E-commerce or Electronic commerce has become an integral part of business in the modern world. It is the buzzword of the modern day. In simple terms, it’s just buying and selling of product and services through internet. But in a broad sense, it includes the entire online process of developing, marketing, selling, delivering, servicing and paying for products and services. With the widespread usage of internet, the sphere of e-commerce has widened dramatically. Before going more into the scope and benefits of let us understand the concept of E-commerce.
What is E-commerce?
According to Wikipedia, E-commerce is the activity of buying or selling of products on online services or over the Internet. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle although it may also use other technologies such as e-mail. Typical e-commerce transactions include the purchase of online books (such as Amazon) and music purchases (music downloads in the form of digital distribution such as iTunes Store).
There are three areas of e-commerce:
E-commerce is supported by electronic business. Electronic commerce draws on technologies such as Mobile Commerce, Electronic Funds Transfer, Supply Chain Management, Internet Marketing, Online Transaction Processing, Electronic Data Interchange (EDI), Inventory Management Systems and Automated Data Collection Systems.
Now, that’s complicating, you might think. To make things simpler, let’s consider them individually.
Online Retailing:
Online shopping is a form of e-commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser. The largest of these online retailing corporations are Flipkart, Amazon and eBay.
Main Features of Online Retailing are:
- Easy access to market, especially, for entrepreneurs has never been easier.
- Online marketplaces allow anyone to set up a simple online shop and sell products within minutes.
- Reduced overheads of expensive retail premises and customer-facing staff, allowing you to invest in better marketing and customer experience on your e-commerce site.
- Potential for rapid growth with a good digital marketing strategy and a plan to scale up order fulfilment systems, one can respond and boost growing sales.
- Widen your market / export, offering your website in a different language, or perhaps partnering with an overseas company.
- Customer intelligence by using online marketing tools, you can target new customers and website analysis tools to gain insight into your customers’ needs.
- Need of a modern professional e-commerce website, especially if you expect large and growing sales volumes.
- Infrastructure costs can sometimes shoot up due to costs of physical space for order fulfilment, warehousing goods, dealing with returns and staffing for these tasks.
- Need to be careful about security and fraud as the growth of online retail market has attracted the attention of sophisticated criminal elements. The reputation of your business could be fatally damaged if you don’t invest in the latest security systems to protect your website and transaction processes.
- Ability to handle Legal issues can be a challenge and you’ll need to be aware of, and plan to cope with, the additional customer rights which are attached to online sales.
- Higher Advertising costs since online marketing can be a very efficient way of getting the right customers to your products, thus demanding a generous budget. This is especially true if you are competing in a crowded sector or for popular keywords.
- Maintain Customer trust can be as difficult as to establish a trusted brand name, especially without a physical business with a track record and face-to-face interaction between customers and sales staff. Hence, you might need to set up a good customer service system as part of your online business.
Electronic markets:
Electronic markets (or electronic marketplaces) are information systems (IS) which are used by multiple separate organizational entities within one or among multiple tiers in economic value chains. In analogy to the market concept which can be viewed from a macroeconomic (describing relationships among actors in an economic systems, e.g. a monopoly) as well as from a micro economic (describing different allocation mechanisms, e.g. public auctions of telephone frequencies) perspective, electronic markets denote networked forms of business with many possible configurations:
First, the topology of electronic markets may be centralized or decentralized in nature. Centralized electronic markets are hubs which often provide services to their participants. Decentralized settings involve sequential relationships within value chains which often are found when electronic messages are exchanged directly between businesses (electronic data interchange, EDI).
Second, the services provided by electronic markets may serve infrastructural or allocation purposes. Among the infrastructure services are routing, messaging, identification and partner directories whereas allocation services enable pricing process which in turn may be static or dynamic in nature. Typical implementations are catalogues, exchanges and auctions.
Third, the relationships of actors involved in electronic markets may be stable or atomistic in nature. The former usually refers to classical supply chains where business collaborate during a longer period of time. In the latter case, the transaction partners are only stable for a single transaction. This is usually to be found in auction and other exchange settings.
This leads to two definitions:
In a narrow sense Electronic Markets are mainly conceived as allocation platforms with dynamic price discovery mechanisms involving atomistic relationships. Popular examples originate from the financial and energy industries.
In a broader sense, price discovery is not critical for electronic markets. This covers all forms of electronic collaboration between organizations and consumer as well as vice versa.
Online Auction:
An online auction is a service in which auction users or participants sell or bid for products or services via the Internet. Virtual auctions facilitate online activities between buyers and sellers in different locations or geographical areas. Various auction sites provide users with platforms powered by different types of auction software. Online auctions mirror traditional auctions and usually involve multiple bidder participation. In both scenarios, bidders and sellers buy and sell tangible and intangible products and services. Starting bids are low but increase at steady rates to meet market demand and item popularity. The time span of an online auction ranges from one to 10 days for items offered 24/7 worldwide.
Online auctions are a widely accepted business model for the following reasons:
- No fixed time constraint
- Flexible time limits
- No geographical limitations
- Offers highly intensive social interactions
- Includes a large numbers of sellers and bidders, which encourages a high-volume online business
- Online auctions include business to business (B2B), business to consumer (B2C), and consumer to consumer (C2C) auctions.
Now that we understood what exactly is E-commerce, we need to investigate its relevance in our Daily Life. Stay tuned with our upcoming blogs to know more about E-Commerce.