E-Commerce

Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail as well.

E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the Internet, especially the World Wide Web. In practice, this term and a newer term, e-business, are often used interchangably. For online retail selling, the term e-tailing is sometimes used.

E-commerce can be divided into:

·         E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered into a "virtual mall"

·         The gathering and use of demographic data through Web contacts

·         Electronic Data Interchange (EDI), the business-to-business exchange of data

·         E-mail and fax and their use as media for reaching prospects and established customers (for example, with newsletters)

·         Business-to-business buying and selling

·         The security of business transactions

A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web.

Electronic commerce that is conducted between businesses is referred to as business-to-business or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that is conducted between businesses and consumers, on the other hand, is referred to as business-to-consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com. Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer usually via the internet. There is no intermediary service. The sale and purchase transaction is completed electronically and interactively in real-time such as Amazon.com for new books. If an intermediary is present, then the sale and purchase transaction is called electronic commerce such as eBay.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

Early development

Originally, electronic commerce was identified as the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK.

From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing.

In 1990, Tim Berners-Lee invented the Worldwide Web web browser and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www. Commercial enterprise on the Internet was strictly prohibited until 1991. Although the Internet became popular worldwide around 1994 when the first internet online shopping started, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

The Internet has created a new economic ecosystem, the e-commerce marketplace, and it has become the virtual main street of the world. Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. Today, e-commerce has grown into a huge industry with US online retail generating $175B in revenues in 2007, with consumer-driven (B2C) online transactions impacting industries from travel services to consumer electronics, from books and media distribution to sports & fitness. With more than 70% of Americans using the Internet on a daily basis for private and/or business use and the rest of the world also beginning to catch on, e-commerce's global growth curve is not likely to taper off anytime soon. However, the US recession has taken its toll on online sales. Although early 2008 estimates by Forrester Research were very strong with 2008 revenues upwards of $204B (a 17% growth rate), 2008 holiday sales showed the first decrease in the last 7 years. Research by ComScore shows sales declining by 1% for the first 49 days of the holiday season.

In the last decade, many startup e-commerce companies have rapidly stolen market share from traditional retailers and service providers, pressuring these established traditional players to deploy their own commerce websites or to alter company strategy in retaliation. This effect is most pronounced in travel services and consumer electronics. According to comScore, online leisure travel bookings reached about $51B in 2005, or 44% of all online sales, which were around $122B in the same year. Roughly 30% of all travel bookings currently occur online. Consumer electronics, which includes the purchase of digital cameras, mobile phones, and home PC's, accounted for nearly $26B of worldwide e-commerce sales occurring in 2006, according to the NPD Group. As traditional brick and mortar firms continue to lose market share to e-commerce players, they will likely see continued declines in their revenues, operating margins, and profits. It is important to note that most e-commerce players are at a competitive advantage to retailers. They have lower operating expenses and better inventory management due to operating in a virtual commerce environment. For example,Amazon.com (AMZN) has revenue per employee of nearly $850k while its retail counterpart, Best Buy (BBY), generates revenue per employee of only $270k. Clearly, e-commerce vendors will have the most to gain if they successfully disrupt retail customer acquisition, disintermediate distributors/resellers, and under-price retail establishments. As a consequence of e-commerce vendor gains, financial transaction processors and parcel shipping companies are among ancillary vendors who will gain.