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e-Commerce

Dibyesh Giri

MCA-V SemSIOM, Pune

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What is Commerce

Traditional commerce may be defined as: From Webster's Revised Unabridged

Dictionary Commerce : \Com"merce\, noun.

The exchange or buying and selling of commodities; esp. the exchange of merchandise, on a large scale, between different places or communities; extended trade or traffic.

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What is E-Commerce

E-commerce is a general term for any type of business, or commercial transaction that involves the transfer of information across the Internet. This covers a range of different types of businesses from consumer-based retail sites, like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchanges trading goods or services between corporations. [WHYTE]

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What is E-Commerce Contd.

In summary, e-commerce is the use of electronic communication to do business

Specifically, the transfer of information (transactions), over the Internet

Some people use the term e-business to refer to all the categories of e-commerce E.g. IBM defines e-business as:

The transformation of key business processes through the use of internet technologies

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Business Processes Well-suited to Particular Type of Commerce

E-commerce Sale/purchase of books & CDs, travel services,

investments and insurance services Online delivery of software Online shipment tracking

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Business Processes Well-suited to Particular Type of Commerce

E-commerce + Traditional Sale/purchase of automobiles and residential real

estate (e.g. do research online then buy from a dealer or real estate agent)

Online banking Roommate matching service

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Advantages of E-commerce

Increases sales, decreases cost Allows small businesses to have global customer base Reduced cost through electronic sales enquires, price

quotes and order taking Provides purchasing opportunities for buyers

(businesses can identify new suppliers and partners)

Increase speed and accuracy for exchanged information, thus reducing cost

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Advantages of E-commerce Contd.

Business can be transacted 24hrs a day The level of detail of purchase information is

selected by user Digital products can be delivered instantly Tax refunds, public retirement and welfare support

costs less when distributed over the Internet Allows products and services to be available in

remote areas, e.g. remote learning

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Disadvantages of E-commerce

Inability to sell some products (e.g. high cost jewelry and perishable foods, although supermarkets like www.Tesco.com delivers to your home)

The newness and evolution of the current technology

Many products require a large number of people to purchase to be viable

High capital investment

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Disadvantages of E-commerce Contd.

Difficulty in integrating current databases and transaction processing systems into e-commerce solutions

Cultural and legal obstacles Transmission of credit card details Some consumers resistant to change Laws are unclear

Shipping profile: Products with a low value-to-weight ratio that can not be efficiently packed and shipped are unsuitable (use traditional commerce)

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The 1st Wave of E-commerce The 1st wave was from the

mid 1990s to 2003 Dot-com boom (over $100

billion in investment): Rapid growth from mid-1990s to 2000

Dot-com bust: in 2000 Gloom years: 2000 –2003

(over $200 billion in investment)

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Characteristics of the 1st Wave

It was primarily a U.S. phenomenon Web pages were in English Internet technologies were slow and inexpensive

(e.g. dial-up lines) Bar codes and scanners used to track parts (B2B

and Business processes) Email, tool for unstructured communication On-line advertising main revenue source

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The 2nd Wave of E-commerce

Beginning in 2003 e-commerce has shown signs of new life

Companies like Amazon.com (books), and eBay.com (auctions) who survived the downturn were beginning to show profits

Continuous growth of B2C sales: 20-30% each year since 2000

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Characteristics of the 2nd Wave

International scope where sellers do business in many countries and languages

Faster, cheaper connections (x20 faster), broadband at home (although more expensive)

Radio frequency ID devices and smart cards Fingerprint readers and retina scanners

(biometric technologies) used for tracking Email, integral part of marketing

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Characteristics of the 2nd Wave

E-commerce integral part of marketing and customer contact strategy

Some categories of on-line advertising, e.g. employment services (job want ads) have replaced traditional advertising outlets

Problems Language conversions Currency conversions

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E-commerce Categories

There are five general e-commerce categories: Business to Consumer (or B2C) e-commerce Business to Business (or B2B) e-commerce

(sometimes called e-procurement) Business processes that support buying and

selling activities Consumer-to-consumer (or C2C) e-commerce Business-to-government (or B2G) e-commerce

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B2C e-commerce

Description Businesses sell products or services to individual

customers (consumers) Example

Walmart.com sells merchandise to consumers through its Web site

Web site www.walmart.com

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B2B E-commerce

Description Businesses sell products or services to other

businesses Example

Grainger.com sells industrial supplies to large and small businesses through its Web site

Web site www.grainger.com

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Business Processes

Description Businesses and other organisations maintain and use

information to identify and evaluate customers, suppliers and employees (and to support buying, selling hiring, planning and other activities). More and more this information is being shared

Example Dell Computer uses secure internet connections to share

current sales and forecasts with suppliers who use it to plan their production, therefore they deliver the right quantities of components at the right time

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C2C e-commerce

Description Participants in an online marketplace can buy and sell

goods with each other

Example Consumers and businesses trade with each other on

eBay.com

Web site www.ebay.com

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B2G e-commerce

Description Business sell goods or services to governments

and government agencies Example

Cal-Buy portal for businesses that want to sell online to the State of California

Web site www.pd.dgs.ca.gov/calbuy/default.htm

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E-commerce Categories Example

You are a computer manufacturing company who performs the following activities on the Internet: Sells computers to individuals (B2C) Purchases parts (e.g. hard drives, power supplies etc.)

from a supplier (B2B) Hires staff, manage customer accounts, advertise, etc.

(Business processes) Sells computers to the Government to be used in schools

(B2G) On eBay.com individuals buy and sell this brand of

computers (C2C)

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Business processes

Relative Sizes of E-commerce Categories

B2C

B2B

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Relative Sizes of E-commerce Categories

Year B2C Sales ($ Billions)

B2B Sales ($ Billions)

2005 150 4100

2004 130 2800

2003 100 1600

2000 50 60

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Payment Systems

Credit cards Debit cards Charge cards Other payment

methods Paypal Metered payments

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Payment Systems: The Basics

Payment systems are still evolving Electronic payments are far cheaper than

mailing paper checks Cost of billing a person by mail ranges from

US$1 to US$1.50 Billing a person electronically cost about

US$0.50 Replacing paper bills also saves on trees

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Primary Payment Methods

There are currently four primary payment methods: Cash Checks Credit cards (most popular method online)

Accounts for more than 85% worldwide consumer transactions

Debit cards In the US electronic transfer is also a growing

payment method

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Payment Cards

The main categories of payment cards are: Credit cards (e.g. Visa)

Spending limit based on credit history Interest is charged on outstanding balances not paid

off within a given time Accepted worldwide User protection facilitated by a 30-day period that a

purchase may be disputed Merchant account (that accepts credit card payments)

required by the business

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Payment Cards Contd.

Debit cards The sale amount is removed from user’s account and

transfers to the sellers account Limited by funds in account plus overdraft (if present)

Charge cards (e.g. American Express) Has no spending limit The amount due on the card is due at the end of the

billing period They do not accumulate interest payments

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Payment Cards Contd.

Some vendors provide single-use-cards which are valid for a single transaction A unique card number is issued This helps with card details security Eg. MINT & OXYGEN

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Payment Cards Contd.

Advantages of Payment Cards In the US card holder’s liability is limited to US$50

when used fraudulently Accepted worldwide

Currency conversion handled by card issuer Ease of use, no special hardware required

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Payment Cards Contd.

Disadvantages of Payment Cards Service companies charge merchants per-

transaction and monthly processing fees Price of goods for the consumer might be slightly

higher as a result A limit is placed on the minimum amount allowed to

spend (e.g. 5 pounds in the UK)

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Payment Acceptances and Processing

The merchant authenticates the payment card to ensure it is valid and not stolen

The merchant checks with the payment card issuer to ensure that credit or funds are available and puts a hold on the credit line or the funds needed to cover the charge

Settlement occurs, usually a few days after the purchase, which means that funds travel between banks and are placed into the merchant’s account

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Payment Acceptance Process in E-Commerce site using Merchant AC

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Critical Issues in E-Commerce

Security

Tax effect

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Security Issue 45%of the first time buyer on the net drops

the entire transaction at last moment, when it comes to entering CC No.

Reason for his worry If someone picks of his CC No. after he gives it? Which is original company? Abc.com or

Abcinfo.com Who will bear the loss? (e.g. Tempering of

customer Order data or What if goods r perishable)

What if buyer denies ownership of Goods?

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Technique to secure transactions

Cryptography

Third Party Authentication

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CRYPTOGRPHY

Means “Use of Secret Code” Used to make data transfer on the net secure

and protect it from unauthorized user. Data is encrypted with a piece of code called

“KEY”. KEY is essential set of characters. [56 bit]

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Management of Communication Key

Sends request for PUBLIC KEY of B

B Sends PUBLIC KEY

A encrypts Message using this public key and sends encrypted message to B

ASYMETRIC KEY Encryption method

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THIRD PARTY AUTHENTICATION

Ensures two way authentication Ensures that the person making the payment

has legal right to make that particular payment & also that the site receiving the payment has the legal right to receive that payment

Two Competing Algorithms use by TPA are SSL [ Secured Socket Level] SET [Secured Electronic Transaction]

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SSL [Secured Socket Layer]

Ensure genuineness of Website & Ensure the User Authentication ID.

Once the parties are involved, it creates a secure pipe for further communication.

Uses both e-commerce transaction as well as secure pipe of further communication.

Minimum in cost. Best suited for B2C

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SET [Secured Electronic Transaction]

Secured Transaction is prompted jointly by IBM & Visa card.

Used strictly for E-commerce Transaction. SET is rigorous and hence secured. High Setup cost.[ $50,000] Feasible for B2B. “SETlite” is new version of SET.

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Tax Effects Two types of good delivery methods after

customer put an order via e-commerce transaction.

1. Mail/Courier

2. Online Itself (Download)

“If payment & delivery is done online, NO Tax for buyer.”

e.g. Buying Win Vista online & Download it online.

“Tax is payable, when a transaction involves identifiable party (Physical Location)”

e.g.. If Buyer wants delivery of DVD in his postal address from US.

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GOOD DAY!!!!!

EVERYONE