e commerce (2015-16) unit i

E-Commerce

S.N.Selvaraj, M.B.A., M.Phil., Assistant Professor, Email: [email protected]

Semester VI

UNIT – I E-COMMERCE

Foundation of Electronic Commerce – Definition and Content of the field – Driving

Force of EC – Impact of EC – Managerial Issues – Benefits and Limitations of EC –

Retailing in EC: Business Models of E-Marketing – Aiding Comparison Shopping –

The impact of EC on Traditional Retailing System.

FOUNDATION OF ELECTRONIC COMMERCE

Electronic commerce generally refers to all forms of transactions relating to

commercial activities, involving both organizations and individuals that are based

upon the processing and transmission of digitized data, including text, sound and

visual images.

It also refers to the effects that the electronics exchange of commercial information

may have on the institutions and processes that support and govern commercial

activities.

Electronic commerce (E-Commerce) is an integration of communication services, data

management, and security mechanisms that allows organizations to exchange

information about the sale of goods and services, where,

Communication Services support the transfer of information from the buyer to

the seller electronically.

Data Management is the exchange and storing of data in a uniform format to

facilitate easy exchange of information.

Security Mechanism authenticates the source of information and guarantees the

integrity and privacy of information.

In other words, E-commerce involves marketing retailing, customer service, banking,

billing, corporate sector purchasing, secure distribution of data, and other value added

services over the Internet.

DEFINITION AND CONTENT OF THE FIELD OF E-COMMERCE

E-commerce consists of the buying and selling of products or services over electronic

systems such as the Internet and other computer networks. E-commerce is subdivided

into three categories:

(1) Business to Business – B2B – For example Cisco

(2) Business to Consumer – B2C – For example Amazon

(3) Consumer to Consumer – C2C – For example eBay

The following are some of the most known definition of electronic commerce:

“Commercial transactions conducted electronically on the Internet”.

“Electronics commerce is about doing business electronically”.

mailto:[email protected]

E-Commerce


E-commerce is defined as the conduct of financial transactions by electronic

means.

“E-commerce is dynamic set of technologies, applications and business process

that links enterprises, consumers and communities through electronic

transactions and the electronic exchange of goods, services and information”.

According to Kalakota and Whinston, Electronic commerce can be defined from the

following perspectives:

1) Communication Perspective: “Electronic commerce is the delivery of

information, products/services or payments via telephone lines, computer

networks or any other means”.

2) Business Process Perspective: “Electronic commerce is the application of

technology toward the automation of business transactions and workflows”.

3) Service Perspective: “Electronic commerce is a tool that addresses the desire of

firms, consumers and management to cut service costs while improving the

quality of goods and increasing the speed of service delivery”.

4) Online Perspective: “Electronic commerce provides the capability of buying and

selling products and information on the internet and other online services”.

Features of Electronic Commerce

Ubiquity: E-commerce is ubiquitous, meaning that it is available just about

everywhere at all times. It liberates the market from being restricted to a

physical space and makes it possible to shop from your desktop. This is called

a Market Space.

Global Reach: E-commerce technology permits commercial transactions to

cross culture and national boundaries far more conveniently and effectively as

compared to traditional commerce.

Universal Standards: One strikingly unusual feature of e-commerce

technologies is that they are shared by all the nations around the world.

Interactivity: E-commerce technology allow for two-way communication

between merchants and consumers.

Information Density and Richness: It is a total amount of quality of information

available to all market participants, consumers and merchants. It increases

greatly the accuracy and timeliness of information making information more

useful and important than ever.

Personalization: Merchants can target their marketing messages to specific

individuals by adjusting the message to a person‟s name, interests and past

purchases. The technology permits personalization and also customization.

Merchants can change the product or service based on user‟s preferences or

prior behavior.

Need of Electronic Commerce

Competition: The organization is either forced by the competition or it can pre-

empt the competition by moving ahead of others in joining e-commerce. An

excellent example is Dell Computers that was the first to start sale of

computers through the Internet thereby reducing cost. IBM, Compaq and other


E-Commerce


manufacturers had to change their marketing strategy to find ways to reduce

operations costs by adopting the e-business model of sale through Internet.

Global Reach: Internet has crashed to geographical boundaries and the entire

world has shrunk to a global village. This permits the customers to make

purchases from any part of the world without actually visiting the place. For

example, books can be purchased from amazon.com from any part of the

world.

Customer Service: The customer can customize the product according to their

own taste such as: online newspaper. The customers can be updated on the

status of order placed by them when it goes through various stages of

processing such as packing, shipping, etc. Pre-sale and Post-sale support are an

important ingredient of the e-commerce package.

Value Addition: A product has to go through various stages of value addition

from manufacturers to the consumers and at each stage the cost is added-up

making the product expensive for the consumer. This business chain can be

shortened through the adoption of e-commerce thereby making the product

cheaply available to the consumers.

Nettish Products: The products which are more suitable for purchase through

the Internet as their delivery takes place through the net are referred to as

Nettish products. For example, e-mail, e-greetings, software, etc.

Three Pillars of E-Commerce

Another electronic business model that builds on traditional market spaces is the three

pillars of electronic commerce model by Peter Fingar.

At the foundation of the model is the existing market space. Three electronic pillars

support open market processes.

1) Electronic Information: The WWW is viewed as a “global repository” of

documents and multimedia data. Constructing an electronic pillar is easy: most

word processing software packages will easily convert documents into a web-

readable format.

Open Market Processes

Electronic

Information

Electronic

Transactions

Electronic

Relationship

Existing Market Space


E-Commerce


2) Electronic Relationships: Electronic relationships, is the central pillar. Placing

information on products and service offerings on a website does not mean that

potential customers or guests will visit that web site a first time, and it

especially does not mean that a user will return to the site.

3) Electronic Transactions: Many businesses have built an electronic information

pillar and some have built or are building an electronic community pillar, but

substantially few have constructed the electronic transaction pillar.

Scope of Electronic Commerce

Electronic commerce (e-commerce) is a term popularized by the advent of

commercial services on the Internet. The commercial use of internet is perhaps

typified by once-off sales to consumers. Other types of transactions use other

technologies. Electronic Markets (Ems) are in use in a number of trade segments with

an emphasis on search facilities and Electronic Data Interchange (EDI) is used for

regular and standardized transactions between organizations.

The mainstream of e-commerce consists of these three areas as under:

Electronic Markets: An electronic market is the use of information and

communications technology to present a range of offerings available in a market

segment so that the purchaser can compare the prices of the offerings and make a

purchase decision. The usual example of an electronic market is an airline booking

system.

Electronic Data Interchange (EDI): EDI provides a standardized system for coding

trade transactions so that they can be communicated directly from one computer

system to another. EDI is used by organizations that make a large number of regular

transactions. The example for this is large supermarket chains.

Internet Commerce: Information and communication technologies can also be used to

advertise and make once-of sales of a wide range of goods and services. For example,

purchase of books that are then delivered by post and booking of bus, train and air

tickets.

The field of e-commerce is taken in a very vast sense. It includes not only the

conventional business fields but also the newer fields like medical transcription,

trades, professions, business, services, etc.

Electronic

Markets

Internet

Commerce

EDI


E-Commerce


Models of E-Commerce / Types of E-Commerce

The several types of e-commerce models in use today are classified based on the

nature of the interaction with players are:

1) Business-to-Consumers (B2C)

2) Business-to-Business (B2B)

3) Consumer-to-Consumers (C2C)

4) Consumer-to-Business (C2B)

5) Business-to-Government (B2G)

Business-to-Consumers (B2C)

In B2C, businesses sell directly a diverse group of products and services to customers.

In these cases, e-business supplements the traditional commerce by offering products

and services through electronic channels. Wal-Mart Stores and the Gap are examples

of companies that are very active in B2C e-business.

Some of the advantages of these e-commerce sites and companies include availability

of physical space (customer can physically visit the store), availability of returns

(customers can return a purchased item to the physical store) and availability of

customer service in these physical stores.

Figure: Business-to-Consumer (B2C) E-Commerce Relationship

There are five major activities involved in conducting B2C e-business:

1) Information sharing: Online advertisements, e-mail, company website, online

catalogues, message board systems, bulletin board systems, etc.

2) Ordering: A mouse click sends the essential information relating to the

requested piece to the B2C site.

3) Payment: Credit cards, Debit cards, and digital cash are among the popular

options for paying goods or services.

4) Fulfillment: Fulfillment that is responsible for physically delivering the product

or service from the merchant to the customer. They may also outsource this

function to third parties with moderate costs.

5) Service and Support: Timely delivery and high-quality service and support to

customers are more important in e-business than traditional businesses.

Customer

Customer

ISP

ISP

Firewall Virtual Stores Payment Process

Electronic

Catalogue

Product

Suggestion

Help

Desk

Account

Status


E-Commerce


Business-to-Business (B2B)

B2B e-business holds electronic transactions among the between businesses. The

internet and reliance of all businesses upon other companies for supplies, utilities and

services has enhanced the popularity of B2B. In a B2B environment, purchase orders,

invoices, inventory status, shipping logistics and business contracts handled directly

through the network result in increased speed, reduced errors and cost savings.

Consumer-to-Consumer (C2C)

Using C2C e-business, consumers sell directly to other consumers using the internet

and web technologies. Individuals sell a wide variety of services/products on the Web

or through auction sites such as eBay.com and gittigidiyor.com through classified ads

or by advertising.

Consumers are also able to advertise their products and services in organizational

intranets and sell them to other employees.

C2C Service

Figure: Consumer-to-Consumer (C2C) Relationship

Consumer-to-Business (C2B)

Consumer-to-Business (C2B) e-commerce involves individuals selling to business

may include a service/product that a consumer is willing to sell. Individuals offer

certain prices for specific products/services. Companies such as pazaryerim.com and

mobshop.com are examples of C2B.

Internet

Customer

Customer

ISP

ISP

Customer

Customer

ISP

ISP

Catalogs

Escrow

Auctions


E-Commerce


C2B Services

Figure: Consumer-to-Business (C2B) Relationship

Business-to-Government (B2G)

B2G is derivative of B2B marketing and often referred to as a market definition of

“public sector marketing” which encompasses marketing products and services to

government agencies through integrated marketing communications techniques such

as strategic public relations, branding, advertising and web-based communications.

Important points regarding B2G:

o Most governmental organizations establish a fairly small threshold (e.g. a few

thousand dollars) above which all purchases must adhere to a contractual

relationship that has been formally put-out for bid, competed for, and awarded

to one or more suppliers.

o Whereas a private sector purchasing agent could look at data warehousing

produced reports and detect a disturbing rise in product defects from a single

supplier – and consequently direct purchases to an alternative supplier with a

slightly higher rice but much higher overall quality – such freedom of choice is

typically not permitted in B2G environment.

o In B2B environment, business is always – or almost always – the seller and

government the buyer.

Main Activities of E-Commerce

The various transactions in e-commerce involve the customer and merchant. The

activities surrounding these transactions fall under the following categories:

a) Marketing

b) Sales

c) Payment

d) Fulfillment

e) Customer Service

Internet

Customer

Customer

ISP

ISP

Business

Business

ISP

ISP

Catalogs

Escrow

Auctions


E-Commerce


E-Commerce: Architectural Framework

Electronic commerce applications require a reliable network infrastructure to move

the information and execute a transaction in a distributed environment. These

applications rely upon two key component technologies: (1) the publishing technology

necessary for the creation of digital content and (2) the distribution technology to

universally move the digital contents and transactions information.

Thus, in the framework network infrastructure forms the very foundation while

publication and distribution technologies are the two pillars that support the creation

of distributed electronic commerce applications. In addition to technological

infrastructure and applications, for electronic commerce to flourish, it is essential to

have a business service infrastructure.

The following is the multi-layered architecture of electronic commerce, comprising of

essential blocks:

E-commerce Applications

Catalog based retail, Marketing & Advertising, Banking &

Investment, Supply Chain Management, Auctions, Home Shopping,

Procurements

Info

rmat

ion

Dis

trib

uti

on

an

d

Mes

sagin

g T

echnolo

gie

s (H

TT

P,

SM

TP

, et

c.)

Netw

ork

Mu

ltimed

ia Co

nten

t

Publish

ing T

echn

olo

gies (H

TM

L,

XM

L, JA

VA

, Grap

hics, V

ideo

To

ols

etc.)

Legal and Public Policy Framework

Public Key, Identification and

Authentication Infrastructure

Business Service Infrastructure

Directories,

Search Engines etc.

Secure Payment Protocols,

Online Payment Infrastructure

Security and Encryption Technology

Abbreviations

HTTP : Hypertext Transfer Protocol

SMTP : Simple Message Transfer Protocol

HTML : Hypertext Markup Language

XML : Extensible Markup Language

JAVA :Java is a programming language. It was designed to have the "look and

feel" of the C++ language, but it is simpler to use than C++ and enforces

an object-oriented programming model.

Network Protocol Standards Network Infrastructure

(Internet)


E-Commerce


DRIVING FORCES OF EC

Economic forces are fueling interest in electronic commerce, and technology driven

digital convergence.

Economic Forces: There are some parameters working as a driving force of

e-commerce which is given below:

i) Strong Competition: To remain in competition the organizations are under

relentless pressure to reduce costs, firms are attracted to the economic

efficiencies offered by electronic commerce.

ii) Economic Integration: The economic forces motivating the shift to

electronic commerce are internal as well as external. Before the global

economy came into existence, the entire economy was ruled by the United

States. But with the stings of the global economy the power the U.S. has

shrunk to about 25%.

iii) Global Economy: The global economy has equipped the economy with the

power to market goods and services across different countries in the globe.

iv) High Consumer Expectations: Consumer expectation regarding the product

and services provided by any organization and company through the

e-commerce is the most important driving force of e-commerce.

Marketing and Customer Interaction Forces: For successful e-commerce interaction

between markets should be strong.

i) Consumer Satisfaction: Companies also employ electronic commerce to

provide marketing channels, to target micro segments or small audiences

and to improve post-sales customer satisfaction by creating new channels of

customer service support.

ii) Targeting Products: As more companies flood the marketplace with new

products, target marketing is becoming an increasingly important tool of

differentiation.

iii) Low Cost Customer Prospecting Methods: In order to be competitive,

marketing executives must employ technology to develop low-cost

customer-prospecting methods, establish close relationships with customer

and develop customer loyalty. Marketers must adapt to a business world in

which traditional concepts of differentiation no longer hold: in this world

“quality” has new meaning, “content” may not be equated with “product”,

and “distribution” may not automatically mean “physical location”.

Economic

Forces Forces behind

E-Commerce

Marketing & Customer

Interaction Forces

Technology &

Digital Convergence


E-Commerce


Technology and Digital Convergence: Technology plays important role in e-commerce

and makes cheap and easy over digital medium.

i) Rapid Technological Change: Digital technology has made it possible to

convert characters, sounds, pictures and motion video into a bit stream that

can be combined, stored, manipulated, and transmitted quickly, efficiently

and in large volumes without loss of quality.

ii) Multimedia Revolution: As a result of e-commerce and the multimedia

revolution are driving the previously disparate industries such as

communications, entertainment, publishing and computing worlds into

ever-closer contact, forcing industries with traditionally different histories

and cultures to compete and cooperate.

iii) Advance Digital Technology: The relentless advances of technology, the

emergence of multimedia standards, and the shift to distributed, computing

and internetworking are providing the raw power for the digital

convergence. Convergence has two dimensions: (1) Convergence of

Content and (2) Convergence of Transmission.

IMPACT OF (EC) E-COMMERCE BUSINESS

E-commerce can transform the way products and services are created sold and

delivered to the customers. It can also change the way in which the company works

with its partners.

Improved Productivity: Using e-commerce, the time required to create, transfer and

process a business transactions between trading partners is significantly reduced. The

improvement in speed and accuracy plus the access to document and information will

result in increase in productivity.

Cost Savings: The cost savings system from efficient communication, quicker

turnaround and closer access to market.

Streamlined Business Process: Use of internet and with automation of business process

can make business more efficient.

Impact of E-commerce

on Business

Streamlined Business Process

Improved Productivity

Opportunities for NewBusiness

Cost Savings

Better Customer Service

Local Proximity

Transparency and Openness


E-Commerce


Better Customer Service: Customer can enjoy the convenience of shopping at any hour

and anywhere in the world.

Opportunities for New Business: Business over the internet have global customer reach.

There are endless possibilities for business to exploit and expand their customer base.

Local Proximity: Local proximity may no longer be a significant factor in retaining

customer. Local market will be replaced by global markets. Indeed it may bring to

reality the goal of making the whole world as one family.

Transparency and Openness: Many businesses have started recognizing key customers,

employees and suppliers more like a partner in the business. E-commerce will lead to

better customer service, more personalized products, reduced costs, supply chain

efficiency and faster time to market.

MANAGERIAL ISSUES OF E-COMMERCE

There exist managerial issues in e-commerce along with its progress and popularity.

1 Managing Resistance to Change

2 Integration of E-commerce into the Business Environment

3 Lack of Qualified Personnel and Outsourcing

4 Alliances

5 Implementation Plan

6 Choosing the Company‟s Strategy toward E-Commerce

7 Privacy

8 Justifying E-commerce by Conducting a Cost-Benefit

Analysis is Very Difficult

9 Order Fulfillment

10 Managing the Impacts

Managing Resistance to Change: Electronic commerce can result in a

fundamental change in how business is done and resistance to change from

employees, vendors, and customers may develop.

Integration of E-commerce into the Business Environment: Integration issues

involve planning, competition for corporate resources with other projects and

interfacing EC with databases, existing IT applications and infrastructure.

Lack of Qualified Personnel and Outsourcing: Very few people have expertise in

e-commerce. There are many implementation issues that require expertise to

integrate e-market with the information systems of buyers and sellers. For this

reason, it may be worthwhile to outsource some e-commerce activities.

Alliances: It is a good idea to join an alliance or consortium of companies to

explore e-commerce and it can be created at any time. Some EC (e.g.

Amazon.com) have thousands of alliances in their e-market.


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Implementation Plan: Because of the complexity and multifaceted nature of EC,

it makes sense to prepare an implementation plan. Such a plan should include

goals, budgets, timetables and contingency plans.

Choosing the Company’s Strategy toward Ecommerce: Generally speaking there

are three major options: (a) Lead, (b) Watch and Wait and (c) Experiment.

Privacy: In electronic payment systems, it may be necessary to protect the

identity of buyers. Other privacy issues may involve tracking of internet user

activities by intelligent agents and cookies, and in-house monitoring of

employees‟ web activities.

Justifying E-commerce by Conducting a Cost-Benefit Analysis is Very Difficult: Many intangible benefits and lack of experience may produce grossly

inaccurate estimates of costs and benefits. Nevertheless, a feasibility study

must be done and estimates of costs and benefits must be made.

Order Fulfillment: Taking orders in EC may be easier than fulfilling them.

Managing the Impacts: The impacts of e-commerce on organizational structure,

people, marketing procedures, and profitability may be dramatic. Therefore,

establishing a committee or organizational unit to develop strategy and to

manage e-commerce is necessary.

BENEFITS AND LIMITATIONS OF EC

Advantages to Customers

1) Reduced Prices: Intermediaries can be eliminated by the company directly

selling the consumers instead of distributing through a retail store.

2) Global Marketplace: Consumers can shop anywhere in the world. Currently

according to the World Trade Organization (WTO) there are no custom duties

put on products bought and traded globally electronically.

3) 24-Hour Access: Online businesses never sleep as opposed to brick and mortar

businesses. One can log on to the internet at any point of time, be it day or

night and purchase or sell anything one desires at a single click of the mouse.

4) More Choices: Before making any purchase, customer can study about the

brand and features and also conduct quick comparison of any item.

5) Quicker Delivery: Allows quick delivery of products and services especially

with digitized products.

6) Information: Consumers can receive relevant and detailed information in

seconds, rather than in days or week.

Advantages to Business

1) Increased Potential Market Share: The E-market enables businesses to have

access to international markets thereby increasing their market share.

Companies can also achieve greater economies of scale.

2) Low-cost Advertising: Advertising on the internet costs less than advertising on

print or television depending on the intricacies and extent of the advertisement.

3) Low Barrier to Entries: Anyone can start up a company the internet. Start-up

costs are a lot lower for companies since there is less need for money for

capital.


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4) Strategic Benefit: The strategic benefit of making a business „e-commerce

enabled‟ is that it helps reduce the delivery time, labor cost and the cost

incurred n the following areas:

i) Documentation preparation

ii) Error Detection and correction

iii) Reconciliation

iv) Mail preparation

v) Telephone calling

vi) Data entry

vii) Overtime

viii) Supervision expenses

Advantages to Society

Enables people in third world countries and rural areas to enjoy products and

services which otherwise are not available to them.

Facilitates delivery of public services at a reduced cost, increases effectiveness,

and improves quality.

Enables more individuals to work at home, and to do less travelling for

shopping, resulting in less traffic on the roads and lower air pollution.

Allows some merchandise to be sold at lower prices since organization may not

need a physical place and full inventory.

Limitations of E-Commerce

a) Privacy and Security: The privacy of personal details and security of financial

transactions are a concern to many users and potential users of e-commerce.

b) Delivery: Delivery of tangible goods causes delay, sometimes inconvenience

and it adds additional cost.

c) Inspecting Goods: The web can provide a good picture, an eloquent description

which you cannot actually see, feel or try on the goods you are buying.

d) Social Interaction: Shopping trip on the internet will not be the same

experience as a shopping expedition with family or friends.

e) Return of Goods: Having to return faulty goods takes time and is an

embarrassment.

Technical Disadvantages of Electronic Commerce

Lack of system security, reliability, standards and some communication

protocols.

Insufficient telecommunication bandwidth.

Software development tools are still evolving and changing rapidly.

Vendors may need special web servers and other infrastructures.

Some software might not fit with some hardware and operating systems.

Non-Technical Disadvantages of Electronic Commerce

a) Cost and Justification

b) Security and Privacy

c) Lack of Trust and User Resistance


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d) Customer Relations Problems

e) Corporate Vulnerability

f) Legal Issues of Software and Copyright

g) Credit Card Fraud and Stolen Identities

h) Business Fraud

E-Commerce Applications

Electronics Auctions: The internet added a new dimension by creating an online

mechanism for implementing the auction process. Traditional auctions had

limited participation of people who turned up at the place of auction. Electronic

auctions potentially encourage greater participation as internet users can

connect to web site hosting an auction and bid for an item.

Electronic Banking: Several financial management software packages such as

Quicken, Microsoft Money and Peachtree are in existence to bank

electronically. Using Quicken, users record and categorize all financial

transactions on a PC. The user can later use the software to balance the

checkbook, summarize credit card purchases, track stocks and other

investments. Customers can view account details, transfer funds, pay bills,

order check, and review account history.

Electronic Searching: The emergence of the internet and electronic commerce

technologies made ease the task by putting information to the people connected

to internet. It exploited, many a times phone companies assist by permitting

people to ask for information by description as well.

Education and Learning: Internet has lately been used as a delivery vehicle for

training and learning as well. The web technology provides a uniform delivery

mechanism for textual, multimedia, and animated contents. IT professionals are

more comfortable working with the new technology and have access to high

speed internet connection.

Marketing: Traditional marketing practices have relied upon one-way

communication due to the nature of the media. Traditional marketing faces

major challenges by high cost in producing brochures and printing them. Also

time consuming is also a major challenge.

RETAILING IN E-COMMERCE

Electronic retailing/E-tailing as the name suggests, is shopping on the internet without

the consumer having to visit a physical store. With the increased use of the internet by

the average Indian, the scope for the electronic shopping is growing.

E-retailing is used for selling retail goods on the internet. This term was used in

internet in 1995 and is almost an inevitable edition to e-mails, e-business and e-

commerce.

E-retailing offers the consumers huge amounts of information in the form of websites

with useful links to similar sites that allows consumers to compare products by

looking at individual items. The convenience of online shopping is unmatched indeed.


E-Commerce


Shopping out of the home or office reduces the stresses of waiting in lines and dealing

with irritating sales people.

There has been a rapid expansion of e-commerce (the sale of goods or services over

the internet or other online system) since 1998 due primarily to the growth in

availability and falling costs of technology. This has occurred both in the B2B

(Business-to-Business) and B2C (Business-to-Consumers) sectors.

Features of E-Retailing

There are some salient features of retailing in EC as follows:

a) Assortment can be unlimited – depending on the ability of the retailer to

physically deliver the products.

b) Items are not on hold – someone has to deliver the product and it involves

delays and costs.

c) On the net, a consumer cannot touch or feel the product.

d) Better information makes the consumer a better shopper.

e) Internet makes it easier to do comparison shopping and to compare prices from

different sellers.

f) The consumer has to plan ahead when he buys on the internet.

Types of E-Retailing

Online retailing is classified into three main categories.

1) Click: The business that operate only through the online channel fall into this

category. For example, Dell, e-Bay, etc.

2) Click and Brick: The business that use both the online as well as the offline

channel fall into this category. For example, Future group, Shoppers Stop, etc.

3) Brick and Mortar: This is the conventional mode of retailing. The businesses

that do not use latest retailing channels and still rely upon the conventional

mode belong to this category.

Traditional Retail Outlets

Types of Outlets Definition and Examples

Shopping Malls and

Department Stores

These include under one-roof general merchandise, drug

stores, and groceries.

Supercenters These consist of three or more anchor stores with a total

leasable area between 2,00,000 and 7,00,000 square feet.

Factory Outlet Mall

These primarily stock name-brand manufacturers‟ items.

Like power centers, factory outlet malls are also gaining

market share at the expense of shopping malls.

Warehouse Clubs

There are retailers offering common consumer products at

near wholesale prices when purchased in bulk quantities.

For example, Wal-Mart‟s Sam‟s Club, Price/Costco, and

BJ‟s Wholesale.

Mail Order and

Catalog Shopping

These are retailers offering all kinds of products that can

be ordered over the phone. The goods are often delivered

within 48 hours.


E-Commerce


E-Retailing Channels

Three dominant forms of electronic retailing channels are:

Television Retailing: Television-based home shopping involves the purchase of

products advertised on television programs and in commercial breaks by telephoning

orders through to the advertised number. This may be undertaken at the press of a

button with the advent of digital satellite and cable television. Digital television

considerably improves a retailer's chances of launching interactive television shopping

and can provide hundreds of channels of output and interactive services. Sometime in

the near future that information will be available at your fingertips and even give you

the option to purchase it there and then using an interactive TV

CD-ROM-based Shopping: On-line retailing is still in its early stages, and some

retailers have been disappointed with the results. But CD-ROM-based shopping is an

attractive alternative to traditional on-line shopping, and it is part of the effort to find

the right formula. A CD-ROM is a pre-pressed optical compact disc which contains

data. The name is an acronym which stands for “Compact Disc Read-Only Memory”.

Computers can read CD-ROMs, but cannot write to CD-ROMs which are not writable

or erasable.

Online-based Shopping: Online shopping is a form of electronic commerce which

allows consumers to directly buy goods or services from a seller over the internet

using a web browser. Alternative names are: e-web-store, e-shop, e-store, Internet

shop, web-shop, web-store, online store, online storefront and virtual store. Mobile

commerce (or m-commerce) describes purchasing from an online retailer's mobile

optimized online site or app. The largest of these online retailing corporations are

Alibaba, Amazon.com and eBay.

BUSINESS MODELS OF E-MARKETING

There are basically seven distribution perspectives that can be used to formulate the

business models of electronic marketing. A combination of these perspectives can be

used to construct various business models depending upon the initial position of each

individual company.

1) Directing Marketing versus Indirect Marketing: Where the product is bought

directly by the consumer from the manufacturer we refer to it as to “Direct

E-Retailing Channels

Television Retailing CD-ROM-based Shopping

Online-based Shopping


E-Commerce


Marketing”. All other distribution channels use an intermediary which is

referred to as “Indirect Marketing”.

2) Full Cyber-Marketing versus Partial Cyber-Marketing: Some new businesses that

evolved in the internet era have made full use of the new e-commerce facilities

and established businesses running on the internet are full cyber-marketing.

Other businesses, many of whom were already in existence before the e-

commerce era have implemented are partial cyber-marketing.

3) Electronic Distributor versus Electronic Broker: Any electronic store or business

directly fulfilling customer orders is an electronic distributor. Electronic

brokers can bring the supplier and the customer together, but do not handle the

products themselves.

4) Electronic Store versus Electronic Shopping Mall: Electronic shopping mall is

usually the term used for a number of electronic stores collected in one website.

An electronic store can be seen as an electronic distributor.

5) Generalized E-Malls or Stores versus Specialized E-Malls or Stores: Generalized

e-malls or stores offer a wide variety of products, while specialized malls or

stores collectivism in certain items, e.g. flowers.

6) Proactive versus Reactive Strategic Posture toward Cyber-Marketing: Proactive

businesses are involved in internet marketing as the main distribution channel

while reactive businesses are still using the conventional distribution channels

but have added the internet as an additional channel.

7) Global versus Regional Marketing: It does not mean necessarily mean that the

business will now also be able to market its products all over the world. This

will depend on the strengths and weakness of each business. A conventional

retail store is usually regionally bound to certain geographical area that it can

serve effectively. For example, Pick-n-Pay – it does not offer its online

shopping to all people over the globe.

Benefits of E-Marketing

o Global Reach

o Easy Marketing

o Economics

o Updates

o More Attractive Compared to Physical Brochures

Limitations of E-Marketing

All Products do not Lend Equally well for Internet Marketing

Costs Involved are consequential

Question mark about Profitability

Threat to Information Security

Customers Trust on Virtual Marketers


E-Commerce


AIDING COMPARISON SHOPPING

Online comparison shopping is a consumer pricing activity employed to locate the

best product deals. Online shoppers rely on search engines for online comparison

shopping. As with online shopping, online comparison shopping provides the

convenience of shopping from home, versus brick-and-mortar retailers.

Rather than going from store to store, potential buyers use online comparison

shopping to price single or multiple items. Online comparison shopping is easier than

driving to stores or calling individual retailers, is more efficient and also yields

savings, such as gas money.

Examples of websites that offer online comparison shopping are Nextag, Comparison-

Engines, Best Web Buys and CNET Shopper. Besides featuring the best pricing,

online comparison shopping websites often provide clearance or seasonal sale items

and deals of the day.

When conducting online price comparisons, consumers should keep the following in

mind:

Thoroughly read all terms and conditions; return policies and details about

hidden or additional charges.

Only provide personal financial information to encrypted websites, which are

marked with HTTPS in the browser's URL field, versus HTTP, which indicates

that a site is not encrypted.

Use common sense when conducting online comparisons. For example, pay

attention to certain types of product offers that sound too good to be true.

Always remain apprised of current frauds and scams to prevent undesirable

shopping incidents.

Before purchasing any product, confirm the authenticity of the item and retailer

via thorough online research, including reviews and feedback.

THE IMPACT OF EC ON TRADITIONAL RETAILING SYSTEM

The development of e-commerce

1995 – 2000 : Innovation

2001 – 2005 : Consolidation

2006 – Present : Reinvention

Main Problems with Traditional Shopping

Expenses

Inconvenient

Difficulty in Price Comparison

Plausible Solution

“Online Shopping”


E-Commerce


Traditional Shopping Versus Online Shopping

Factor Shopping Style

Traditional Shopping Online Shopping

Price High Price Low Price

Convenience Inconvenient More Convenient

Price Comparison Difficult to Compare Prices Easy to Compare Prices

Critical Evaluation of Future Shopping Styles (1)

1) US online retail sales are forecast 10% compound annual growth rate by 2014

(Forrester Research)

2) Online sales now account for almost 10% of total retail sales in the UK (BBC

website, 2010)

3) The most rapid growth is among teenagers and old adults. (Laudon and Traver,

2010)

Critical Evaluation of Future Shopping Styles (2)

Disadvantages of E-Shopping Advantages of Traditional Shopping

Hidden cost of online shipping Social interaction

Security and privacy: Cybercrime Face-to-fact communication

Inconvenient: Children or elderly

people

Shopping experience: Touch and feel

products

According to Lokken (2003), “Traditional retail shopping will not be reduced or

replaced by online shopping in the future”.

REFERENCE BOOKS: EFRAIM TURBUN, JAE LEE, DAVID KING, H.MICHAEL CHUNG

“ELECTRONIC COMMERCE – A MANAGERIAL

PERSPECTIVE”,

Pearson Education Asis – 2000
