E-Commerce involves conducting commercial transactions electronically on the Internet, through social media and other electronic networks. These transactions are similar due to similarity of features of E-Commerce.
Since its beginnings in early 1990s, E-Commerce has been constantly developing exponentially currently becoming a very important business activity. Most importantly, it allows businesses to operate globally 24 hours a day, 7 days a week, 365 days a year. The Internet never sleeps!
Those companies that provide their services only online are called E-Tailers. E-Tailers are businesses that operate predominantly online and primarily trade online such as Alibaba, Amazon.com, eBay, Facebook, etc. They are different from retailers that operate physical stores and outlets.
What are the features of E-Commerce?
Common features of E-Commerce for a business organization considering selling products online include:
- Global reach. E-Commerce allows businesses to sell their products to customers being based in any location despite geographical barriers. Fast transactions happen within seconds from any location in the world. E-Commerce has no limits nor borders.
- Accessibility 24 hours a day / 7 days a week. E-Commerce allows customers to purchase products online from the comfort of their home or office. Thus, E-commerce provides extra convenience for customers. As online shopping is accessible at all times unlike traditional retailers which have strict opening hours.
- Access to information. Businesses are able to provide detailed, timely and accurate product information thanks to the Internet. This will help customers to make more informed buying decisions now and in the future. Also, every purchase is being recorded providing firms with huge amount of information about their customers’ behavior. Finally, business managers, especially Finance Managers, can access information about billing and payment.
- Consumer reviews. E-Commerce allows current customers to post online product reviews after each purchase. This can influence the buying decisions of other potential customers whether to make a purchase (after reading a positive comment) or not (after reading a negative comment). Customers can also share information about products using ‘Share’ buttons via social networks such as Facebook, LinkedIn, Twitter, Pinterest, Instagram, etc.
- Impersonal interaction. E-Commerce does not provide sellers and buyers with personal face-to-face interactions as E-Tailers rely on technologies to reach their customers. Unlike physical retailers offering customers personal customer service, the nature of the interaction with consumers under a system of E-Commerce is impersonal.
- Barrier to entry. E-Commerce is highly dependable on technology that is often not cheap. On another hand, technology has helped E-Tailers enter into new markets as start-up costs for online retailers are much lower than the costs for opening retail shop in a physical location.
- Trust issues. Businesses have legal and social obligations to ensure that all business transactions are not only legal but also ethical. Because of lack of personal interactions between buyers and sellers, trust issues play a very important role in trading products online. For example, some customers may not trust making online payments to E-Tailers using the credit cards or debit cards being afraid of the loss of personal information.
Example 1: Online security in the UK The news is seeing increasing reports relating to security breaches of electronic data. A survey for the Information Commissioner's Office (ICO) shows that about 20% of people had been victims of identity theft crime (BBC, 29th January 2007). Criminals are using more sophisticated measures of accessing secure data, using fake fronts on cash points (BBC, 14th Feb 2007), and phishing – E-Mails that appear to be from your bank and ask you to confirm your details, usually via a link to a website (The Times, 18th November 2006). How can businesses operate to try and ensure high levels of security are maintained? The British Standards Institute (BSI) works with industry to create standards for a company's management of information security. The British Standards Institute (BSI) developed the BS 7799 standard in 1995 to establish best practice for capturing, storing and handling data. Some businesses are using technology to try and improve security. Online finance service PayPal, which is used by many people on eBay to pay for items, is introducing a security token to tackle fraud. The token generates random numbers that are used in the login process (BBC, 13th February 2007). What will happen when businesses fail to meet security standards? Nationwide Building Society experienced a serious breach in security near the end of 2006 when an employee’s laptop, containing sensitive customer account details was stolen. UK-based Nationwide Building Society is the world’s largest building society with 16 million members and 18,000 employees. The theft was all the more serious because the employee failed to report the security breach straight away. The Nationwide wrote to customers to apologies about the security problems, but has since been fined almost a £1 million by the City watchdog (BBC, 14th February 2007). How can data security been considered a part of service quality? What processes might Nationwide have put in place to reduce the risk of security breaches?
E-Commerce and business strategy
Previous thinking was about efficient production which means using inputs in a smarter way to produce more output at lower costs.
Investment in the Internet infrastructure of the business may improve workforce productivity.
New era is about to be about efficient consumption which means now only using fewer inputs to produce not only more outputs, but more of the outputs consumers really desire.
In short, the Internet and mobile communication methods are indeed transforming the ways in which businesses market their products, trade and manage relationships with customers.
