E-commerce

E-commerce is now synonymous with the Internet. Users - private or corporate - can communicate with web-based online stores using a web browser such as Microsoft Explorer or Netscape Communicator. An Internet store provides all the facilities a customer needs, including a product catalogue, a virtual shopping basket, and a secure credit card payment system.

In theory, the Internet has no geographical, political or temporal boundaries. It has a common infrastructure available to all. The universal availability of access to the Internet, while not radically changing logical processes, has created new opportunities and removed some of the physical limitations of traditional methods of conducting business.

CAT Paper 5 and ACCA Qualification Paper F1 students may be interested in the social and employment consequences of e-commerce. For Paper P3 candidates, e-commerce is now a weapon of competitive strategy, offering the possibility of new products and services, more efficient ways of performing traditional business processes, and new distribution channels.

Business-to-business (B2B)

E-commerce

E-commerce can be simply defined as conducting business transactions over electronic networks by way of linked computer systems. When the concept was originally introduced, it was envisaged that it would mainly involve business organisations linking their computer systems to conduct business with each other more speedily, efficiently and economically.

B2B e-commerce is well-established and is still a fast-growing area. Examples include companies linking to their suppliers to facilitate Just-In-Time (JIT) stock control. To enable this to happen, participating companies have had to agree on interface and application standards. Many office equipment and consumable suppliers can now take orders online and provide direct delivery to business customers.

One of the key drivers associated with B2B e-commerce is the overhaul of inefficient trading processes. Companies can link directly to suppliers, check availability of products, and then place orders and track shipments without delay or human assistance.

In an increasingly competitive world, the best businesses are using new technologies to clarify customer demand, target marketing efforts more precisely, tighten business processes, and investigate new methods of distribution.

Business-to-consumer (B2C)

E-commerce

The volume of B2B e-commerce has been overtaken in the last five years by the growth of consumer e-commerce applications as the general public (B2C) increasingly conduct business over networks with commercial and public sector organisations.

The catalyst for B2C e-commerce has been the growth in the number of people who have access to both a home computer and the Internet. Most e-commerce applications are now Internet-based, trading goods and services. Other terms used to refer to this practice include e-business, e-tailing and e-trading.

Business activities

Commerce refers to the activities in which an organisation or individual engages in order to complete a transaction. Most stages in the lifecycle of a product or service can be conducted in an e-commerce environment. For example, a book retailer might undertake the following e-commerce activities:

• market research
• advertising
• providing product information
• contacting customers
• taking orders
• tracking shipping
• receiving and processing payments
• ordering stock from publishers
  

The list of activities or logical processes does not differ significantly from the list of business activities that the organisation has always carried out. The difference is that the company can conduct its retail business by using computers and telecommunications technologies instead of, or in addition to, operating stores.

Benefits for business

Some of the organisational benefits of doing business over the Internet include the following:

• Business can be conducted 24-hours-a-day, 7-days-a-week.
• Products can be supplied to anyone, anywhere in the world (as long as there is an economic and reliable distribution channel).
• Suppliers can respond quickly to customer requirements.
• Suppliers can build a one-to-one relationship with customers. Through search tools and customer profiles, information can be tailored to customer requirements on demand. Direct communication results in improved pre and post-sales support.
• Customers can access up-to-date information - expensive printed catalogues and service guides can be replaced by a single electronic product database (which must be kept up to date at all times).
• E-mail distribution is cheaper than direct mail, and providing the information on a website is cheaper still if users can be encouraged to access it for themselves.
  The overheads of maintaining a physical retail outlet are reduced.
• Routine business operations can be automated, saving time and money - the supply chain is shortened so delivery times and costs are reduced.
• Staff costs can be reduced - standard enquiries and sales can be handled automatically via software, leaving staff with time to handle the difficult or higher added-value transactions.
• Entirely new services can be developed - for example, software and music can be delivered instantaneously and cheaply via the Internet.

The self-serve economy

E-mail and websites are as easily, and readily, accessible as telephones and faxes. As a result, consumers are becoming more confident in the use of electronic media to conduct all kinds of transactions, from transferring money between bank accounts, to reserving film or theatre tickets, to ordering books online.

The willingness of consumers to help themselves, and to make new technologies part of their daily lives, bypassing the shop assistant and customer service representative, is the principal characteristic of the self-serve economy.

Self-serve characteristics, valued and required from an e-commerce service include availability, reliability, choice, speed, and convenience. A well-run and efficient e-commerce operation will deliver the following benefits to consumers.

• 24-hour shopping, 7-days-a-week.
• Global choice and access to a wider range of goods and services than in any local retail store or shopping centre.
  Lower prices - because of reduced operating costs and wider competition.
• Ease of use when identifying and browsing the choices available.
• Rapid response to orders - not as fast as retail off-the-shelf, but few retail chains provide their complete product offering at every outlet, and frequently products have to be ordered.
• For products that can be delivered electronically, such as software, video, newspapers and music, supply is instantaneous without any delay caused by intermediaries.
  

Social and employment costs of e-commerce

Although the benefits of e-commerce are significant, they do not come without the risk of some longer-term social costs.

• If substantial numbers of residents of small communities choose to shop on the Internet, local stores may not be able to compete and may have to close. For those who do not have, or do not wish to have access to the Internet, such closures could lead to social deprivation.
• Many aspects of electronic shopping are automated and fewer staff are needed to process orders, leading to a possible rise in unemployment in certain economic sectors.
• E-commerce businesses have access to global markets but they are also subject to global competition. This means that costs and working practices need to remain flexible to cope with changing consumer demands and competitor activity. Suppliers can choose to operate from offshore
  low-cost bases. This has a particular impact on high wage/high social cost economies which may find that jobs are exported to lower cost economies.
• Flexibility to operate offshore and to buy internationally means that it is very difficult for national governments to police the legality of operations and to ensure the quality and safety of some products supplied (eg medicines).
  Ensuring the reliability, security and integrity of data and operations can be a problem - electronic hacking is often one step ahead of the security industry.