Electronic commerce, also known as e-commerce, is the buying and selling of Egoods over the Internet. Have you ever bought anything over the Internet? If you have not, there is a very good chance that you will within the next year or two. Shopping on the Internet is growing rapidly and there seems to be no end in sight. The underlying reason for the rapid growth in e-commerce is that it provides incentives for both buyers and sellers.
From the buyer’s perspective, goods and services can be purchased at any time of day or night. Traditional commerce is typically limited to standard business hours when the seller is open. Additionally, buyers no longer have to physically travel to the seller’s location.
For example, busy parents with small children do not need to coordinate their separate schedules or to arrange for a baby sitter whenever they want to visit the mall. From the seller’s perspective, the costs associated with owning and operating a retail outlet can be eliminated.
For example, a music store can operate entirely on the Web without an actual physical store and without a large sales staff. Another advantage is reduced inventory. Traditional stores maintain an inventory of goods in their stores and periodically replenish this inventory from warehouses. With e-commerce, there is no in-store inventory and products are shipped directly from warehouses.
While there are numerous advantages to e-commerce, there are disadvantages as well. Some of these disadvantages include the inability to provide immediate delivery of goods, the inability to “try on” prospective purchases, and questions relating to the security of online payments. Although these issues are being addressed, very few observers suggest that e-commerce will replace bricks-and-mortar businesses entirely. It is clear that both will coexist and that e-commerce will continue to grow.
Just like any other type of commerce, electronic commerce involves two parties: businesses and consumers. There are three basic types of electronic commerce:
It involves the sale of a product or service to the general public or end-users. Often times this arrangement eliminates the wholesaler by allowing manufacturers to sell directly to customers. Other times, existing retail stores use the Web as another way to reach customers.
It involves individuals selling to individuals. This often takes the form of an electronic version of the classified ads or an auction.
It involves the sale of a product or service from one business to another. This is typically a manufacturer-supplier relationship. For example, a furniture manufacturer requires raw materials such as wood, paint, and varnish.
We have seen the overview of all of the above lets now go in-depth on the topic.
The fastest-growing type of e-commerce is business-to-consumer. It is used by large corporations, small corporations, and start-up businesses. Because extensive investments are not required to create traditional retail outlets and to maintain large marketing and sales staffs, e-commerce allows start-up companies to compete with larger established firms.
The three most widely used B2C applications are for online banking, financial trading, and shopping.
- Online banking is becoming a standard feature of banking institutions. Customers are able to go online with a standard browser to perform many banking operations. These online operations include accessing account information, balancing checkbooks, transferring funds, paying bills, and applying for loans.
- Online stock trading allows investors to research, buy, and sell stocks and bonds over the Internet. While e-trading is more convenient than using a traditional full-service broker, the greatest advantage is cost.
- Online shopping includes the buying and selling of a wide range of consumer goods over the Internet. There are thousands of e-commerce applications in this area. Fortunately, there are numerous Web sites that provide support for consumers looking to compare products and to locate bargains.
A recent trend in C2C e-commerce is the growing popularity of Web auctions. Web auctions are similar to traditional auctions except that buyers and sellers seldom, if ever, meet face-to-face. Sellers post descriptions of products at a Web site and buyers submit bids electronically. Like traditional auctions, sometimes the bidding becomes highly competitive and enthusiastic.
There are two basic types of Web auction sites:
- Auction house sites sell a wide range of merchandise directly to bidders. The auction house owner presents merchandise that is typically from a company’s surplus stock. These sites operate as a traditional auction and bargain prices are not uncommon. Auction house sites are generally considered safe places to shop.Person-to-person auction sites operate more like flea markets. The owner of the site provides a forum for numerous buyers and sellers to gather. While the owners of these sites typically facilitate the bidding process, they are not involved in completing transactions or in verifying the authenticity of the goods sold. As with purchases at a flea market, buyers and sellers need to be cautious.
Challenges for E-commerce
The single greatest challenge for e-commerce is the development of fast, secure, and reliable payment methods for purchased goods. The three basic payment options are check, credit card, and digital cash.
Checks are the most traditional. Unfortunately, check purchases require the longest time to complete. After selecting an item, the buyer sends a check through the mail. Upon receipt of the check, the seller verifies that the check is good. If it is good, then the purchased item is sent out.
• Credit card purchases are faster and more convenient than check purchases. Credit card fraud, however, is a major concern for both buyers and sellers. Criminals known as carders specialize in stealing, trading, and using stolen credit cards over the Internet.
Digital cash is the Internet’s equivalent to traditional cash. Buyers purchase digital cash from a third party (a bank that specializes in electronic currency) and use it to purchase goods. Sellers convert the digital cash to traditional currency through a third party. Although not as convenient as credit card purchases, digital cash is more secure.