The term "Electronic Commerce" (or e-Commerce) refers to the use of an electronic medium to carry out commercial transactions. Most of the time, it refers to the sale of products via Internet, but the term eCommerce also covers purchasing mechanisms via Internet (for B-To- B). 

A client who purchases on the Internet is called a Cyberconsumer. E-Commerce is not only limited to online sales, but also covers:

  • Preparation of estimates online
  • Consulting of users
  • Provision of an electronic catalog
  • Access plan to point of sales
  • Real-time management of product availability (stock)
  • Online payment
  • Delivery tracking
  • After-sales service

In certain cases, electronic commerce makes it possible to highly customize products, in particular when the electronic commerce site is linked with the production system of the enterprise (e.g. business cards, customized items such as T-shirts, cups, caps, etc.)

Finally, insofar as electronic services and products are concerned (MP3 files, software programs, e-books, etc.), electronic commerce makes it possible to receive the purchase in a very short time, if not immediately.

Electronic commerce (e-commerce) remains a relatively new, emerging and constantly changing area of business management and information technology. E-commerce is digitally enabled commercial transactions between and among organizations and individuals. Digitally enabled transactions include all transactions mediated by digital technology e.g. Internet. For the most part, this means transactions that occur over the Internet and the Web. Commercial transactions involve the exchange of value (e.g., money) across organizational or individual boundaries in return for products and services. Exchange of value is important for understanding the limits of e-commerce. Without an exchange of value, no commerce occurs.

Some of the definitions of e-commerce often heard and found in publications and the media are:

  • Electronic Commerce    (EC)    is    where    business    transactions    take    place    via telecommunications networks, especially the internet.
  • Electronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet.
  • Electronic commerce is about doing business electronically.
  • E-commerce is defined as the conduct of a financial transaction by electronic means.

Comparison Between E-commerce and Traditional Commerce

Traditional Commerce or Commerce is a part of business, which encompasses all those activities that facilitate exchange. Two kinds of activities are included in commerce, i.e. trade and auxiliaries to trade. The term trade refers to the buying and selling of goods and services for cash or kind and auxiliaries to trade, implies all those activities like banking, insurance, transportation, advertisement, insurance, packaging, and so on, that helps in the successful completion of exchange between parties.

In finer terms, commerce encompasses all those activities that simplify the exchange of goods and services, from manufacturer to the final consumer. When the goods are produced, it does not reach to the customer directly rather it has to pass from various activities, which are included under commerce. Its main function is to satisfy the wants of consumers by making goods available to them, at the right time and place.

Electronic commerce is very much like traditional commerce. It also involves an exchange of goods. But the exchange of goods is conducted online. Technologies such as email, electronic data interchange and electronic fund transfer are used to track transactions and receive payments. Some of the differences between electronic commerce and traditional commerce are explained briefly below:

                                   Difference between E-Commerce and Traditional Commerce


1. Cost Effective

E-commerce is very cost effective when compared to traditional commerce. In traditional commerce, cost has to be incurred for the role of middlemen to sell the company’s product. The cost incurred on middlemen is eliminated in e-commerce as there is a direct link between the business and the customer. The total overhead cost required to run e-business is comparatively less, compared to traditional business.

For example, in running an e-business, only a head office is required. Whereas in traditional method, a head office with several branches are required to cater to the needs of customers situated in different places. The cost incurred on labour, maintenance, office rent can be substituted by hosting a website in e-business method.

2.  Time Saving

It takes a lot of time to complete a transaction in traditional commerce. E-commerce saves a lot of valuable time for both the consumers and business. A product can be ordered and the transaction can be completed in few minutes through internet.

3.  Convenience

E-commerce provides convenience to both the customers and the business. Customers can browse through a whole directories of catalogues, compare prices between products and choose a desired product anytime and anywhere in the world without any necessity to move away from their home or work place.

E-commerce provides better connectivity for its prospective and potential customers as the organization’s website can be accessed virtually from anywhere, any time through internet. It is not necessary to move away from their work place or home to locate and purchase a desired product.

4.  Geographical Accessibility

In traditional commerce, it may be easy to expand the size of the market from regional to national level. Business organizations have to incur a lot of expenses on investment to enter international market. In e-commerce it is easy to expand the size of the market from regional to international level.

By hosting a website, by placing advertisements on the internet and satisfying certain legal norms, a business can penetrate into global market. It is quite easy to attract customers from global markets at a marginal cost.

5.  Introduction of New Products

In traditional commerce, it takes a lot of time and money to introduce a new product and analyze the response of the customers. Initially, cost has to be incurred to carry out pilot surveys to understand the taste of the customers.

In e-commerce, it is easy to introduce a product on the website and get the immediate feedback of the customers. Based on the response, the products can be redefined and modified for a successful launch.

6.  Profit

E-commerce helps to increase the sales of the organization. It helps the organization to enjoy greater profits by increasing sales, cutting cost and streamlining operating processes.

The cost incurred on the middlemen, overhead, inventory and limited sales pulls down the profit of the organization in traditional commerce.

7.  Physical Inspection

E-commerce does not allow physical inspection of goods. In purchasing goods in e- commerce, customers have to rely on electronic images whereas in traditional commerce, it is possible to physically inspect the goods before the purchase.

8.  Time Accessibility

Business is open only for a limited time in traditional commerce. Round the clock (24 x 7) service is available in e-commerce.

9.  Product Suitability

E-commerce is not suitable for perishable goods and high valuable items such as jewellery and antiques. It is mostly suitable for purchasing tickets, books, music and software. Traditional commerce is suitable for perishables and touch and feel items. Purchasing software, music in traditional commerce may appear expensive.

10.  Human Resource

To operate in electronic environment, an organization requires technically qualified staff with an aptitude to update them in the ever changing world. E-business has difficulty in recruiting and retaining talented people.

Traditional commerce does not have such problems associated with human resource in non electronic environment.

11.  Customer Interaction

In traditional commerce, the interaction between the business and the consumer is a “face-to- face”.

In electronic commerce, the interaction between the business and the consumer is “screen-to- face”. Since there is no personal touch in e-business, companies need  to have intimate relationship with customers to win over their loyalty.

12.  Process

There is an automated processing of business transactions in electronic commerce. It helps to minimize the clerical errors.

There is manual processing of business transactions in traditional commerce. There are chances of clerical errors to occur as human intervention takes place.

13.  Business Relationship

The business relationship in traditional commerce is vertical or linear, whereas in electronic commerce the business relationship is characterized by end-to-end.

14.  Fraud

Lots of cyber frauds take place in electronic commerce transactions. People generally fear to give credit card information. Lack of physical presence in markets and unclear legal issues give loopholes for frauds to take place in e-business transactions.

Fraud in traditional commerce is comparatively less as there is personal interaction between the buyer and the seller.

Comparison Chart

Basis For Comparison Traditional Commerce E-commerce
Meaning Traditional commerce is a branch of business which focuses on the exchange of products and services, and includes all those activities which encourages exchange, in some way or the other. E-Commerce means carrying out commercial transactions or exchange of information, electronically on the internet.
Processing of Transactions Manual Automatic
Accessibility Limited Time 24×7×365
Physical Inspection Goods can be inspected physically before purchase. Goods cannot be inspected physically before purchase.
Customer interaction Face-to-face Screen-to-face
Scope of business Limited to particular area Worldwide reach
Information exchange No uniform platform for exchange of information. Provides a uniform platform for information exchange.
Resource focus Supply side Demand side
Business Relationship Linear End-to-end
Marketing One way marketing one-to-one marketing
Payment Cash, cheque, credit card, etc. Credit card, fund transfer etc.
Delivery of goods Instantly Takes time