What is E-commerce?

E-commerce refers to the trading of products or services using computer networks. It provides a new and convenient way of doing retail and conducting customer services because it is available anytime, and has a broader reach of customers.

E-commerce is first introduced in the 1960s for the purpose of exchanging electronic data in long distance, also known as electronic data interchange. It grew explosively during the period of late 1990s to early 2000s with the popularization of Internet and the introductions of eBay and Amazon.

What are the components of a e-commerce program?

For most businesses, e-commerce is powered by a Web-based program called E-commerce Software or Shopping Cart Software. This program usually include several components:

Web Hosting: web hosting is a key factor when it comes to managing an online store. It is a server that gives companies the services needed for owning an online shopping website such as space on the server and internet connectivity.

Merchant interface is the series of tools used to manage the website. It is important to take factors such as design and utility into consideration when setting up a merchant interface. A well-prepared merchant interface has just the right amount of design without making the usage of the interface complex.

Product catalog is the presentation of the products. The catalog is what the customers will notice the most and has a great impact on how they view the store. It is important to maintain a well-structured, straight forward catalog to avoid confusions but also to add design to attract customers at the same time.

Shopping cart is what the customers use when they have decided on their purchase. They can add or remove items as they view the website. This is the step where the customers choose payment and shipping options and finalize their order.

Payment processing is where the customers choose the payment option and enter the card information in order to validate the order. The process can be done through services such as PayPal and Google Checkout.

Shipping options can play a huge role in E-commerce. Shipping is a way that online stores can offer incentives to the customers. These incentives include free shipping or fast shipping options. The more convenient the shipping options are, the more customers the store will attract.

Types of E-commerce

E-commerce is subdivided into 4 major types:

1. B2B (Business to Business): businesses trade off with each other online

•  Example: The Newton Group is one of the largest industry that distributes eyewear to more than 2,500 independent ophthalmic practitioners and retailers nationwide. They have over 200 ophthalmic suppliers and stocks numerous lenses from all the popular contact lens manufacturers. Thousands of lenses are being shipped out daily.
  
  

2. B2C (Business to Consumer): businesses selling to consumers

• Example: Amazon, which is the one of the world's largest e-commerce platform that provides online shopping experience with large range of selection on products such as books, electronics, apparels, beauty supplies and so forth.

3. B2G (Business to Government): businesses selling to government agencies

• Example: GSA Advantage is an organization that engaged in supplying products and services online to federal government officials. The organization's main mission is to create and provide the most efficient purchasing portal which specially designed for federal agencies to shop online.

4. C2C (Consumer to Consumer): business model that facilitates the transaction of products or services between customers

• Example: eBay, the most notable company which adopts the online-auction shopping style. The company provides a worldwide platform for individuals to buy and sell a broad variety of goods and services, and a small percentage of fee is charged from the sellers on each item sold. 

Benefits and Other Issues with E-commerce

Benefits:

E-commerce can be greatly beneficial to both customers and merchants because it:

• Helps customers save time through allowing shopping and acquiring services online 
• Provides detailed and useful information about products 
• Permits customers to do comparison shopping that will allow them to choose the best product with the best price
• Allows businesses to attract more customers through: 

         - Offering lower consumer prices through coupons, deals and bargain offerings 

         - Open for 24/7, e-commerce allows customers to purchase goods anytime and from anywhere they are. 

         - Websites, having clear directions, make online shopping experience easy and convenient 

• Gives abundant information about the price elasticity which shows how the quantity demanded for a good or service changes when the price changes. For instance, with the help of auctions, companies can learn the willingness of customers to pay a particular price for their product. 
• Provides market efficiency through disintermediation (refer to Figure 1). This allows manufacturers to directly sell products to customers thus creating increased revenues and lower consumer prices

(figure 1)

Issues:

Despite all of the benefits mentioned above, customers and companies have to carefully consider some of the issues and costs associated with e-commerce:

• Security is one of the major concerns and there have been many issues with the abused information and “stolen” money.
• Dissatisfaction with the purchased goods after delivery as some of the products may not be exactly the same as they are represented online.
• Disintermediation that allows the manufactures to set up a lower price will simultaneously cause price conflicts with the retailers who usually set up higher price for the products.
• Show rooming occurs when some customers go to the physical store to examine a product; however, they end up buying online. There has been debate that this impacts the profitability of the retailer.

One of the biggest issues with e-commerce that needs to be addressed is taxation. It is very difficult to tax goods or services when customers live in a different country than the company offering online shopping.

The Future of E-commerce

E-commerce is expected to continually grow in the future, perhaps faster than ever. This will lead to a shift of physical retail store to digital retail store. Online shopping is becoming more popularized and natural, eventually, it will become an experience fully integrated into people’s daily lives. Thus, retail will be about offering people the products and services they want on the devices they used. Moreover, mobile devices will play a larger role in generating web sale. Some studies show that purchases made on mobile devices will make up 25% of the market by 2017.


Although it seems very tempting for businesses to engage in e-commerce since it is the main driver behind retail sales today, businesses will have to consider the barriers that may prevent it from successfully adopting e-commerce. First, they probably require additional technology infrastructures such as servers, websites, and payment processing. New e-commerce processes and programs need to be coordinated into existing processes, which can be difficult and extensive for larger businesses. Also, they need to consider the increased expenses in terms of both logistics and customer service.