MANAGING BUSINESS ON THE WEB
Commerce is the exchange of goods and services for money. Traditional commerce involves a customer personally going to a department store to buy product. However, in today’s scenario, it is no longer essential for the customer to personally visit and buy products. Instead, the customer can browse through the Web site and place an order for the products online. T his form of commerce, which is conducted through an electronic media, is called electronic commerce or e-commerce.
E-Commerce can be defined as the process of conducting business transactions by using computers connected through a network, E-commerce is an integration of the following services:
- Communication Services: Support the electronic transfer of goods or services from the buyer to the seller.
- Data Management Services: Help to exchange and store data in a uniform format to enable easy exchange of information between the buyer and the seller on the internet.
- Security Mechanisms: Authenticate the source of information and guarantee the integrity and privacy of information. All e-commerce transactions involve the exchange of confidential information, such as your financial and credit card information.
e-commerce involves not only buying and selling of goods or services electronically but also involves marketing, retailing, customer service, banking, billing, corporate sector purchasing, secure distribution of data, and other value added services on the Internet.
Advantages of E-Commerce
The advantages of e-commerce are:
- Global reach: An e-commerce Web site is accessible to a global audience. It requires an internet connection to connect to an e-commerce Web site. As a result, a vast audience browsing the internet has access to the products and services displayed on the Internet Web site.
- Instant availability: An e-commerce Web site is accessible 24 hours a day and 365 days a year.
- Systematic communication: An e-commerce Web site displays the information of the products it is selling in a systematic and organized way. For example, if you are looking for information about a book on an inter Web site, you can get information from various perspectives, such as the contents of the book, the reviews of the book, and the author’s views on the book, it also contains information such as the price and availability of the book and the information about the author.
- Reduced paperwork: With e-commerce, information us transferred electronically, the paperwork involved is reduced significantly.
- Easier entry into new markets: An e-commerce Web site enables new business houses to enter new geographical areas for selling.
- Improved market analysis: With e-economic, a large base of the internet users can be survey for an analysis of the marketability of a new product or a service idea.
- Lower transaction costs: With e-commerce, the cost of taking orders and customer service are lower because the order of a product can be placed by filling an online form or sending an e-mail.
- Flexibility: An e-commerce Web site gives you the flexibility to compare prices offered by other shops, and search large catalogs and then place an order.
- Larger catalogs: An e-commerce Web site has large catalogs, which a customer can browse through.
Electronic Commerce vs. Traditional Commerce
The following table lists the difference between traditional commerce and e-commerce:
||Involves person-to-person contact and sometimes orders are accepted through the telephone or by post.
||Relies on the Internet.
||Involves TV, radio, newspapers, banners, shows and other conventional methods.
||Involves the Internet as well as the conventional media.
||A large number of people are involved in the process of buying, selling, and other business processes.
||Processes are automated and, for this reason, very few people are involved.
||Person-to-person contact between the consumer ad the supplier helps to verify the standard identification items such as a driver’s license or a passport.
||Does not involve physical proximity among the business entities and, for this reason, the identity must be verified digitally.
||Ordering the products is done either in person or through telephone, faxes and postal services
||Ordering is done through online forms or e-mail.
||Payments methods are in physical forms of money such as cash, checks, credits cards (the person has to be present in-person to sign the authorization slip), debit cards, and drafts.
||Payment methods are electronic cash, credit card and other forms of electronic payment tools that can be used online. The offline forms of money, such as drafts and cash, are also used in e-commerce.
||Occurs instantly unless it involves the shipment of products
||Occurs only after verification of the consumer and payment information
|Location to sell
||Requires a physical location to carry out the business
||Selling place may exist virtually because the business may not stock any products and directly ask the supplier to fulfill the order.
||May not be prompt because of working hours constraint and suppliers not being able to reach or locate the consumer
||Prompt because instead the work being dependent on people, the computer records the information from consumers and prompt solutions are given.
Differences between Traditional Commerce and E-commerce
For any type of data exchange to take place, it is necessary to have a set of rules defined. This helps to streamline the functioning of the system. The protocols that help to define the standards according to which effective electronic commerce can be implemented are Electronic Data Interchange (EDI), Secure Electronic Transactions (SET), Open Buying on the Internet (OBI), and Internet Open Trading Protocol (IOTP).
Electronic Data Interchange (EDI)
EDI is the inter-organizational exchange of documents in standardized electronic message formats. EDI involves several documents, such as quotations, purchase orders, purchase order response, purchase order change, receiving advice, and invoices.
These electronic message formats allow computers in one company to communicate with the computers in another company without producing paper documents.
To use EDI, a company must have computerized accounting records and trading partners who agree to exchange EDI transactions. EDI has become popular because it enables firms to exchange business information rapidly, at lower rates, and more accurately than the paper-based systems.
A typical EDI configuration involves translation software that converts a document into a standard format that is transferred on the network. In addition, it contains a location. When the recipient receives the document, the standard documents are again converted back into the readable format.
Secure Electronic Transactions (SET)
SET is a payment standard on the internet. This standard is formulated by the combination of Secure Electronic Payment Protocol (SEPP) and Secure Transaction Technology (STT). It provides the authentication of credit card holders, merchants, and acquirers. Merchants are categorized as the sellers of a particular product, and consumers are the acquirers. SET ensures the confidentiality and integrity of payment data. It is also used to define the algorithms and protocols necessary for these security services.
Open Buying on the Internet (OBI)
OBI is sponsored by American Express and enabled by Supply Works Inc. OBI ensures that the purchaser identified and the spending capabilities of the purchaser are authorized before a purchase is completed. After purchasing, the invoicing and payment are handled electronically without user intervention. OBI uses EDI for purchase order transfer and invoicing.
Internet Open Trading Protocol (IOTP)
IOTP defines the trading protocol options that control how a trade occurs. These options tell the consumer how the transaction will occur and the available payment options. The transaction information can be handled dynamically. For example, a vendor may give a discount if a consumer uses a credit card that is preferred by the store or a certain item is purchased in bulk.
For developing an e-commerce Web site, the e-commerce needs to be identified. Depending on the parties involved in the transaction, e-commerce can be classified into four models such as;
Business-to-Business (B2B) model
Business-to-Consumer (B2C) model
Consumer-to-Consumer (C2C) model
Consumer-to-Business (C2B) model
Business-to-Business (B2B) model
The B2B model involves electronic transactions for ordering, purchasing, as well as other administrative tasks between two business houses. It includes trading goods, such as business subscriptions, professional services, manufacturing, and wholesale dealings. Sometimes in the B2B model, business may exist between two virtual companies, neither of which may have any physical existence. In such cases, business is conducted only through the Internet.
Business-to-Consumer (B2C) model
The B2C model involves electronic transactions among business organizations and consumers. It applies to any business organization that sells its products or services to consumers on the Internet. These Web sites display product information in an online catalogue and store in a database. The B2C model also includes services such as online banking, travel services, and health information.
Consumer-to-Consumer (C2C) model
The C2C model involves transactions between consumers. Here, a consumer sells directly to another consumer. EBay.com and uBid.com are examples of online auction Web sites that provide the feature for a consumer to advertise and sell products online to another consumer. However, it is essential that both the seller and the buyer must register with the auction site. The seller needs to pay a fixed fee to the online auction house to sell products, and the buyer can bid without paying any fee.
Consumer-to-Business (C2B) model
The C2B model involves a transaction that is conducted between a consumer and a business organization. Although it is similar to the B2C model, with a difference that the consumer is the seller and the business organization is the buyer. In this type of a transaction, the consumers decide the price of a particular product instead of the supplier. This category includes individuals who sell products services to organizations. For example, www.monster.com is a Web site on which a consumer can post a resume for the services the consumer can offer. Any business organization that is interested in deploying the services of the consumer can contact the consumer and then employ the consumer, if suitable.
Issues in E-Commerce
The Internet has not only emerged as a boon but also brought with it many issues related to the exchange of data on the Web. Free access of information on the internet has brought about the rise of cyber criminals who try to access and capture data form insecure systems. Therefore, there is a definite need of special laws or cyber laws, which will be applicable to these criminals. Cyber laws are especially important for e-commerce because of the exchange of confidential data, such as personal information and payment details, on the Internet. Some of the issues to be taken into consideration when planning, developing, and implementing an e-commerce Web site are:
Intellectual property- Intellectual property rights are an important asset possessed by publishers in their respective markets. Protecting intellectual property rights include both literary or creative products and business construction. The term also refers to the limited aspects of the intellectual property output that are protected by specific legal rights.
Security-Mechanisms to pay online merchants for goods and services add a degree of risk because financial information must be sent on the public network. The confidential transmission of data, authentication of the parties involved, and the integrity of order data and payment instructions are all components of the new electronic business model.
Taxation-In the E-commerce business, it becomes difficult to determine the sales tax applicable on the merchandise. This is because sales taxes vary with countries or states. For example, a user in Canada accesses the Web site of a Web store hosted in Australia and purchase some goods. In this situation, it would be difficult to decide the sales tax applicable on the goods.
Customs- The lack of boundaries with the use of the internet may pose several problems to e-commerce service providers. For examples, an e-commerce service provide may charge the customers a higher customers duty when there is a lower customers duty involve or vice-versa.
Regulations-Sometimes, government institutions and bodies may impose certain laws and regulations that may adversely affect e-commerce business. For example, the US Federal laws do not allow e-commerce service providers to use more than 128 bits of encryption.
Fraud-There have been several instances where e-commerce service providers have been cheated by a malafide person. The e-commerce service provider is always at a risk of such frauds. According to the US Electronic Funds Transfer Act, an e-commerce service provider can charge a credit card holder only a maximum of $50 if the credit card of the holder is found to be involved in a fraudulent transaction. Another form of fraud is when the credit card of a bonafide credit card holder has been fraudulently used by some unauthorized person.
Trust-The e-commerce service provider needs to build up confidence among the target audience. This is required because people need to divulge their credit card information to purchase goods online. In addition, the e-commerce service provider needs to provide an unambiguous and genuine money-back guarantee if the products fail to perform, as promised.
Ubiquitous availability-The e-commerce service provider needs to ensure that the Web site is up and running always. Disruption of services may result not only loss in business but also in customer dissatisfaction.
Copyright-The copyright law protests original works, such as literary works and software from being duplicated without permission. For example, an e-commerce Web site cannot sell software without the permission of the owner.
Trademark- Trademarks are special symbols or words that help to uniquely identify an organization. This distinguishes it from its competitors. For example, an e-commerce Web site cannot use the logos, drawings and pictures that some other company uses to distinguish itself uniquely.
Domain name rights-The name given to a Web site of an organization is unique. The domain name rights help to protect the names of Web sites of the organizations from duplication. For example, www.amazon.com is the Web site of Amazon. No other organization can use this domain name.
Patent-A patent protects new or improved products or processes. Patents can be acquired on both services and products. If an organization acquires a patent on any product or service, no other organization can produce the same product or service for the time of the patent law is implemented. For example, an e-commerce Web site should not sell any product that has been patented by another organization.
Licensing-Licensing is seeking the permission to sue the copyright protected material form the owner. In this case, the owner decides the stipulations with regard to the use of copyrighted material. The agreement usually determines how the work will be used, whether it will be based on royalties or a down payment. For example, an e-commerce Web site can sell products such as software and software games after taking a license from the copyright owner.
Trade secret rights-Trade secret rights help to protect confidential business issues that exist among two or more business houses. For example, in an e-commerce Web site two or more organizations share crucial business information. Trade secret rights prevent misuse of such crucial business information.
With the increase in electronic publication through electronic media, there has been a rise in th4e issues of copyright, trademark, and patent infringement. Rapid computer transmission, electronic reproduction, and text and image manipulation are destined to change the way the ownership of information is treated under law.
The various organizations concerned with copyrights, licensing, and trademarks are:
Information Infrastructure Task Force (IITF): Formed in 1993 by the US Federal government, the IITF is responsible to formulate policies to Protect intellectual Property Rights (IPR). IITF consists of representatives from other Federal agencies, such as the Federal Bureau of Investigation (FBI). IITF works hand in hand with the private sector to develop and implement policies related to IPR protection.
main name are paid on timeg the Web sitesand nt. To do this, you can include Web services in your Web site.
s explicity responsiWorld Intellectual Property Organization (WIPO): Is an agency within the United Nations. The aim of WIPO is to promote the protection of IPR worldwide. To achieve this objective, WIPO works closely with governments and international organizations. At present more than 170 countries are members of WIPO.
U.S. Patent and Trademark Office (UPTO): Is a noncommercial U.S. federal agency that manages filling, approval, and protection of patents, trademarks, and copyrights.
Canadian Intellectual Property Office (CIPO): Is an agency that handles the administration and processing of intellectual property including new inventions, trademarks, and copyrights in Canada.
E-Commerce solutions are the methods used for setting up a Web business. The two ways to set up a Web business are:
An in-house method
An instant storefront method
In this method, a Web business must buy, and implement an electronic commerce software package, a service platform, Internet connections, and secure payment processing network connections. They should also have a round-the-clock maintenance system. In the in-house method, all the components of an e-commerce business are handled internally with the help of the above-mentioned components. This way, you are able to effectively manage the e-commerce business. Normally, only large businesses that have the staff to support e-commerce can afford this solution.
Instant Storefront Method
An alternative to an in-house solution is to use a software package form a vendor that can provide the required features at a lower rate. These packages require very little technical knowledge. The better ones allow customization and also take care of the technology so that the business can focus on selling goods and services.
The two types of instant storefront packages are online and offline
- Online Storefront Solution: With an online solution, the entire e-commerce package is on the computers of the service provider. The business accesses it with a Web browser. The advantage of an online business is that it can be managed from anywhere on the Internet. The storefront frees itself from constant upgrades and other logistic-related issues associated with maintaining an internet infrastructure. The disadvantage is that the control of the software package is with the service provider, and maintenance can be time-consuming depending on the speed of the internet connection.
- Offline Storefront Solution: An offline solution involves installing software on the infrastructure of the business. The owner builds and maintains the business inside the application. When the changes are ready to be published, the advantages of an offline solution include control, which means the business own the software and speed, which means any changes to the store can be made quickly. The disadvantages include the lack of software portability and installation and upgrade problems.
Managing E-Commerce Business
E-commerce business management is required to stay ahead in the competition, increase profits, and retain customers. For managing e-commerce business, proper management of the Web site is required. It is an ongoing process because with time, the audience needs change. To address the changing needs of the audience, active management of a Web site is essential.
The following factors need to be considered for managing e-commerce business:
- Understanding t audience profile: You must understand the audience profile for online interaction. To interact effectively with users, you must enable them to place their questions or comments with the managers of the Web site. Their feedback will help understand their needs and manage the Web site effectively.
- Understanding the requirement for the Web site: You must be clear about the requirements for maintaining the Web site. For this, you need to understand the purpose of the Web site and, the audience of the Web site.
- Develop a proper management plan: You need to analyze and implement changes to the Web site with the changing needs of your Web site users. It is recommended to update your Web site at periodic intervals.
- Manage product information: you must deliver the right information to customers. It will lead to customer satisfaction and revisits to your Web site. Another efficient way to run the business is to integrate the online channel with catalog and retail store. This will allow customers to perform online shopping.
- Be prepared to accept change: You must be ready to add, delete, or change the content of the Web site if the content does not meet the expectations of end users.
- Ensure reliable information at every interaction: You must present the most reliable, accurate, and complete information at every customer interaction. For example, the price of a product is changed by the manufacturer. This change should be replicated instantly on the Web site to avoid any confusion between the buyer and seller.
- Develop a friendly user interface: You must provide a friendly user interface for non-technical users because they would not feel comfortable with a complex interface design.
- Specify success criteria: You must set clear and measurable goals, such as the number of visitors visiting the Web site, to check whether the Web site is gaining success. Analysis of data can provide you with input to improve the accessibility and increase the popularity of your Web site.
- Allocation responsibility for ongoing site management: You must ensure that some people or an organization is explicitly responsible for the Web site management.
- Include marketing plan: You must include a marketing plan as a part of the management plan. This plan should focus on getting more visitors.
- Share data: You must provide links to any resources on the Internet. You can enhance users satisfaction by providing hyperlinks to other Web sites hosting related information. This is easier that creating entirely new content. To do this, you can include Web services in your Web site.
- Handle technical requirements: You must handle the technical aspects apart from the design aspects of the Web site. Ensure that fees for hosting the Web sites and domain name are paid on time. Otherwise, your Web site will be off the Internet, which in turn, can result in losing your customers.
- Allow for platform-independent data transfer: You must be able to handle both structured and unstructured format of content. The XML language is the solution, which allows users to recombine information for all types of sales. Marketing. And support purpose.
- Managing inventory effectively: You must mange the flow and maintain the product information among suppliers. It helps in retaining customers.
- Ensure your Web site requires minimal maintenances: You must design the site in such a way that it minimizes the frequency of changing the content of the Web site.