What is E-commerce – Meaning, Definition, Types, Advantages, and Disadvantages:
We live in an era where we can’t imagine our life without Internet technologies. We are accustomed to buying online, but we do not always think about the technologies behind online shopping. E-commerce is our future. Today, each of us daily encounters this type of business, which presents unique communication opportunities, the most important thing is that anyone can expand trading on the Internet, whether it be a small private store, network company, or financial giant.
Meaning of E-commerce:
E-commerce is a term that means electronic commerce. E-commerce refers to conducting business activities on the Internet. The main functions of e-commerce include online advertising, ordering, payment, customer service and delivery of goods and other sales, pre-sales and after-sales services, as well as market research and analysis, financial accounting and production arrangements, and many other business activities using the Internet.
Definition of Ecommerce:
- Electronic Commerce is the process of buying and selling goods or services, making money transactions, and transferring data over the internet.
What is E-commerce?
- Electronic commerce is abbreviated as EC, E-commerce, or eCommerce.
- In general, e-commerce refers to the electronification of the entire business activity.
- In a narrow sense, EC (Electronic Commerce) refers to electronic transactions and related service activities carried out on the Internet.
- E-commerce is divided into: ABC, B2B, B2C, C2C, B2M, M2C, B2A (ie B2G), C2A (ie C2G), O2O, etc.
- Ecommerce is a new type of business operation mode for online transactions and online electronic payments between merchants, as well as various business activities, transaction activities, financial activities, and related comprehensive service activities.
- E-commerce is a process of continuously optimizing various activities of an enterprise by using digital information technology.
- E-commerce includes electronic currency exchange, supply chain management, electronic marketplaces, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management, and automatic data collection systems.
- In this process, the information technologies utilized include the Internet, extranets, e-mail, databases, electronic directories, and mobile phones.
History of e-commerce:
- In March 1990, the United Nations uniformly promulgated the standard EDI for electronic data interchange to the world.
- In November 1993, the US Congress formally discussed and passed the North American Information Superhighway Program Act.
- On July 1, 1997, in the State of the Union address delivered by the President of the United States to the people of the country, the Clinton administration made it clear that it would temporarily not increase any new taxes on companies engaged in trade on the Internet.
- Since the mid-1990s, people have also done a lot of work in the legal, financial, and other aspects involved in e-commerce.
- In May 1998, the World Trade Organization (WTO) formally reached a one-year provisional agreement on tax exemptions for Internet trade.
- In November 1998, the Asia-Pacific Economic Work Organization held a meeting to discuss the development of e-commerce and international cooperation with special topics.
The main reason for the formation and development of e-commerce:
- As early as the 1960s, the U.S. military and transportation departments began to use telegrams to transmit various commercial documents.
- But it was later discovered that the randomness of natural language in writing often led to trade disputes.
- To standardize the use of electronic means to transmit various commercial documents, the United States and Europe began to study and launch their own EDI standards in the late 1970s.
- EDI is electronic data interchange technology.
- The introduction of EDI standards has greatly promoted trade documents and the Informatization process of trade procedures.
- In the 1990s, the application and development of Internet technology also played a significant role in promoting the construction and application of enterprise information systems.
- One of the most representative development branches is the emergence of e-commerce systems.
- The emergence of e-commerce has greatly expanded the scope of traditional information technology and information system applications.
- Dealing with business problems is the key to the formation and development of e-commerce.
Types of E-commerce:
According to different transaction subjects, e-commerce can be divided into various modes, among which B2C (business-to-consumer), B2B (business-to-business), and G2B (government-to-business) models are developing rapidly. E-commerce is a new form of international trade operation, and the main means of international trade is e-commerce. E-commerce is divided according to the form of transaction, which corresponds to the traditional trade mode.
1. Business to Business (B2B):
Mutually beneficial relationships between companies. Manufacturers establish contacts with each other using special Internet sites. Usually, it concerns the sale and purchase of components, software, or raw materials. The seller receives money, and the buyer receives goods for the manufacture of his products. It is in B2B that the most working capital rotates.
2. Business to Consumer (B2C):
The B2C model is even more common than B2 B. It assumes that the transaction is made between a company (or individual entrepreneur) and the end consumer. Almost anything can be implemented in this way: equipment, software, books, food, clothes, services, and so on. Even the sale of music and video files is such a type of trade. At the same time, transactions are very often made of an international nature, which means that the seller and the buyer are in different countries. Such a purchase of goods is not suitable for every client, since it does not allow you to get enough information, touch and inspect the purchased item, but it guarantees a reduced price since you do not have to spend money on renting a trading floor, sellers’ salaries and much more.
3. Consumer trade (С2С):
The C2C system is a transaction between two people who are not related to entrepreneurial activity. Such popular sites as Avito or Yula act as platforms for making a purchase, but social networks are less commonly used. Here you can sell not only used goods but also gizmos made by yourself. The level of sales under this scheme is significantly lower than those listed above. This is due, among other things, to a small selection. The high risk of one of the parties can also be called a minus. The level of fraud in C2C trading is much higher than in any other area, and it is much more difficult to ensure the security of a transaction, even for leading trading platforms.
4. Consumer business (С2В):
Scheme C2B specializes in a specific group of projects, namely crowdsourcing. Its essence lies in the fact that ordinary people offer their goods or services to companies that need them. Such a system is widespread among designers, photographers, and artists. They exhibit their finished works on marketplaces, and organizations can purchase them to create their own unique brand. Sometimes such projects are created by personal orders.
5. Business administration (B2G):
The B2G model covers Internet transactions between businesses and government agencies. These include fiscal transactions, social security, and the transfer of legal and tax documents. Often, working inside the site requires the purchase of an electronic signature, with which the director of the company can perform a huge number of operations. Including – becoming a participant in state auctions.
6. Consumer Administration (C2G):
The C2G model is different from all those presented above. It involves transactions not in the classical sense of trade, but between an individual and one of the public services. This may be the filing of tax returns, payment of social payments, or medical services. This way of interaction with government agencies is effective, convenient, and does not require spending a lot of time. In recent years, it has become increasingly popular in many countries.
Advantages of E-commerce:
1. Reduce transaction Costs: First, enterprises can improve marketing efficiency and reduce promotional expenses through network marketing activities; secondly, e-commerce can reduce procurement costs, because, with the help of the Internet, enterprises can seek suppliers with the best prices in the global market, and through cooperation with suppliers. Information sharing can avoid losses due to inaccurate information. Some data show that the use of EDI can usually save enterprises 5%-10% of procurement costs.
2. Reducing Inventory Cost: To cope with the unpredictable market demand, enterprises have to maintain a certain inventory of products, and because enterprises are not sure about the raw material market, they often maintain a certain inventory of raw materials. The root cause of inventory generation is poor information. E-commerce based on information technology can change the problem of inaccurate and untimely information in enterprise decision-making. Through the Internet, the market demand information can be transmitted to the enterprise for decision-making and production, and the production information of the enterprise can be immediately transmitted to the supplier to replenish the supply on time, thereby realizing zero inventory management.
3. Shortening the production cycle: The production of a product is the result of the cooperation of many companies, so the design, development, production, and sales of products may involve many related companies. Through e-commerce, the past phased cooperation method of closed information can be changed to information sharing. work to minimize wait times due to information lock-in.
4. Increasing business opportunities: Traditional transactions are limited by time and space, while Internet-based e-commerce is a 24-hour global operation. An online business can be carried out to a market range that traditional marketers cannot reach through sales and advertising promotions.
5. Reducing the dependence on materials: The business activities of traditional enterprises must have a certain material basis to carry out business activities, while virtual enterprises can be established through the Internet, such as the establishment of online stores and online banks. The savings are passed on to consumers, which is why Amazon, the famous online bookstore, offers consumers great discounts that traditional bookstores cannot.
6. Reducing intermediate links: E-commerce redefines the traditional circulation mode, reduces intermediate links, makes direct transactions between producers and consumers possible, and thus changes the way the entire social economy operates to a certain extent.
Impact of e-commerce on the social economy:
- E-commerce will change the way business activities.
- E-commerce will change the way companies operate
- E-commerce will change the way people consume
- E-commerce will change the production mode of enterprises
- E-commerce will change the way of enterprise management
- Electronic commerce will form a new trade mechanism
- E-commerce can realize the best allocation of resources
- E-commerce will bring a whole new financial industry.
- E-commerce will transform government behavior
5 Steps Necessary to start an e-commerce Business
The e-commerce industry has seen a lot of growth in the last few years, and it is expected to grow in the coming years as well. According to research firm Forrester, online sales of retail goods stood at $1.6 billion (about Rs 9,500 crore) last year. Consultancy Technopark believes that by 2021 it will reach $ 76 billion (about Rs 4.5 lakh crore).
There are also many people who want to start their own online business seeing the increasing trend of online shopping. In such a situation, some steps are being told here, through which any person can start an online business or say e-commerce. These 5 steps can be followed to start your online business-
1. Identify the need and find a way to meet it:
Many people, before starting an online business, do not know the need of the people and think of giving them the product directly. The thing to keep in mind here is that first understand the need of the people and then give them the product accordingly. To increase your chances of success, you should do market research. For this, such a group of people can be talked to, who are looking for a solution to a problem. The Internet will help you in this, Visit online forums and see what kind of problems people are trying to find solutions to. Visit websites that solve people’s problems and see if people are satisfied with them. Also, see how many opportunities there are for you. If you can give people good solutions from other websites then here your search ends.
2. Build your own website:
As soon as you get the market and the product, then the next step comes to design the website for your business. While designing or getting the website done, keep some things in mind:
- Keep the background simple. It is better to have a white background.
- Keep the navigation of the page very simple, so that the user does not face any problems in using it.
- Use graphics, audio, and video only when they are very important to your product or service.
- Keep the process of buying a product simple, so that the user can buy the product at least by clicking.
- Make your website customer friendly.
3. Use search engines to bring target users to your website:
Pay-per-click advertising is the best way to drive traffic to your website. In Pay Per Click Advertising, you can test different types of keywords using them. With keywords that generate more traffic, you can take those keywords to all the related pages of your website.
4. Build an expert reputation on your website:
People use the Internet to get information. Make different types of expert information available to people for free, which will work to bring traffic to your website and give a better search engine ranking. For this, make articles and videos of expert content and spread them on the Internet. This work can be best done through social networking sites. A website like Facebook is a good way to get people not only content but also videos. It’s also a good idea to put a SEND TO A FRIEND link in your content so people stay connected.
5. Utilize the Power of Email Marketing:
Using e-mail marketing is also very important to grow your business. It has many advantages-
- Your relationship with the visitors is very good with e-mail marketing.
- With the help of this, you can not only give solutions to their problems to your visitors but also tell them about new offers.
- One of the great things about e-mail marketing is that it can measure the response. Some people will give positive feedback about the product, some will give negative feedback and some will not respond at all.
- The best thing about e-mail marketing is that it is much cheaper than TV, radio, and print.
- In this way, keep growing your business and keep making changes in your product or service according to the demand of the visitors.
- Increase your credibility to solve visitor problems.
- Write feedback from those who have used your product.
- Tell the user about the product and its benefits.
- Give some offers with the product.
Frequently Asked Questions on E-commerce:
1. What is meant by electronic commerce?
Answer: Electronic commerce is a business model based on the purchase, sale, and marketing of products and services through digital media (web pages, social networks, among others.)
2. What are the 5 types of electronic commerce?
B2C – Business to consumer trade, B2B – Business-to-business commerce, C2B – Consumer to-business trade, C2C – Consumer to-consumer trade
3. How safe is electronic commerce?
Answer: Electronic commerce can be a safe activity as long as the user plays his part, by making sure that he is making a payment through a secure channel.
4. What is the future of electronic commerce?
Answer: According to the Italian financial consultancy and Forbes broadcast, global e-commerce retail sales will reach more than 2.7 trillion dollars in 2021, and should reach 3.4 trillion dollars in 2025. These figures express once again that the future of e-commerce is stable, with no signs of falling.
5. What are the limits of electronic commerce?
Answer: The limitations of e-commerce are the lack of a physical store, the new challenges of mobile shopping, and the difficulties of online marketing. It is also difficult to manage the transition from electronic commerce to physical products.
6. What are the advantages and disadvantages of e-commerce?
Disadvantages: Website bugs, More competitive market, The customer cannot try the product before buying it, the Shipping process is costly
Advantages: Security in the form of payment, Business open 24/7, 365 days a year, Accessibility from anywhere, Cost savings for the entrepreneur.
7. Where is electronic commerce used?
Answer: Electronic commerce can be used in any environment in which documents are exchanged between companies: purchases or acquisitions, finance, industry, transportation, health, legislation, and revenue or tax collection.
8. What is the key technology to promote the development of e-commerce?
Answer: The root certification authority (root CA Secure Sockets Layer (SSL) protocol public key infrastructure (PKI, public key infrastructure) technology of the highest authority level of the SET protocol”).
10. Describe the main mode of inter-enterprise e-commerce.
(1) E-commerce model based on value-added network and intranet: This model selectively accepts information and controls users connected to the enterprise. The e-commerce activities between enterprises mainly support the exchange of information before and during the transaction. and document transmission.
(2) The EDI-based extranet e-commerce model: uses Internet technology to allow units that have close business relations with the enterprise to interconnect with the enterprise through the Internet, and prohibit non-related units or individuals from connecting through the firewall to ensure network connectivity. Safety.
(3) Internet-based Internet E-commerce Model: Enterprises build WWW websites on the Internet. Internet visitors can access the enterprise site through a standardized browser that supports hypertext multimedia within the site’s specified authority. The visit is interactive, on the one hand, the required information can be obtained from the website, and on the other hand, information (such as orders, and requests) can be sent directly to the website.
11. What is the difference between generalized e-commerce and narrow e-commerce?
Answer: E-commerce in the narrow sense is also called electronic transaction, which mainly refers to the transaction activities carried out on the Internet using the communication means provided by the Web, including buying and selling products and providing services through the Internet.
In a broad sense, e-commerce refers to all business activities carried out by the Web including electronic transactions, such as market distribution, customer contact, material allocation, etc. These business activities not only include internal business activities of enterprises, such as production, management, finance, etc. but also includes business activities between enterprises.
E-commerce in a broad sense is not only a combination of hardware and software but also a comprehensive system that combines buyers, sellers, manufacturers, and partners with the existing systems on the Internet, Intranet, and Extranet to conduct commerce and trade.
12. What are the technical features of the post-transaction e-commerce system?
- The e-commerce system that supports post-transaction mainly refers to the e-commerce system that goes further based on the original two types and can complete the links such as payment and settlement.
- That is to say, these systems can not only complete the process of information exchange, trade negotiation, and exchange of business documents but also can directly complete some money-related processes such as payment and settlement of funds online.
- This type of system is also a type of system that has attracted much attention from the media and companies in the international community since the mid-to-late 1990s.
- Since this type of system involves money and payment issues, it has a great impact on the security and safety of the system.
- Confidentiality is extremely demanding. So, how can we technically ensure that the entire transaction process and the payment and settlement process of funds are absolutely safe and reliable?
- So far, the solution mainly comes from two aspects: the first aspect is through a protocol called SET, through this protocol, all financial payment information on the Internet is encrypted to ensure the safety and reliability of the transaction process; another aspect is the method of dynamic authentication through the network, that is, the network dynamically monitors the transaction parties while the system performs transaction operations. , to avoid all kinds of violations, fraud, and false business practices.