E-commerce

E-commerce is a transaction of buying or selling online. Electronic commerce draws on technologies such as mobile commerce, 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 for at least one part of the transaction's life cycle although it may also use other technologies such as e-mail.

E-commerce businesses may employ some or all of the following:

Timeline

A timeline for the development of e-commerce:

Business application

An example of an automated online assistant on a merchandising website.

Some common applications related to electronic commerce are:

Governmental regulation

In the United States, certain electronic commerce activities are regulated by the Federal Trade Commission (FTC). These activities include but not limit to the use of commercial e-mails, online advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive.[26] Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers' personal information.[27] As a result, any corporate privacy policy related to e-commerce activity may be subject to enforcement by the FTC.

The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law in 2008, amends the Controlled Substances Act to address online pharmacies.[28]

Conflict of laws in cyberspace is a major hurdle for harmonization of legal framework for e-commerce around the world. In order to give a uniformity to e-commerce law around the world, many countries adopted the UNCITRAL Model Law on Electronic Commerce (1996).[29]

Internationally there is the International Consumer Protection and Enforcement Network (ICPEN), which was formed in 1991 from an informal network of government customer fair trade organisations. The purpose was stated as being to find ways of co-operating on tackling consumer problems connected with cross-border transactions in both goods and services, and to help ensure exchanges of information among the participants for mutual benefit and understanding. From this came Econsumer.gov, an ICPEN initiative since April 2001. It is a portal to report complaints about online and related transactions with foreign companies.

There is also Asia Pacific Economic Cooperation (APEC) was established in 1989 with the vision of achieving stability, security and prosperity for the region through free and open trade and investment. APEC has an Electronic Commerce Steering Group as well as working on common privacy regulations throughout the APEC region.

In Australia, Trade is covered under Australian Treasury Guidelines for electronic commerce,[30] and the Australian Competition and Consumer Commission[31] regulates and offers advice on how to deal with businesses online,[32] and offers specific advice on what happens if things go wrong.[33]

In the United Kingdom, The Financial Services Authority (FSA)[34] was formerly the regulating authority for most aspects of the EU's Payment Services Directive (PSD), until its replacement in 2013 by the Prudential Regulation Authority and the Financial Conduct Authority.[35] The UK implemented the PSD through the Payment Services Regulations 2009 (PSRs), which came into effect on 1 November 2009. The PSR affects firms providing payment services and their customers. These firms include banks, non-bank credit card issuers and non-bank merchant acquirers, e-money issuers, etc. The PSRs created a new class of regulated firms known as payment institutions (PIs), who are subject to prudential requirements. Article 87 of the PSD requires the European Commission to report on the implementation and impact of the PSD by 1 November 2012.[36]

In India, the Information Technology Act 2000 governs the basic applicability of e-commerce.

In China, the Telecommunications Regulations of the People's Republic of China (promulgated on 25 September 2000), stipulated the Ministry of Industry and Information Technology (MIIT) as the government department regulating all telecommunications related activities, including electronic commerce.[37] On the same day, The Administrative Measures on Internet Information Services released, is the first administrative regulation to address profit-generating activities conducted through the Internet, and lay the foundation for future regulations governing e-commerce in China.[38] On 28 August 2004, the eleventh session of the tenth NPC Standing Committee adopted The Electronic Signature Law, which regulates data message, electronic signature authentication and legal liability issues. It is considered the first law in China's e-commerce legislation. It was a milestone in the course of improving China's electronic commerce legislation, and also marks the entering of China's rapid development stage for electronic commerce legislation.[39]

Forms

Contemporary electronic commerce can be classified into categories. The first category is business based on types of goods sold (involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce). The second category is based on the nature of the participant (B2B, B2C,C2B and C2 C);[40]

On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are pressing issues for electronic commerce.

Aside from traditional e-commerce, the terms m-Commerce (mobile commerce) as well (around 2013) t-Commerce[41] have also been used.

In 2010, the United Kingdom had the highest per capita e-commerce spending in the world.[42] As of 2013, the Czech Republic was the European country where e-commerce delivers the biggest contribution to the enterprises´ total revenue. Almost a quarter (24%) of the country's total turnover is generated via the online channel.[43]

Among emerging economies, China's e-commerce presence continues to expand every year. With 668 million Internet users, China's online shopping sales reached $253 billion in the first half of 2015, accounting for 10% of total Chinese consumer retail sales in that period.[44] The Chinese retailers have been able to help consumers feel more comfortable shopping online.[45] e-commerce transactions between China and other countries increased 32% to 2.3 trillion yuan ($375.8 billion) in 2012 and accounted for 9.6% of China's total international trade.[46] In 2013, Alibaba had an e-commerce market share of 80% in China.[47] In 2014, there were 600 million Internet users in China (twice as many as in the US), making it the world's biggest online market.[48] China is also the largest e-commerce market in the world by value of sales, with an estimated US$899 billion in 2016.[49]

In 2013, Brazil's e-commerce was growing quickly with retail e-commerce sales expected to grow at a double-digit pace through 2014. By 2016, eMarketer expected retail e-commerce sales in Brazil to reach $17.3 billion.[50] India has an Internet user base of about 243.2 million as of January 2014. Despite being third largest user base in world, the penetration of Internet is low compared to markets like the United States, United Kingdom or France but is growing at a much faster rate, adding around 6 million new entrants every month. In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.[51] The India retail market is expected to rise from 2.5% in 2016 to 5% in 2020.[52]

The rate of growth of the number of internet users in the Arab countries has been rapid – 13.1% in 2015. A significant portion of the ecommerce market in the Middle East comprises people in the 30-34 year age group. Egypt has the largest number of internet users in the region, followed by Saudi Arabia and Morocco; these constitute 3/4th of the region’s share. Yet, internet penetration is low: 35% in Egypt and 65% in Saudi Arabia.[53]


E-commerce has become an important tool for small and large businesses worldwide, not only to sell to customers, but also to engage them.[54][55]

In 2012, e-commerce sales topped $1 trillion for the first time in history.[56]

Mobile devices are playing an increasing role in the mix of e-commerce, this is also commonly called mobile commerce, or m-commerce. In 2014, one estimate saw purchases made on mobile devices making up 25% of the market by 2017.[57]

For traditional businesses, one research stated that information technology and cross-border e-commerce is a good opportunity for the rapid development and growth of enterprises. Many companies have invested enormous volume of investment in mobile applications. The DeLone and McLean Model stated that three perspectives contribute to a successful e-business: information system quality, service quality and users' satisfaction.[58] There is no limit of time and space, there are more opportunities to reach out to customers around the world, and to cut down unnecessary intermediate links, thereby reducing the cost price, and can benefit from one on one large customer data analysis, to achieve a high degree of personal customization strategic plan, in order to fully enhance the core competitiveness of the products in company.[59]

Impact on markets and retailers

Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend.[60] Depending on the category, e-commerce may shift the switching costs—procedural, relational, and financial—experienced by customers.[61]

Individual or business involved in e-commerce whether buyers or sellers rely on Internet-based technology in order to accomplish their transactions. e-commerce is recognized for its ability to allow business to communicate and to form transaction anytime and anyplace. Whether an individual is in the US or overseas, business can be conducted through the internet. The power of e-commerce allows geophysical barriers to disappear, making all consumers and businesses on earth potential customers and suppliers. Thus, switching barriers and switching costs may shift.[61] eBay is a good example of e-commerce business individuals and businesses are able to post their items and sell them around the globe.[62]

In e-commerce activities, supply chain and logistics are two most crucial factors need to be considered. Typically, cross-border logistics need about few weeks time round. Based on this low efficiency of the supply chain service, customer satisfaction will be greatly reduced.[63] Some researcher stated that combining e-commerce competence and IT setup could well enhance company's overall business worth.[64] Other researcher stated that e-commerce need to consider the establishment of warehouse centers in foreign countries, to create high efficiency of the logistics system, not only improve customers' satisfaction, but also can improve customers' loyalty..

Impact on supply chain management

For a long time, companies had been troubled by the gap between the benefits which supply chain technology has and the solutions to deliver those benefits. However, the emergence of e-commerce has provided a more practical and effective way of delivering the benefits of the new supply chain technologies.[65]

E-commerce has the capability to integrate all inter-company and intra-company functions, meaning that the three flows (physical flow, financial flow and information flow) of the supply chain could be also affected by e-commerce. The affections on physical flows improved the way of product and inventory movement level for companies. For the information flows, e-commerce optimised the capacity of information processing than companies used to have, and for the financial flows, e-commerce allows companies to have more efficient payment and settlement solutions.[65]

In addition, e-commerce has a more sophisticated level of impact on supply chains: Firstly, the performance gap will be eliminated since companies can identify gaps between different levels of supply chains by electronic means of solutions; Secondly, as a result of e-commerce emergence, new capabilities such implementing ERP systems, like SAP ERP, Xero, or Megaventory, have helped companies to manage operations with customers and suppliers. Yet these new capabilities are still not fully exploited. Thirdly, technology companies would keep investing on new e-commerce software solutions as they are expecting investment return. Fourthly, e-commerce would help to solve many aspects of issues that companies may feel difficult to cope with, such as political barriers or cross-country changes. Finally, e-commerce provides companies a more efficient and effective way to collaborate with each other within the supply chain.[65]

Impact on employment

E-commerce helps create new job opportunities due to information related services, software app and digital products. At same time, it also causes job losses as it replaces traditional shopping and do not need amount of in-store staff. Accompanied with the e-commerce development, it requires broader range of skills in digit, technology and information base. The employees should be capable at dealing with large number of customers’ demands and order process. Therefore, it increases the demand of employees with high skills and specialized expertises as well as increases the wages for this group of people. In contrast, people who with poor technical skills cannot enjoy the wages welfare. On the other hand, because e-commerce requires sufficient stocks that could be delivered to customers in time, the warehouse become an important element. Warehouse needs more staff to manage, supervise and organize, thus the condition of warehouse environment will be concerned by employees.[66]

Impact on customers

With the existence of e-commerce, it brings convenience for customers as they do not have to leave home and only need to browse website online, especially for buying the products which are not sold in nearby shops. It could help customers buy wider range of products and save customers’ time. Then, the online shopping often provides sales promotion or discounts code, thus it is more price effective for customers. Moreover, e-commerce provides products’ detailed information; even the in-store staff cannot offer such detailed explanation. Customers can also review and track the order history online. However, e-commerce is lack of human interaction for customers, especially who prefer face-to-face consumption. When the customer regrets to purchase the product, it involves returning goods and refunding process. This process is inconvenient as customers need to pack and post the goods. If the products are expensive, large or fragile, it refers to safety issues.[67]

Social impact

Along with the e-commerce and its unique charm that has appeared gradually, virtual enterprise, virtual bank, network marketing, online shopping, payment and advertising, such this new vocabulary which is unheard-of and now has become as familiar to people. This reflects that the e-commerce has huge impact on the economy and society from the other side.[68] For instance, B2B is a rapidly growing business in the world that leads to lower cost and then improves the economic efficiency and also bring along the growth of employment.[69]

To understand how the e-commerce has affected the society and economy, this article will mention six issues below:

  1. e-commerce has changed the relative importance of time, but as the pillars of indicator of the country's economic state that the importance of time should not be ignored.
  2. e-commerce offers the consumer or enterprise various information they need, making information into total transparency, and enterprises are no longer is able to use the mode of space or advertisement to raise their competitive edge.[70] Moreover, in theory, perfect competition between the consumer sovereignty and industry will maximize social welfare.[71][72]
  3. In fact, during the economic activity in the past, large enterprises frequently had the advantage of information resources at the expense of consumers. Nowadays, the transparent and real-time information protects the rights of consumers, because the consumers can use the internet to pick out the portfolio to their own benefit. The competitiveness of enterprises will be much more obvious than before; consequently, social welfare would be improved by the development of e-commerce.
  4. The new economy led by e-commerce changes humanistic spirit as well, but above all, employee loyalty.[73] Due to the market with competition, the employee's level of professionalism becomes crucial for enterprise in the niche market. The enterprises must pay attention to how to build up the enterprises inner culture and a set of interactive mechanisms and it is the prime problem for them. Furthermore, though the mode of e-commerce decreases the information cost and transaction cost, its development also makes human beings overly computer literate. Emphasizing a more humanistic attitude to work is another project for enterprise to development. Life is the root of all and technology is merely an assistive tool to support quality of life.
  5. Online merchants gather purchase activity and interests of their customers. This information is being used by the online marketers to promote relevant products and services. This creates an extra convenience for online shoppers.
  6. Online merchandise is searchable, which makes it more accessible to shoppers. Many online retailers offer a review mechanism, which helps shoppers decide on the product to purchase. This is another convenience and a satisfaction improvement factor.

E-commerce is not a new industry, technically speaking, but it is creating a new economic model. Most people agree that e-commerce will positively impact economic society in the future, but in its early stages its impacts are difficult to gauge. Some have noted that e-commerce is a sort of incorporeal revolution.[74] e-commerce has numerous social benefits: one, the cost of running an e-commerce business is very low when compared with running a physical store; two, there is no rent to pay on expensive premises; and three, business processes are simplified and less man-hours are required to run a typical business smoothly. In the area of law, education, culture and also policy, e-commerce will continue to rise in impact. e-commerce will truly take human beings into the information society.

Distribution channels

E-commerce has grown in importance as companies have adopted pure-click and brick-and-click channel systems. We can distinguish pure-click and brick-and-click channel system adopted by companies.

Examples of new systems

According to eMarketer research company, "by 2017, 65.8 per cent of Britons will use smartphones".[76]

New mobile apps such as LINE, WeChat have grown tremendously into ecosystems where hundred of millions of users and businesses can transact with one another. [77]

E-commerce recommendation

The contemporary e-commerce trend recommends companies to shift the traditional business model where focus on “standardized products, homogeneous market and long product life cycle” to the new business model where focus on “varied and customized products”. E-commerce requires the company to have the ability to satisfy multiple needs of different customers and provide them with wider range of products. With more choices of products, the information of products for customers to select and meet their needs become crucial. In order to address the mass customization principle to the company, the use of recommender system is suggested. This system helps recommend the proper products to the customers and helps customers make the decision during the purchasing process. The recommender system could be operated through the top sellers on the website, the demographics of customers or the consumers’ buying behavior. However, there are 3 main ways of recommendations: recommending products to customers directly, providing detailed products’ information and showing other buyers’ opinions or critiques. It is benefit for consumer experience without physical shopping. In general, recommender system is used to contact customers online and assist finding the right products they want effectively and directly.[78]

See also

References

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