finance and Home Banking Management

i. Basic Services
ii. Intermediate Services
iii. Advanced services
Basic Services
•These are related to personal finance ATM BSC
•The evolution of ATM machines from live tellers and now ASC
to home banking
ATM
BSC
•The ATM network has with banks and their associations
IASC
being the routers and the ATM machines being the
heterogeneous computers on the network. ATM
BSC

•This interoperable network of ATMs has created an ASC

interface between customer and bank that changed the ATM
BSC
competitive dynamics of the industry. Increased ATM usage
and decrease in teller transactions

BSC – Bank Switching Center

ASC – Association Switching Center
IASC – Inter Association Switching Center
Impact of ATM
• The customer need not go to the bank at all for his most important
service
• Both the bank and the customer became faceless to each other
• The customer need not modify his working schedule to visit the banks
• The banks need not resort to concept like split hours, opening on
holidays etc.
 Intermediate Services
• Consider the computerized on-line bill-
payment system

• It never forgets to record a payment and

keeps track of user account number, name,
amount and the date and we used to instruct
with payment instructions.
Advanced Services
• The goal of advanced series is to offer their on-line customers a
complete portfolio of
• Life insurance,
• auto insurance
• mutual funds,
• pension plans,
• home financing, and other
• financial products
2. Home Shopping:

i. Television-Based Shopping
ii. Catalog-Based Shopping
Television Based Shopping
• It is launched in 1977 by the Home
Shopping Network (HSN).

• Television-based home shopping involves

the purchase of products advertised on
television programs and in commercial
breaks by telephoning orders through to
the advertised number
 Catalog-Based Shopping (Online Shopping)
• In a more sophisticated version, orders can be
placed online (through computers) and
payment also can be made through
credit/debit cards
• Negotiation, trial testing etc. are missing from
this scheme
• There is little scope to ensure the quality of
product, after sales services etc.
• The on-line catalog business consists of
brochures, CD-ROM catalogs, and on-line
interactive catalogs
• Currently, we are using the electronic brochures
3. Home Entertainment
• Customer can watch movie and play games ..etc.
• Movie on Demand - it is possible for the user to select a movie/CD online and
make his cable operator play the movie exclusively for him cause against
payment.
Impact of Home entertainment on traditional
industries
• Devastating effects on theatre business

Industry Estimates of consumer Expenditures

1980 ($4.7 bin) 1990 ($31.0 bin) 1993 ($37.8 bin)

Theaters 49.0% $2.3 14.5% $4.5 13.2% $5.0
Basic cable 35.0% $1.6 34.5% $10.7 36.9% $13.9
Premium cable 16.0% $0.8 16.5% $5.1 14.0% $5.3
Home video (DVD) __ __ 33.8% $10.5 34.8% $13.2
Pay per view __ __ 0.7% $0.2 1.1% $0.4
4. Micro transactions of information
• One change in traditional business forced by the on-line information business is the creation of a
new transaction category called small-fee transactions for micro services

• The telephone directories provide a basic type of micro transaction. If you want by one particular
of item- say – books – they list the addresses and phone numbers of the various book dealers
whom you may contact.

• Similar facilities are available on the internet- may be for number of items and also with more
details. IT may include detailed catalogues, other related information etc.

• of course, the customer has to pay a small charge for visiting the site- each time he visits the site.

• This can be thought of as an extension of the earlier described television based ordering. You
don’t have to order only those items that are shown in the computer, but search for an item that
you need.

• Also ordering is on line. Some preliminary two way interaction are also possible.
Desirable Characteristics of an Electronic marketplace

• Critical mass of Buyers and sellers: To get critical mass, use electronic
mechanisms

• Opportunity for independent evaluations and for customer dialogue and

discussion: Users not only buy and sell products, they compare notes on who has
the best products and whose prices are outrageous

• Negotiation and bargaining: Buyers and sellers need to able to haggle over
conditions of mutual satisfaction, money, terms & conditions, delivery dates &
evaluation criteria
• New products and services: Electronic marketplace is only support
full information about new services

• Seamless interface: The trading is having pieces work together so

that information can flow seamlessly

• Resource for disgruntled buyers: It provide for resolving

disagreements by returning the product
 Mercantile Process models
Mercantile processes define interaction models between consumers and
merchants for online commerce

This is necessary because to buy and sell goods a buyer, a seller

and other parties must interact in ways that represent standard
business process
It defines the interaction between the consumer and the merchant for online
commerce.

This is necessary because to buy and sell goods a buyer, a seller and other
parties must interact in ways that represent standard business process.

A well established standard process for processing credit card purchasers

has contributed to the wide spread dissemination of credit cards.

The establishment of common mercantile process model is expected to

increase the convenience for consumers.
 Mercantile Models from the Consumer's Perspective
• The online consumer expects quality and convenience, value, low
price etc.
• To meet their expectations and understand the behaviour of online
shopper there is a need for the business process models that
provides the standard product / service purchasing process.

• The process model for a consumer point of view consists of seven

activities that can be grouped into three phases. They are

1. Pre phase
2. Purchase consumption
3. Post purchase interaction phase
 Steps taken by customer in purchasing
Product or service search and discovery in the
information space

Comparison shopping and product selection based on

various attributes Prepurchase determination

Negotiation of terms E.G Price , Delivery times

Placement of order

Authorization of Payment Purchase consummation

Receipt of Product

Customer service and support Postpurchase interaction

1. Pre purchase Determination: this phase includes search and discovery for
a set of products in the larger information space applicable of
meeting customers requirements and product selection from the smaller
set of products based on attribute comparision.
2. Purchase Consumption: this phase includes mercantile protocols that
specify the flow of information and documents associated with purchasing
and negotiation with merchants for suitable terms such as price availability
and delivery dates.
3. Post Purchase interaction: this phase includes customer service and
support to addresses customers complaints, product returns & product
defects.
Pre Purchase Preparation
• From the consumer point of view any major purchase can be
assumed to involve some amount of pre purchase deliberation.

• Pre purchase deliberation is defined as elapsed time between the

consumer’s first thinking about buying and actual purchase
itself.
Based on the pre purchase deliberation Consumers can be categorized
into three types

1. Impulsive buyers - these buyers purchase the product quickly.

2. Patient buyers - who purchase products after making some
analysis or comparison.
3. Analytical buyers - who do substantial research before making the
decision to purchase product or services.
Marketing researchers have isolated several types
of purchasing
• Specifically planned purchase: the need was recognized on entering
the store and the shopper brought the exact item planned.
• 2. Generally planned purchases: the need was recognized, but the
shopper decided in-store on the actual manufacture of the item to
satisfy the need.
• 3. reminder purchases: the shopper was reminded of the need by
some store influence. This shopper is influenced by in-store
advertisements and can substitute products readily.
• 4. Entirely unplanned purchases: the need was not recognized
entering the store.
Purchase Consumption:
• After identifying the product to be purchased by the buyer and the seller
must interact in some way ( e- mail, on- line) to carry out the
mercantile transactions.

• What is Mercantile Transaction?

• The mercantile transaction is defined as the exchange of information

between the buyer and seller followed by necessary payment depending
upon the payment model mutually agreed on, they may interact by
exchanging currently i.e. backed by the third party such as the central bank,
master card, visa card etc.
A simple mercantile protocol would require the following
transaction where the basic flow remains the same .
• Through e- mail, online the buyer contacts the vendors to purchase a product or service.
This might be done online through e- mail (or) through e-catalogue etc.
• Vendor states the price.
• Buyer and vendor may or may not engage in a transaction.
• If satisfied buyer authorizes payment to the vendor with an encrypted transaction
containing the digital signature.
• Vendor contacts the billing service of the buyer to verify the encrypted authorization for
authentication.
• Billing service decrypts the authorization and checks the buyer account balance and
puts a hole on the amount transfer.
• Billing service give the vendor green signal to deliver the product.
• On notification of adequate funds to cover financial transaction, vendor delivers the
goods to buyer or in the case of information purchase provides a crypto key to unlock
the file.
• on receiving the goods the buyer signs and delivers receipt. Vendors then tell billing
service to complete the transaction.
• At the end of the billing cycle buyer receives a list of transactions.
Two types of payment method in mercantile
protocol
• Mercantile process using digital cash (E cash)
• PayPal, eCash, WebMoney, Payoneer, cashU,
• Google Wallet, Apple Pay (Only for apple device), paytm

• Mercantile Transaction Using Credit Cards / Debit Card

Post Purchase Interaction:
• As long as there is payment for services there will be references,
disputes, other customer service issues that need to be considered.
• Returns and claims are an important part of purchasing process that
impact the administrative costs, scrap and transportation expenses
and customers relations.
Mercantile process model from merchants
perspective ?
• To better understanding, it is necessary to examine the order
management cycle (OMC).
• The OMC includes eight distinct activities.
• The actual details of OMC vary from industry to industry and also for
individual products and services
OMC has generic steps
(i) Order planning & Order generation.
(ii) Cost estimation & pricing.
(iii) Order receipt & entry.
(iv) Order selection & prioritization.
(v) Order Scheduling
(vi) Order fulfillment & delivery.
(vii) Order billing & account/payment management.
(viii) Post sales service.
Order planning & order Generation

• Order planning leads to order generation.

• Orders are generated in a no. of ways in the e-commerce
environment.
• The sales force broadcasts ads (direct marketing), sends personalized
e-mail to customers (cold calls), or creates a WWW page
Cost Estimation & pricing
• Pricing is the bridge between customer needs & company capabilities.
• Pricing at the individual order level depends on understanding the
value to the customer that is generated by each order, evaluating the
cost of filling each order; & instituting a system that enables the
company to price each order based on its value & cost
Order Receipt & Entry
• After an acceptable price Quote, the customer enters the order
receipt & entry phase of OMC.
• This was under the purview of departments variously titled customer
service, order entry, the inside sales desk, or customer liaison.
Order Selection & Prioritization
• Customer service representatives are also often responsible for
choosing which orders to accept and which to decline.
• Not, all customers’ orders are created equal; some are better for the
business.
Order Scheduling
• In this phase the prioritized orders get slotted into an actual
production or operational sequence.
• This task is difficult because the different functional departments-
sales, marketing,, customer service, operations, or production- may
have conflicting goals, compensation systems, & organizational
imperatives:
• Production people seek to minimize equipment changeovers, while
marketing & customer service reps argue for special service for
special customers.
Order Fulfillment & Delivery
• During this phase, the actual product or service is delivered.
• Actual provision of the product or service is made.
• It involves multiple functions and locations.
Order Billing & Account/Payment
Management
• After the order has been fulfilled, billing is given by finance staff.
• The billing function is designed to serve the needs and interests of the
company, not the customer.
Post sales Service
• This phase plays an increasingly important role in all elements of a
company’s profit equation: customer, price, & cost.
• It can include such elements as physical installation of a product,
repair & maintenance, customer training, equipment upgrading &
disposal.