E-Commerce

E-commerce is a term that refers to electronically mediated financial transactions between two parties, and these commercial interchanges can be between organizations, individuals, or a combination of both. In 1989, the networks forming the backbone of the Internet became accessible to business and commercial users. The liberalization of the Internet networks [Page 485](originally designed for military, then educational and research use only) to allow commercial transactions led to rapid and exponential growth of the number of Internet users and commercially orientated websites. During this period, the term e-commerce came into popular usage as a result of the commercialization of computer networks forming the Internet and the growing number of firms that rushed to sell online. Business trading rapidly expanded as commercial organizations across the United States, and then Europe, Asia, and the rest of the world entered into financial exchanges via the Internet. The rate of adoption of e-commerce websites has continued to grow to the present day, and in many nations over 90 percent of firms have websites. Not all websites are e-commerce enabled, however, as more consumers and firms move online; more websites include transactional facilities.

Growth in commercial online trading has given rise to a proliferation of new phrases, acronyms, and terms—for instance, e-commerce, business-to-business e-commerce (B2B); business-to-government e-commerce (B2G); business-to-consumer e-commerce (B2C); consumer-to-consumer e-commerce (C2C). The parties involved in the exchange provide details of the context in which the e-commerce transaction takes place and indicate where it takes place in the supply chain; for instance, B2C transactions are between retail suppliers and the end consumer of the product or service.

Buy-side e-commerce is an interaction between buyers and sellers in the supply chain and generally refers to the procurement of supplies and resources needed by an organization such as product constituents, components, materials, plant equipment, and business services. In certain settings, e-commerce transactions can be considered part of the wider process of e-procurement. E-procurement is defined to include specification of goods and services, notification of suppliers, tendering procedures, evaluation of tenders and agreement, and acceptance of contract signatures plus fulfillment processing (Muffato and Payaro 2004).

Sell-side e-commerce refers to commercial interactions, in other words, financial exchanges between sellers and their customers. However, there are various types of websites that not only facilitate e-commerce but also support the development of sell-side e-commerce. According to Dave Chaffey, there are four dominant types of sell-side e-commerce websites:

• Transactional e-commerce site. This takes place in a commercial website setting and allows the purchasing of online products and services like those offered by http://Amazon.com, http://dell.com, and http://buy.com. Firms engaging in this type of e-commerce are able to benefit from the sale of products and services, for instance, insurance products. These types of websites also offer other support services and provide information for consumers who might want to purchase products via physical stores, mail-order catalogues, or other offline methods of purchasing. This type of sell-side e-commerce is typically used by retailers, travel companies, retail banks, and car-insurance providers. In parts of the world where this type of e-commerce is well established, “online shopping is moving rapidly from a minority hobby, to an everyday part of most peoples' lives and a quiet revolution is taking place which is empowering consumers and shifting the balance of power in the supply chain towards the consumers” (Doherty and Ellis-Chadwick, 2010).
• Services-oriented relationship-building website. This type of site provides information that will help build cus tomer relationships and acts as a precursor to the actual purchase. These types of sites do not typically offer goods for sale online, as the primary objective is to develop relationships and engage the interest of potential customers, but rather play an important role in the development of transactions. They provide information through the web and encourage potential customers to sign up for e-newsletters, which can then inform purchase decisions—for instance, Motley Fool, which is, according to its own website, a website that “champions shareholder values and advocates tirelessly for the individual investor.” The main contribution to e-commerce is by encouraging offline sales and generating inquiries or leads from potential customers. These sites can add value for existing customers who can glean additional information about the products and services of interest.
• Brand-building site. These types of sites are used to present an online experience of the brand; they are usually developed to enhance the brand presence of manufacturers (e.g., Nestle, Kraft, DANONE, and PepsiCo) and exclusive fashion and leading fragrance houses (e.g., Prada, Gucci, Ted Baker, Channel). This type of website seeks to present the brand experience rather than sell products. However, some fashion brands are beginning to offer transactional capacity within their website (e.g., http://Gucci.com, [Page 486]http://Versace.com). Nevertheless, the key contribution to e-commerce is to support the brand and to educate website visitors to the meaning of the brand and its values.
• Portal or media site. This type of site provides access to other e-commerce sites and in doing so also provides “wrap-around” services in the form of information, news, updates, offers, and promotions. The term portal refers to a gateway. Portal sites contribute to e-commerce revenue through advertising, commission-based sales, and sale of customer data (lists).

Since the early 1990s, e-commerce has developed significantly in terms of the range of firms and organizations engaging in online transactions, and technology innovations have extended the reach. For instance, wireless devices, such as mobile phones, netbooks, and other peripheral devices, now enable e-commerce transactions to be conducted in remote locations. This development is frequently referred to as mobile commerce or m-commerce, and mobile access appears to attract more individuals and firms because of flexible access to the Internet (Sumita and Yoshii 2010). However, while mobile computing is bringing e-commerce closer to more individuals, the perceived risk of security breaches to data and information continues to act as a barrier to the development of e-commerce, especially in the B2C context (McCole, Ramsey, and Williams 2010).

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