1.1 Introduction to E-Commerce
1.1.1
E-Commerce
vs. E-Business: Defining the Scope
One of the most fundamental concepts in this field is
understanding the distinction between Electronic Commerce (E-Commerce) and
Electronic Business (E-Business). These terms are often used interchangeably,
but they have distinct meanings.
·
E-Commerce (Electronic
Commerce): This refers specifically to the buying and selling of goods, services, and information
using the internet or other digital networks. It is the transactional component. E-commerce involves the
exchange of value (e.g., money) across organizational or individual boundaries.
o
Core activities:
Online sales, digital marketing, online payments, and order fulfillment.
o
Think: The online
storefront of a company, like Amazon's "Buy Now" button, a Netflix
subscription page, or an online bank transfer.
·
E-Business (Electronic
Business): This is a broader concept that
encompasses all of E-Commerce plus the use of
digital technologies to manage a firm's internal processes and coordinate with
external partners (like suppliers and distributors). E-Business is about
transforming the entire business, not just the sales component.
o
Core activities:
Includes E-Commerce, plus:
§
Supply Chain Management (SCM):
Digitally managing the flow of goods from raw materials to the final customer.
§
Customer Relationship
Management (CRM): Using databases to manage customer interactions,
sales, and support.
§
Enterprise Resource Planning
(ERP): Integrated systems to manage core business processes (e.g.,
finance, HR, manufacturing).
§
Internal Communications:
Using intranets, email, and collaboration tools.
Simple Analogy: If a company were a
restaurant, E-Commerce would be its online ordering system and
payment gateway. E-Business would be the entire operation: the online ordering, the digital
inventory system that orders more ingredients, the networked kitchen display
system, the employee scheduling software, and the customer loyalty database.
1.1.2
The
Types of E-Commerce
E-Commerce models are classified based on the nature of the
participants in the transaction.
·
B2C (Business-to-Consumer):
o
Definition: Businesses selling products or services directly to individual
consumers.
o
Characteristics: This is the most visible form of e-commerce. It is often
characterized by high volumes of transactions, a strong emphasis on marketing
and branding, and a user-friendly interface.
o
Examples: Amazon
(Retail), Netflix (Subscription), Spotify (Freemium/Subscription), any online
clothing store.
·
B2B (Business-to-Business):
o
Definition: Businesses selling products or services to other businesses.
o
Characteristics: The transaction value is often much higher than in B2C, though the number of customers may
be smaller. Relationships are typically long-term and based on contracts. The
purchasing process is often more logical and less emotional.
o
Examples:
https://www.google.com/search?q=Alibaba.com (a marketplace for suppliers),
Microsoft Azure (cloud services for companies), a car manufacturer buying tires
from a supplier via an online procurement portal.
·
C2C (Consumer-to-Consumer):
o
Definition: Consumers transacting directly with other consumers.
o
Characteristics: These transactions are facilitated by a third-party
platform (an intermediary) that typically charges a fee or commission. Trust,
reputation (reviews), and ease of use are critical.
o
Examples: eBay
(Auctions/Sales), Facebook Marketplace, Poshmark (Apparel), local classified
sites.
·
Other Key Types (for broader
context):
o
C2B (Consumer-to-Business):
Individuals sell their services or products to businesses. (e.g., A freelance
graphic designer on Upwork, a photographer selling photos to a stock image
site).
o
B2G (Business-to-Government):
Businesses provide services, bid on contracts, or sell goods to government
agencies. (e.g., A software company providing a new payroll system for a
government ministry).
o
P2P (Peer-to-Peer):
Often used for sharing services or assets, bypassing a traditional business
entity. (e.g., Turo for car sharing, decentralized file sharing).
1.1.3
Benefits
of E-Commerce
E-Commerce provides significant advantages to both
businesses and consumers.
| For Businesses | For Consumers |
|---|---|
| Global Reach: A local store can become a global vendor, operating 24/7. | Convenience: The ability to shop 24/7 from any location. |
| Cost Reduction: Lower overhead costs (e.g., rent, staff, utilities) compared to a "brick-and-mortar" store. | Wider Selection: Access to a global marketplace with a virtually unlimited selection of goods ("long tail" products). |
| Data & Personalization: Ability to track user behavior, gather data, and provide personalized recommendations and marketing. | Price Transparency: Easy to compare prices, features, and reviews from multiple vendors (price discovery). |
| Automation & Efficiency: Streamlined processes for ordering, payment, inventory management, and customer service (e.g., chatbots). | Information Access: Detailed product specifications, user guides, and reviews from other consumers. |
| Niche Markets: Can profitably sell low-demand "long-tail" products that a physical store couldn’t afford to stock. | No Crowds/Travel: Avoids the drawbacks of physical shopping. |
1.1.4
The
Driving Forces of E-Commerce
The rapid growth of e-commerce isn't an accident. It is
propelled by four interconnected forces.
i.
Economic Forces:
-
This is the business "push."
Organizations are strongly motivated by the desire to reduce costs (e.g.,
transaction costs, search costs, operational costs) and increase
efficiency.
-
E-commerce provides a powerful mechanism for
achieving higher profitability and return on investment (ROI).
ii.
Market (Business) Forces:
-
This is the "pull" from the
competitive environment. As key competitors (like Amazon) move online, other
businesses must adopt e-commerce to survive and maintain market share.
- It's
also a response to changing consumer behavior—businesses must go where the
customers are.
iii.
Technology Forces:
- This
is the infrastructure that makes it all possible. The development
and widespread adoption of:
§ The
Internet (from dial-up to high-speed broadband and fiber optics).
§ The
World Wide Web (making the internet user-friendly).
§ Mobile Devices: The rise of smartphones and tablets.
§ Secure Payment Systems: The development of protocols (like
SSL/HTTPS) and gateways that build user trust.
§ Cloud Computing: Which allows businesses to scale their
operations on demand without buying expensive hardware.
iv.
Societal Forces:
- This
is the "acceptance" from the public. Consumer behavior and
expectations have fundamentally changed.
- There
is an increased "digital trust" where people are
comfortable sharing financial information online.
- Society
now values convenience, personalization, and instant access (the
"on-demand" culture, e.g., food delivery, streaming services).
- This also includes the societal impacts that advanced learners
might research, such as changes to the job market or the digital divide.
1.2
Internet
& Web: The Core Technologies
E-commerce is built on the foundation of the internet and
the web. It's crucial to understand these components.
· The Internet:
- Definition: The physical infrastructure.
It's a massive, global network of interconnected computers, servers, routers,
and cables (fiber-optic, copper) that communicate using a standard set of
rules.
- Analogy: The Internet is the "highway system"
or "plumbing" of the digital world.
- Key Protocol: TCP/IP (Transmission
Control Protocol/Internet Protocol). This is the fundamental rulebook that
allows different networks to "talk" to each other and exchange data
packets.
·
WWW (World Wide Web):
-
Definition: The Web
is not the same as the internet. It is an information system that runs on top of the
internet. It's a collection of all the websites, documents, and resources (like
images and videos) that are interlinked by hyperlinks and accessed
using a web browser.
-
Analogy: If the
internet is the highway, the Web is all the "destinations" (websites,
content) and the "cars" (browsers) that use it.
· HTML (HyperText Markup Language):
- Definition: This is the standard language for creating
web pages. It is not a programming
language, but a "markup" language.
-
Function: It uses
"tags" (e.g., <h1>, <p>,
<img>) to tell the web browser what the content is and how to structure and display it.
· HTTP (HyperText Transfer Protocol):
- Definition: This is the protocol (rule) for
communication on the Web. It's the language that a web browser (client)
uses to "ask" a web server for a page, and the language the server
uses to "answer."
- Process:
§ Your
browser sends an HTTP Request (e.g., "GET /index.html").
§ The
web server finds the requested file.
§ The
server sends it back in an HTTP Response.
§ HTTPS: The "S" stands for Secure. It uses encryption (SSL/TLS) to scramble the data
between your browser and the server. This is non-negotiable for e-commerce
as it protects sensitive data like credit card numbers and passwords.
1.3
Value
Chain in E-Commerce
This concept can be abstract, so we'll use a
clear example as planned. The Value Chain (popularized by Michael
Porter) is a model of all the activities a company performs to create a
product. E-commerce has a powerful role in transforming every step.
i.
Industry Value Chain
This shows the main steps in an entire industry,
from raw materials to the final customer.
- Traditional
Chain (e.g., Bookstore:
Author → Publisher → Printer →
Distributor → Retail Bookstore → Customer
- E-Commerce
Impact (Disintermediation):
E-commerce can "cut out the middleman" (a
process called disintermediation). This reduces costs and gives the producer a
direct relationship with the customer.
§ Example 1: A Publisher can set up its own website (B2C)
and sell directly to the Customer, bypassing the Distributor and
Retailer.
§ Example 2: An Author can self-publish on Amazon's
Kindle Direct Publishing (a C2B platform) and sell directly to the Customer, bypassing the Publisher, Printer, Distributor,
and Retailer.
ii.
Firm Value Chain
This model looks at
the key activities inside a single firm. E-commerce
can optimize every step.
Primary Activities (Directly creating the product):
· Inbound Logistics: (Receiving/storing inputs).
-
Traditional:
Manually receiving shipments, paper invoices.
-
E-Commerce: An e-procurement system automatically links to a supplier's
inventory (B2B), enabling Just-in-Time (JIT) inventory.
· Operations: (Making the product).
-
Traditional:
Production schedules based on long-range forecasts.
-
E-Commerce: Real-time sales data from the website instantly informs the
production floor what to make (e.g., "the blue shirt is selling 3x faster
than the red one").
· Outbound Logistics: (Shipping the product).
-
Traditional:
Manual shipping labels, calls to a courier.
-
E-Commerce: The
website is integrated with logistics partners (like FedEx or DHL) for
automated label printing, and the customer gets an automatic tracking email.
· Marketing & Sales: (The storefront).
-
Traditional:
Print ads, TV commercials.
-
E-Commerce: Digital
marketing (SEO, social media), a personalized website, and the online checkout
process.
· Service: (After-sales support).
-
Traditional: A
call center with limited hours.
-
E-Commerce: 24/7 customer service via chatbots, online knowledge bases,
and helpdesk ticket systems.
Support Activities (Helping the primary activities):
·
Firm Infrastructure:
(Management, Finance). E-commerce provides real-time digital dashboards
for managers to see sales data, replacing delayed monthly reports.
·
Human Resources: Online
job portals (e-recruiting), e-learning for staff training.
·
Technology Development:
This is the team that builds, maintains, and secures the e-commerce platform
(the website, app, and databases).
·
Procurement: (Buying the
inputs). Using B2B portals to source materials, from office supplies to raw
steel, at the best price.
1.4
The
Role of E-Commerce
The role of e-commerce in modern business is not just to be
an "online store." It is a fundamental driver of business strategy
and innovation.
·
It Creates New Business Models:
E-commerce is the foundation for models that were impossible 30 years ago, such
as:
§
The Platform Economy:
(e.g., Uber, Airbnb)
§
The Subscription Economy:
(e.g., Netflix, Spotify)
§
The "Freemium" Model:
(e.g., Dropbox, LinkedIn)
·
It Increases Market Efficiency:
By making prices transparent and information instantly available, e-commerce
forces businesses to be more competitive and efficient.
·
It Enables Globalization:
It lowers the barriers for small businesses to compete globally, allowing them
to find customers, suppliers, and partners anywhere in the world.
·
It Transforms Consumer
Behavior: E-commerce has fundamentally changed how we shop,
research, and interact, creating a new "on-demand" and highly
personalized consumer culture.