E-Commerce - The new trend of commerce

Published: 29th June 2007
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Ecommerce (e-commerce) or electronic commerce is the purchasing, selling, and exchanging of goods and services over computer networks (such as the Internet) through which transactions or terms of sale are performed electronically. Contrary to popular belief, ecommerce is not just on the Web. In fact, ecommerce was alive and well in business to business transactions before the Web back in the 70s via EDI (Electronic Data Interchange) through VANs (Value-Added Networks). In this new industrial environment E-commerce became an important factor of modern business development.





In this dynamic era e-commerce can be broken into four main categories: B2B, B2C, C2B, and C2C.A brief look into each;



  • B2B (Business-to-Business)


    Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable.


  • B2C (Business-to-Consumer)


    Businesses selling to the general public typically through catalogs utilizing shopping cart software.


  • C2B (Consumer-to-Business)


    A consumer posts his project with a set budget online and within hours companies review the consumer's requirements and bid on the project. The consumer reviews the bids and selects the company that will complete the project.


  • C2C (Consumer-to-Consumer)


    There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell thanks to online payment systems like PayPal where people can send and receive money online with ease. EBay's auction service is a great example of where person-to-person transactions take place everyday since 1995.


  • There are some more forms emerging out of the above mentioned categories;



    Companies using internal networks to offer their employees products and services online--not necessarily online on the Web--are engaging in B2E (Business-to-Employee) ecommerce.





    G2G (Government-to-Government), G2E (Government-to-Employee), G2B (Government-to-Business), B2G (Business-to-Government), G2C (Government-to-Citizen), C2G (Citizen-to-Government) are other forms of ecommerce that involve transactions with the government--from procurement to filing taxes to business registrations to renewing licenses.











    Perhaps the clearest indication of the growing importance of e-commerce in the global economy is the rapidity with which Internet use has grown and spread during the last decade. The boom in e-commerce also includes increased use of other media for trade, such as the telephone, television, fax, and electronic payment. Because e-commerce became such an integral part of the global economy, the WTO has begun to consider how it fits into the multilateral trade framework, and what rules or regulations should apply. At the Second Ministerial Conference in Geneva in 1998, WTO members wrote the Declaration on Global Electronic Commerce, which calls for the establishment of a work program "to examine all trade-related issues relating to global electronic commerce, taking into account the economic, financial, and development needs of developing countries. Because e-commerce cuts across many other key WTO issues such as services, and intellectual property rights, the WTO has appointed councils from each 'cross-cutting' issue to investigate the effect of e-commerce on global trade. These councils include the Council on Trade in Goods, the Council on Trade in Services, the Council on Trade-Related Intellectual Property, and the Committee on Trade and Development.



    Role of Internet


    Seven years into the new century, it is clear that the internet has become a mainstream activity. Today few big businesses can afford not to have an internet site to advertise and sell their wares. And it has become second nature for many people to check out products, prices and availability online before buying. From the point of view of the economy as a whole, the internet was dramatically lowering the cost of transactions, especially in the services sector.



    With this ever rising usage pattern of internet around the world, it has become a driving force behind the increasing preference of e-commerce globally. With a very low investment; anyone can have a web page in Internet. This way, almost any business can reach a very large market, directly, fast and economically, no matter the size or its location of your business. With a very low investment almost anybody that can read and write can have access to the World Wide Web.



    Also the history of ecommerce is unthinkable without Amazon and Ebay which were among the first Internet companies to allow electronic transactions. Thanks to their founders we now have a handsome ecommerce sector and enjoy the buying and selling advantages of the Worldwide Web.



    Ecommerce also has a great deal of advantages over "brick and mortar" stores and mail order catalogs. Consumers can easily search through a large database of products and services. They can see actual prices, build an order over several days and email it as a "wish list" hoping that someone will pay for their selected goods. Customers can compare prices with a click of the mouse and buy the selected product at best prices.



    Online vendors, in their turn, also get distinct advantages. The web and its search engines provide a way to be found by customers without expensive advertising campaign. Even small online shops can reach global markets. Web technology also allows to track customer preferences and to deliver individually-tailored marketing.

    Cisco, a company that supplies the routers over which most Internet traffic flows, handles 72 percent of its orders and nearly three quarters of its customer support over the Internet. Cisco estimates that taking Internet orders and offering customer support over the Net saves the company $500 million per year. That's a half billion dollars that drops right to the bottom line.



    Intel was crowing about filling nearly half its orders online. That's billions of dollars worth of business being done over the Internet by just one company. The amount of business Intel booked over the Net two years ago was almost nil.



    In the US, retail sales on the internet are expected to reach $170bn in 2006, while forecasters suggest that Europe's online market will overtake the US by 2010.



    China is growing even faster, and may have more internet users than the US by the end of the decade.



    The UK's largest supermarket, Tesco, is also the country's largest online retailer, and the largest store in the US, Wal-Mart, now has one of the largest websites.



    While the internet may still seem revolutionary in increasing the range of available services, such as digital music downloads and voice over internet phone calls, it is also part of our daily routine.



    Traditional ways of doing business


    Traditionally, inter-business transactions begin with a buyer looking for inputs or a supplier seeking buyer s for its goods and services. Buyers and suppliers search for each other through advertising, trade shows, brokers, and dealers. Supplier send out sales agents.Buyers then negotiate with potential sellers concerning product specifications and prices, and per haps conclude a spot transaction or form a long-term contract. After the agreement has been reached, the transaction still involves ordering, billing, arrangements for transportation, confirmation of payments, and acceptance of delivery.



    Doing business the e-commerce way


    E-commerce innovations aim to reduce the cost t of procurement before, during and after the transaction. At every stage, e-commerce avoids the need to translate computer files into paper documents, a process that generally involves errors, delay and costly clerical personnel. E-commerce automates this process by mediating transactions through Web sites and electronic data interchange (EDI).





    Before the transaction, Internet technology may lower the cost of searching for suppliers or buyers and making price and product comparisons. Search costs can be significant relative to the value of the product, particularly f or small purchases





    During the transaction, e-commerce can reduce the cost of communicating with counterparts in other companies regarding transaction details. Transactions over computer networks avoid many of the associated costs of inter personal economic exchange, including the costs of travel, time s pent on communication, physical space for meetings, and processing paper documents.





    After the transaction, electronic commerce allows companies to lower costs of communication, to monitor contractual performance, or to confirm delivery. In addition, companies can apply information generated by the transaction to update their inventory, production and accounting records by automatically linking their transactions to software used for managing all aspects of the firm including sales, purchasing and operations.





    Today the largest electronic commerce is Business-to-Business (B2B). Businesses involved in B2B sell their goods to other businesses. It was predicted that the revenues, up until 2006, will grow 40% to 50% yearly. Also a large growth in Business-to-Consumer (B2C) e-commerce, which is online businesses selling to individuals is also around the corner.





    Recent facts




    With the emergence of ecommerce business during the last decades, a number of ecommerce software development solution providers have been also grown. No one can imagine a successful ecommerce business without the assistance of a reliable ecommerce software development solution provider. Ecommerce service provider performs many useful jobs for your business, such as doing market research, getting traffic for your ecommerce storefront and online ordering system.





    The year 2006 witnessed the rapid development of e-commerce around the world. E-commerce became a powerhouse for economic globalization. The wide application of e-commerce reduces enterprises' operation and management cost and the cost on business activities, facilitates the flow of capital, technology, products, services and human resources worldwide, and propels economic globalization. At present, e-commerce application has become an important factor determining enterprises' international competitiveness. The success of Amazon and eBay in the U.S.A and China's Alibaba shows that e-commerce is leading the development of the global service industry, and affecting the development model of commerce in the future.





    In 2006, e-commerce turnover hit US$12.8 trillion, taking up 18% in the global trade of commodities. Developed countries led by the U.S.A are still leading players in this field, while developing countries like China are emerging, becoming an important force in the global e-commerce market. In 2006, B2B e-commerce was still in the dominant position, and B2C, G2C, G2B, and C2C e-commerce achieved rapid development. On the whole, the industry shows the trend of diversification. Industry E-commerce led by large backbone enterprises is the main force of B2B.





    Concerns




    Beside all these advancement there are still some concerns in the Internet business/e-commerce. Regardless of any technologies that might be devised in the future perishable goods and high cost items will never lend to Internet business, as they are difficult to inspect from a remote location. It is very difficult to quantify the cost and benefits in the Internet business as a result of which return on investment is hard to calculate. With this strategic difficulty, the factors in relation to legal issues, taxes, are vague and not standardized in this field of Internet business and one big reason for this is the political structures of the world have not kept up with the Internet technology





    Ecommerce in India


    India is currently in the midst of an e-commerce revolution. The arrival of the Internet followed by the escalating growth of Web-based businesses is leading to e-commerce both on the B2B and the B2C sides. The e-commerce trends in India are in perfect accordance with the sweeping changes taking place in the global markets. Even the IT friendly Government has taken significant strides in the past few months to ensure that the economic climate is ripe for e-business.



    As per a Nasscom - McKinsey study 1999, India has the potential to earn revenues worth US$ 10 billion by 2008 from e-business solutions. (Both the domestic and export markets put together).



    As part of its survey on e-commerce, Nasscom also conducted a study on the plans and capabilities of software development companies in India. The study revealed that Supply Chain Management optimization and Customer Relation Management (CRM) are going to be one of the strongest drivers of the global e-commerce solutions market. And more than 72 percent of Indian software development houses were found to possess strong expertise in Supply Chain Management and CRM.



    Some of the areas of e-commerce services available are:


    • Legacy application integration


    • Internet application integration


    • EDI


    • Migration to Web-based models


    • New IT frameworks


    • Integration with business strategies


    • E-commerce training services


    Nasscom has recommended a five-year moratorium on e-commerce transactions and also suggested a comprehensive study on the various issues involved, before a decision is taken to tax e-commerce. In fact, due to the global nature of e-commerce, it is suggested that India should support a permanent ban on taxes on Internet access, a permanent ban on custom duties on electronic transmissions, international tax rules that are neutral, simple and certain; and simplification of state and local sales taxes.







    In a nutshell, e-commerce has really changed the way people and various organizations go about doing business. It has also paved way for the use of innovation and creativity in the once tedious business process. And with this trend, software development companies around the world are lining up for providing businesses with the most successful and resourceful e-commerce business models.





    The author is a marketing executive in an offshore software development company in India. The company deals in offshore software development and offshore outsourcing. For more information visit: http://www.otssolutions.com.

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