General Overview Of Ecommerce Information Technology Essay

Electronic commerce is the term used for any type of business or commercial transaction that involves the transfer of products, services and information over electronic systems such as the internet and other computer networks. The trader and customer are not face to face at any point during these transactions, the business being conducted remotely, regardless of location.

E-commerce covers a range of different types of businesses, from consumer based retail sites, through auction or music sites, to business exchanges trading goods and services between corporations. It is one of the most important aspects of the Internet to emerge. Almost all big retailers are present on the World Wide Web.

Although most electronic commerce involves the physical transportation of items in one way or another, a large percentage of e-commerce is conducted entirely electronically for virtual items, such as access to certain information on a website, purchasing software or other on-line services.

“E-business is a superset of e-commerce” [1] , as it is generally considered to be the sales aspect of e-business. The financing and payment aspects of business transactions are facilitated by the exchange of data.

E-commerce can be mainly divided into Business-to-Business electronic commerce (B2B) and Business-to-Consumer electronic commerce (B2C). B2B implies that both sellers (suppliers) and buyers are business corporations, while B2C implies that buyers are individual consumers.

Business-to-business e-commerce differs significantly from business-to-consumer e-commerce. Most B2B commerce is done through negotiated contracts which allow the seller to anticipate and plan for amount a buyer will purchase; while B2C merchants, on the other hand, sell on a first-come, first serve basis.

1.1.1. B2B e-commerce

B2B e-commerce does not just consist of the transaction via the Internet, but also the exchange of information before and the service after a transaction. From the purchasing company’s point of view, B2B e-commerce is a medium for facilitating procurement management by reducing the purchase price and the cycle time. [2] 

The key players in a B2B e-commerce transaction usually include selling and buying companies, deliverers, and often some type of electronic intermediaries, or third-party service providers. This type of business transaction may take many forms, yet most fall into three categories. They classified depending on who controls the marketplace: the supplier, the buyer or the intermediary:

(a) In a Supplier-Oriented Marketplace: many buyers face few suppliers.

(b) In a Buyer-Orientated Marketplace: few buyers face many suppliers.

(c) In an Intermediary-Oriented Marketplace: many buyers face many suppliers.

A) Supplier-Oriented Marketplace

In a Supplier-Oriented Marketplace customers are offered a wide variety of products and services which support them in their own businesses. The markets involve property, exchanges, auctions and bid systems. Suppliers are offered new market channels in marketing and distribution by using Supplier-Oriented Marketplaces, as products may be sold directly to customers without the use of intermediaries. Successful examples of this type of business model are Dell and Cisco. [3] Both companies sell their products via the internet. However, there are thousands of other companies that use the Supplier-Oriented model as well.

Cisco’s mainly provides electronic support using the internet. Its main applications include software downloads, defect tracking and technical advice. Cisco also sells routers, switches and other network interconnect devices. Since the company first began providing electronic support online in 1994 its productivity had increased by about 200 to 300 percent per year. What is more, the online technical support made it possible for Cisco to reduce technical support staff costs by approximately US $125 million. The internet Product Center also allows its customers to purchase any product over the internet, saving time for both Cisco and its customers.

Cisco has estimated that by putting its application online, the company saves over US $360 million per year as a result of almost completely eliminating distribution, packaging, duplication and printing costs.

B) Buyer-Oriented Marketplace

When using a Supplier-Oriented Marketplace, buyers have to search electronic stores and malls to find and compare suppliers and producers. As this could be a very costly and time consuming operation for buyers, especially those who purchase thousands of items over the internet, they prefer to open their own marketplace, which is known as a Buyer-Oriented Marketplace. [4] An example of such a marketplace is GE’s electronic bidding site which boosts the company’s purchasing process. [5] These types of bidding sites allow suppliers to download project information from the internet and submit bids for projects. Buyers can more easily evaluate a supplier’s bid and thus may negotiate electronically. As a result, a buyer will accept a bid that best meets their requirements. By doing so, they can identify and build partnerships with suppliers worldwide. Their specifications and information can be rapidly distributed to suppliers and consequently, bids are quickly received and compared from a large number of suppliers as to negotiate better prices.

C) Intermediary-Oriented Marketplace

The Intermediary-Oriented Marketplace, as its name suggests, is established by an intermediary company which runs a marketplace where business buyers and sellers can meet. There are two types of such business models: horizontal and vertical marketplaces. While vertical marketplaces concentrate on one industrial sector, horizontal marketplaces offer services to all industrial sectors.

The Intermediary-Oriented Marketplace is a neutral business platform which offers classical economical functions of a usual market; the only difference is that the participants are not physically present. This business model contains catalogues which present information on products and prices. Consequently, the marketplace makes possible the comparisons and the transparency of the products. Such marketplaces can also offer auctions, which can be organized by sellers (where products are sold) or by buyers (in this case, orders are sold). In addition, electronic functions are offered so as participants can negotiate in real time. [6] 

An example of an Intermediary-Oriented Marketplace is Buzzsaw [7] which is a vertical electronic marketplace which concentrates on the building industry. A construction project involves many different parties, such as building contractors, builders, architects, merchants and the owner of the building many of which are regional sellers. The software that Buzzsaw offers can improve the planning process as well as the communication between the parties involved. Alongside the software, detailed information about the building industry is provided, such as news affecting the building sector or a local weather forecast. Given that the marketplace also provides the option to do business, all relevant products for the building industry can be traded. The Web site also offers search engines so as to find wanted products and buyers and sellers can insert offers and requests on the marketplace.

1.1.2. B2C e-commerce

B2C e-commerce is basically a concept of online marketing and distributing of products and services over the internet. Many businesses prefer this method because they can reach more customers, service them better and make more sales while spending less to do so. For the consumer, it is relatively easy to appreciate the importance of e-commerce. Many prefer not to waste time fighting the very crowded supermarkets, and shop on-line at any time in virtual Internet shopping malls, and have the goods delivered home directly, all from the comfort of their own homes.

B2C e-commerce is conducted essentially by three types of business models [8] :

(a) Direct Sellers are online retailers that sell directly to customers only over the Internet. There are two types of direct sellers: e-tailers and manufactures.

E-tailers, such as Amazon.com, ship the products directly to the consumer, wholesaler or manufacturer for delivery, upon receiving an order. They do not have traditional stores that customers can visit and they do not sell offline.

Manufacturers, sell to consumers directly via the internet. They remove intermediaries and establish a direct relationship with the customer. These types of retailers are present on the Web as well as have traditional stores or sell offline through catalogues or mail-order. They are called “brick-and morter” retail businesses because they are merchants with multi-channel distributions supported by online stores. This process has been used for years, for example, catalogue companies such as Dell.com.

(b) Online Intermediaries are companies that bring together sellers and buyers to complete a business transaction, in exchange for a percentage of the transaction’s value. Presently, these types of businesses make up the largest category of B2C companies. There are two types of online intermediaries: brokers and informediaries.

Brokers facilitate transactions between sellers and buyers online. Orbitz.com is an example of a popular B2C online broker, which acts an intermediary between a consumer and multiple suppliers of airline carriers, hotel chains, automobile rentals, and other such companies.

Informediary is a non-biased intermediary between those who supply information and those who want it. It can be any business that provides information based products and services within a supply chain. For example, an informediary may gather, store and sell information about a Web site. The information is considered to be valuable to organizations for target marketing, price setting, negotiations, advertising and market research.

(c) A Portal provides the means of electronic access to Web content, resources and services. A portal typically has a search engine which is the central point to the services provided. The most popular search portal Web sites are Google.com, Yahoo.com and MSN.com. They have a large number of consumers and businesses utilizing their services each day around the world. Other services included on these types of websites include e-mail, chat as well as news and entertainment links.

1.2. A Brief History of E-commerce

E-commerce and its meaning have changed a lot over the past 40 years. At first, the term e-commerce meant the performance of commercial transactions electronically, using Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), the electronic exchange of business documents and information form one computer to another. EDI originated in the mid 1960s and by the mid 1970s was formalized by the Accredited Standards Committee. [9] The new technology allowed business companies and organizations to send commercial documentation electronically, such as purchase orders or invoices.

It was in 1991 that E-commerce became possible, when the internet was opened to commercial use. Since then, e-commerce has experienced a rapid intensification; thousands of businesses have started online companies and provide online services. Although, it wasn’t until 1994 that the internet began to gain popularity among the general public, and by the year 2000 a large number of companies from around the world had already started to offer their services on the World Wide Web. By then, people had given another meaning to electronic commerce: the process of purchasing goods and services over the internet using electronic communication. [10] 

Among the first internet company to allow electronic transactions, Amazon and E-bay are the most notable as they continue to be successful to this day. According to study conducted by internetretailer.com in 2009, the top 10 most famous worldwide internet retailers are: Amazon, Otto, Staples, Office Depot, Dell, Arcandor, Hewlett Packard, Tesco, OfficeMax and Apple. [11] According to all-rankings.com, the top ten most purchased products online are: travel tickets, holidays, books, concert/theatre/festival tickets, clothes, electrical goods, CDs, cinema tickets, DVDs and music downloads. [12]