Large business enterprises have used electronic commerce to conduct their business-to-business transactions. Electronic Data Interchange (EDI) on private networks began in the 1960s and banks have been using dedicated networks for Electronic Fund Transfer (EFT) almost as long. Recently, however, with the increased awareness and popularity of the Internet, electronic commerce has come to encompass individual consumers as well business of all sizes.

The Internet is already changing the way that many companies conduct their business. As that influence grows and more companies use the Internet, the possibilities for conducting business-to-business commerce on the Internet will expand greatly and become more of a routine part of commerce than it is today.

An Overview 

Electronic commerce is defined as the buying and selling of products and services over the Internet, but there are many more aspects. From its inception, electronic commerce had included the handling of purchase transactions and funds transfers over computer networks. It is grown now to include the buying and selling of new commodities such as electronic commerce are greater that merely adopting our present view of commerce to performing those same transaction over electronic networks (although that is a good place to start an exploration of topic).

            Despite electronic commerce’s past roots in transactions between large corporations, banks and other financial institutions, the use of the Internet as a way to bring electronic commerce to the individual consumer has led to a shift in viewpoint. Over the past few years, both the press and the business community have increased their focus on electronic commerce involving the consumer.

            Meanwhile business-to-business electronic commerce is rolling along, stronger than ever. The Internet has also given business electronic commerce as boost-in some cases, smaller companies are now discovering that they can conduct business on line, just like their larger counterparts. And business of all sizes are finding that they can take advantage of the Internet to loser the cost of electronic commerce-either by business data to digital from and incorporating it with their business practices.

            The move for business to digitize information is not new-it has been going on for more than a decade and continues to increase as personal computers become standard business equipment for more and more corporations. what is making a notable difference to business is that a significant synergy has formed between the use of digital information, computerized business practices and the Internet. This synergy is what enables electronic commerce.

            Before we define electronic commerce, consider for a moment what makes up traditional commerce. Traditional commerce involves more than just selling an item and collecting the money. Here is what is actually involved in the sales cycle of a purchase managed without electronic commerce.

            To meet the needs of the marketplace, businesses design and manufacture new products, market their products, distribute them and provide customer support, generating revenue for them along the way. Customers first have to identify a need for something, whether it is a physical product, a service or information. Then they may look for   information about that product or service, find places that sell t and compare the options they have found (prices, service, reputation and so on) before they actually purchase the product. Making the sale might also involve negotiating the price, quantity, and terms of delivery and maybe even some legal issues. Any the sales cycle does not end with the delivery of the product or service, either. Customer support adds more steps while working to the benefit of both parties-customers get what they need to keep their products performing well and suppliers learn more about market needs. Meanwhile, banks and other financial institutions handle thee transfer of funds between buyers and seller, whether they are individual consumers or large multi-national corporations.

            Once a person realizes how many tasks and processes are involved in traditional commerce, he can discard the simplistic definition of commerce as just the buying and selling of products. You should also discard the equally simplistic definition of electronic commerce as merely the conducting of business transactions over electronic networks instead of paper, telephones, courier, trucks, plane and other means of moving products and information.

            Electronic commerce is a system that includes not only those transactions that center on buying and selling goods and services to directly generate revenue, but also those transactions the support revenue generation, such as generating demand for those goods and services, offering sales support and customer service or facilitating communication between business partners.

            Electronic commerce builds on the advantages and structures of traditional commerce by adding the flexibilities offered by electronic networks. By operating with digital information in electronic networks, electronic commerce brings with it some new opportunities or conducting commercial activities. For example, by using digital information for commercial activities, electronic commerce makes it easier for different groups to cooperate. The groups could be departments sharing information within a company to plan a marketing campaign, companies working together to customers to improve customer relations.

            Conducting commercial activities on electronic networks also removes certain physical constrains. For example, computing systems on the Internet can be set up to provide customer 24hours day, 7 days a week. Orders for products and services can also be accepted on an anytime, anywhere basis.

            Electronic commerce enables new forms of business, as well as new ways of doing business. Amazon.com, for example, is a bookseller based in Seattle, Washington. The company has no physical stores, sells all their books via the Internet and coordinates deliveries directly with the publishers so they do not have to maintain any inventory. Companies such as Kantara and software.net take this a step further.

            Because all of their products (commercial software packages) are electronic and can be stored on the same computers that they use for processing orders and serving the opportunity to purchase electronic connectors and related components directly from its Web-based catalog, bypassing the need for EDI-based purchase orders and confirmations.

            The definition of electronic commerce is not a static one. Even as the new opportunities offered by our current technological capabilities have yet to be fully exploited, new networking technologies or applications software can arrive tomorrow. Thus we shall be presented not only with new ways of doing what we have done in the past, but will shall also find new things to do.

 Traditional versus Electronic Business Transactions

Let us consider what tasks your company has to perform when an employee wants to buy something, for example, a filing cabinet. First the employee generates a request for the filling cabinet, including some specifications (four-drawer versus five drawer, with lock versus no lock) and passes this request on though an approval process involving one or two managers, depending on the cost. That request finally makes it over to the purchasing department, where someone has to check through the office supply catalogs to select an appropriate model and supplier. Assume the company does not have a single preferred supplier for office supplier, so the purchasing agent has to check more than one catalog and all thee suppliers to determine the availability of the filling cabinet. Once a supplier is selected, the agent can issue a purchase order and either fax or mail it to the supplier. (Phone orders are not accepted because a paper trial is an important part of the process.). Fig.15.1 below shows the components of an electronic commerce system

Electronic   Commerce

Components of electronic commerce

Once the order has been received, the supplier verifies the credit and sales history of the ordering company, checks the warehouse for inventory and finds out when the shipper can pick up the cabinet from the warehouse and deliver it to the appropriate location. Satisfied that the item can be delivered within the time requested, the supplier creates a shipping order, notifies the warehouse and creates an invoice for the filing cabinet. The invoice gets mailed, the filing cabinet gets delivered and somewhere along the way, your company pays the bill for the cabinet.

Now consider how this might be done using electronic commerce. The employee would visit the Web site of either the distributor or the manufacturer and select the appropriate filling cabinet by matching the needs (colour, number of drawers, lock, size) with the data in an online catalog. The employee would then use electronic mail to send a digital request (perhaps appending the Web page of the selected product) to the manager for approval. Once approved, the manager would simply use e-mail to forward the request to purchasing. Purchasing could then copy the necessary information into their order database and send an electronic order to the supplier, via EDI or another form, also using e-mail.

            When the supplier receives the order, a computer program might automatically insert the order into a database of pending orders, check inventory at the warehouses, check your company’s credit status and earmark the item for delivery. This same program might then pass a shipping order electronically to the appropriate warehouse and create an invoice. If a shipping agent were used, the warehouse would notify the shipper via e-mail. Once the filling cabinet was received, accounts payable would instruct the bank, via e-mail, to transfer the appropriate fund to the supplier.

            Compare the traditional way of doing things to the electronic commerce version. Many of the steps are the same, but the way that information is obtained and transferred along the  cycle is different. Many different media were needed in the traditional method, making coordination more difficult and increasing the time required to process the order. But with electronic commerce, everything starts out and stays digital; only different applications are needed to transfer and process the data as it winds its way though the order process.

            The initial desire for the filing cabinet might have been spurred by a flyer manufacture of office furniture or the cabinet might have been featured in a magazine. Even before the product was delivered and paid for, other means of communication were used-more printed media (catalogs, ordering forms and s on), interoffice mail, the telephone and perhaps fax or the United States Postal Service. The payment itself might have been made by writing a check, using a corporate purchasing card or including it in a larger monthly payment to the supplier.

            Imagine how much more efficient this process would be if you were able to obtain all the information you needed right at your fingertips and also make your purchases, all using one medium. That is the promise of electronic commerce, reflected in the last column of the table shown on the previous page. Of course, you cannot deliver filing cabinets over the Internet, but some goods and services are more amenable to electronic transfer than others.        

More Than the Sum of Its Parts

For those of you in the business of providing information products and services or content, your production options very from traditional print media to various forms of multimedia, either for the Web, movies or television. The crucial fact is that all of this information can be expressed and stored as computer bits, which makes the product more versatile as new media are embraced or new opportunities arise. For example, catalog data stored in a database can be presented electronically via the Web, but it can also be printed in customized catalogs targeted at specific market niches. Or the data might be included on a CD-ROM, along with multimedia presentations of your products. Your production infrastructure is going to rely on computers and other electronic devices. If you are publishing information on the Internet, you will be using such computer applications as Web servers, databases and multimedia authoring tools.

 Information Sharing        

It is necessary to make your clientele aware of your products and services. That means advertising and marketing, or, more generally, providing data for your customers information about your company and its product, while you learn more about your markets in order to reach customers better, and design your products and services to meet their needs. With electronic commerce, the two goals (both your and your customers) can go hand-in-hand.

            You also may find that networked communities can be useful for distributing information about your products. Chat rooms, multi-party conferencing, bulletin board systems, and newsgroups (the Usenet newsgroups on the Internet, for example) are all ways that you can foster discussion off your company and its products. Many of these systems can be integrated with a Web-server.

The World Wide Web (or more often just “the Web:) provides one effective medium for communicating with your customers. You can design Web sites to include product catalogs that can be searched electronically and that provide new types of product information. If you maintain an online catalog of products using the Web, you can obtain data on which products are requesting searches and how often those requests are made. Or you can actively request information from visitors your Web site by providing them with a page for comments. Asking Web visitors to provide some information about themselves as they search your catalog or prepare an online order, can help you tie demographic data to product searches and information request-information that can help your marketing and sales department. You can also send periodic notice about product upgrades and features to interested parties by e-mail.

            The Internet offers you a number of different ways to provide customer support. For example, if you are maintaining a Web server, you can include a form to accept questions from customers using a Web browser and direct those queries to your support staff. You can compiler questions that arise repeatedly into what are know as Frequently Asked Questions (FAQ) files and distribute them via e-mail, Usenet news and the Web. Even before Web sites became a mechanism for accepting questions, customers have often been able to correspond with support staffs via e-mail.

            One part of customer support that you should not overlook is actively seeking customer opinions. You can design forms based surveys for your Web site or use e-mail to distribute similar surveys to select customers.

            While a larger number of Web sites are aimed at the general public, a significant number of sites are aimed at business markets. In some cases, you can find intermediaries or brokers, offering sites that allow buyers and sellers in a particular market to interact, trade information, but and make sales. Internet-driven information explosion in many markets is an opportunity for intermediaries help guide clients through the mass of information.

Ordering

It should be a routine matter for customers to electronically place orders for your company’s goods or services. Electronic forms that minor traditional paper order form are a good way of handling this. Client/server applications have often been designed to handle this, but because most Web systems support electronic forms, many companies are now obvious opportunity as accepting orders via e-mail, either. Even if you do not use forms-based e-mail on the Internet, it is not too difficult to write a CGI script to process ASCII-text messages and place the order information into a database.

Payment

With a wide variety of payment mechanisms in place or proposed, this is perhaps the most fluid and fast-changing part of electronic commerce. Customers can used credit cards, electronic checks, digital cash, and even something called microcash, when the payments are only a few pennies or dimes. Some businesses have long been users of EDI, but the setup costs have made it prohibitive for smaller businesses. However, with the advent of EDI over the Internet, small business and even home businesses, can use EDI. Soon, your business will have both consumer-based and business-based payments processed through the Internet.

            Entrepreneurs are experimenting with a variety of electronic payment systems on the Internet. Many are electronic equivalents of the systems we are accustomed to using every day, such as credit cards, checks and debit cards. Even digital cash, an attempt to electronically represent the hard currency in your pocket, is also available. But all of these electronic methods for paying for goods and services over a network are still in a fledgling stage when compared to all the transactions completed every day using cash, checks and credit cards in traditional world. Businesses have responded to the popularity of the Web by putting their product data sheets and catalogs for ordering on Web servers, so tying payment systems to the medium makes sense. Many vendors offer commerce-server or merchant-server Web software specifically designed to handle accepting payments over the Web; some also include facilities for generating product catalogs.

            Businesses are also starting to use EDI for transactions over the Internet with their suppliers, either by using Web-based forms for entering EDI transactions with a services company on the Internet or by using secure e-mail to  forward EDI transactions to their business partners.

            In addition to all the methods for making payments electronically over the internet, there are still the tried-and-true methods used every day, such as giving credit card number. These methods are slowly being replaced by electronic commerce, so they are not covered in any detail in this book.

Fulfillment      

Our economy depends on the daily transfer of massive amounts of information. Many companies make money generating, transferring or analyzing that information. If your company is one of these, then you can use the Internet to transfer your information products to your clients aside from the forms of information, such as newsletters, news, analysis reports and stock prices don’t forget that electronic data also includes software. Documentation, program patches and upgrades are also well suited to Internet-based distribution.

            If you deal in physical goods, you cannot actually deliver your products via the Internet, but you can use EDI to inform your shippers of goods that need to be transferred. And the Internet lets you use e-mail to communicate with suppress and distributors about matters such as the status of deliveries. In some cases, shippers such as Federal Express, United Parcel Services and American President Lines now let you check delivery status using the Web.

            No matter how innovative and popular your products are, they are no good if you cannot deliver them to your customers. Once you create a way to distribute it. You also need ways to inform your current and potential customers about the product. Whether your product is softgoods, that is, information or hard goods, that is, tangible products, you can use e-mail and a Web site to make product release information available. As a customer we personally like e-mail because we do not have to remember to check a Web site; others do not like being bombarded by e-mail, so you have to seek a happy balance according to your customer’s wishes. Web sites are good for making a lot more information available than you would probably transmit via e-mail.

            If you come to rely on intermediaries or other distributors to distribute your products and product information, sharing product release schedules, product development and marketing plans and similar types of information between your company and intermediaries can be invaluable. Maintaining shared databases accessible by outsiders and allowing them to enter data as well as review it, helps strengthen ties with your partners.

Service and Support           

Rarely does a company’s relationship with a customer end with the sale may be only the beginning of a long and fruitful relationship with a customer. Not only might the customer need some soft of assistance with the product or service, but your company might want to work with the customer to improve the products and services it can often to other customers in the future.

            Items such as technical notes about your products features and uses, FAQs (frequently asked questions) that provide answers to your customers most commonly-posed inquiries, software updates and bug fixes, are only some of the information you can make available to customers on the Internet. Cleverly designed systems can provide this information to customers through a variety of channels, such as fax, e-mail and the Web, all at the same time. And these system do not have to be static; you can let your customers help decide what information you should provide. Providing a form for questions on a Web site or simply accepting questions by e-mail (and not just to your technical support people), can go a long way towards ensuring that your are getting the right information into the right s

New Opportunities

The comparison of how traditional and electronic commerce can be used for ordering items such as a filling cabinet was z simple, rather straightforward example of commerce. When you consider the different applications that can be used to work on digital information, such as those briefly outlined in the previous section, you should realize that electronic commerce can not only simplify the delivery of information and goods, but it can also change the relationship between them. That adds up to new opportunities.

            Electronic advertisements for office furniture could lead right to information about local stores carrying that item, along with that store’s business hours and directions, even pointers to reviews of the products. If a customer does not need to see a product in person before buying, orders could be placed and paid for electronically.

            Electronic commerce offers other new opportunities to both individuals and businesses. As electronic commerce matures and more companies conduct business on line, you shall of able to do comparison-shopping more easily.

            In addition, vendors will be able to electronically notify potential customers about sales of items in which they are particularly interested. Despite all the talk concerning disinter mediation, the increase of direct buyer-seller interaction at the expense of the middleman, electronic commerce will open up new opportunities for new kinds of intermediaries. For example, some business will become intermediaries or brokers to track special markets, notifying clients of bargains, changing market conditions and hard-to-find items and even conducting periodic searches for special products on their behalf.

             We have only begun to see the opportunities and synergies that electronic commerce can offer. In the past three to four years, the Internet has become more consumers to confidently use the Internet and it has offered individuals and businesses new way to present and find information. Business-to-business transactions can now take place at less expense using the Internet than they did savings for large businesses, but also the opportunity for smaller businesses to use the electronic processes they found prohibitively expensive in the past.

The Benefits of Electronic Commerce   

Electronic commerce can offer your company both short-term and long-term benefits. Not only can it open new markets, enabling you to reach new customers, but it can also make it easier and faster for you to do business with your existing customer base. Moving business practices, such as ordering, invoicing and customer support, to network-based systems can also reduce the paperwork involved information is digital, you can better focus on meeting your customers need. Tracking customers satisfaction, requesting more customer feedback and presenting customer solutions for your clientele are just some of the opportunities that can stem from electronic commerce.` 

Ecommerce: The Emerging force

Types of ecommerce

The two main forms of ecommerce are EDI and internet-based ecommerce. Internet commerce largely consists of web-based ecommerce. Today, EDI features and technologies differ from those offered by internet commerce, but these differences will become less pronounced as internet commerce matures and as traditional EDI utilizes new internet-based technology. For example, some EDI services now use the internet, rather than a traditional dedicated network, as a transport mechanism. Meanwhile, ISPs increasingly will offer higher-quality services, which today are the province of EDI, to those concerned about reliability and security.

Electronic Data Interchange

Historically, the main form of ecommerce has been EDI. EDI is a form of program-to-program communication that lets business applications in different organizations exchange information automatically to process a business transaction. EDI transactions involve predefined relationships between trading partners, suppliers and customers and typically are carried over specialized networks known as value-added networks (VANs). These relationships and the use of private EDI networks allows EDI service providers to offer a degree of security, performance and reliability that is more difficult to accomplish with the ad-hoc relationships and internet-based communications that characterize web-based ecommerce.

Internet commerce 

Internet commerce involves managing and conducting a business transaction using the Internet. Web commerce, a subset of Internet commerce, goes beyond using the Internet as a transport mechanism and presupposes that participants have web access. Typically, the web browser is used as a software client for interactive access to a web server implementing ecommerce. Currently, web-based ecommerce is the most widely used form of internet commerce.+

Components of the transaction may include catalog display, ordering, order fulfillment, payment processing and back-end integration Internet commerce embraces all stages in the trading cycle, from information exchange and relationship building, negotiation and contract agreements to transactions and fulfillment logistics.

Moving to web-based ecommerce

The rapid growth in business and consumer use of the internet and the web-beginning with the introduction of the first graphical web browser, Mosaic, in 1992-and the subsequent elimination of the National Science Foundation’s (NSF’s) acceptable-use policy (which prohibited commercial use of the internet backbone) created the potential for new forms of ecommerce. These options now are attracting more attention than EDI, are growing much faster and eventually will be much larger, both in terms of participants and in the value and volume of transactions.

As interest in the web exploded during the mid-1990s and as the number of consumers with access to the internet at work or at home grew, companies that originally had established web sites primarily for marketing purposes to promote their corporate or brand identity or to provide information about their products, soon became interested in using those sites for sales purposes as well (that is to take orders). In other cases, the web was used in support of transactions that already had occurred or were ongoing, For example, in tracking of shipments being handled by the major package delivery services.

The compelling advantage of the web as an infrastructure for ecommerce is that it provides a universal software client, the web browser and a ubiquitous infrastructure, the global TCP/IP network known as the internet, that can serve as a readymade platform for ecommerce. This situation vastly reduced the cost of setting up as an EC merchant because it eliminates the need for each vendor to develop, distribute, and support a software client and maintain a dedicated network and dialing access facilities.

Although business-to-consumer web-based ecommerce has garnered more attention recently, business-to-business ecommerce will continue to account for the bulk of transaction dolled volume in  the next few years, in part due to existing infrastructure and to compelling financial benefits. Barriers to business-to-consumer ecommerce have included concerns about security and poor performance often experienced by consumers from Internet congestion, slow modems, the use of large graphic files and other factors. At the same time, business-to-business ecommerce has been accelerated extranets (intranets than have been extended to include business partners and key customers) has fueled the growth in internet-based business-to-business ecommerce.

The two forms of web-based ecommerce, business-to-business and business-to-consumer, share many common characteristics and technologies as well as in the business drivers for adopting ecommerce. Common technology characteristics of both business-to-business and business-to-consumer web-based ecommerce include the following:

There are important technology differences between the business-to-business and business-to-consumer ecommerce models. For example, the need to process payments via credit card securely has been a major driver for the development of the broad range of security technologies and payment systems. However, this need is felt most acutely on business-to-consumer sites because ecommerce merchants expect payment  at the time an order is placed and consumers want to be able to pay online to avoid the delay  and inconvenience associated with having to mail a check to the merchant. On business-to-business ecommerce sites, this issue is not as pressing because the merchant typically is willing to invoice the buyer and collect payment later and because business customers are used to ordering via a purchase order rather than paying immediately via credit card. For business-to-business transaction, additional safeguards are built into the existing processes to protect the companies against possible fraud.

Both business-to-business and business-to-consumer web-based ecommerce also share certain non-technology characteristic, which highlight additional distinctions between web-based ecommerce and EDI.

Non-technology characteristics of web-based ecommerce included these:

Some examples of the use of EDI to improve business processes include the following:

In the case of web-based ecommerce, the benefits are more varied and may differ significantly between the business-to-business and business-to-consumer models. In the business-to-consumer ecommerce market, the anticipated benefits to the vendor vary according to the business model for becoming involved with ecommerce initially.

In some cases, merchants have taken a familiar business model, such as catalog shopping, and transported it to the web as a new medium, using their web site instead of a paper catalog to provide product information and using online ordering to replace calling an operator to place an order. Today, these web sites may not generate many incremental orders (orders that would not be place if the company was not on the web.) Rather merchants are investing in ecommerce to extend their presence to the web so they will not become (visible by their absence), to give consumers and additional mechanism through which to do business with them; and to gain experience with web-based ecommerce so that when (or if) it becomes a larger part of their sales, they are ready to take advantage of it.

Gaining experience with web-based ecommerce is particularly important so that a company can avoid being outflanked by competitors who take advantage of the web more quickly and use it to gain market share. In the future, as usage of the web becomes more widespread and possible begins to replace (rather than supplement) existing channels, other business drivers may become important as well. for example, expenses of direct mail merchants (such as printing and postage) could be reduced dramatically if web-based ecommerce replaces traditional catalog sales.

In other cases, entirely new business models are developed around web-based commerce. These include the online retailer, the aggregator and the direct seller.

The online retailer

The online retailer is a company set up specifically to sell via the web, such as the Internet bookseller Amazon.com. Under this model, all the web-based orders are incremental because these companies would not exist without the web. They need to take advantage of some characteristics of the web-such as the ability to have a catalog that is unlimited in size or the ability to provide additional information about the product not available elsewhere (for example, other customer’s comments about a particular book). They also may need to provide another benefit over non-web shopping, such as discounts over retail stores (made possible by their lower cost of doing business), to attract customers away from non-web shopping and away from their web-based competitors.

The aggregator

Another new business model is the aggregator or the electronic mall. Here, the web site provides the consumer with a selection of products from multiple vendors but typically limits the selection to a particular type of product, such as computer accessories. The aggregator may be able to offer a broader selection of products than would normally be found elsewhere. For example, an online wine retailer might sell wine from smaller wineries that do not have their own web sites or that have a limited presence in retail stores. In other cases, the merchant may be taking advantage of the web’s ability to provide more detailed information about products, such as comparative product specifications, than is possible in a traditional retail establishment. Some vendors also provide a forum for their customers to discuss their products, essentially creating a virtual community.

On the other hand, disintermediation is not a one-way process. Although ecommerce may eliminate the need for intermediaries that do not offer value-added services, the value of many distributors or resellers will increase if they leverage their personal relationships with customers and offer services not available elsewhere. Even successful internet companies acknowledge the need for third parties to reach the substantial marketplaces between very large enterprises and individual consumers accessing products directly from the web.

In the case of business-to-business ecommerce, many of these business models and their related benefits also apply. A well-known vendor may set up a web site to expedite the order-taking process, resulting in increased convenience and access to more detailed information for its customers. In this case, the benefit is less likely to be incremental orders; however, the savings due to a reduced cost of order processing and the handling offer related inquiries can be enormous. In other cases, an existing product distributor may act as an ecommerce aggregator, combining product information from multiple manufacturers with order-taking capability.

Some Essentials

Significant investments in business process redesign, IT infrastructure enhancement and marketing reorientation are required to deliver customized, personalized, information-based products and services. IT organizations also are challenged with implementing new applications that must handle increasing volumes of data. In addition, accommodating a growing number of consumer-to-business ecommerce transactions may require an upgraded network and systems infrastructure.

Ecommerce facilitates new types of business processes for reaching customers as well as new types of products and selling environments-interactive shopping malls, electronic books and catalogs. Use of ecommerce technologies can result in improved efficiencies in finding and servicing customers, in communicating with trading partners and in developing new products and markets