Introduction To Ecommerce2

Introduction to e-commerce
Electronic commerce
• To many people the term electronic commerce,
often shortened to e-commerce, is equivalent
to shopping on the web.
• The term electronic business is sometimes used
to capture the broader notion of e-commerce.
• In this course, we will use e-commerce in its
broadest sense. It encompasses both web
shopping and other business conducted
electronically.
E-commerce is not new
• Banks have used electronic funds transfers
(EFTs), also called wire transfers, for decades.
• Businesses have been engaging in electronic

data interchange for years. EDI occurs when
one business transmits computer readable data
in a standard format to another business.
Electronic data interchange
• In the 1960s businesses realized that many of
the documents they exchanged related to the
shipping of goods and contained the same set
of information for each transaction.
• By sending the information electronically in a
standard format, the businesses could save
money on printing, mailing, and re-entry of
data.
• Electronic transfer of data also introduces fewer
errors than manual transfer.
Technology and commerce
• In order to understand how technology can aid
commerce we need to understand traditional
commerce.
• Once we have identified what activities are
involved in traditional commerce, we can
consider how technology can improve them.
• Note that technology does not always improve
commerce. Knowing when technology will
NOT help is also useful.
Origins of commerce
• The origins of traditional commerce predate
recorded history.
• Commerce is based on the specialization of
skills. Instead of performing all services
and producing all goods independently,
people rely on each other for the goods and
services they need.
• Example: My mother trades vegetables to one of
her neighbours in exchange for repairs to the
Fences.
Traditional commerce
• Although money has replaced bartering, the basic
mechanics of commerce remain the same: one
member of society creates something of value
that another member of society desires.
• Commerce is a negotiated exchange of valuable

objects or services between at least two parties
and includes all activities that each of the parties
undertakes the complete the transaction.
Views of commerce
Commerce can be viewed from at least two
different perspectives:
1. The buyer’s viewpoint
2. The seller’s viewpoint
Both perspectives will illustrate that commerce

involves a number of distinct activities, called
business processes.
The buyer’s perspective
From the buyer’s perspective, commerce involves
the following activities:
1. Identify a specific need
2. Search for products or services that will satisfy
the specific need
3. Select a vendor
4. Negotiate a purchase transaction including
delivery logistics, inspection, testing, and
acceptance
5. Make payment
6. Perform/obtain maintenance if necessary
The seller’s perspective
From the sellers’ perspective, commerce involves
the following activities:
1. Conduct market research to identify customer
needs
2. Create a product or service to meet those needs
3. Advertise and promote the product or service
4. Negotiate a sales transaction including delivery
logistics, inspection, testing, and acceptance
5. Ship goods and invoice the customer
6. Receive and process customer payments
7. Provide after sales support and maintenance
Business processes
Business processes are the activities involved in
conducting commerce.
Examples include:
• Transferring funds
• Placing orders
• Sending invoices
• Shipping goods to customers
E-commerce
We will define e-commerce as the use of electronic
data transmission to implement or enhance any
business activity.
Example: A buyer sends an electronic

purchase order to a seller. The seller then sends an
electronic invoice back to the buyer.
When used appropriately, electronic transmission

can save both time and money.
Impact of e-commerce
E-commerce is changing the way traditional
commerce is conducted:
• Technology can help throughout the process
including promotion, searching, selecting,
negotiating, delivery, and support.
Well-suited for e-commerce
Business processes that are well-suited for electronic
commerce:
• Sale/purchase of new books and CDs
• Online delivery of software
• Advertising and promotion of travel services
• Online tracking of shipments
The business processes that are especially well-suited

to e-commerce include commodity items, that is, a
product or service that has become standardized.
Best for traditional commerce
Business processes that are well-suited to traditional
commerce:
• Sale/purchase of high fashion clothing
(Any possible exceptions?)
• Sale/purchase of perishable food products
• Sale of expensive jewelry and antiques
In general, products that buyers prefer to touch, smell,

or otherwise closely examine are difficult to sell using
e-commerce.
Advantages of e-commerce
For the seller:
• Increases sales/decreases cost
• Makes promotion easier for smaller firms
• Can be used to reach narrow market segments
For the buyer:

• Makes it easier to obtain competitive bids
• Provides a wider range of choices
• Provides an easy way to customize the level of
detail in the information obtained
Advantages of e-commerce II
In general:
• Increases the speed and accuracy with which
businesses can exchange information
• Electronic payments (tax refunds, paychecks,
etc.) cost less to issue and are more secure
• Can make products and services available in
remote areas
• Enables people to work from home, providing
scheduling flexibility
Disadvantages of e-commerce
• Some business processes are not suited to
e-commerce, even with improvements in
technology
• Many products and services require a critical
mass of potential buyers (e.g. online grocers)
• Costs and returns on e-commerce can be
difficult to quantify and estimate
• Cultural impediments: People are reluctant to
change in order to integrate new technology
• The legal environment is uncertain: Courts and
legislators are trying to catch up

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Introduction to e-commerce

• Businesses have been engaging in electronic

• Commerce is a negotiated exchange of valuable

Both perspectives will illustrate that commerce

Example: A buyer sends an electronic

When used appropriately, electronic transmission

The business processes that are especially well-suited

In general, products that buyers prefer to touch, smell,

For the buyer:

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