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| What is E-Commerce? |
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| 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. |
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| 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 IDC estimates the global number of web users was around 502 million in 2004. 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 ecommerce reached $1.3 trillion in 2003 worldwide from just $50 billion in 1998. |
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| According to reports by Forrester Research, B2B e-commerce generated $1.3 trillion in 2003 exceeding the B2C market by up to five to seven times. |
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| Types of Ecommerce |
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| • B2B: Business to Business |
| • B2C: Business to Consumer |
| • B2G: Business to Government |
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| Growth of E-commerce in the United States |
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2000 |
2001 |
2002 |
2003 |
2004 |
% of total |
| United States |
$488.7 |
$864.1 |
$1,411.3 |
$2,187.2 |
$3,189.0 |
13.3% |
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| How has E-commerce changed the way business is done? |
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| 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. |
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| 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, the youngest age group surveyed, 18 to 24, displayed higher confidence in these areas. |
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| How do companies benefit from E-commerce? |
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| • Companies are adopting E-commerce because of the following reasons. |
| • As there are no middlemen in E-commerce it reduces transaction cost, overhead cost and also labor cost. |
| • As of now there is no tax on E-commerce transaction, companies gain benefit from this transaction. |
| • Procurement cost and sales cost is reduced through E-commerce. |
| • Purchase cycle and sales cycle is 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 digitalized 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 the 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 at anytime through Internet by providing the latest 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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| The phenomenon of shopping cart abandonment |
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| Word-of-mouth reports of difficult checkout systems and lousy delivery keep many consumers from trying to buy their favorite products online. In the U.S. the Federal Trade Commission fined 7 companies a total of USD1.5 million for failure to deliver goods when promised, last Christmas; in mid-November, 2000, the commission sent warnings to 100 top online retailers that they should not make holiday shipping promises they cannot keep. |
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| Shopping cart abandonment occurs when a visitor exits the web site by going through the checkout process without buying. Several ecommerce sites face the problem of shopping cart abandonment. Web sites face an average abandonment rate of 30% or more. |
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