Electronic Commerce

Commerce involves buying and selling and support services like transport, insurance, banking, communication, etc. When all these activities are undertaken using information and communication technologies, it is termed as Electronic Commerce or e-Commerce.

In other words, e-Commerce refers to the process of conducting business with the help of electronic devices using the computer and interconnected telecommunication network. Here, offer for sale and its acceptance are made electronically through Internet. It does not require physical interaction between the parties concerned. It is also known as ‘online trading’, ‘online shopping’ and ‘e-shopping’.

e-Commerce takes place between companies i.e., business to business (B2B), between companies and their customers (B2C), and customer to customer (C2C).

B2B refers to interactions between a manufacturer and a supplier of materials and services, or between a manufacturer and a wholesaler, or between a wholesaler and a retailer. A network of computers is used for making enquiries seeking or placing orders, communicating supply of goods, making payments, and so on.

B2C, as the name implies, have business firms (manufacturer or retailers) at one end and its consumers on the other. It enables a business firm to be in touch with its customers on round the clock basis. It involves a wide range of marketing activities including promotion, seeking orders, intimating supply and so on.

C2C usually involves consumers at both ends dealing in goods for which there is no established market mechanism as is the case with used books and household equipment.

Electronic Business

The term e-Business is used in a broader sense. The e-Business covers not only the interaction with its customers and suppliers but also interactions and dealings among various departments and persons within the firm. Thus, e-Business is a wider term which includes e-commerce and other electronically conducted business functions like production, accounting, finance, personnel, administration, etc. In other words, e-Business includes not only B2B, B2C, and C2C but also Intra-B Commerce i.e., interaction and dealings among various departments and persons within the firm.

For example, the marketing department may interact regularly with the production department and get the products made as per the requirements of the customers. Similarly, regular interaction among other departments helps in attaining efficient inventory handling, better cash management, proper utilisation of manufacturing capacity, timely and sufficient provision of customer services, and so on. Thus, e-Business implies use of Internet technologies to perform the key business processes.

Benefits of E-Commerce

  1. Wider Accessibility: With the help of a well-developed computerised networking system, the business units can operate at the national as well as the global level. The buyers and sellers from any part of the world can interact with each other. This helps in gaining exposure to new markets.

  2. Improved Customers Service: E-Commerce enables a company to be open for business whenever a customer needs it. Up-to-date information about products can be offered on the web, making it easier and convenient for customers to select the best product. It also enables suppliers of goods and services to offer a wide range of services to the customers, before as well as after sale, and respond to customers’ queries without any delay.

  3. Shortened Transaction Time: An e-Business transaction takes much less time as compared to the normal process of buying and selling because the producers are able to cut short the distribution channels and establish direct contact with the consumers. It also enables a company to introduce a new product into the market, gain customers’ reaction quickly, implement the necessary changes without incurring heavy cost and loss of time.

  4. Cost Saving and Low Prices: There is a substantial cost saving in business transactions through e-Commerce as there is hardly any display of goods involved and need for large stocks in godowns. The number of employees required is also limited. For example, as the orders are directly put into the system there is no need for any sales persons or order entry clerk. This helps in substantial savings in operational costs and offers products at lower prices to customers.

  5. Enlarge Business and Profits: With e-Commerce, the companies are able to approach a larger number and variety of customers and gain exposure to new markets. This enables them to enlarge their business volume and earn more profits.

  6. Convenience to Customers: The customers also stand to gain by e-Commerce in various ways. They have access to a large number of suppliers, enjoy a wider choice, and acquire quality products and services at competitive prices. They also receive prompt and efficient service and gain information about new products easily.

Limitations of E-Commerce

  1. It lacks personal touch with customers, which makes it unsuitable for items such as clothes, jewellery, etc.

  2. The web can provide a good picture, a detailed description of the product, but the customer cannot actually see, feel or try on the goods while buying.

  3. The transaction can be finalised quickly, but physical delivery of goods often takes long time and be delayed. This leads to a lot of inconvenience for the customers.

  4. Return of faulty goods bought online may often be more problematic and a time consuming exercise.

  5. Shopping through Internet is not the same experience as a shopping expedition with family or friends. It is not suitable for non-routine buying where one is usually guided by advice of friends and family members.

  6. Online transactions are prone to a number of risks that can result into financial, reputational or psychological losses to the parties involved in a transaction.

  7. The risks relate to (i) the transaction (default in order taking, default in delivery, default in payment); (ii) data storage and transmission; and (iii) privacy.

  8. Moreover, the privacy of personal details and security of financial transactions are a concern for many users.

Most of the above limitations are applicable to B2C commerce. As for the business buying i.e., B2B e-Commerce, these limitations have little relevance as both the parties are sufficiently knowledgeable, resourceful and well informed, and transact regularly with each other. No supplier therefore, can afford mishandling of any transaction with its business customers.