E-commerce also known as electronic commerce (EC) is the process of buying and selling goods and services or the transfer of resources or data via an electronic network, predominantly the Internet. In other words, e-commerce is the use of electronic communications and digital information processing technology in business transactions to generate, convert and redefine affiliations for the purpose of value creation among the organizations, as well as individuals and agencies. It covers an array of different businesses, from user based marketing sites, auctions and music spots to businesses exchanging and trading goods and products by corporations. E-commerce is carried out with the help of various applications such as email, fax, online directories and shopping tumbrils, Electronic Data Interchange (EDI), File Transfer Decorum and web services. E-commerce enables consumers to electronically exchange products without spending much time or crossing distance.
Today, most corporations are characterized with online survival as it has become inevitable in the modern world. Electronic deals have been popular for quite some time in the form of Electronic Data Interchange (EDI). EDI requires every supplier and customer to set up a steadfast link where e-commerce represents a cost-efficient means of establishing multiple ad-hoc connections. Many companies will find the road towards creating a successful online store, which is difficult if they are unaware of the e-commerce technologies. Therefore, researching and understanding the guidelines required to correctly implement the e-business plan is essential for achieving success in the online store establishment.
History of E-commerce
The concept e-commerce was initially used to define the procedure of carrying out business transactions electronically using such technologies as the EDI and Electronic Funds Transfer (EFT) that first appeared in the 1970s (O’Brien & Marakas, 2006). They facilitated the enactment of electronic contracts among diverse businesses specifically in the arrangement of electronic purchase orders and invoices. EDI and EFT used to be the empowering items of machinery that laid the foundation for the today’s e-commerce. In 1982, the development of the Boston Computer Exchange that was a marketplace for used computer equipment marked the first known example of electronic commerce (Tian & Stewart, 2007). All through the 1980s, the conception of credit cards, ATMs and mobile banking was the subsequent phase for the advancement of e-commerce. In the early 1990s, e-commerce developed further providing additional services such as Enterprise Resource Planning (ERP), data warehouses and data mining. In 1994, e-commerce services rapidly developed with the introduction of security protocols and high-speed internet connections such as DSL ensuring much faster online transactions (Tian & Stewart, 2007).
Electronic commerce was first introduced in the 1990s, and its practical application was getting more and more widely spread especially during the past five years. Soon, the precincts between conservative and e-commerce became progressively fuzzy as more companies transferred their activities to the Internet. During the 1990s, experts forecasted an accelerated progression in e-commerce associated making deals. In response to those predictions, over the years 1998-2000 (Tian & Stewart, 2007), a substantial number of businesses in Western Europe and the United States constructed their first major e-commerce websites. It 1994, the pioneer e-commerce companies, specifically eBay and Amazon, were launched (Tian & Stewart, 2007). Amazon and eBay were the first corporations to establish their conspicuous e-commerce brands, such as computers, books, office supplies, music, and a diversity of electronic devices. These companies allow consumers to purchase diverse goods and services online from other companies and consumers. Besides, eBay hosts online auctions (Tian & Stewart, 2007).
Amazon.com, Inc. initially was the most well-known e-commerce company founded by Jeff Bezos. Originally, Amazon’s business framework needed tremendous investment in warehousing, distribution and gratification proficiency that took years before Amazon gained profitability in the market. Finally in 2003, Amazon got its first annual proceeds. Dell.com is another giant company in the sphere of e-commerce that was launched in 1994 with a single static web age. Dell’s online services rapidly grew over the years, and in 1997, it announced a single-day transactions record of a million dollars on its website (Tian & Stewart, 2007).
Types of E-commerce
E-commerce has various categories. There are six major divisions of e-commerce, i.e. Business to Business (B2B) that is an e-commerce category, which entails all electronic transactions of goods and services conducted among businesses (Fernandes, 2014). Manufacturers and traditional commerce wholesalers stereotypically function using this category of e-commerce.
Business to Consumer (B2C) is an e-commerce platform that is popular for its formation of electronic business associations between commercial and eventual clients. It tallies to the merchandizing segment of electronic commerce, where customary retail trade usually functions. Business to Consumer affiliations are not only easier and more vibrant, but also more intermittent (Fernandes, 2014). This brand of commerce has grown progressively due to the emergence of a network, and the existing copious computer-generated outlets on the Internet, which sells all kinds of end user merchandises and services such as computers, footwear, books, vehicles, foodstuffs, monetary merchandises, digital periodicals, etc. The shoppers usually have access to more gen provided about informative content compared to shopping in the old-fashioned market (Fernandes, 2014). There is also a universal concept that buying via the internet is relatively cheaper, and it does not put in danger a personalized customer service. Business to Consumer e-commerce further warrants a quick processing and delivery of products.
Consumer to Consumer (C2C) e-commerce is a type that includes all electronic transactions of goods and services carried out by users (Laudon & Laudon, 2010). As a rule, such deals are made by the third parties. E-commerce provides an online platform specifically where these transactions will be carried out.
Consumer to Business (C2B) is an e-commerce category that offers a complete reverse of the traditional approach to buying and selling of goods and services. This form of e-commerce is commonly used in a multitude of funded projects (Laudon & Laudon, 2010). A wide range of people make their products available for procurement to companies precisely seeking the products they are offering. The key illustrations of C2B deals include the websites where inventers provide numerous suggestions for a corporation insignia. Eventually, just one emblem is chosen and efficiently procured. Another platform is the arcades that trade free royalty pictures, imageries, and designs (Fernandes, 2014).
Business to Administration (B2A) is the type of e-commerce that embraces all online transactions carried out by corporations and public administration (Fernandes, 2014). B2A e-commerce provides significant services in such areas as the pecuniary sector, societal security, business operations, lawful documents, catalogues, etc. This e-commerce platform has grown briskly over the years with significant investments made in the e-government.
Consumer to Administration (C2A) is an e-commerce platform that embroils all automated businesses owned by individuals and the government (Laudon & Laudon, 2010). The Consumer to Administration contracts include educational applications that involve the dissemination of information over the internet and distance learning that allows students from all over the world to gain knowledge in different educational centers across the globe without physically attending classes in the given institution. Another application is the social security where this type of e-commerce is evidenced through the distribution of information of the social security holder and their beneficiaries. Making payments to the social security accounts can also be done online (Fernandes, 2014). Taxes are another C2A application where filing of tax returns and making payments have been simplified hence making governments collect more revenues as this platform closes all the tax evasion loopholes. C2A e-commerce has also enabled the advancement of the health sector as patients can now make online appointments with their doctors. This is convenient as patients do not have to physically visit the doctors’ offices to make appointments. The information about the patients can also be stored online to avoid excessive paperwork. Patients can also pay for their treatment online (Fernandes, 2014).
Advantages of E-commerce
According to O’Brien and Marakas (2006), e-business is a two-way advantageous status quo for both the customer and supplier. E-commerce brings a lot of benefits to consumers and product providers alike. Benefits to consumers include the following: customers get access to a wide choice of products in the cyber market; e-commerce ensures that the choice of products is not restricted to a few goods available in the market. A wide variety of goods and services allows a consumer to compare the prices and quality of various products and then choose the best (Sinha, 2014).
Consumers enjoy lower prices for merchandises due to the amplified cybernetic contention amid suppliers (Sinha, 2014). The e-commerce has long been embraced, and it now encompasses a lot of players. The market participants are competing for the potential customers, and, for this reason, they have competitive prices, which is an advantage for consumers. Consumers enjoy an advantage of choosing the best price available to them, thus enabling them to save money.
Consumers have access to full information in the market. There is no information asymmetry. It is up to consumers to research about a product or a service they are interested in and make an informed decision (Sinha, 2014). The accessibility of the extensive gen circulation makes it possible and more convenient for shoppers to equate the goods, specifications and fees, and even examine the available testimonials before selecting and purchasing the product.
Consumers get to enjoy expansive access to support and guidance from specialists and consultants. E-commerce experts offer full support and guidance to customers regarding the available products and services (Sinha, 2014). These advisory services are available anytime hence making online shopping much easier for customers.
E-commerce helps consumers to save time and money. Consumers save the time they could have used to drive to the market stalls to do their shopping as they can just shop online (O’Brien & Marakas, 2006). In the shopping centers such as the supermarkets, malls and others, there are always long queues and this makes shopping time-consuming (Loshin & Vacca, 2004). E-commerce has no such queues as customers are served immediately. Users can also save money as they can bargain on some commodities that do not have fixed prices.
Consumers also enjoy faster services available to them together with the delivery services. E-commerce provides a vast array of fast services to the online customers. E-commerce extends its services to delivering products to the clients. Consumers enjoy the delivery services since it is a door-door order delivery (O’Brien & Marakas, 2006).
E-commerce induces users to shop online as trademarked goods are relatively cheaper in the online stores. Some products are relatively cheaper in the online shops than the physical outlets. This helps consumers to save some money (Laudon & Laudon, 2010).
E-commerce provides 24 hours and seven days per week shopping. Consumers are provided with virtual stores that are always open. Improved productivity has been accomplished through the existing rivalry amongst the online businesses. The consumers in turn benefit by receiving better quality products and services resulting in splendid expediency as well as ample pre and post-sales assistance (Sinha, 2014).
E-commerce is also beneficial for products/services providers in the following ways: e-commerce assists dwindling stock expenses as it does not need to uphold mammoth stocks or expensive marketing outlets. The online marketing and sales department is a quotient of the traditional mortar-based businesses (Sinha, 2014). Portfolio handling budgets are curtailed by implementing just-in-time methods that boost the company’s capacity to evaluate demand more precisely.
E-commerce helps service providers to enhance customer services. Studies have shown that the provision of after-sale services represents 10% of the costs of production. In the e-commerce platform, these expenses are condensed. On the other hand, there is an enhancement in the superiority of services (Laudon & Traver, 2002). A superior consumer affiliation known as customization is reached as every customer’s needs are met, thus, retaining the clients in the e-commerce setting. For this reason, Customer Relationship Management (CRM) has developed a catchphrase that many corporations have been adopting. E-commerce avails decent prospects for CRM elucidations that in turn help establish good customer relations. It is necessary for every company to improve customer loyalty as customers with extensive choices of suppliers can move from one online store to the next one (O’Brien & Marakas, 2006).
Globalization of businesses is also achieved through e-commerce; as e-commerce condenses operating costs, the firms are facilitated to make the information about its products and services available to all the potential consumers internationally (Loshin & Vacca, 2004). For example, Amazon is a prominent virtual bookstore has internationalized its operations making huge sales volumes hence defeating the traditional retailers.
Marketing of products is made quicker in the e-commerce platforms. Companies make goods and services available in the market quicker due to the overall online design process, drawing associates and clienteles into the progression and eliminating the outdated communication obstructions (Sinha, 2014).
Productivity and competitiveness are amplified via e-commerce as it allows the manufacturers to establish relationships with their customers. The best companies enjoy a competitive advantage in the market; hence controlling a larger market share. For instance, Amazon has a well-developed online store that has attracted many customers hereafter making it a market leader in the e-commerce industry (Loshin & Vacca, 2004).
Consumers and service providers enjoy economic benefits facilitated by e-commerce, such as condensed costs of production for suppliers. Opening of new outlets enhances faster shopping for consumers and facilitates greater market share for suppliers. Order streamlining acceleration and accuracy saves time spent by customers. Proper authorization and handling of products ensures there are no irregularities for the suppliers’ businesses. Enriched decision making means that there is enough gen availed to ensure that customers will not regret their purchase. Suppliers find it easier to control the existing investments in infrastructure as e-commerce centralizes operations. Tracing and conveyance of products is made easier for both the consumers and providers to avoid losses. E-commerce creates a connection between the producers and purveyors via the same network to cut on operational costs, which is beneficial to website operators (Sinha, 2014).
Disadvantages of E-commerce
There are some transactions that are inappropriate for electronic commerce, specifically corporations dealing with retailing merchandises that are exceedingly fragile and costly and goods that necessitate scrutiny before securing (O’Brien & Marakas, 2006). Some of the core disadvantages of e-commerce encompass the following. Firstly, security is the primary challenge as customers need to be confident in the supplier and trust the provider in terms of payment techniques. Sometimes, customers can be tricked and swindled. Customers find it difficult simply to trust the online stores that may delay business. So customers are required to survey the reliability and reputation of the online stores before entering into any contract with them (Laudon & Traver, 2002). The service providers should also ensure that their systems and information are not questionable as customers always need a secure access. Fortification of data is also indispensable.
Secondly, firms face difficulties of assimilating the present traditional commerce databanks and transaction processing software into e-commerce related software (Sinha, 2014). Thirdly, handling an e-commerce business, it becomes difficult to compute the return on investment. Fourthly, various corporations have been faced with the situations where hiring and retaining workforces with the technical, design, and business progression abilities is desirable to generate an operational e-commerce existence. Fifthly, some online businesses face cultural and legal barriers while conducting the electronic activities as different nations have different legal frameworks and different cultural practices (Sinha, 2014). Sixthly, some online service providers forget the extent to which why forming a loyal relationship with customers is important. Without customer loyalty, the business is highly unlikely to survive. Seventhly, scalability of the system should be enhanced to ensure that the developed website supports a broad range of customers at a time to avoid congestion and time wastage (Laudon & Traver, 2002).
E-commerce is a new type of business where commercial operations are carried out via the Internet. E-commerce systems make available an opportunity to purchase and sell goods and services, order payments, preserve services, spawn prices subject to innumerable circumstances, and implement marketing strategies. Customers are also exposed to a wide range of options to choose from. Service providers also save money as they do not market their products physically as the products are available online to everyone accessing the Internet. Along with the growth of the popularity of e-commerce, the technology also develops making it easier to open and operate cybernetic online stores. E-commerce businesses have enjoyed some advantages over the offline retail locations and catalog operators. E-commerce has enabled consumers to browse online, easily search and find exactly what they are looking for and immediately purchase products. Shopping is made easier and faster with the help of e-commerce. However, e-commerce businesses also face challenges that are impossible to avoid.