E-Commerce (Sneha B R)

UNIT 1:

Introduction to E-Commerce :

• Definition: E-Commerce refers to the performing online commercial activities,

transactions over internet.
• It includes activities like buying and selling product, money transactions etc. over
internet.
• Internet is used for E-commerce.
• Websites and applications (apps) are required for e-commerce.
• Examples of E-Commerce are online retailers like amazon, flipkart, Myntra, etc.

Activities of E-Commerce are:

• Buying and selling product online

• Online ticketing
• Online Payment
• Paying different taxes
• Online accounting software
• Online customer support

Note:
Definition of E-Business:
E-Business refers to performing all type of business activities through internet.

Advantages of E-commerce/Significance of E-commerce:

• E-commerce enables fast and secure shopping.

• It is making digitalized world.
• E-commerce also enables to choose different goods and services according to
your choice.
• It is a simple way of selling and buying products and services.
• E-commerce replaced the paper work as all transactions are through internet
today.
• It provides better management system, as it has a centralized database.
• E-commerce via internet covers a large number of customers worldwide.
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According to these features, E-commerce benefits are classified into 3 types.

Ø Benefits to organization.
Ø Benefits to consumers.
Ø Benefits to society.

BENEFITS TO ORGANIZATION:
1. E-commerce expands the market place to national and international level.
2. E-commerce decreases the cost of creating, processing, distributing, storing, and
retrieving paper-based information.
3. Ability for creation highly specialized business.
4. E-commerce reduces the time between the outlay of capital and the receipt of products
and services.
5. E-commerce initiates business processes reengineering projects.

BENEFITS TO CONSUMERS:
1. E-commerce enables customer to shop or do \other transactions 24hrs a day, all year
round from almost any location.
2. E-commerce provides customers with more choices they can select from many
vendors and from many products.
3. In some cases, especially with digitized products E-commerce allows quick delivery.
4. Customer can retrieve relevant and detailed information in seconds, rather than days
or weeks.
5. E-Commerce facilitates competition, which results in substantial discounts
6. E-Commerce allows consumers to interact with other customers and exchange ideas
as well as compare experiences.

BENEFITS TO SOCIETY:
1. E-Commerce 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.
2. E-Commerce enables people in rural areas to enjoy products and services that are not
available to them. This includes opportunities to learn professions and earn college
degrees.
3. E-Commerce facilitates delivery of public services such as health care education and
distribution of Government social services at a reduced cost and or improved quality.
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Limitations of E-Commerce
The limitations of E-Commerce can be grouped into
1) Technical
2) Non-Technical Categories.

Technical limitations of E-Commerce:

1. There is a lack of system security, reliability, standards and some communication

protocols.
2. There is insufficient telecommunication band width.
3. Software development tools are changing rapidly.
4. It is difficulty to integrate the internet and software with some existing application
data basis.
5. Some electronic commerce software might not be fit without some network are may
be incompatible with some operating systems or other components.

Non-technical limitations of E-Commerce:

1. Cost and justification: - The cost of developing E-Commerce in house is very costly
and made mistakes due to lack of experience may result in delays.

2. Security and privacy: - these issues are especially important in the B2C area,
especially security issues which are privacy measures are constantly improved.EC
Industry has a very long and difficult task of convincing customers that online
transactions are secure and they will keep.

3. Lack of trust and user resistance: - Customers do not trust on unknown faceless
sellers , paperless transactions and electronic money.

E-commerce applications:

Globally E-Commerce is applied in the following fields.

• E Marketing
• E-Advertising
• E-Banking
• Mobile Commerce
• E-Learning
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• E-Shopping
• Online training
• Search Engines
• Entertainment

Disadvantages of E-commerce:
• E-commerce has no universal standard for quality and reliability.
• E-commerce works through internet, it is possible that navigation on internet itself may
be slow.
• Strong security is required in e-commerce as all transactions are through internet.
• There is high risk of buying unsatisfactory products through e-commerce.
• It uses public key infrastructure which is not safe.
• Customers also trap in banking fraud which is quite frequent.
• Hackers also try to get access of data or to destroy data in e-commerce.
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Technological building blocks underlying e-commerce:

1) Internet:
• Definition: The Internet is a global network of millions of computers that can
communicate with each other.
• Through the Internet, people can share information and communicate from anywhere
with an Internet connection.
• The Internet acts as a pipeline to transport electronic messages from one network to
another network.
• At the heart of most networks is a server, a fast computer with large amounts of
memory and storage space.
• The server controls the communication of information between the devices attached to
a network, such as computers, printers, or other servers
Assignment question:
1. How is internet important in an e-commerce?

2) Web:
• Definition: World Wide Web (WWW) A network of inter connected pages of
information stored on publicly accessible servers.
• In simple terms, The World Wide Web is a way of exchanging information between
computers on the Internet, tying them together into a vast collection of interactive
multimedia resources
Assignment question:
2. How Does The World Wide Web Facilitate Ecommerce?

3) Mobile platform:
• Definition: A mobile platform describes some sort of framework, either in hardware or
software, which allows mobile applications to run.
• The mobile platform provides the ability to access the Internet from a variety of
mobile devices such as smartphones, tablets, and other ultra-lightweight laptop
computers via wireless networks or cell phone service
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Assignment question:
3) How mobile apps are reshaping the e-commerce industry? Or Benefits of
building a mobile app for eCommerce business

Major trends in e-commerce:

1. Augmented reality (AR) enhances the reality of online shopping.

➢ AR has been a complete game changer for ecommerce. With this type of technology,
shoppers can truly see the item they're shopping for, which helps them make a buying
decision.
2. There will be a growing volume of voice search.

➢ As more homes adopt smart speakers, more consumers will utilize voice search to
shop online, order food and organize their lives. The rise of voice search creates an
opportunity for ecommerce businesses.
3. AI helps shops learn about shoppers.

➢ Artificial Intelligence (AI) and machine learning make it possible for the customer to
have automated, personalized shopping experiences. AI is continuously collecting data
on how a customer shops, when they buy purchases and what they're looking for in a
product or a service. It's a piece of technology that really can't be replicated in-store.
4. Personalization insights to create individualized experiences.

➢ The data collected from AI is what makes it possible for a buyer to get personalized
product recommendations and detailed customer service.

5. Mobile shopping.
➢ Mobile shopping allows customers to make purchases from anywhere.
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6. More ways to pay.

➢ E-commerce is offering a wide variety of ways to pay bills so that a customer can
easily make payment along with that it also increases business.

7. Chatbots improve shopping experiences.

➢ Chatbots interact with online shoppers much like an in-store sales associate would do.
➢ By using chatbots shopper can buy a product in just a few clicks.

8. Get feedback from your customers.

➢ Getting feedback from current customers can give insight into trends to the shoppers,
and shoppers can create more specific plans for the future.

9. Get feedback from your customers.

➢ Getting feedback from current customers can give insight into trends to the shoppers,
and shoppers can create more specific plans for the future.

10. Customers respond to video.

➢ Creating videos for your website is a great way to instantly grab and engage a
customer and inform them about your product or service.
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Unique Features of e-commerce Technology/Functions of e-commerce:

1. Ubiquity
• E-commerce is available everywhere, at all time.
• It sets free market from computer such as desktop, laptop etc., The result is
called a market space [A marketspace is an information and
communication-based digital exchange environment.].

2. Global reach
• permits commercial transactions to cross cultural and national boundaries
far more conveniently and cost-effectively than in traditional commerce.

3. Universal Standards:
• Universal Standards are standards shared by all the nations around world.
• These are technical standards of Internet for conducting e-commerce.
• It gives all the ability to connect at the same "level" and it provides network
externalities that will benefit everyone.
• Universal technical standards reduce entry costs and minimal search costs.

4. Richness
• Advertising and branding are an important part of commerce. E-commerce
can deliver video, audio, animation, etc. However, it’s about as rich as
television technology.
• enables an online merchant to deliver marketing messages in a way not
possible with traditional commerce technologies.
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5. Interactivity
• E-commerce technologies permits two-way communication between customer and
sellers which makes it interactive. It proves as significant feature of e-commerce
technology over the commercial traditional technologies.

6. Information Density
• Information density means total amount and quality of information available over
Internet to all market buyers and sellers.
• Internet vastly increases information density.
• Information density offers better quality information to consumer and merchants.
• E-commerce technologies increase accuracy and timeliness of information.
• For example, flipkart.com store has variety of products with prices.

7. Personalization:
• E-commerce technology offers personalization.
• Personalization means designing marketing messages according to particular
individuals by customizing it as per customer personal details like name, interests, and
past purchases record.
• Products or services can be modified or altered according to the user's choice or past
buying record.

8. Social technology
• provides a many-to-many model of mass communications.
• Millions of users are able to generate content consumed by millions of other users. The
result is the formation of social networks on a wide scale and the aggregation of large
audiences on social network platforms
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Modes of electronic commerce/Types of electronic commerce:

1)Business-to-consumer:
The term business-to-consumer (B2C) refers to the process of selling products and services
directly between a business and consumers who are the end-users of its products or services.
Most companies that sell directly to consumers can be referred to as B2C companies.
Example: Amazon , Flipkart.
2)Business-to-business:
B2B (business-to-business), a type of e-commerce, is the exchange of products, services or
information between businesses. A B2B transaction is conducted between two companies,
such as wholesalers and online retailers.
Example: Samsung is one of Apple's largest suppliers in the production of the iPhone
3) Customer-to-customer:
C2C, customer to customer, or consumer to consumer, is a business model that facilitates
the transaction of products or services between customers. Consumer to consumer, or C2C, is
the business model that facilitates commerce between private individuals.
4) M-commerce :
mobile commerce is the buying and selling of goods and services through wireless handheld
devices such as smartphones and tablets.
Example in-app purchasing, mobile banking, virtual marketplace apps like the Amazon
mobile app or a digital wallet such as Apple Pay, Android Pay and Samsung Pay
5) Social e-commerce:
It is e-commerce that is enabled by social networks and online social relationships.
It include customer ratings and reviews, user recommendations and referrals etc.,
Example: Shoppable ads. Shoppable influencer content. Shoppable videos and media leading
to e-commerce sites
6) Local e-commerce:
Local e-commerce, as its name suggests, is a form of e-commerce that is focused on
engaging the consumer based on his or her current geographic location.
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ELECTRONIC DATA INTERCHANGE:

• Definition:
EDI is a standard format to exchange business information between two
organizations electronically instead of using paper documents.
• Electronic Data Exchange is the direct exchange of data and important business
documents through the Internet and in a very professional manner.
• Two different companies sitting at the extreme corners of the world can very easily
interchange information or documents with the help of EDI.
• The most common documents exchanged via EDI are:
❖ Invoices
❖ Purchase Orders
❖ Financial Information letters
❖ Transaction Bills
❖ Shipping requests and notifications
❖ Acknowledgment and feedback
❖ Transcripts
❖ Claims
❖ Business Correspondence letters
• EDI Users:
➢ Central and state government agencies
➢ Industry
➢ Banking
➢ Retailing
➢ Manufacturing
➢ Insurance
➢ Healthcare
➢ Automotive
➢ Electronics
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➢ Grocery
➢ Transportation
Advantages of EDI:
• The paper usage reduced: The expense of storing, printing, recycling, reduces up to
the maximum amount due to the EDI.
• Improved quality of Data: The data entry errors are reduced due to EDI.
• Speed Increases: The best advantage is the increase in the speed of the data
interchange. With everything going online, the speed of the information transfer
increases exponentially.
• Security: By following the Protocols and the standard rules, the security of all the
important documents is always secure and safe.
• Information accuracy: Since the information exchanged is based on standards agreed
by the sender and receiver both, the correct information is always transferred
regardless of where they belong to.
• Less Cost: With very less errors, fast response time, every thing becoming automated,
and no use of paper, the cost automatically reduces.
Disadvantages / Limitations of EDI:
• The initial setup of the EDI is very Time-consuming.
• EDI standards keep on changing after some amount of time.
• A very systematic and proper back up is required as the entire data relies on EDI.
• The setup and maintenance of the EDI is very Expensive.

Electronic Data Interchange (EDI) Characteristics

There are two characteristics that set EDI apart from other ways of exchanging information.
• EDI only involves business-to-business transactions; individual consumers do not
directly use EDI to purchase goods or services.
• EDI involves transactions between computers or databases, not individuals. Therefore,
individuals sending e-mail messages or sharing files over a network do not constitute
EDI.
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E-commerce with Internet/WWW :

❑ Internet:
• Definition : The Internet is a global network of millions of computers that can
communicate with each other.
• Through the Internet, people can share information and communicate from anywhere
with an Internet connection.
• The Internet acts as a pipeline to transport electronic messages from one network to
another network.
• At the heart of most networks is a server, a fast computer with large amounts of
memory and storage space.
• The server controls the communication of information between the devices attached to
a network, such as computers, printers, or other servers
❑ WWW :
• Definition : World Wide Web(WWW) A network of inter connected pages of
information stored on publicly accessible servers.
• In simple terms, The World Wide Web is a way of exchanging information between
computers on the Internet, tying them together into a vast collection of interactive
multimedia resources
Why is Internet is important in E-commerce?
• The Internet allows people from all over the world to get connected.
• It is a global collection of networks, connected to share information using a common
set of protocols.
• The Internet is an enabler for e-commerce as it allows businesses to showcase and sell
their products and services online and gives potential customers, prospects, and
business partners access to information about these businesses and their products and
services that would lead to purchase.
• Before the Internet was utilized for commercial purposes, companies used private
networks-such as the EDI or Electronic Data Interchange-to transact business with
each other. That was the early form of e-commerce. However, installing and
maintaining private networks was very expensive. With the Internet, e-commerce
spread rapidly because of the lower costs involved and because the Internet is based on
open standards.
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Why WWW is important in E-commerce?

• Ecommerce has revised the meaning of the World Wide Web. It allows online
transactions of money for the trade of products and services directly online using
internet technology.
• Customers experiencing the personalized shopping on the web, and they expect the
same in the local market.
• WWW effects shopping so much that shoppers often find customers coming with
reference images of products from the web, to find similar products in the local
market.
• With the increasing acceptance of online shopping, especially during the lockdowns of
COVID-19, more customers moved to online shopping . Considering the changing
trends, presently, more businesses are forced to move online for better conversions.
Payments and Security:
Payments:
• E-commerce sites use electronic payment, where electronic payment refers to
paperless monetary transactions.
• It reduces the paperwork, transaction costs, and labor cost.
• user friendly and less time-consuming than manual processing,
• it helps business organization to expand its market reach/expansion.
• Listed below are some of the modes of electronic payments −
i. Credit Card
ii. Debit Card
iii. Smart Card
iv. E-Money
v. Electronic Fund Transfer (EFT)
Security :
• Security is an essential part of any transaction that takes place over the internet.
• Customers will lose his/her faith in e-business if its security is compromised.
Electronic cash and Electronic payment Schemes:
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Electronic cash/online electronic cash:

• eCash/digital cash can be defined as electronic cash. It's a way of paying for goods and
services that isn’t in physical cash.
• There are two forms of eCash, an online form and an offline form.
• With online eCash, information regarding currency is downloaded to a hard drive. It
stays there until it is transferred to another person or business online.
• The idea behind offline eCash has its roots in credit cards and debit cards. Offline
eCash would function similarly to a debit card. Funds from a hard drive would be
linked to a digitally encoded card. This card would replace paper money (like a debit
card). However, the main difference here is that physical money no longer exists to
begin with. With a debit card, physical money is still present, in a way.

How Does eCash Work?

1. In the eCash model, users would download their electronic money from their bank.
2. It would then be stored on their hard drive.
3. Doing online purchase, they have to use their “digital wallet” to transfer funds to the
merchant.
4. The merchant, need the same “digital wallet” software in order to receive these funds.
5. The software that manages the “digital wallets” would be run by the eCash bank.
6. eCash bank will verified the transaction.
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7. This is similar to the payment concepts that are behind debit and credit card
transactions.
8. After the transferred amount has been verified, the merchant would be able to pay
transaction fees to have it uploaded to a traditional bank.
Advantages of eCash:
• Lower Cost: the cost of using digital cash is extremely low.
• Long Distance Transactions: long distance transaction is easy.
Disadvantages of eCash:
• Security is less and traceability difficult.
• Without computer and internet access we are not able to enjoy the usage of eCash.

Electronic payment Schemes/Internet monetary payment:

❑ An e-payment or Electronic Payment system allows customers to pay for the services
via electronic methods.
❑ They are also known as online payment systems.
❑ Normally e-payment is done via debit, credit cards, direct bank deposits, and e-checks,
other alternative e-payment methods like e-wallets, bitcoin, cryptocurrencies, bank
transfers are also gaining popularity.

Types of e-payment system:

Internet banking –the payment is done by digitally transferring the funds over the
internet from one bank account to another.
Some popular modes of net banking are, NEFT, RTGS, IMPS.
Card payments – Card payments are done via cards e.g. credit cards, debit cards,
smart cards, stored valued cards, etc. In this mode, an electronic payment accepting
device initiates the online payment transfer via card
Credit/ Debit card – An e payment method where the card is required for making
payments through an electronic device.
Smart card – Also known as a chip card, a smart card, a card with a microprocessor
chip is needed to transfer payments.
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Stored value card – These types of cards have some amount of money stored
beforehand and are needed to make funds transfer. These are prepaid cards like gift
cards, etc.
Direct debit – Direct debit transfers funds from a customer’s account with the help of
a third party
E-cash – It is a form where the money is stored in the customer’s device which is used
for making transfers.
E-check – This is a digital version of a paper check used to transfer funds within
accounts.
E-wallet – Very popular among customers, an E-wallet is a form of prepaid account,
where customer’s account information like credit/ debit card information is stored
allowing quick, seamless, and smooth flow of the transaction.
Mobile wallet – An evolved form of e-wallet, mobile wallet is extensively used by
lots of customers.
• It is a virtual wallet, in the form of an app that sits on a mobile device. Mobile wallet
stores card information on a mobile device.
• The user-friendly nature of mobile wallets makes them easier to use. It offers a
seamless payment experience making customers less dependent on cash.
QR payments –QR code stands for ‘Quick Response’ code, a code that contains a
pixel pattern of barcodes or squares arranged in a square grid.Each part of the code
contains information. This information can be merchant’s details, transaction details,
etc. To make payments, one has to scan the QR code with a mobile device.

How e-payment system works?

Entities involved in an online payment system
The merchant
The customer / the cardholder
The issuing bank
The acquirer
Payment Processor
Payment Gateway
Working of e-payments can be explained in the following three steps:
1. Payment initiation
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2. Payment authentication
3. Payment settlement

Payment initiation –
• Customer finalizes the product/service and chooses the payment method to initiate the
transaction.
• Depending on the payment method, the customer enters the required information like
card number, CVV, personal details, expiration date, PIN, etc.
• The chosen payment method either redirects the customer to an external payment page
or a bank’s payment page to continue the payment process.
Payment authentication –
• The information submitted by the customer along with other details like payment
information, customer’s account information is authenticated by the operator.
• The operator can be a payment gateway or any other solution involved. If everything
gets authenticated positively, the operator reports a successful transaction.
• if there is any problem with any of the authentication checks, the transaction
fails.After the successful transaction, the customer gets a payment confirmation.
Payment settlement –
• After the successful authentication process, payment from the customer’s bank gets
transferred into the merchant’s account by the online payment service provider.
Benefits of e-payment systems:
• E-payments are making shopping and banking more convenient. They are helping
customers to reach more clients locally and globally.
• E-payments are faster making the transactions efficient.
• With e-payments, customers can pay online at any time from anywhere, making them
easily accessible and convenient for customers.
• Online payment solutions come with security and risk and anti-fraud tools making
them reliable and secure not only for customers but also for merchants.
• E-payments are proved to be highly effective for international transactions, as they
are cheaper, easier, faster, and generally are real-time.
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Disadvantages of e-payment systems :

• Security is less.
• Without computer and internet access we are not able to enjoy the usage of e-payment
systems.
Security in E-commerce:
• Security is an essential part of any transaction that takes place over the internet.
• Customers will lose his/her faith in e-commerce if its security is compromised.
Following are the essential requirements for safe e-payments/transactions −
• Confidentiality − Information should not be accessible to an unauthorized person. It
should not be intercepted during the transmission.
• Integrity − Information should not be altered during its transmission over the network.
• Availability − Information should be available wherever and whenever required
within a time limit specified.
• Authenticity − There should be a mechanism to authenticate a user before giving
him/her an access to the required information.
• Non-Repudiability − It is the protection against the denial of order or denial of
payment. Once a sender sends a message, the sender should not be able to deny
sending the message. Similarly, the recipient of message should not be able to deny the
receipt.
• Encryption − Information should be encrypted and decrypted only by an authorized
user.
• Auditability − Data should be recorded in such a way that it can be audited for
integrity requirements.
Measures to ensure Security:
Major security measures are following −
• Encryption − It is a very effective and practical way to safeguard the data being
transmitted over the network. Sender of the information encrypts the data using a
secret code and only the specified receiver can decrypt the data using the same or a
different secret code.
• Digital Signature − Digital signature ensures the authenticity of the information. A
digital signature is an e-signature authenticated through encryption and password.
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• Security Certificates − Security certificate is a unique digital id used to verify the

identity of an individual website or user.
Security Protocols in Internet
We are using some of the protocols over the internet to ensure secured online transactions.
Secure Socket Layer (SSL)
It is the most commonly used protocol and is widely used across the industry. It meets
following security requirements −
• Authentication
• Encryption
• Integrity
• Non-reputability
"https://" is to be used for HTTP urls with SSL, where as "http:/" is to be used for HTTP urls
without SSL.
Secure Hypertext Transfer Protocol (SHTTP)
• SHTTP extends the HTTP internet protocol with public key encryption, authentication,
and digital signature over the internet.
• Secure HTTP supports multiple security mechanism, providing security to the end-
users.
• SHTTP works by negotiating encryption scheme types used between the client and the
server.
Secure Electronic Transaction
It is a secure protocol developed by MasterCard and Visa in collaboration. Theoretically, it is
the best security protocol.
It has the following components −
• Card Holder's Digital Wallet Software − Digital Wallet allows the card holder to
make secure purchases online via point and click interface.
• Merchant Software − This software helps merchants to communicate with potential
customers and financial institutions in a secure manner.
• Payment Gateway Server Software − Payment gateway provides automatic and
standard payment process. It supports the process for merchant's certificate request.
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• Certificate Authority Software − This software is used by financial institutions to

issue digital certificates to card holders and merchants, and to enable them to register
their account agreements for secure electronic commerce.

Payment and purchase order process:

• Steps in a PO process:
• Step 1: Creating the Purchase Requisition (PR):- A requisitioner creates a
document to obtain permission for the purchase to go ahead. It could be amended or
added to before approval is received, or even cancelled.
• Step 2: Issuing the PO :- Once the PR has been approved, the PO can be created after
prices, delivery, terms and conditions have been agreed. For large purchases,
organizations usually issue a Request for Proposal (RFP) to their preferred suppliers.
Before the order can be issued, some level of financial authority is required to sign off
the purchase. The PO is usually then issued electronically to the chosen supplier.
• Step 3: The supplier approves the PO:- If any details are incorrect or unacceptable,
the supplier may request amendments. The supplier then approves the amended PO if
necessary, usually via email or using an e-procurement platform.
• Step 4: Purchaser records and files the PO:- awaiting delivery. After the product
has been delivered or the service has been performed, the organization will review the
purchase to see if it meets acceptable standards. Goods are signed in on a Goods
Received Note. Services are usually similarly signed off when the services have been
supplied satisfactorily.
• Step 5 :Approval and payment:- On receipt of the invoice, it is matched to the
PO. Provided all is correct, the invoice is paid as per the agreed payment terms.
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