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What is E-Commerce?

Last Updated:07-Aug-2013

Electronic commerce is a type of business transaction wherein the price or essential terms are negotiated over an online system such as an internet, extranet, electronic data interchange network, or electronic mail system. It does not include transactions negotiated via facsimile machine or switched telephone network, or payments made online for transactions whose terms were negotiated offline.

The International Data Corporation (IDC) predicts that the number of small businesses that are into e-commerce across the world has grown from 400,000 in 1998 to an estimated 2.8 million in 2003.

The Internet has grown by leaps and bounds allowing millions of people to connect electronically. According to Internet Telecommunication Union, the global number of web users is around 2.7 billion in 2013. The Increasing approval of the Internet as a communications tool both by individuals and businesses is the basis for business-to-business and business-to-consumer e-commerce. Revenue generated by e-commerce in the US reached $165.4 billion in 2010 from just $27.3 billion in 2000.

According to estimates by Forrester Research, B2B e-commerce will generate $559 billion in 2013 which would make it twice the size of B2C e-commerce.

Types of e-commerce
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  B2B: Business to Business
  B2C: Business to Consumer
  B2G: Business to Government

Growth of e-commerce in the United States (in billions)

Year 2008 2009 2010 2011 2012
e-commerce growth $132.40 $134.90 $165.40 $194.70 $225.50

How has e-commerce changed the way business is done?
Overall confidence among frequent Internet users is driven by greater confidence in online credit card use, convenience, availability of information and proper delivery of goods, as well as the ability to compare prices. Men and women indexed similarly in most attributes, but men have more confidence they will find lower prices online.

Attitudes toward e-commerce among different age groups were primarily driven by product selection, comfort with online credit card use and customer service. Not surprisingly, people aged 18 to 34 were more likely than their 35-64 year old counterparts to engage in nearly every shopping activity.

How do companies benefit from e-commerce?
  Companies are adopting e-commerce because of the following reasons.
  As there are no intermediaries in e-commerce, it reduces transaction cost, overhead cost and also
     labor cost.
  As of now, as there is no tax on e-commerce transaction in the USA, companies benefit from this
  Procurement cost and sales cost are reduced through e-commerce.
  Purchase cycle and sales cycle are shortened in e-commerce transaction.
  Companies minimize their inventory level in e-commerce trade.
  Service sector industries are gaining more benefits from e-commerce as services are digitised and
     traded electronically.
  Companies immediately enter into international market.
  It helps in analyzing the behavior of customer i.e. mode of consumption, personal preferences and
     purchasing power, etc.
  As there is no supply chain in e-commerce, companies offer goods at lower price.
  In case of traditional sales, companies make huge investment to store the goods at different
     location but in e-commerce investment in inventory is reduced.
  24/7/365 basis helps companies to attract more customers.
  Small companies use e-commerce as a medium of advertisement.
  It helps in providing up to date information about their product to the consumers.
  As Small and Medium enterprises are not able to open their overseas office, they use e-commerce
     to reach the global market.
  Companies collect information about their competitors quickly.
  Companies maintain close contact with their customers and consumers anytime through
     the Internet by providing up to date information on products and services round the clock.
  Companies use multi-media to promote corporate image, product and service brand names through
     the Internet.

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