Unit-1: Introduction to E-commerce

What is eCommerce?

In its simplest terms, eCommerce means electronic commerce and refers to any sale made over the internet.


Ecommerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions. Ecommerce is often used to refer to the sale of physical products online, but it can also describe any kind of commercial transaction that is facilitated through the internet.

Types of Ecommerce Models

There are four main types of ecommerce models that can describe almost every transaction that takes place between consumers and businesses.

1. Business to Consumer (B2C):
When a business sells a good or service to an individual consumer (e.g. You buy a pair of shoes from an online retailer).

2. Business to Business (B2B):
When a business sells a good or service to another business (e.g. A business sells software-as-a-service for other businesses to use)  

3. Consumer to Consumer (C2C):
When a consumer sells a good or service to another consumer (e.g. You sell your old furniture on eBay to another consumer).

4. Consumer to Business (C2B):
When a consumer sells their own products or services to a business or organization (e.g. An influencer offers exposure to their online audience in exchange for a fee, or a photographer licenses their photo for a business to use).

Examples of Ecommerce
Ecommerce can take on a variety of forms involving different transactional relationships between businesses and consumers, as well as different objects being exchanged as part of these transactions.

1. Retail:
The sale of a product by a business directly to a customer without any intermediary.

2. Wholesale:
The sale of products in bulk, often to a retailer that then sells them directly to consumers.

3. Dropshipping:
The sale of a product, which is manufactured and shipped to the consumer by a third party.

4. Crowdfunding:
The collection of money from consumers in advance of a product being available in order to raise the startup capital necessary to bring it to market.

5. Subscription:
The automatic recurring purchase of a product or service on a regular basis until the subscriber chooses to cancel.

6. Physical products:
Any tangible good that requires inventory to be replenished and orders to be physically shipped to customers as sales are made.

7. Digital products:
Downloadable digital goods, templates, and courses, or media that must be purchased for consumption or licensed for use.

8. Services:
A skill or set of skills provided in exchange for compensation. The service provider’s time can be purchased for a fee.

The Scope of Electronic Commerce

The potential for e-commerce development is enormous. Now a days one can buy products online through multiple sites. In the age of e-commerce everything from gym equipment to laptops are available online. E-Commerce is a super set of business cases. It includes E-trading, E-Franchising, E-Mailing, E-Engineering etc. Scope of e-commerce can be enumerated as follows:

1. Exchange of digitized information

2. Technology-enabled

3. Customers retention

4. Accounting

5. Supplier integration

6. Support the exchange

1. Exchange of digitized information: The digitized information exchange can represent communications between two parties, coordination of the flow of goods and service, or transmission of electronic orders. These exchange can be between organizations or individuals.

2.Technology-enabled: E-Commerce is about technology-enabled transactions. Web browsers are perhaps the best Know of these technology-enabled customer interfaces. However, other interfaces including automated teller machines (ATMs) also fall in the general category of e-commerce. Business once managed transactions with customers and markets strictly through human interaction; In e-commerce, such transitions can be managed using technology.

3. Customers retention: E-Commerce enables organizations to get classified and customized market information that helps in retaining customers through fast order fulfillment and effective customers relationship management (CRM). End-to-End supply chain management in e-commerce provides the opportunity the overall flow of demand and supply and results in fruitful customers retention.

4. Accounting: Financial accounting, treasury management and asset management are best possible in e-commerce because of integrated database. Financial planning and strategy determination become more convenient in e-commerce.

5. Supplier integration: For lowering inventory-carrying costs and broader availability of material and opportunities suppliers network can be integrated through EDI to implement just-in-time (JIT) inventory management.

6. Support the exchange: E-Commerce includes intra and interorganizational activities that support the exchange. The scope of e-commerce includes all electronically based intra and interorganizational activities that directly or indirectly support marketplace exchange. In this sense, we are talking about a phenomenon that affects both How business organizations relate to external parties customers, suppliers, partners, competitors, and markets and how they operate internally in managing activities, processes and systems.

Electronic markets

An electronic market is an inter-organizational information system they allow the participating buyers and sellers to exchange information about prices and product offerings. The firm operating the system is referred to as the intermediary, which may be a market participant- a buyer or seller, an independent third party, or a multi-firm consortium.

Electronic markets are the foundation or of electronic commerce. They potentially integrate advertising, product ordering, delivery of products, and payment systems. Many electronic markets also offer additional services, such as payment or logistics services that help members complete a transaction. They may also support community activities like distributing industry news, sponsoring online discussions, and providing research on customer demand or industry forecasts for components and raw materials.

Functions of E-Markets:-

E-markets serve three particular functions:

  1. They act as an exchange for business transactions-not only purchasing but also for checking price and stock availability, invoicing and order chasing.
  2. They manage catalog content, converting product information into a common format understood by all parties.
  3. They provide additional services to support the trading process such as shipping, payment, tendering and determining a company’s financial status.

Other functions performed by the e-markets:-

  • E-markets provide an electronic or online method to facilitate transactions between buyers and sellers. They present ideal structures for commercial exchange, because of market efficiency attained by tightening and automating the relations between sellers and buyers of products and services.
  • Electronic markets bring together their member companies into trading communities united by common business interest, thus improving speed and efficiency. They offer both buyers and sellers forums to reduce transaction costs, to enhance sales, to streamline distribution processes, to deliver and consume value-added services, and to streamline customer management.
  • Electronic markets minimize the inefficiency by tightening the relationships between supplier and buyer, promoting price transparency, reducing supply chain costs, and increasing the reach of suppliers.
  • By bringing buyers and sellers together online, electronic markets play the role of digital intermediaries. For example, demand and supply information can be aggregated and disseminated, and buyers and sellers can be matched in electronic markets.
  • E-markets also provide the possibility of forwarding and reverse auctions. The forward auction brings together many buyers and on a seller. By this model, the price can only increase. It is most beneficial for companies that are looking to unload surplus inventory. The reverse auction model brings together many sellers and few buyers. The buyer drives the price, so in this model, prices are driven downwards.
  • E-markets provide an efficient and cost-effective means of conducting trade. They automate and streamline multiple steps in the buying process and thus have evolved as new channels for corporate purchasing. For example, buyers can save a significant amount of time and money on simplified product searches through online catalogs. They can create online requests for proposals to solicit service providers and these providers can respond to potential buyers at a low cost.
  • E-markets provide open transaction networked when a large number of potential buyers and sellers are able to participate without the restrictions of time and space. Automated transactions save on communication and people cost and result in fewer ordering errors.
  • E-markets also assist order tracking, payments, and collections as well as easy reordering and product replenishment.

What is Electronic Data Interchange (EDI)?

Electronic Data Interchange (EDI) is the electronic interchange of business information using a standardized format; a process which allows one company to send information to another company electronically rather than with paper. Business entities conducting business electronically are called trading partners.

Many business documents can be exchanged using EDI, but the two most common are purchase orders and invoices. At a minimum, EDI replaces the mail preparation and handling associated with traditional business communication. However, the real power of EDI is that it standardizes the information communicated in business documents, which makes possible a “paperless” exchange.

The traditional invoice illustrates what this can mean. Most companies create invoices using a computer system, print a paper copy of the invoice and mail it to the customer. Upon receipt, the customer frequently marks up the invoice and enters it into its own computer system. The entire process is nothing more than the transfer of information from the seller’s computer to the customer’s computer. EDI makes it possible to minimize or even eliminate the manual steps involved in this transfer.

Business Strategy in an Electronic Age

1. Business: The operational activities and processes that occur in an attempt to achieve an organisation’s goals.

2. e- (electronic) Computer-mediated. That is, we are talking about business activities and processes that are conducted or facilitated by computer technologies.

3. Strategy. A plan of action or policy designed to achieve a major or overall aim.

In the 1990s, enterprise resource planning (ERP) was at the forefront of many e-business strategies. ERPs were the first management information systems to computerise a diverse set of business functions in an integrated way. In the late 1990s, customer relationship management (CRM) became the e-business strategy of choice.

Supply chain management (SCM) is another area where software and service vendors have made big promises. Results for enterprises are mixed, and many solutions are still experiencing growing pains, although not all solutions are problematic. For example, RFID (radio-frequency identification [tags]) is a rapidly growing application in SCM, helping organisations easily identify products and shipments.

e-Business strategy in practice

A framework for decision-making and action—the e-business strategy framework. The framework has four fundamental stages as shown

Stage 1. Strategic planning
Strategic planning involves contextual high-level analysis that may make use of management tools such as Porter’s Five Forces, SWOT, PEST, Scenario, Gap, Scouting, Problem Inventory and other analyses. A fundamental difference from ‘regular’ business strategy is that electronic technology capabilities are often a key driver of the need or opportunity for strategy.

Stage 2. Systems design
Strategic objectives are translated into practical project designs and plans. Electronic technology capabilities are matched with the objectives. Costs, timeframes and resource requirements are determined, and the results assessed against the strategic requirements. Key criteria include involving stakeholders to generate buy-in, and payoff and risk analysis, before implementation can be authorised.

Stage 3. Implementation
The specific plan developed in Stage 2 is executed. Key issues here are that you continue to involve stakeholders and to aim for early wins rather than a nothing-to-everything ‘big bang’ deployment of every bell and whistle simultaneously. It is also imperative to ensure that people involved in using the system have adequate training before it goes live.

Stage 4. Performance management
The project needs to be assessed against the original project plans for specification, time and budget compliance. Most importantly, you must measure the business performance of the strategic initiative in action

Delivering value is the key goal of e-business—or any business for that matter. Value creation can occur anywhere along the value chain. …. Michael E. Porter’s value chain model, first published in 1985. The model sparked a radical change in management thinking when it was released and has been used extensively in business ever since.

Saarinen et al. (2006) make a strong case for properly managing business in such a multi-channel world, where supply chains are now mediated by a growing number of delivery channels and methods. They suggest that building a successful multi-channel e-business requires: customer focus and utility, maturity of technology and services, developing the business model, networking and outsourcing.

Improved service levels, Increased access to information, Mass customisation, Increased process transparency, Increased job flexibility, Reduced transaction processing, Easier administration, Knowledge management, Skill improvement, Reduced transaction costs, Greater integration with supply chain, Improved processing, Improved returns, Greater transparency of information, Reduced customer acquisition costs, Increased customer retention, Increased customer value over time, Improved system flows, Better research.

Risk issues

There are undoubtedly many risks associated with e-business. Consider the broad categories of risks with regards to the four-stage e-business strategy framework:

1. No strategy or wrong strategy
Any enterprise has risks associated with ignoring e-business opportunities and staying with old traditional methods of doing business. There are also risks in actually moving to a new or updated e-business platform. The strategy may be off course for various reasons. It may fail to take into account the latest competitive activities of others. Strategies must fill a real need or desire held by customers and other stakeholders, and it may be necessary to conduct market research to determine the potential level of support before making an investment.

2. Poor translation of strategy into design
There are significant risks in the translation of e-business strategy into system designs that can be implemented in practice. Larger projects with extended timelines can mean that an initial design becomes obsolete before it is deployed. Some designs must attempt to bridge the gap between archaic legacy systems and new leading edge systems, with the potential for a complex and unreliable fit. Others may appear technically neat and clever, but fail to deliver well on the value expected in the strategy statement.

3. Poor implementation
Many projects are implemented by personnel who have not undertaken such a project before. Partly by definition, e-business initiatives tend to be new. The more leading edge (i.e. unproven) the technology is, the greater the risk—and the potential rewards.

4. Failing to measure performance
It has been said that you shouldn’t do what you can’t measure. Any e-business initiative needs at least two major forms of measurement. Measuring the project itself—according to the project triangle of time, budget and specifications and measuring the quantitative and qualitative business outcomes expected of the initiative.

Implications for managers

Most make the mistake of confusing e-business with e-commerce, and further muddy the waters by assuming the Internet is the sole tool for its implementation. e-Business is a much broader concept than this. It encompasses any computer-mediated initiatives designed to deliver value to one or more stakeholders.

1) Business strategy overarches e-business strategy, although they are strongly interlinked because technology can alter existing or create new operating models and therefore influence-business strategy.
2) e-Business strategy is not just about new technology. Other factors, especially wider business networks can play a far more powerful role in strategy than the technology alone.
3) Integration is key. The majority of e-business initiatives will be deployed using newer technologies but will be connected to legacy back office systems.
4) Consider a wide range of stakeholders for any initiative.
5) For any approved strategy other than the simplest, plan to implement the solution in stages.

As strategist Michael Porter noted in discussing the effect of the Internet on strategy (Porter, 2001), “When seen with fresh eyes, it becomes clear that the Internet is not necessarily a blessing. It tends to alter industry structures in ways that dampen overall profitability, and it has a leveling effect on business practices, reducing the ability of any company to establish an operational advantage that can be sustained”


You need to build strategies for if you want your business to thrive. Here are a few strategies which
you can try;
Go niche (protection) rather than mass
You will find every type on people on this platform. You will find teenagers, moms and even
grandparents. You will need musicians, politicians, makeup artists and so on. You might feel
overwhelmed when you realize that the whole world is your audience. Instead of clawing at everyone,
try to go for a specific target group. Your website should be about a specific group of people who
share common interests. You can promote your business keeping only one target group in mind. If you
want your business to be found by just artists, just focus on artists and not musicians.
Personalize your website
You cannot just build a website which is not appealing to your target group. You have to give your
website such a look that your customers keep on coming back. Yes, while trying to make it
extravagant do not make it difficult to use. Make sure that your website is easy to use. Make it simple
yet elegant so that people can access it through laptops and mobile phones. There is software available
today which will allow you to personalize product selections based on their previous purchases. You
can make use of that software to show your customer that you care.
Prepare the right content

Content matters. Content can change your website overnight. You have to cater to your audience’s
needs. If you are focusing you on females, make sure you put up content which females are more
likely to be interested in and not just some random article about cars. Using SEO friendly keywords is
highly recommended. This is because when your customer types in that keyword on Google or Bing,
your website will show up on the list.
Use different channels to showcase your brand
Do not just stick to your website. Make use of different channels. You need to promote on different
channels like YouTube, Facebook and Twitter. Do not just stick to one channel. You need to
constantly remind your audience about your existence because you are not the only eCommerce selling
online. Keep on appearing before them in forms of ads so that they are tempted to visit your website.
Once they visit, about 20 percent of those visitors will turn into your customers.
Create new partnerships
Things work best when you have a partner. You will definitely benefit by forming strategic
partnerships for your business. It does not matter how long you have been in the business. When you
partner with another business, you can get direct access to their customer base. You get to tap into their
target audience and convert those potential customers into loyal consumers. Yes, that is possible. If
you aware of Youtube, you might have seen that Youtubers constantly collaborate with other
Youtubers. Why do you think they do that? They do that because by collaborating they get more
people to view their video.
Interact with your customers
Your business might be virtual but your customers are real. You might be operating your whole
business from a bunch of laptops but you customers are paying real money for it. It is important to hear
from your customers. Listen to what they have to say. If they do not like something, improve on it.
Give them what they desire or want to buy. Do not just keep on throwing make up and accessories
because your target audience is women. If you niche target is stay home mothers, you might benefit
from displaying furniture on your website.
Use social media as your weapon
Social media is the most powerful platform today. You will get to identify all your potential customers
by peeking into their personal lives. You will get to see their interests and habits. You should invest a
lot in social media. You can even direct people from social media directly to your website. Think of
Facebook, if one of your posts is appealing to someone, he or she might share it. In this way, your post
gets more generic view. Well, that’s the beauty of social media


The first mover advantage refers to an advantage gained by a company that first introduces
a product or service to the market. The first mover advantage allows a company to establish strong
brand recognition and product/service loyalty before other entrants.
It is important to note that the first mover advantage only refers to a large company that moves into a
market. For example, Amazon was not the first company to sell books online. However, it was the first
company to achieve significant scale in that line of business.
[Important: Being first typically enables a company to establish strong brand recognition and
customer loyalty before competitors enters the arena.]
There are several advantages to being the first business to execute a strategy

Benefits of Being a First Mover :

List three main benefits of being a first mover:
 Technology leadership
First movers can make their technology/product/services harder for later entrants
(participators) to replicate (rejoin). For example, if the first mover can reduce the costs of
producing a product (an “experience” curve effect), the first mover can establish an
absolute cost advantage. In addition, applying for patents can protect and establish a firstmover advantage.
 Control of resources
The second benefit is the ability to control strategic and/or scarce resources. For example,
Wal-Mart was able to locate their stores in small towns and prevent others from entering
the market.
 Buyer-switching costs
The third benefit that first movers may enjoy is buyer-switching costs. If the first business
is able to establish itself first, it may seem inconvenient consumers to switch to a new
Advantages of Being a First Mover
 Establish their product as the industry standard
 Be able to tap into consumers first and make a strong impression, which can lead to brand
recognition and brand loyalty.
 May be able to control resources, such as basing themselves in a strategic location,
establishing a premium contract with key suppliers, or hiring talented employees.
 Can gain an advantage when there is a high switching cost for consumers to switch to later