UNIT-1

E-COMMERCE AND ITS TECHNOLOGICAL ASPECTS

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Overview of developments in Information Technology and Defining E-Commerce: The scope of E
commerce, Electronic Market, Electronic Data Interchange, Internet Commerce, Benefits and
limitations of E-Commerce, Produce a generic framework for E-Commerce, Architectural
framework of Electronic Commerce, Web based E Commerce Architecture.

Electronic Commerce:\

Electronic commerce, commonly known as E-commerce is trading in products or services

using computer networks, such as the Internet.
Electronic commerce draws on technologies such as mobile commerce, electronic funds
transfer, supply chain management, Internet marketing, online transaction processing,
electronic data interchange (EDI), inventory management systems, and automated data
collection systems.
Modern electronic commerce typically uses the World Wide Web for at least one part of
the transaction's life cycle, although it may also use other technologies such as e-mail.

Definition of E-commerce

Sharing business information, maintaining business relationships and conducting business

transactions using computers connected to telecommunication network is called E-Commerce.
Advantages of E-commerce
➢ Buying/selling a variety of goods and services from one's home or business
➢ Anywhere, anytime transaction
➢ Can look for lowest cost for specific goods or service
➢ Businesses can reach out to worldwide clients - can establish business partnerships
➢ Order processing cost reduced
➢ Electronic funds transfer faster
➢ Supply chain management is simpler, faster, and cheaper using ecommerce
- Can order from several vendors and monitor supplies.
- Production schedule and inventory of an organization can be inspected by
 cooperating supplier who can in-turn schedule their work

Disadvantages of E-commerce:
➢ Electronic data interchange using EDI is expensive for small businesses
➢ Security of internet is not very good - viruses, hacker attacks can paralise
e-commerce
➢ Privacy of e-transactions is not guaranteed
➢ E-commerce de-personalises shopping

Features of E-Commerce:
➢ Ubiquity
Internet/Web technology is The marketplace is extended beyond traditional available
everywhere: at work, at home, and boundaries and is removed from a temporal and
elsewhere via mobile devices, anytime. geographic location. ―Marketspace‖ is created;
shopping can take place anywhere. Customer convenience is enhanced, and shopping costs
are reduced.
➢ Global reach
The technology reaches Commerce is enabled across cultural and across national
boundaries, around the earth. national boundaries seamlessly and without modification.
―Marketspace‖ includes potentially billions of consumers and millions of businesses
worldwide.

➢ Universal standards
There is one set of There is one set of technical media standards technology standards,
namely Internet across the globe.
➢ Richness
Video, audio, and text messages Video, audio, and text marketing messages are are
possible. integrated into a single marketing message and consuming experience.
➢ Interactivity
The technology works Consumers are engaged in a dialog that through interaction with the
user. dynamically adjusts the experience to the individual, and makes the consumer a co-
participant in the process of delivering goods to the market.
➢ Information density
The technology Information processing, storage, and reduces information costs and raises
quality. communication costs drop dramatically, while currency, accuracy, and timeliness
improve greatly. Information becomes plentiful, cheap, and accurate.
➢ Personalization/Customization
The Personalization of marketing messages and technology allows personalized messages
to customization of products and services are be delivered to individuals as well as groups.
based on individual characteristics.
Threats of E-commerce:

Hackers attempting to steal customer information or disrupt the site

A server containing customer information is stolen.
Imposters can mirror your ecommerce site to steal customer money
Authorised administrators/users of an ecommerce website downloading hidden active
content that attacks the ecommerce system.
A disaffected employee disrupting the ecommerce system.
It is also worth considering where potential threats to your ecommerce site might come
from, as identifying potential threats will help you to protect your site. Consider:
Who may want to access your ecommerce site to cause disruption or steal data; for example
competitors, ex-employees, etc.
What level of expertise a potential hacker may possess; if you are a small company that
would not be likely to be considered a target for hackers then expensive, complex security
may not be needed.

E-Commerce Categories

1. Electronic Markets

Present a range of offerings available in a market segment so that the purchaser can
compare the prices of the offerings and make a purchase decision.
Example: Airline Booking System
What does an electronic marketplace do?
An online marketplace is an e-commerce site that connects sellers with buyers. It’s often
known as an electronic marketplace and all transactions are managed by the website owner.
Companies use online marketplaces to reach customers who want to purchase their products
and services. Examples of online marketplaces include Amazon, eBay, and Craigslist.

What’s the history of electronic marketplaces?

Online marketplaces have been around since 1995, when eBay and Craigslist were founded.
eBay launched and became a place that brought sellers and buyers together in an auction
setup. Nowadays, there are countless online marketplaces from sites like Amazon, Etsy,
Alibaba, and bol.com.
What are the benefits of an online marketplace?
The biggest advantages of an online marketplace and the reasons many businesses sell via
online marketplaces is that:

• It is an additional source of revenue.

• It cuts marketing costs.
• It allows companies to internationalize its business.
• It creates transparency in availability, stock levels, and prices.
• It is a great way for customers to compare prices.
• It allows your company to function 24/7.
• It generates trust between your brand and customers.
• Customers are more likely to purchase from an online marketplace with a wide range
of options.
• Businesses need to pay a fee/percentage of sales to the online marketplace platform.
• Selling via your own e-commerce site vs. via a marketplace.
What does the future of online marketplaces look like?
Today, marketplaces are growing at a very fast pace. Analysts predicted that worldwide
marketplaces would account for 40% of the global online retail market in 2020. 75% of U.S.
marketing experts say that by placing your business where your customers want to buy from
will benefit your company’s revenue from selling via online marketplaces.
The future of your business’ success on online marketplaces is to focus on your niche and
giving all customers that come via online marketplaces superb customer experiences.

2. Electronic Data Interchange (EDI)

• It provides a standardized system

• Coding trade transactions

• Communicated from one computer to another without the need for printed orders
and invoices & delays & errors in paper handling
• It is used by organizations that a make a large no. of regular transactions

Example: EDI is used in the large market chains for transactions with their suppliers
Electronic Data Interchange (EDI): Electronic Data Interchange (EDI) - interposes
communication of business information in standardized electronic form.

Prior to EDI, business depended on postal and phone systems that restricted communication
to those few hours of the workday that overlap between time zones.

Why EDI?

• Reduction in transaction costs

• Foster closer relationships between trading partners

EDI and Electronic Commerce

• Electronic commerce includes EDI & much more

• EDI forges boundary less relationships by improving interchange of information between

trading partners, suppliers, & customers.

Applications of EDI:

1. Role of EDI in international trade:

• Reduced transaction expenditures

• Quicker movement of imported & exported goods

• Improved customer service through ―track & trace‖ programs

• Faster customs clearance & reduced opportunities for corruption, a huge problem in trade

2. Interbank Electronic Funds Transfer (EFT)

• EFTS is credit transfers between banks where funds flow directly from the payer‘s bank to
the payee‘s bank.

• The two biggest funds transfer services in the United States are the Federal Reserve‘s
system, Fed wire, & the Clearing House Interbank Payments System (CHIPS) of the New
York clearing house

3. Health care EDI for insurance EDI

• Providing good & affordable health care is a universal problem

• EDI is becoming a permanent fixture in both insurance & health care industries as medical
 provider, patients, & payers

• Electronic claim processing is quick & reduces the administrative costs of health care.

• Using EDI software, service providers prepare the forms & submit claims via
communication lines to the value-added network service provider

• The company then edits sorts & distributes forms to the payer. If necessary, the insurance
company can electronically route transactions to a third-party for price evaluation

• Claims submission also receives reports regarding claim status & request for additional
Information

4. Manufacturing & retail procurement using EDI

• These are heavy users of EDI

• In manufacturing, EDI is used to support just-in-time.

• In retailing, EDI is used to support quick response

EDI semantic layer:

• Describes the business application

• Procurement example

– Requests for quotes

– Price quotes

– Purchase orders

– Acknowledgments

– Invoices

• Specific to company & software used

Standards translation:
• Specifies business form structure so that information can be exchanged
• Two competing standards
– American National Standards Institute(ANSI)X12
 – EDIFACT developed by UN/ECE, Working Party for the Facilitation of
International Trade Procedures
EDI transport layer
• How the business form is sent, e.g. post, UPS, fax
• Increasingly, e-mail is the carrier
• Differentiating EDI from e-mail
– Emphasis on automation
– EDI has certain legal status

Physical network infrastructure layer

• Dial-up lines, Internet, value-added network, etc.

Information flow with EDI:

1. Buyer sends purchase order to seller computer

2. Seller sends purchase order confirmation to buyer
3. Seller sends booking request to transport company
4. Transport company sends booking confirmation to seller
5. Seller sends advance ship notice to buyer
6. Transport company sends status to seller
7. Buyer sends Receipt advice to seller
8. Seller sends invoice to buyer
 9. Buyer sends payment to seller

Internet Commerce
• It is use to advertise & make sales of wide range of goods & services.

• This application is for both business to business & business to consumer transactions.

• Example: The purchase of goods that are then delivered by post or the booking of tickets that
can be picked up by the clients when they arrive at the event.

• The full sales and marketing cycle - for example, by analyzing online feedback to ascertain
customer's needs
• Identifying new markets - through exposure to a global audience through the World Wide
Web
• Developing ongoing customer relationships - achieving loyalty through ongoing email
interaction
• Assisting potential customers with their purchasing decision - for example by guiding them
through product choices in an intelligent way
• Providing round-the-clock points of sale - making it easy for buyers to order online,
irrespective of location
• Supply Chain Management - supporting those in the supply chain, such as dealers and
distributors, through online interaction
• Ongoing Customer Support - providing extensive after-sales support to customers by online
methods; thus increasing satisfaction, deepening the customer relationship and closing the
selling loop through repeat and onging purchases.
•
 Overview of developments in Information Technology

• Progress in the field of technology, computers, and telecommunications supports the

development of internet technology. With the internet business people no longer have
difficulty in obtaining any information, to support their business activities, even now tend to
be able to obtain various kinds of information, so information must be filtered to get the right
and relevant information. The use of the internet has experienced tremendous developments
in the business sector, especially in large scale companies. Since the discovery of internet
technology in the 1990s its use has expanded because it is seen as providing enormous
benefits for the smooth running of the business or business activities. Motivation and
benefits of e-commerce in improving service to customers as well as increasing the
competitiveness of companies in this case become the point of view of the author which is
used as an object in this study. The application of e-commerce technology is one of the
important factors to support the success of a product from a company. To accelerate and
increase sales quickly, by looking at the rapid development of information technology, we
can utilize an on-line service in the form of ecommerce. So far, the sales system of customers
used by companies is only in writing and manual, which often tends to be misleading. With
the existence of e-commerce services that can be quickly enjoyed by customers and
companies themselves, all services desired by customers can be immediately followed up as
quickly as possible, so that the company will be able to provide the best and fastest service
for customers. E-commerce, is the use of communication networks and computers to carry
out business processes. Mostly e-commerce, occurs between businesses, and not between
business and consumers. The development of the use of technology through electronic
networks in daily life has covered various aspects, including trade activities. Since ancient
times humans have been familiar with cross-country trading activities, which are carried out
by exploring continents around the world with simple vehicles or transportation. Technology
development very helpful to humans and make human life easier

• E-commerce, on the other hand, is an abbreviation of electronic commerce ,it is a is a big

part of e-businesses where enterprises are completely dependent on conducting business
online or electronically .it refers to the field of marketing, buying, selling, distributing and
servicing different products and/or services over electronic systems such as internet, and e-
mail. It aims at using electronic business applications for the purpose of commercial
transactions. E-commerce was originally identified with the development of Electronic Data
 Interchange (EDI) and Electronic Funds Transfer (EFT) in the late 1970s, where businesses
were allowed to send and receive commercial documents like purchase orders or invoices
electronically. E-Commerce is believed to have started off in 1994 when the first ever banner
appeared on the internet but electric commerce not using the internet must have originated as
far back as the 1970s when technologies such as Electronic Funds Transfer and Electric Data
Interchange were being used.

• The development of the World Wide Web in the 1990, gave E-commerce a brand new
identity, making it faster and easier for companies to reach their consumers. In today’s
generation, almost every business conducts some sort of e-commerce, whether it means
taking credit cards or accepting online orders. Just like normal commerce, e-commerce can
be B2B (business to business) or B2C (business to customers).

• Popular examples of B2C business is Amazon and EBay. If you have a laptop or a desktop
then you can easily shop online. It has become very popular in these modern days. Not only
can it help you do transactions online, it is also very convenient with all the swipe machines
where you can swipe your credit card for payment. People can do a business-to-business
transaction via e-commerce called B2B. It can also do a company to consumer transaction
called B2C. This is where your orders will be received via shipments and deliveries. You can
use credit cards when doing these transactions. One of the best examples for this is when
amazon.com do business with their clients. Another popular online shopping site is eBay.

Architectural framework of Electronic Commerce

There are mainly 4 types of business models based on transaction party.

Business-to-Consumer (B2C)

In a Business-to-Consumer E-commerce environment, companies sell their online goods

to consumers who are the end users of their products or services. Usually, B2C E-
commerce web shops have an open access for any visitor, meaning that there is no need
for a person to login in order to make any product related inquiry.
Business-to-Business (B2B)

In a Business-to-Business E-commerce environment, companies sell their online goods to other

companies without being engaged in sales to consumers. In most B2B E-commerce
environments entering the web shop will require a log in. B2B web shop usually contains
customer-specific pricing, customer-specific assortments and customer-specific discounts.

Consumer-to-Business (C2B)

In a Consumer-to-Business E-commerce environment, consumers usually post their products or

services online on which companies can post their bids. A consumer reviews the bids and selects
the company that meets his price expectations.
Consumer-to-Consumer (C2C)

In a Consumer-to-Consumer E-commerce environment consumers sell their online goods to

other consumers. A well-known example is eBay.

E-Governance:
E-governance is the application of information and communication technology (ICT) for
delivering government services, exchange of information communication transactions,
integration of various stand-alone systems and services between government-to-customer (G2C),
government-to-business (G2B), government-to-government (G2G) as well as back office
processes and interactions within the entire government framework.

Through e-governance, government services will be made available to citizens in a convenient,

efficient and transparent manner. The three main target groups that can be distinguished in
governance concepts are government, citizens and businesses/interest groups. In e-governance
there are no distinct boundaries.

Business - to - Government (B2G)

B2G model is a variant of B2B model. Such websites are used by government to trade and
exchange information with various business organizations. Such websites are accredited by the
government and provide a medium to businesses to submit application forms to the government.

Government - to - Business (G2B)

Government uses B2G model website to approach business organizations. Such websites support
auctions, tenders and application submission functionalities.

Government - to - Citizen (G2C)

Government uses G2C model website to approach citizen in general. Such websites support
auctions of vehicles, machinery or any other material. Such website also provides services like
registration for birth, marriage or death certificates. Main objectives of G2C website are to
reduce average time for fulfilling people requests for various government services.
Architecture of e-commerce applications

1. Two-tier Architecture (client server)

Here, data reside on a server. Business logic and user interfaces reside on clients
Drawbacks:
• Clients sustain the main load and consequently result to be monolithic and
heavyweight
• Excessive overhead
• Simple but unsuitable for e-commerce applications
2. Three-tier architecture

• It separates the business logic of the application from user interfaces and from data
access. Middle tier can be further be divided
• In this case it’s calledmulti-tier architecture: it is Easier to modify one component
and has lower cost to deploy and maintain.

Application server
• Software that runs on the middle tier of a three-tier environment. In multi-tier environments
it is often a distributed and complex software
• Commercial implementations exist:
• Microsoft Commerce Server 2000
• Sun I Planet
 • IBM Web Sphere Application Server

Web-based E-commerce is one of the fastest-growing segments of the technology that defines the
business strategy. Web-based E-commerce provides easy and better communication between
geographically separated buyers and sellers. E-commerce is a way of doing business by enabling
better interaction among customers, business partners and business relationship managers using
electronic tools. The Web provides an array of electronics tools such as e-mail and Web pages for
E-commerce and its related processes. Web-based E-commerce continues to improve convenience
and versatility using increased processing power and expanded cellular capabilities and makes it
more reachable to the customers.

To design Web-based E-commerce architecture, the following steps are performed:

1. Planning for Web-based E-commerce architecture.

2. Understanding the roles of buyers and sellers.
3. Analyzing the requirements of buyers and sellers.
4. Resolving the issues in Web-based E-commerce.
Planning for Web-based E-commerce architecture:

• The basic idea of designing and building of any architecture is not only to describe the
computational steps but also the description of task. To design the architecture of a Web-based
system, the following points must be kept in mind
• Understanding the various roles and the kinds of users to ensure that the maximum users can
get the maximum advantages of the system to accomplish their aim Understanding the
functions of the different modules of the system and their interfaces, i.e. how the different
functions perform a special task by exchanging information and how the functions are related
to each other in a single unit
• Recording the links of the transaction details of the business in a database. The transaction
details contain information such as transition type, purchased item information, i.e. price, item
identification and stock information.
• Specifying the trust model for the system: Every system must have at least an implicit trust
model that helps maintain the security of the system by providing the details of the
relationships between the components.

Understanding the role of a buyer and a seller

As a Web-based E-commerce system is used by different users for different purposes, the roles
of the buyers and the sellers need to be considered. The roles consideration helps you to
recognize the various operations in designing and analyzing the architecture of-a Web-based
Ecommerce system that satisfies all the requirements of the business.

Roles of a buyer:

In Web-based E-commerce, customers have different roles with respect to the services they
require or the action they perform. A buyer plays the roles of a Specifier, an approver and a
recipient. A specifier selects' the hem to be "purchased, an approver is the person who agrees
for purchase and a recipient is the person who gets the delivered items and services.

Buyers' roles are also distinguished according to the relation with the seller such as anonymous
buyers and member buyer. An anonymous buyer is a walk-in buyer who uses the system to deal
with the seller only once for a simple purchase. A member buyer establishes a membership
with the seller by repeatedly purchasing

Roles of a seller:

On the other side of Web-based E-commerce, the sellers also have many roles on the basis of
the responsibility assigned to the person in the company

The most important business roles are as follows:

• Business manager: They are responsible for all the business approaches such as deciding
on-line products and services, determining pricing and establishing business relationships. The
success of online business mostly depends on this role
 • Internet commerce architect and the systems analyst: They create and manage the
contents of the transaction process, the technical needs of the
buyer and all the outer business requirements into a system design.

• Content designer: They are concerned about the look and feel of the Web-based E-
commerce system such as graphic designs, page layout and user experience.

• Content author: They work within the design of the content designer by creating and
adapting the product information to a form.

• Implementer: An implementer implements the software and the program, which are used to
work with the Web-based E-commerce system.

• Database administrator: They are responsible for maintaining the correctness, consistency
and integrity of data stored in t database.

• Sales and marketing team: They focus on all the efforts to promote Inter-net-based E-
commerce.

• Buyer service representative: Buyer service representatives handle all the buyer dealings.

3. Analyzing the requirements of buyers and sellers: The different requirements of buyers and
sellers affect Web-based E-commerce applications. .Web-based E-commerce systems include a
client system, a merchant system, a transaction system and a payment gateway. A client system is a
computer system that is connected directly or indirectly to the Internet and always used by buyers
for browsing and purchasing items. A merchant system is the computer system that contains the
electronic catalogue of the sellers of online goods or products. A transaction system is the
computer system that processes an order and stores the information about the transactions. A
payment gateway is the computer system that controls the financial networks—for example,
authorization and settlement of credit cards used by the buyers.

4. Requirements of a buyer: The Web-based E-commerce architecture is influenced by the

structure and presentation of the Website and the facilities provided by the Web browsers that are
commonly used by buyers to deal with sellers. Client wallets are used for different payment
methods—such as cash and E-payment—by keeping track of the transactions. These payment
methods require additional processing such as cryptographic operations. This application is used by
only a few buyers, so they are irrelevant for most of the Web-based E-commerce systems. Some
buyers use third-party systems such as server-side wallets that are Websites used for buyer
payment credential registration for the sellers without using special client software.
5. Requirements of a seller:

In a Web-based E-commerce architecture, the seller is involved in all the stages of E-commerce
sales life cycle. Two things are common for every Web- based E-commerce architecture: one,
creative presentation of products and two, payment service. Some of the seller requirements are
stated as follows:
• Content management system is responsible for the creation and management of dynamic
updated contents of the Website and the whole Web presentation.
• Transaction processing system is used to track the transaction information such as item,
buyer, cost of item, type of the payment and status of the service.
• Payment processors control the money movement. For example, in the credit card payment
system, the seller connects to a credit card processor for the authorization.
• Fulfillment systems are used to handle the packing and the shipping orders of the
deliverable products.