E-commerce implies business transactions over the internet where the parties involved are either selling or buying. The transactions conducted involve the transfer or handling over ownership and rights to products or services.
Impact of E-Commerce on Business:
1) Transformation in the Marketplace:
Now business can be conducted at anywhere any place accessible to internet. Firms can offer their products and services with involvement of intermediaries.
Traditional intermediary functions will be replaced, new products and markets will be developed, and new and far closer relationships will be created between business and consumers.
It will change the organization of work- new channels of knowledge diffusion and human interactivity in the workplace will be opened more flexibility.
2) Fast Growth of Business:
E-commerce will serve as a catalyst and diffuse more widely changes that are already under way in the economy, such as the reform of regulations, the establishment of electronic links between businesses (EDI), the globalization of economic activity, and the demand for higher-skilled workers.
Likewise, many pectoral trends already under way, such as electronic banking, direct booking of travel, and one-to-one marketing, will be accelerated because of electronic commerce.
3) Helpful in Globalization:
Information exchange was constraint in transnational business but e-commerce provides facilities to MNCs and global organizations to transfer real time information to employees, stake holders and customers.
E-commerce over the Internet greatly increases interactivity in the economy. These linkages support business organization in expansion of business.
4) Electronic Commerce Growth:
At present, electronic commerce over the Internet is relatively small but is growing very rapidly. At present electronic commerce is in a birth stage, and technology and market dynamics are still casting its basic shape. People resist using e-commerce.
This is especially true for the business-to-consumer segment, where people concerns about security of payment, potentially fraudulent merchants, privacy of personal data, etc.
5) New Employment Opportunities:
Electronic commerce will cause changes in the mix of skills required, driving demand for information technology professionals.
For electronic commerce, IT expertise also needs to be joined with strong business applications skills, and therefore requires a flexible, multi-skilled works force.
Apart from contingent skills needed to support electronic commerce transactions and applications, there will be a requirement of hardware and software professionals.
6) New Business Opportunities:
Changing industry structures and electronic commerce systems allow for new business models, based on the wide availability of information and its direct distribution-to end customers.
Going further than new ones, we also see new business models are new forms of intermediaries, or information brokers.
The examples are currently the directory providers or the search engines, such as Yahoo and Lycos, bidding sites like e-bay, Internet shopping, on line trading, online consultancy etc.
E-commerce is a technology driven activity which require an infrastructure that supports the seamless location, transfer, and integration of business information in a secure and reliable manner.
Adaptability of e-commerce in small cities and village is very low due to non-availability of basic infrastructure.
7) Product Promotion:
Through a direct, information rich and interactive contact with customers. The first use of electronic commerce is to provide product information through online electronic brochures and buying guides.
This can be seen as an additional marketing channel, allowing reaching maximum number of customers the advantage of electronic commerce as way to deliver product information and its availability anytime, anywhere, provided the customer has right infrastructure to access the information.
8) New Sales Channel:
Multidirectional approach of e-commerce has created new sales channels by which firms can directly reach to customers, suppliers, and stake holders, considering electronic commerce and in particular the World Wide Web, as a sales channel makes sense for two kinds of products- Physical products sometimes also sold in conventional stores, which can be advertised and for ordered online, such as computer hardware or wine, products which can additionally be delivered over the electronic commerce medium, such as information or software.
Electronic commerce strategies are of primary value in markets where information is of significant added value to the products being brought, rather than in commodity markets. Centralizing, this information digitally is therefore of significant value for customers.
9) Customer Service:
E-commerce provides on line customer care and support services. The ability to provide online answers to problems, through resolution guides, archives of company encountered problems, electronic mail interaction, in the future audio and video support and all that 24 hours a day, 365 days a year, builds customer confidence and retention.
Monitoring how customers use this support information also provides insights on improvement areas in current products and the list of issues encountered with products can be significant source of product feedback for the design of new products.
10) Customer Relationships:
Electronic commerce systems will allow for more personalized relationships between suppliers and their customers, due to their ability to collect information on customer’s needs and behavioural patterns.
The role of technology in learning about customers is its ability to record every event in the relationship, such as customers asking for information about a product, buying one, requesting customer service, etc.
Throughout all these interactions, either over the phone, in person or online, the needs of the customer are identified and will feed future marketing efforts.
Types of e-Commerce
Now there are actually many types of e-Businesses. It all depends on who the final consumer is. Some of the types of e-commerce are as follows:
1) Business-to-Business (B2B)
Transactions that take place between two organizations come under Business to business. Producers and traditional commerce wholesalers typically operate with this type of electronic commerce. Also. it greatly improves the efficiency of companies.
Benefits of Business-to-Business (B2B)
Encourage Business online, import Export is easy, Buyer Seller determination is easy, Trade guides.
Examples : Alibaba.
2) Business-to-Consumer (B2C)
When a consumer buys products from a seller then it is business to consumer transaction. People shopping from Flipkart, Amazon, etc is an example of business to consumer transaction.
In such a transaction the final consumer himself is directly buying from the seller.
3) Consumer-to-Consumer (C2C)
A consumer selling product or service to another consumer is a consumer-to-consumer transaction. For example, people put up ads on OLX or EBay of the products that they want to sell.
C2C type of transactions generally occurs for second-hand products. The website is only the facilitator not the provider of the goods or the service.
4) Consumer-to-Business (C2B)
In C2B, there is a complete reversal of the traditional sense of exchanging goods. This type of e-commerce is very common in crowdsourcing-based projects.
A large number of individuals make their services or products available for purchase for companies seeking precisely these types of services or products.
Examples: Freelancer, Fiverr.
5) Consumer-to-Administration (C2A)
The Consumer-to-Administration model encompasses all electronic transactions conducted between individuals and public administration. Some examples of applications include
C2G (also called C2A): typically individuals paying the government for taxes or tuition to universities.
- Education – disseminating information, distance learning, etc.
- Social Security – through the distribution of information, making payments, etc.
- Taxes – filing tax returns, payments, etc.
- Health – appointments, information about illnesses, and payment of health services, etc.
6) Business-to-Administration (B2A) or (B2G)
This part of e-commerce encompasses all transactions conducted online by companies and public administration or the government and its varies agencies.
Also, these types of services have increased considerably in recent years with investments made in e-government.
B2G (also called B2A), for businesses, whose sole clients are governments or type of public administration.
One example is Synergetics Inc. in Ft. Collins, Colorado, which provides contractors and services for government agencies.
Limitations of E-commerce:
1) Security
The biggest drawback of e-commerce is the issue of security. People fear to provide personal and financial information, even though several improvements have been made in relation to data encryption.
Certain websites do not have capabilities to conduct authentic transactions. Fear of providing credit card information and risk of identity limit the growth of e-commerce.
2) Lack of privacy
Many websites do not have high encryption for secure online transaction or to protect online identity. Some websites illegally collect statistics on consumers without their permission.
Lack of privacy discourages people to use internet for conducting commercial transactions,
3) Tax issue
Sales tax is another bigger issue when the buyer and seller are situated in different locations. Computation of sales tax poses problems when the buyer and seller are in different states.
Another factor is that physical stores will lose business if web purchases are free from tax.
4) Fear
People fear to operate in a paperless and faceless electronic world. Some of the business organizations do not have physical existence, People do not know with whom they are conducting commercial transactions.
This aspect makes people to opt physical stores for purchases.
5) Product Suitability
People have to rely on electronic images to purchase products. Sometimes, when the products are delivered, the product may not match with electronic images.
Finally, it may not suit the needs of the buyers. The lack of ‘touch and feel’ prevent people from online shopping.
6) Cultural obstacles
E-commerce attracts customers from all over the world. Habits and culture of the people differ from nation to nation. They also pose linguistic problems.
Thus, differences in culture create obstacles to both the business and the consumers.
7) High Labour cost
Highly talented and technically qualified workforce are required to develop and manage the websites of the organization.
Since internet provides a lot of job opportunities, business organizations have to incur a lot of expenses to retain a talented pool of employees,
8) Legal issues
The cyber laws that govern the e-commerce transactions are not very clear and vary from country to country. These legal issues prevent people from entering into electronic contracts.
9) Technical limitations
Some protocol is not standardized around the world. Certain software used by vendor to show electronic images may not be a common one.
It may not be possible to browse through a particular page due to lack of standardized software. Insufficient telecommunication bandwidth may also pose technical problems.
10) Huge technological cost
It is difficult to merge electronic business with traditional business. Technological infrastructure may be expensive and huge cost has to be incurred to keep pace with ever changing technology.
It is necessary to allocate more funds for technological advancement to remain competitive in the electronic world.
Key Differences Between e-commerce and e-business
The points presented below are substantial so far as the difference between e-commerce and e-business is concerned:
- Buying and Selling of goods and services through the internet is known as e-commerce. Unlike e-business, which is an electronic presence of business, by which all the business activities are conducted through the internet.
- e-commerce is a major component of e-business.
- e-commerce includes transactions which are related to money, but e-business includes monetary as well as allied activities.
- e-commerce has an extroverted approach that covers customers, suppliers, distributors, etc. On the other hand, e-business has an ambivert approach that covers internal as well as external processes.
- e-commerce requires a website that can represent the business. Conversely, e-business requires a website, Customer Relationship Management and Enterprise Resource Planning for running the business over the internet.
- e-commerce uses the internet to connect with the rest of the world. In contrast to e-business, the internet, intranet and extranet are used for connecting with the parties.