SCDL MBA PROJECT - on e-Commerce

INTRODUCTION

Internet has become an important medium for doing global business based on the state of the art technology. Electronic commerce has two major aspects: economical and technological. New standards and new facilities are constantly emerging and their proper understanding is essential for the success of an operation, and especially for those who are assigned a duty to select, establish, and maintain the necessary infrastructure.

In the emerging global economy, e-Commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged greater customer participation, and enabled mass customization, besides reducing costs.

With developments in the Internet and Web-based technologies, distinctions between traditional markets and the global electronic marketplace-such as business capital size, among others-are gradually being narrowed down. The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills (such as intellectual resources) to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of a global information milieu and new economic environment. With its effect of levelling the playing field, e-Commerce coupled with the appropriate strategy and policy approach enables small and medium scale enterprises to compete with large and capital-rich businesses.

On another plane, developing countries are given increased access to the global marketplace, where they compete with and complement the more developed economies. Most, if not all, developing countries are already participating in e-Commerce, either as sellers or buyers. However, to facilitate e-Commerce growth in these countries, the relatively underdeveloped information infrastructure must be improved. Among the areas for policy interventions are:

·         High Internet access costs, including connection service fees, communication fees, and hosting charges for websites with sufficient bandwidth;

·         Limited availability of credit cards and a nationwide credit card system;

·         Underdeveloped transportation infrastructure resulting in slow and uncertain delivery of goods and services;

·         Network security problems and insufficient security safeguards;

·         Lack of skilled human resources and key technologies (i.e., inadequate professional IT workforce);

·         Content restriction on national security and other public policy grounds, which greatly affect business in the field of information services, such as the media and entertainment sectors;

·         Cross-border issues, such as the recognition of transactions under laws of other ASEAN member-countries, certification services, improvement of delivery methods and customs facilitation; and

·         The relatively low cost of labour, which implies that a shift to a comparatively capital intensive solution (including investments on the improvement of the physical and network infrastructure) is not apparent.

It is recognized that in the Information Age, Internet commerce is a powerful tool in the economic growth of developing countries. While there are indications of ecommerce patronage among large firms in developing countries, there seems to be little and negligible use of the Internet for commerce among small and medium sized firms.

E-Commerce promises better business for SMEs and sustainable economic development for developing countries. However, this is premised on strong political will and good governance, as well as on a responsible and supportive private sector within an effective policy framework. This primer seeks to provide policy guidelines toward this end.

DEFINITIONS AND CONCEPTS

Electronic commerce or e-Commerce refers to a wide range of online business activities for products and services. It also pertains to “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact.”

E-Commerce is usually associated with buying and selling over the Internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Though popular, this definition is not comprehensive enough to capture recent developments in this new and revolutionary business phenomenon.

A more complete definition is: E-Commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals.

E-Commerce is an emerging concept that describes the process of buying and selling or exchanging of products, services, and information via computer networks including the internet.

Definition of E-Commerce from Different Perspective

1. Communications Perspective

EC is the delivery of information, products/services, or payments over the telephone lines, computer networks or any other electronic means.

2. Business Process Perspective

EC is the application of technology toward the automation of business transactions and work flow.

3. Service Perspective

EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.

4. Online Perspective

EC provides the capability of buying and selling products and information on the internet and other online services.

Benefit of e-Commerce

·         Access new markets and extend service offerings to customers

·         Broaden current geographical parameters to operate globally

·         Reduce the cost of marketing and promotion

·         Improve customer service

·         Strengthen relationships with customers and suppliers

·         Streamline business processes and administrative functions

Scope of E-Commerce

·         Marketing, sales and sales promotion

·         Pre-sales, subcontracts, supply

·         Financing and insurance

·         Commercial transactions: ordering, delivery, payment

·         Product service and maintenance

·         Co-operative product development

·         Distributed co-operative working

·         Use of public and private services

·         Business-to-administrations (e.g. customs, etc)

·         Transport and logistics

·         Public procurement

·         Automatic trading of digital goods

·         Accounting

·         Dispute resolution

History of E-Commerce

The history of e commerce is a history of how Information Technology has transformed business processes. Some authors will track back the history of e commerce to the invention of the telephone at the end of last century.

EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce if we consider ecommerce as the networking of business communities and digitalization of business information.

Large organizations have been investing in development of EDI since sixties. It has not gained reasonable acceptance until eighties. EDI has never reached the level of popularity of the web-based ecommerce for several reasons:

·         High cost of EDI prohibited small businesses and medium-sized companies from participating in the electronic commerce;

·         Slow development of standards hindered the growth of EDI;

·         The complexity of developing EDI applications limited its adaptation to a narrow user base.

The Internet and the Web

The Internet was conceived in 1969, when the Advanced Research Projects Agency (a Department of Defence organization) funded research of computer networking. The Internet could end up like EDI without the emergence of the World Wide Web in 1990s. The Web became a popular mainstream medium (perceived as the fourth mainstream medium in addition to print, radio and TV) in a speed which had never been seen before. The Web users and content were almost doubled every a couple of months in 1995 and 1996. The web and telecommunication technology had fuelled the stock bubble in the roaring 90s and eventually pushed NASDAQ over 5,000 in 2000 before it crashed down to 1,200 in 2002. XML and Web Services Besides the availability of technical infrastructures, the popularity of the Web is largely attributed to the low cost of access and simplicity of HTML authoring, which are the obstacles of EDI development. The Internet and the Web have overcome the technical difficulty of EDI, but it has not solved the problem of slow development of

e commerce standards.

XML, as a meta mark-up language, provides a development tool for defining format of data interchange in a wide variety of business communities. Web Services offers a flexible and effective architecture for the implementation. There is no doubt that XML and the Web Services will shape the course of e commerce in years to come

Concepts of Electronic Commerce

Electronic commerce is narrowly defined as buying and selling products/services over the Internet. The concept has been broadened to include all business activities of a sales cycle. The distinction between E-Commerce and E-business has become blurred. Ecommerce and Electronic Commerce has been used interchangeably, Electronic Business, however, has not been a widely accepted terminology.

David Kosiur described the Components of Electronic Commerce in three dimensions (Processes, Institutions and Networks) in his 1997 book Understanding Electronic Commerce. We expand Institutions as E-Commerce Players, Networks as Technologies and add Markets as the fourth dimension of E-Commerce.

E- Commerce in Action

How e-Commerce Works

The consumer first moves through the internet to the merchant’s web site. At the web site, the consumer is briefly given an introduction to the product or services the merchant offers. It is at this point that the consumer makes the decision to visit the web store by clicking on a link or button located on the web page. After choosing to visit the web store, the consumer is typically connected to an online transaction server located somewhere else on the internet which runs software commonly referred to as a shopping cart application.

 The shopping cart application has been setup by the merchant to display all products and services offered, as well as calculate pricing, taxes, shipping charges, etc. From there, the consumer decides that he wants to purchase something, so he enters all pertinent credit card information and a sales order is produced. Depending on the ecommerce implementation, the sales order can now take two totally different paths for confirming to the consumer that the order is officially placed.

Scenario 1

The consumer’s credit card information goes directly through a private gateway to a processing network, where the issuing and acquiring banks complete or deny the transaction. This generally takes place in no more than 5-7 seconds and the consumer is then informed that the order was received, the credit card was authorized, and that the product will ultimately be shipped.

Scenario 2

The consumer’s entire order and credit card information is electronically submitted back to the merchant’s server (usually via email, FTP, or SSL connection) where the order can be reviewed first and then approved for credit card authorization through a processing network. The consumer then receives an email shortly afterwards, confirming the order being received, the credit card being authorized, and status on when the product will exactly be shipped.

In both scenarios, the process is transparent to the consumer and appears virtually the same. However, the first scenario is a more simplistic method of setting up a shopping cart application and does not take into consideration any back office issues that may delay shipment (i.e., items out of stock, back orders, orders submitted after office hours or during holidays, etc.). Most of the e-Commerce Manager relies on the second scenario to handle all of its ecommerce orders. This second scenario keeps the consumer accurately informed throughout the entire ordering process. There are several basic steps you will need to accomplish before becoming e-Commerce Enabled.

·         Getting a Merchant Bank Account

·         Web Hosting

·         Web Design Considerations

·         Registering a Domain Name

·         Obtaining a Digital Certificate

FORCES FUELING E-COMMERCE

There are three major forces fueling e-Commerce.

They include:

1.            Economic forces

2.      Marketing and customer interaction forces

3.      Technology, particularly multimedia convergence

1. Economic Forces

One of the most evident benefits of e-Commerce is economic efficiency resulting from the reduction in communications costs, low-cost technological infrastructure, speedier and more economic electronic transactions with suppliers, lower global information sharing and advertising costs, and cheaper customer service alternatives.

Economic integration is either external or internal. External integration refers to the electronic networking of corporations, suppliers, customers/clients, and independent contractors into one community communicating in a virtual environment (with the Internet as medium).

Internal integration, on the other hand, is the networking of the various departments within a corporation, and of business operations and processes. This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically.

Internal integration is best exemplified by corporate intranets. Among the companies with efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel.

Eg. sesami.net: Linking Asian Markets through B2B Hubs

sesami.net is Asia’s largest B2B e-hub, a virtual exchange integrating and connecting businesses (small, medium or large) to trading partners, e-marketplaces and internal enterprise systems for the purpose of sourcing out supplies, buying and selling goods and services online in real time. The e-hub serves as the centre for management of content and the processing of business transactions with support services such as financial clearance and information services.

It is strategically and dynamically linked to the Global Trading Web (GTW), the world’s largest network of trading communities on the Internet. Because of this very important link, sesami.net reaches an extensive network of regional, vertical and industry-specific interoperable B2B e-markets across the globe.

2. Market Forces

Corporations are encouraged to use e-Commerce in marketing and promotion to capture international markets, both big and small. The Internet is likewise used as a medium for enhanced customer service and support. It is a lot easier for companies to provide their target consumers with more detailed product and service information using the Internet.

3. Technology Forces

The development of ICT is a key factor in the growth of ecommerce. For instance, technological advances in digitizing content, compression and the promotion of open systems technology have paved the way for the convergence of communication services into one single platform. This in turn has made communication more efficient, faster, easier, and more economical as the need to set up separate networks for telephone services, television broadcast, cable television, and Internet access is eliminated. From the standpoint of firms/businesses and consumers, having only one information provider means lower communications costs.

Moreover, the principle of universal access can be made more achievable with convergence. At present the high costs of installing landlines in sparsely populated rural areas is a disincentive to telecommunications companies to install telephones in these areas. Installing landlines in rural areas can become more attractive to the private sector if revenues from these landlines are not limited to local and long distance telephone charges, but also include cable TV and Internet charges.

This development will ensure affordable access to information even by those in rural areas and will spare the government the trouble and cost of installing expensive landlines.

E-COMMERCE AND E-BUSINESS

While some use e-Commerce and e-business interchangeably, they are distinct concepts. In e-Commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals).

In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. A more comprehensive definition of e-business is: “The transformation of an organization’s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy.”

Three primary processes are enhanced in e-business:

1. Production processes, which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others;

2. Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers’ purchase orders and payments, and customer support, among others;

3. Internal management processes, which include employee services, training, internal information-sharing, videoconferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient.

The Internet Economy

The Internet economy is a broader concept than e-Commerce and e-business. It includes e-Commerce and e-business. The Internet economy pertains to all economic activities using electronic networks

as a medium for commerce or those activities involved in both building the networks linked to the Internet and the purchase of application services such as the provision of enabling hardware and software and network equipment for Web-based/online retail and shopping malls (or “e-malls”). It is made up of three major segments:

physical (ICT) infrastructure, business infrastructure, and commerce. The CREC (Center for Research and Electronic Commerce) at the University of Texas has developed a conceptual framework for how the Internet economy works. The framework shows four layers of the Internet economy-the three mentioned above and a fourth called intermediaries.

Internet Economy Conceptual Frame

Based on Center for Research in Electronic Commerce, University of Texas, “Measuring the Internet Economy”, June 6, 2000; available from www.Internetindicators.com.

TYPES OF E-COMMERCE

There are a number of different types of E-Commerce

·         B2B - Business to Business

·         B2C - Business to Consumer

·         C2B - Consumer to Business

·         B2E - Business to Employee

·         C2C - Consumer to Consumer

B2B - Business to Business

E-Commerce has been in use for quit a few years and is more commonly known as EDI (electronic data interchange). In the past EDI was conducted on a direct link of some form between the two businesses where as today the most popular connection is the internet. B2B e-Commerce currently makes up about 94% of all e-Commerce transactions. Typically in the B2B environment, E-Commerce can be used in the following processes:

·                     Procurement;

·                     order fulfilment;

·                     Managing trading-partner relationships.

E-Commerce technologies have allowed even the smallest businesses to improve the processes for interfacing with customers. They are now able to develop services for individual clients rather than provide a standard service. An alternative way of thinking of B2B e-Commerce is to think of it as being used to:

·         Attract, develop, retain, and cultivate relationships with customers;

·         Streamline the supply chain, manufacturing, and procurement processes, and automate corporate processes to deliver the right products and services to customers quickly and cost-effectively;

·         Capture, analyze, and share, information about customers and company operations, in order to make better decisions.

B2C - Business to Consumer

This is where the consumer accesses the system of the supplier. It is still a two way function but is usually done solely through the Internet. B2C can also relate to receiving information such as share prices, insurance quotes, on-line newspapers, or weather forecasts. The supplier may be an existing retail outlet such as a high street store; it has been this type of business that has been successful in using eCommerce to deliver services to customers. These businesses may have been slow in gearing-up for e-Commerce compared to the innovative dot.com start ups, but they usually have a sound commercial structure as well as in-depth experience of running a business - something which many dotcoms lacked, causing many to fail.

C2B - Consumer to Business

Consumer to Business is a growing arena where the consumer requests a specific service from the business.

B2E - Business to Employee

Business to Employee e-Commerce is growing in use. This form of e-Commerce is more commonly known as an ‘Intranet’. An intranet is a web site developed to provide employees of an organisation with information. The intranet is usually access through the organisations network, it can and is often extended to an Entrant which uses the Internet but restricts uses by sign on and password.

C2C - Consumer to Consumer

These sites are usually some form of an auction site. The consumer lists items for sale with a commercial auction site. Other consumers access the site and place bids on the items. The site then provides a connection between the seller and buyer to complete the transaction. The site provider usually charges a transaction cost. In reality this site should be call C2B2C.

B2A is the least developed area of e-Commerce and it relates to the way that public sector organisations, at both central and local level, are providing their services on-line  known as e-Government, it has the potential to increase the domestic and business use of e-Commerce as traditional services are increasingly being delivered over the Internet.

CHALLENGES IN ELECTRONIC COMMERCE

For more than two decades, organizations have conducted business electronically by employing a variety of electronic commerce solutions. In the traditional scenario, an organization enters the electronic market by establishing trading partner agreements with retailers or wholesalers of their choosing. These agreements may include any items that cannot be reconciled electronically, such as terms of transfer, payment mechanisms, or implementation conventions. After establishing the proper business relationships, an organization must choose the components of their electronic commerce system. Although these systems differ substantially in terms of features and complexity, the core components typically include:

·         Workflow Application: A forms interface that aids the user in creating outgoing requests or viewing incoming requests. Information that appears in these forms may also be stored in a local database.

·         Electronic Data Interchange (EDI) Translator: A mapping between the local format and a globally understood format.

·         Communications: A mechanism for transmitting the data; typically asynchronous or bisynchronous

·         Value-Added Network (VAN): a store and forward mechanism for exchanging business messages

Using an electronic commerce system , a retailer may maintain an electronic merchandise inventory and update the inventory database when items are received from suppliers or sold to customers. When the inventory of a particular item is low, the retailer may create a purchase order to replenish his inventory. As the purchase order passes through the system, it will be translated into its EDI equivalent, transmitted to a VAN, and forwarded to the supplier’s mailbox. The supplier will check his mailbox, obtain the EDI purchase order, translate it into his own local form, process the request, and ship the item.

These technologies have primarily been used to support business transactions between organizations that have established relationships (i.e. retailer and the wholesaler). More recently, due largely to the popularity of the Internet and the World Wide Web, vendors are bringing the product directly to the consumer via electronic shopping malls. These electronic

malls provide the consumer with powerful browsing and searching capabilities, somewhat duplicating the traditional shopping experience. In this emerging business-to- consumer model, where consumers and businesses are meeting electronically, business relationships will have to be automatically negotiated.

The Challenge

As the information technology industry moves towards the creation of an open, competitive Electronic Marketplace, it must provide an infrastructure that supports the seamless location, transfer, and integration of business information in a secure and reliable manner. This Marketplace will be used by all application domains to procure commodities and order supplies. As such, electronic commerce applications will require easy-to-use, robust, security services, a full suite of middleware services, and data and protocol conversion services. Using this Electronic Marketplace, a purchasing agent will competitively procure supplies, a manufacturer will obtain product or parts information, and a consumer will procure goods and services.

Security Issues

Ensuring security of payments and privacy of online transactions is key to the widespread acceptance and adoption of e-commerce. While the appropriate policies are in place to facilitate e-commerce, lack of trust is still a barrier to using the Internet to make online transactions.

Security of electronic communications is a major control issue for companies engaged in electronic commerce. It is essential that the commerce related data of buyers and sellers be kept private when they are transmitted electronically. The data being transmitted also must be protected against being purpose fully altered by someone other than the sender.

Much online commerce continues to be handled through private EDI networks usually run over VANs. VANs (Value Added Networks) are relatively secure and reliable. Thus high availability computing requires a security infrastructure for electronic commerce and electronic business. Large public networks, including the internet, are more vulnerable because they are virtually open to anyone and because they are so huge that when abuses do occur, they can have an enormously wide spread impact.

When the internet becomes part of the corporate networks, the organisation’s information systems can be vulnerable to actions from outsiders. There are some typical types of computer crimes that hakers commit on the internet on a regular basis. That is why Internet security measures like encryption and firewalls are so vital to the success of electronic commerce and other business uses of the internet.

Building Blocks

In the heterogeneous, distributed environment that makes up this Electronic Marketplace, information and services will be accessible via methods that are as wide and as varied as the vendors and consumers that populate and use them. No longer will interoperability be achieved by using a single set of standards. Competing technologies will always be available, and quite often there will be no clear winner. Instead, emerging middleware technologies will complement the suite of standards and standards to provide seamless location, transfer, and integration of business information.

One can imagine that over time, the Electronic Marketplace will be populated with a myriad of products and services. To aid the consumer in finding useful and necessary information from amongst the vast sea of resources that will ultimately be available, advances in resource discovery technologies will be critical. Key components that will be necessary to advance resource discovery techniques are distributed naming and directory services. Distributed naming services provide an environment that allows functions to move transparently among computing platforms. Coupling this feature with directory services provides a method for organizations to dynamically register business capabilities as they move on and off the information highway.

As the amount of information that can be exchanged grows, traditional communications protocols will give way to a set of faster and more reliable protocols. Middleware communications will be used to hide the complexity of the underlying communications protocols. Applications will require programmable interfaces to message queuing, database access, remote procedure calls, and object request brokers. It is imperative that the communications infrastructure be able to support these and future services in a flexible and efficient manner.

The seamless location and transfer of information will allow consumers and providers to exchange business information, but will not provide for the integration of that information into their business processes. Current data translation practices allow for a syntactic translation of information, which works well when semantic differences can be settled out of band. In the Electronic Marketplace, where entire business paradigms must be established electronically, it will be necessary to carry both the semantics and syntax of data elements through the data translation process.

Security services will be imperative in the daily operation of the Electronic Marketplace. Applications will require a full suite of end-to-end security services, including authentication, integrity, confidentiality, non-repudiation, and access control. The first three services can be achieved through public-key cryptosystems that employ digital signature, encryption, and key exchange technologies. Non-repudiation can be added through the use of a certification authority. Upon user authentication, traditional access control or role-based access control methods can be employed to define access rights. Perhaps the biggest challenge in creating this Electronic Marketplace will be to overcome current interoperability problems caused by competing security algorithms, message formats, and certificate management systems. Security is a prime example of a situation where competing solutions exist and there is no clear winner in sight. Recent work in the area of cryptographic API’s promises to provide a well-defined, high-level interface to security services, regardless of the complexity of the underlying algorithms. Differences in message formats and certificate management systems must similarly be overcome, either through standards, or through the use of mediators and facilitators.

Solutions

To directly address the issues of building an information infrastructure that will support an Electronic Marketplace, the National Institute of Standards and Technology has established two cooperative, complementary programs.

The CAIT, under the guidance of industry participants, identifies, develops, and demonstrates critical new technologies and applications. The ECIF provides a laboratory environment that supports technology transfer through rapid prototypes, pilots, the integration of key infrastructure components and services, and the demonstration of existing and emerging Electronic Commerce technologies.

Through on-going projects in the areas of database access, facilitators and mediators, resource discovery, secure messaging, and integration technologies, the CAIT and ECIF focus on the following:

·         Where enabling services and technology are not yet commercially available, NIST fosters joint research projects aimed at bringing together the research community and the vendor community. This joint fellowship provides vendors with the tools they need to quickly implement emerging technologies while researchers remain focused in their development of new technologies.

·         Where components are commercially available, NIST creates test beds and pilots aimed at achieving interoperable solutions. These solutions are achieved by demonstrating interoperability among middleware technologies, standards and defect standards.

·         Promotes technical awareness via presentations, publications, demonstrations, and consulting.

E-COMMERCE COMMUNITIES

In a word, it’s community that will drive e-Commerce in the future. We certainly have the technology to build great business-to-consumer and business-to-business ecommerce applications into our business models. And attributes such as viable application design, integration with business processes, and overall performance matter.

But those who invest in community will see a large increase in repeat business, improved support functions, and the opportunity to go after new forms of e-Commerce revenue.

A successful community strategy must embrace the idea of moving the one on-one communication that occurs offline into the virtual world of e-Commerce. Such a strategy currently requires multiple technical approaches. However, community solutions will soon become more integrated and far-reaching.

The tools that form online communities include discussion or forum software, chat functions, instant messaging, two-way mailing lists, online collaboration tools, audio, video, and more. We must choose to invest slowly at first and increase our community commitment over time.

For example, the online version of some inquiry might be fulfilled simply via a pop-up notification window on my return visit, assuming your e-Commerce application was enabled to take a feedback. Or, in a more sophisticated version, you might make a customer service representative available via video and audio. The same type of solutions can be enabled for business-to-business transactions.

Online business is much more exacting, and those participating usually have a darn good idea of what they want. Better to let me contact you and supply my long-distance requirements. The feedback should be supplied without a long or scripted marketing pitch, too. Community is also a wise strategic investment in other ways. Suppose one set up a moderated discussion group or a two way mailing list to get people talking about their products. Consumers will often have good ideas about product improvements or good or bad experiences with the product. By implementing these types of open communication, a company may gather ideas about new product offerings, improvement of existing products, or methods of bolstering support, all of which will likely yield repeat business.

Online conversation with business partners will also give net positive results. A private discussion area or secured online meetings can go a long way toward building stronger relationships between companies. This will also serve to potentially drive new business opportunities for both parties.

Building community has to be at the heart of any successful e-Commerce strategy. Certainly we cannot totally mimic offline human interaction in an online setting. However, e-Commerce settings today are very inhuman in nature; we need to factor in the human part of the equation if e-Commerce is to be successful.

CONSUMER ORIENTED E-COMMERCE

E-retailing essentially consists of the sale of goods and services. Sometimes we refer to this as the sale of tangible and intangible goods. We can divide tangible goods into two categories: physical goods and digital goods. Examples of physical goods would be a book, a television set, a video recorder, a washing machine, etc. Examples of digital goods are software and music, which may be downloaded from the internet. The sale of intangible goods is sometimes called e-servicing. Examples of services that may be sold are information such as the most recent stock prices, the most recent foreign exchange rate or education. Entertainment such as games that would be played on the internet is also examples of e-services. So are the sales of services such as telecommunication services or banking services. The sales of tangible and intangible goods are all referred to as customer oriented e-Commerce or e-retailing, if they are sold directly to the consumer who is the end user. Here we discuss the sale of tangible goods.

Let’s see the difference between Traditional Retailing and E-Retailing

Traditional Retailing

Before we begin a discussion of e-retailing, it would be useful to look at some aspects of traditional retailing. This helps to identify some essential characteristics of retailing.

Traditional retailing essentially involves selling to a final customer through a physical outlet or through direct physical communication. This normally involves a fairly extensive chain starting from a manufacturer to a wholesaler and then to the retailer who through a physical outlet has direct contact with the final customer.

Examples of physical outlets that retailers currently use are:

·         Malls

·         Generalized stores (e.g. department store)

·         Specialized stores

·         Franchise stores

It is useful to reflect that even in traditional retailing we have moved away from just using a static physical outlet within which a customer can have direct contact with the retailer. Thus, more recent forms of traditional retailing include

·         direct mailing

·         telemarketing

·         door-to-door sales

·         vending machines

Direct mailing to a customer normally involves sending a brochure or catalogue to a customer. The customer browses through this catalogue and then carries out mail ordering. In some respects, this notion of browsing through a catalogue is a forerunner of e-retailing. Direct mailing, telemarketing, door-to-door sales, or the use of vending machines includes other forms that have actually moved away from a physical fixed outlet and in a way are intermediate forms of the movement away from traditional physical retailing outlet to the virtual retailing we see on the internet.

E-Retailing

The internet has allowed a new kind of specialization to emerge. Instead of specializing just in a special product line, they allow specialization in particular classes of customers and sellers. Thus, we see lastminute.com, which allows last minute purchases of travel tickets, gift, and entertainment to be matched against last minute sellers of the same items. Here, we see specialization not in a product line but in a class of purchasers and a class of sellers. This kind of specialization would not have been possible before we had the internet.

In addition to these specialized stores, we also get generalized estores Where a store sells several product lines under a single management. Examples of these generalized stores include JC penny and Walmart. We also have the electronic counterpart of malls or e-malls. Emalls essentially provide a web-hosting service for your individual store much in the way that mall provide a hosting service in the sense of a physical location for your store.

Examples of these e-malls are Yahoo! Store,

GEOShops and CNET Stores:

In the future we may see the equivalent of franchise stores developing. One new class of business that is developing very quickly on the internet is the e-broker. The e-broker does not sell directly to a customer but brings the customer in touch with a particular supplier, so that a given set of criteria specified by the customer is satisfied. For example, the customer may want to buy goods at the cheapest price and so the e-broker would then do a search to find the supplier that would provide the cheapest goods. Or, a customer may want to find a particular kind of goods and the e-broker sets about determining which supplier would provide those goods. This area of e-broking is likely to grow very greatly in the near future.

Benefits of E-Retailing

To the customer...

Customers enjoy a number of benefits from e-retailing. The first of these is convenience. It is convenient for the customer as he does not have to move from shop to shop physically in order to examine goods. He is able to sit in front of a terminal and search the net and examine the information on goods. The second aspect of convenience he gets is in terms of time.

Normally, the traditional shop has an opening time and a closing time and the customer can only visit the shop within these periods. On the net, the customer can choose at any time to visit a site to examine the goods that are available and actually carry out his purchasing at one’s own convenient time. The third type of convenience that the customer gets is that he has access to a search engine, which will actually locate the products that he describes’ and also the site where they may be available, or perhaps even locate the sites where they may be available at the best price.

The second type of benefit to customers is better information. The Internet and the World Wide Web are essentially communication media that allow retailers to put on quite extensive information related to their products, which is available to the customers. Furthermore, since the customer can look at several sites, he will be able to obtain different pieces of information from each site to build a far better picture for him about the products that he is interested in. In some sites, there are customer reviews of different products as well as reviews by the business itself. An example of this can be found on Amazon.com. This allows-the customer to finesse his requirements before actually making the purchase. It also gives different sources of information. The third type of benefit that the customer gets is competitive pricing. This is due to two factors.

·         The first is lowered costs to the retailer because he does not have to maintain a physical showroom, he does not have to hire several shop assistants, and these savings can be passed on to customers in the form of reduced prices.

·         Secondly, competitive pricing pressure that arises from the fact that the customer is now able to look at prices at several sites. Therefore, the pressure is always there on the retailer to maintain a competitive price for his products.

·         The third benefit is customization. The customer can actually specify the features of the products that he would like and thus in some cases it is possible that the retailer may allow a customized product to be delivered.

An example of this is on the Dell site. The computer site allows shoppers to custom specify their own computer software and hardware configurations. Thus, the customer is able to select exactly what he wants. This ability to get the business to deliver a product that the customer specifies he wants is the essence of C2B ecommerce.

The benefits of e-retailing to the customer include

·         Convenience

·         Better information

·         Competitive price

·         Customization

·         Shopping anywhere, anytime

So with e-retailing, the customer can shop “anywhere around the globe without being restricted to his local vicinity. He could, for example, purchase goods over and have them delivered to a domestic address. He can also shop, as mentioned earlier at any time.

These are very considerable benefits of e-retailing to the customer. These benefits could see larger and larger numbers of customers move more and more of their shopping on to eretailing sites in the future.

To the Business...

There are a number of benefits of e-retailing to the business itself.

·         The first of these is global reach. The retailer now is no longer restricted to customers who are able to reach the store physically. They can be from anywhere around the globe. The retailer must, of course, deliver the goods of a purchase to the customer. We see later that has an impact on the types of goods that are most easily handled through e-retailing.

·         The second benefit is better customer service. The use of email and the use of electronic interchange of messages between the customer and the retailer allow better communication between the customer and the retailer. These allow one to easily inquiries and deal with complaints. These also allow a much more rapid response time than was possible in the days of faxes and postal mail.

·         The third benefit is the lowered capital cost to the retailer. The retailer does not have to maintain showrooms; he can probably have lower inventories. Thus, while Amazon.com lists over a few million titles, it keeps an inventory of a few thousand best selling titles only. Therefore, the retailer has lower warehousing costs. He does not have to have many shop assistants who are physically answering questions and Showing the customer goods.

·         The fourth benefit to the retailer is mass customization. Based on requests by the customers, the retailer is now able to carry out mass customization with reduced time to market for the customized products.

·         The next advantage is targeted marketing. The retailer is now able to pick on a specific targeted group of customers and direct marketing towards these customers. The retailer is also able to provide more value-added services in the way of better information, add-on services to basic services, or add-on options to products that he is selling.

·         The last advantage to the retailer consists of different new forms of specialized stores that he is now able to utilize.

The benefits to the e-retailer are

·         Global reach & Better customer service

·         Low capital cost

·         Mass customization & Targeted marketing

·         More value-added services

·         New forms of specialized stores and niche marketing

The future of E-Retailing

When one examines e-retailing, one can distinguish between two trends, namely Technologies that help you see and experience the product better, e.g. virtual reality, Java 3D, etc. Technologies that  help you not to see at all but use an intelligent agent (or mobile  agent) that does all the shopping tasks for you.

Summary: E-retailing essentially consists of the sale of goods and services. Sometimes we refer to this as the sale of tangible and intangible goods.

MODEL FOR E-COMMERCE & INFORMATION SUPERHIGHWAY

There are basically seven types of models for E-business. The E- Business model would be closely tied to the mission of the organization. Once the organization has decided what it aims to do one of the models that have been explained below may be adopted.

Category Killer

A category killer would use the Internet to define a new market by identifying a value proposition for the customer or create a new value proposition. The organization which des so, would have the first mover advantage in the market and would stay ahead of the competition by continuously innovating.

Example: Amazon.com.

Channel Reconfiguration

This model would use the Internet as means of reaching the customers and suppliers and to conduct, transactions on them. This model supplements the legacy distribution and communication channels. The advantage of such a model is decreased time to market. Such a model would invest in end-to-end process integration. This would require a major application overhaul to develop an integrated infrastructure that allows the processes to flow seamlessly, which in turn should lead to reduction of costs of products by eliminating, redundancies of operations and enhancing the scope of each operation. The advantage of such a model is decreased time to market, and minimizing the total product cost.

Examples: Cisco.

Transaction Aggregation

This type of organization would create an electronic commerce and payment infrastructure that integrates their existing transaction processing capabilities with e -business capabilities. This would facilitate a client in carrying out all the steps of purchases - searching, comparing, and selecting and paying online. These intermediaries may fulfill the following roles -

·         Support buyers in identifying their needs and finding an appropriate seller.

·         Provide an efficient means of exchanging information between both parties.

·         Execute the business transaction.

For example: Microsoft Expedia and eBay.

Infomediary

An infomediary provides specialized information on behalf of producers of goods and services and their potential customers. That is, it serves to bring together the customer and the supplier of goods. An example of an Infomediary is priceline.com.

Event Aggregation

This model would serve to simplify a major purchasing event such as buying a house, by offering the customer a unified front-end for purchasing related goods and services from multiple providers. It provides convenience to the customer and hence enhances the relationship between the customer and the company.

E.g. RealtoLcom.

Market Segment Aggregation

The organization defines a customer base and builds a comprehensive suite of services tailored to that customer type. Say for instance in our country the MNC’s which have to set up their offices would have to go through a lot of procedures before they get the final clearances. A Market segment aggregator, who could get all the clearances that are required, could possibly handle this work.

E.g. American Express’s, small business exchange, catering to the needs of small-scale companies.

Value Chain Integration

Value Chain Integration (VO) connects the organization’s systems with its supplier’s systems using the Internet, and this integration would lead to a joint manufacturing execution plan, keeping the customers needs in the center. Such an arrangement provides seamless integration within and between enterprises, tying together large islands of information systems. The advantage is that, when the customer keys in his requirement over the net, it would be transmitted to every process centre in the value chain without much loss of time. This way the organization can rapidly react to events. E.g. Dell Online.

Strategic Model for e-Business - Software Development

1. Stage of Orientation

Define your short, medium and long term targets to discuss your individual requirements

2. Stage of Analysis

Analyses of special requirements for your application

3. Stage of Design and Layout

Visual displays based on your ideas

4. Stage of Transformation

Realizing requirements and ideas in the software solutions

5. Stage of Implementation

Full implementation of your e Business solutions

Using Value Chains to Model An e-Commerce Business

A value chain for a product is the chain of actions that are performed by the business to add value in creating and delivering the product. For example, when you buy a product in a store or from the web, the value chain includes the business selecting products to be sold, purchasing the components or tools necessary to build them from a wholesaler or manufacturer, arranging the display, marketing and advertising the product, and delivering the product to the client. In the book Designing Systems for Internet Commerce by G. Winfield Treese and Lawrence C. Stewart, the authors suggest breaking down the aspects of your business into four general value-chain areas:

Attract: in which you get and keep customer interest, and includes advertising and marketing

Interact: in which you turn interest into orders, and includes sales and catalogs

Act: in which you manage orders, and includes order capture, payment, and fulfillment

React: in which you service customers, and includes technical support, customer service, and order tracking.

According to Treese and Stewart, looking at the value chain for your business helps you to define areas of focus — what your company is good at, or where you should concentrate your efforts to gain competitive advantage. Within System Architect, the Process Decomposition diagram is a handy vehicle for establishing what business processes are performed within each of these value-chain areas. The Process Decomposition diagram enables you to model three model elements — Primary Process Groups, Process Threads, and Elementary Business Processes. Each of the value-chain areas listed above can represent a Primary Process Group. Each group contains one or more process threads (a process thread is a grouping of process flows that deal with a central process — for example, ordering). Each process thread contains the elementary business processes that make up the thread (these are modeled on one or more Process Chart diagrams for each Process Thread).

Let’s Take a Look at an Example

Suppose we’ve already modeled a number of Process Chart diagrams for the various process flows that occur within our on-line retail business. Each of these Process Chart diagrams represents all or part of a Process Thread. We can create a Process Decomposition diagram to model the hierarchy of our process threads to elementary business processes, and the value chain areas that they are contained within. Create a Process Decomposition diagram.

Draw four Primary Process Groups on The diagram — named Attract, Interact, Act, and React. Browse all of the Process Threads that you’ve modelled for your business in System Architect’s browser. Drag-and-drop them onto the diagram workspace, and assign them to the value-chain Primary Process Groups according to the guidelines above. Select all of the Process Threads on the diagram, and from System Architect’s Dictionary menu, select Update Selected Process Threads EBPs. System Architect reviews all of the Process Chart diagrams you have built, and automatically draws appropriate elementary business processes on the diagram, under the Process Threads that they belong to (remember, every Process Thread is represented by one or more Process Chart diagrams).

Take a look at one of the Primary Process Groups, for example, Interact. Note that you can now view this value chain category, and see the various processes that are performed by your company to satisfy this value chain. As Treese and Stewart state, in developing systems for Internet commerce, you should focus on parts of the value chain related to that of the underlying business (ie, the product you are selling), and from looking at the value chain required to doing business online. Understanding these two pieces and how they fit together is an important part of creating a successful business in Internet commerce.

Electronic Commerce Industry Framework

Electronic commerce not only affects transactions between parties, it also influences the way markets will be structured. Traditionally, market ties were led through the exchange of goods, services, and money. Electronic commerce adds a new element: information. Market ties, such as those forming around online payments, are now based on information goods, in-lation services, and electronic money. Electronic Commerce Applications

·         Supply chain management

·         Video on demand.

·         Remote banking

·         Procurement and purchasing

Generic Framework for E-Commerce

To better understand the market structure that is developing around electronic commerce, we have developed a simple framework (see Fig.) that succinctly captures the developments in this area. Even those aware of the importance of electronic commerce have little under-standing of online jargon, or how the industry is structured. Such confusion is further entrenched by the media’s use of different names to refer to the same phenomenon or its various elements: the Information Superhighway, the Internet, Cyberspace, Interactive Multimedia, and so on. It is important for businesses to understand the overall industry in order to develop business strategies that employ electronic commerce.

The next section will explain each aspect of the electronic commerce infrastructure in detail, beginning with the most broadly based term: the Information Superhighway Infrastructure.

The Information Superhighway

The Information Superhighway has many different types of transport systems and does not function as a monolithic entity; there is no single inter-state highway that connects the digital equivalent of Los Angeles to Miami. Instead, the architecture is a mixture of many forms of high-speed network transport, whether it be land-based telephone, air-based wireless, modem -based PC, or satellite-based. For instance, mail sent from a portable PC in the French Riviera to a computer in Los Angeles might travel across several different types of transport networks interconnected with each other before it reaches its destination.

The players in this industry segment can be called information transport providers. They include: telecommunication companies that provide phone lines; cable TV systems that provide coaxial cables and direct broadcast satellite (DBS) networks; wireless companies that provide mobile radio and satellite networks; and computer networks, including private net-works like CompuServe or America Online, and public data networks like the Internet.

This industry segment also includes hardware and software tools that provide an interface with the various network options, and to the customer premises equipment (CPE), or terminal equipment, which is a generic term for privately owned communications equipment that is attached to the net-work. This category of subscriber terminal equipment can be divided into three parts: cable TV set-top boxes, computer-based telephony, and net-working hardware (hubs, wiring closets, and routers or digital switches). The terminal equipment is in fact the gateway to information services, commercial transactions, and 500 digitally compressed channels.

The biggest area of growth over the last five years has been in the router business. Routers and digital switches help to connect large net-works (or internet works). Routers are devices that can connect the local area networks (LANs) inside various organizations with the wide area networks (WANs) of various network providers. This interconnection enables easy communication between separate networks across geo-graphical distances and provides access to distributed computing re-sources. The router industry is a multibillion dollar industry that is dominated by players such as Cisco, Bay Networks, and 3COM, all three of which supply equipment that links data communications net-works through the Internet. In a recent valuation by Business Week, Cisco was rated as the fortieth largest company in America, with a market value of $26 billion. Not bad for a company with an extremely specialized product.

IMPLEMENTATION AND MANAGEMENT ISSUES

Hardware versus Software Implementations Encryption can be implemented in either hardware or software. Each has its related costs and benefits. The trade-offs among security, cost, simplicity, efficiency, and ease of implementation need to be studied when acquiring security products.

In general, software is less expensive and slower than hardware, al-though for large applications, hardware may be less expensive. In addition, software is less secure, since it is more easily modified or bypassed than some hardware products.

In many cases, encryption is implemented in a hardware device (such as a card/key entry system), but is controlled by software. This software re-quires integrity protection to ensure that the hardware device is provided with correct information (controls, data) and is not bypassed. Thus, a hybrid solution of software and hardware is generally provided. Effective security requires the correct management of the entire hybrid solution.

Key Management

All keys need to be protected against modification, and secret keys and private keys need protection against unauthorized disclosure. The proper management of cryptographic keys is essential to the effective use of encryption for security. Key management involves the procedures and protocols, both manual and automated, used throughout the entire life cycle of the keys. This includes the generation, distribution, storage, entry, use, destruction, and archiving of cryptographic keys. Ultimately, the security of information protected by encryption directly depends upon the protection afforded to keys.

With secret-key encryption, the secret key(s) must be securely distributed (safeguarded against unauthorized replacement, modification, and disclosure) to the parties wishing to communicate. Depending on the number and location of users, this task may be difficult. Automated techniques for generating and distributing cryptographic keys can ease overhead costs of key management, but some resources have to be devoted to this task.

Public-key encryption users also have to satisfy certain key manage-ment requirements. For example, since a private/public-key pair is associated with (generated or held by) a specific user, it is necessary to link the public part of the key pair to the user. In some cases, the key may be linked to a position or an organization, rather than to an individual user.

In a small community of users, public keys and their owners can be strongly bound by simply exchanging public keys. However, business conducted on a larger scale, involving geographically distributed users, necessitates a means for obtaining public keys online with a high degree of confidence in their integrity and binding to individuals. The support for the binding between a key and its owner is generally referred to as a public-key infrastructure. This involves support for users being able to enter the community of key holders, generate keys (or have them generated on their be-half), disseminate public keys, revoke keys (in case, for example, of compromise of the private key), and change keys. In addition, it may be necessary to build in time/date stamping and to archive keys for verification of old signatures.

Complying with Export Rules

A number of governments have regulations regarding the import or export of encryption. The U.S. government controls the export of cryptographic implementations because it considers them part of munitions. As a general rule, the U.S. government allows encryption to be used when: the data being encrypted is of a financial nature and the transaction is between known banks; the content of the data is well- defined; the length of the data is limited; and the encryption cannot easily be used for other purposes. The rules governing export can be quite complex, since they consider multiple factors. In addition, encryption is a rapidly changing field, and rules may change

from time to time. Questions concerning the export of a particular implementation should be addressed to appropriate legal counsel.

Other Business Issues

Three problems deter widespread acceptance of encryption for public commerce. First, successful encryption requires that all participating parties use the same encryption scheme. Standards that make encryption feasible have to be established within an organization or a cooperating group (such as banks).

Second, the distribution of keys has prevented wider use of encryption, as there is no easy way to distribute the secret key to an unknown person on the network. The only safe way to communicate a key is in person, and even then the distributor must provide a different secret key for each per-son. Even public-key schemes require a method for key distribution.

The final deterrent to widespread acceptance of encryption is that it is difficult to use. For encryption to flourish, the encryption user interface must be simplified so that an average consumer can easily use the software. Currently, a consumer will not wait more than a few seconds for information access or retrieval. In the future, encryption will be done by fast hardware rather than software.

Legal Issues

As encryption becomes commonplace in the commercial world, employers will face the problem of producing documents that only certain employees can decrypt. Given labor force mobility, a company may be confronted with the task of producing documents encrypted by ex- employees who may not wish to cooperate.

ELECTRONIC PAYMENT SYSTEMS

Electronic payment is an integral part of electronic commerce. Broadly de-fined, electronic payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers, electronic checks, or digital cash) that is backed by a bank or an intermediary, or by legal tender. Three factors are stimulating interest among financial institutions in electronic payments: decreasing technology costs reduced operational and processing costs, and increasing online commerce.

The desire to reduce costs is one major reason for the increase in electronic payments. Cash and checks are very expensive to process, and banks are seeking less costly alternatives. It is estimated that approximately 56 percent of consumer transactions in the United States are cash and 29 percent are check. Credits, debits, and other electronic transactions account for about 15 percent of all consumer transactions, and are expected to increase rapidly. Electronic transactions numbered 33 billion in 1993 and are expected to climb to 118 billion by the year 2000. For the same period, paper transactions are forecast to show very modest growth, from 117 billion in 1993 to 135 billion in the year 2000. Banks and retailers want to wean customers away from paper transactions because the processing overhead is both labors intensive and costly.

The crucial issue in electronic commerce revolves around how con-sumers will pay businesses online for various products and services. Currently, consumers can view an endless variety of products and services offered by vendors on the Internet, but a consistent and secure payment capability does not exist. The solutions proposed to the online payment problem have been ad hoc at best. For instance, in one method marketed by Cyber Cash, users install client software packages, sometimes known as “electronic wallets,” on their browsers. This software then communicates with “electronic cash registers” that run on merchants’ Web servers. Each vendor’s client works with only that vendor’s own server software, a rather restrictive scenario. Currently, merchants face the unappealing option of either picking one standard and alienating consumers not subscribing to a standard or needing to support multiple standards, which entails extra time, effort, and money.

Today, the proliferation of incompatible electronic payment schemes has stifled electronic commerce in much the same way the split between Beta and VHS standards stifled the video industry’s growth in the 1970s. Banks faced similar problems in off-line commerce in the early nineteenth century. Many banks issued their own notes, and a recurrent problem was the tendency of some institutions to issue more notes than they had gold as backing. Further, getting one bank to honour another’s notes was a major problem. Innovations in payment methods involved the creation of new financial instruments that relied on backing from governments or central banks, and gradually came to be used as money. Banks are solving these problems all over again in an online environment.

The goal of online commerce is to develop a small set of payment methods that are widely used by consumers and widely accepted by merchants and banks. This chapter offers a brief examination of the various types of electronic payment systems. It then provides an overview of the business, consumer, and legal implications of electronic payment systems.

Overview of the Electronic Payment Technology

Electronic payments first emerged with the development of wire transfers. Early wire transfer services such as Western Union enabled an individual to deliver currency to a clerk at one location, who then instructed a clerk at an-other location to disburse funds to a party at that second location who was able to identify himself as the intended recipient. Cash was delivered to the customer only after identity was established. In this scenario, there was no banking environment; Western Union was a telegraph company. Assurance of payment relied on the financial stability of the firm. Security was pro-vided to the extent that Western Union was a privately controlled transmission facility used to send messages about funds transfer; its lines were not shared with the public, and transactions were private. Authentication was provided only by a signature at the other end of the transmission that verified that the intended party had indeed received the funds.

During the 1960s and early 1970s, private networking technology has enabled the development of alternative electronic funds transfer (EFT) systems. Electronic funds transfer systems have shortened the time of payment instruction transfer between banks, and in the process have reduced float. However, EFT systems have not changed the fundamental structure of the payment system. Many of the so-called payment innovations over the past two decades have been aimed at minimizing banking costs such as reserve requirements, speeding up check clearing, and minimizing fraud. However, the consumer rarely interacted with the early EFT systems. Recent innovations in electronic commerce aim to affect the way consumers deal with payments and appear to be in the direction of a real-time electronic trans-mission, clearing, and settlement system.

Consumer electronic payment systems are growing rapidly, but the opportunities are scarcely tapped. In the United States, it is estimated that only 3 percent of the $460 billion supermarket industry is transacted on credit or debit cards. Only 1 percent of the $300 billion professional services area is transacted electronically. Less than 12 percent of business at gasoline service stations is electronic and less than 1 percent of fast food restaurants have magstripe readers. The educational market alone is more than $100 billion today, only 6 percent of which is transacted electronically. Even more important is the predicted growth ahead.

Electronic or Digital Cash

Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. The versatility of digital cash opens up a host of new markets and applications. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. Although it may be surprising to some, even after thirty years of developments in electronic payment systems, cash is still the most prevalent consumer payment instrument. Cash remains the dominant form of payment for three reasons: lack of consumer trust in the banking system; inefficient clearing and settlement of noncash transactions; and negative real interest rates on bank deposits.

These reasons behind the prevalent use of cash in business transactions indicate the need to re-engineer purchasing processes. In order to displace cash, electronic payment systems need to have some cash-like qualities that current credit and debit cards lack. For example, cash is negotiable, meaning that it can be given or traded to someone else. Cash is legal tender, meaning that the payee is obligated to take it. Cash is a bearer instrument, meaning that possession is proof of ownership. Cash can be held and used by anyone, even those without a bank account. Finally, cash places no risk on the part of the acceptor; the medium is always good.

In comparison to cash, debit and credit cards have a number of limitations. First, credit and debit cards cannot be given away because, technically, they are identification cards owned by the issuer and restricted to one user. Credit and debit cards are not legal tender, given that merchants ‘have the right to refuse to accept them. Nor are credit and debit cards bearer instruments; their usage requires an account relationship and authorization system. Similarly, checks require either personal knowledge of the payer, or a check guarantee system. A really novel electronic payment method needs to do more than recreate the convenience that is offered by credit and debit cards; it needs to create a form of digital cash that has some of the proper-ties of cash.

LEGAL ASPECTS OF E- COMMERCE

The world is used to conducting business and commerce on signed paper documents. Two millennia of commerce have been based on the written document with its value ‘authorized’ by the signature of a duly authorized officer. The current legal practice has paper documents and signatures affixed thereon as its foundation. Electronic documents and messages, without the familiar signatures and marks, have changes the scene. However, trade still wants to be assured that the electronic world is safe. The EC system must, therefore, offer at least the same level of reliability as that which obtains in the paper world notwithstanding the significant difference between the concepts embodied in electronic messages and paper documents. It is well known that frauds do take place in the traditional paper based commercial transaction. Signatures can be forged, paper document can be tampered with, and even the most secure marks, impression, emblems and seals can be forging. But then these are known, and trade as well as the legal community knows how to deal with these problems. Companies set aside funds to take care of losses due to such frauds.

The EC world, on the other hand, exposes us to issues, which were hitherto unknown, since they are directly the outcome of creating documents electronically, transmitting them over world wide computer communication networks. Trading partners exchange documents electronically. They need to convince themselves that such documents are authentic when received over networks, and that their authentication can be established in case of dispute. Transactions may be electronic, but the key concept of admissibility of evidence and evidential value of electronic documents, which are central to the law, remain the same. There must be a way to prove that a message existed, that it was sent, was received, was not changed between the sending and receiving, and that it could not be read and interpreted by any third party intercepting or deliberately receiving it. The security of an electronic message, legal requirement, thus gets directly linked to the technical methods for security of computers and networks. From the legal angle, there is a further

complication because the electronic message is independent of the actual medium used for storage transmission. The message can be stored on a floppy, a magnetic disk, or an optical disk. Likewise, it may be transmitted over a Local Area Network, a Wide Area Network, a private Value Added Network or the Internet. The physical medium could be coaxial cable, radio link, optical fibre or a satellite communication channel.

The legal issues of EC have generated tremendous interest among technologists, traders and legal experts. Many of the early EDI experiments, and even production systems went into operation without any legal interchange agreement between trading partners, between VANs and their customers. No laws for EC existed; in fact they are still in the making. In India, too the Indian Customs EDI system (ICES) Project got off theground in 1995 without any EC/EDI law in existence, or even a proper interchange agreement.

Legal Issues for Internet Commerce

Internet commerce raises legal issues through the provision of the following services:

·         Online marketing

·         Online retailing ordering of products and services

·         Financial services such as banking and trading in securities.

·         Exchange of electronic messages and documents

·         EDI, electronic filing, remote employee access, electronic transactions.

·         Trade and commerce over the Internet give rise to several legal issues as given below.

Copyright and the Internet

Copyright developed in the printed world to protect the economic interests of creative writers. Copyright law protects only the expression of an idea and idea itself. In due course it protect the originality of artists and innovators too. In recent times, however, the subject matter of copyright has further expanded. For example, the Copyright Designs and Patent Act, 1988 in the UK, allows protection of the following subject matter:

Original literary, dramatic, musical and artistic works; the typographical arrangement of published editions of literary, dramatic or musical works; sound recordings; broadcasts; cable programs These have been broadly classified into two groups as ‘author works’ and ‘media works’ by Hector L. McQueen. The multimedia capability of websites enables all types of work to be ‘published’ on the Internet in the sense that copies can be distributed to users/customers. The problems, however, is that unlike a paper copy, this copy can be readily duplicated and distributed further by the recipient. If the material is in the public domain there are no difficulties. But the copyright law applies to the downloaded matter, much the same way it applies to physical copies.

Issues Related to Jurisdiciary

The Internet allows anyone to set up a Website anywhere in the world. Its location could, however, be interpreted to decide the jurisdiction of disputes especially in EC. A Website may accept orders from visitors to the site as part of an Internet store or a shopping mall. For example, amazon.com is a bookstore retailing books. A court law may rule that the location of the Website determines the jurisdiction for that business. This is based on accepted legal practice. Jurisdiction determines which laws would be acceptable. EC on the Internet will grow if the parties doing business know what rules will govern what rules govern their activities.

Service Provider liability

Many ISPs provide users access to shared websites, Usenet news, E-mail distribution list etc. These facilities can because by their users to upload unlawful, defamatory, copyright or trademarks infringing material. Unlawful material includes banned publications, hate propaganda, pornography and obscene material, without ISP having chance to review it.

Liability for materials distributed in the Internet may be different for the Website operators, and the ISPs. AN ISP could be held liable for the bulletin boards, and for aiding and abetting the commission of an offence such as the distribution of photography. Similarly, third-party liability for defamation, web sites, etc: “Thus the concerns include libel and defamation, liability for infringement of third-party rights, liability for hosting of unlawful materials.

EIGHT STEPS TO PLAN SUCCESSFUL E-COMMERCE

Good plans are simple plans. They are also measurable, their implementation is accountable, he resources to deliver the plan are available and there is a time-frame for the plan to be delivered.

Whatever planning process an organisation uses, expect that the company will not control the direction in which online services evolve. The customer will decide what works and what doesn’t.

Respond Fast

If the plan is to respond to customer wishes, then the most successful plan will be the one that responds fastest. This means that every component of the plan should be built with the intention of proving a principle. Ask yourself if your customers want this? If they do, then a more robust version can be built. If they don’t, then you can redirect your time and resources and use the knowledge gained to good effect elsewhere.

Test out Your Plan

In the online marketplace everything is a test until it’s proven by the customer. Successful testing follows a simple rule:

Test one Thing at a Time

Only test changes that can be measured directly. If a test includes more than one change, it’s almost always impossible to measure the effect of each one. Test to learn from the customer and to improve one step at a time.

Challenge Internal Assumptions

Remove internal processing costs to make dramatic improvements to profit margins. Analyse each sales process to clarify what it is that staff spend time doing. In particular, look for processes in which information is transferred.

Focus on Customer, Supplier & Distributor Benefits

What’s in it for customers, suppliers and distributors? Have you asked what they’d like? The web’s very good at research. Are you offering them a new way to use an existing service or a completely new service? Is it faster, cheaper, more convenient or just new and online? What new information do they get? Decide what you can reliably offer each group now and plan a phased introduction of more complex services. Complexity often arises from integrating tried and tested stand-alone services.

Give Good Reasons to Use Online Services

Not all customers will automatically move to an online service simply because it’s there. Equally, in a service’s early stages it may not make good sense to risk overwhelming a new online channel by quickly moving large numbers of customers over to the new service.

If you prefer customers to use an online channel, find ways to: Inform them that it is there (they may not know this) Tell them how to change over Incentives the swap to make it worthwhile Introduce the new service as a special privilege beta test programme

Calculate the Three Sets of Costs

Very few organisations have all the resources in-house to start offering online services. There are three sets of costs that should be calculated:

1. Current company costs that will be altered by the online changes

·         both internal and external costs

2. Cost to implement the changes

·         interim support may be needed

·         training for staff whose tasks change

3. New cost assumptions, post change

·         long-term cost-savings

·         long-term outsourcing arrangements

·         ongoing online development plans

Help Staff Adapt to Online Working

An online service will affect your staff and the work that they do. If your organisation is typical, there will be a progressive transfer from processing tasks towards customer service. Some may find this work more fulfilling; others will not enjoy the increased interaction with customers. Unless a company’s online services are entirely online, staff who are to fulfil new service roles will require assistance to develop new skills. They will almost certainly require some training in how to make the most of the new technology for the benefit of their customers.

CONCLUSION

Just as e-mail has come to dominate our lives in communication with anyone around the globe, e-Commerce is fast emerging as a way of transactions between parties doing business nationally and internationally.

At the turn of the last millennium, e-Commerce created excitement in the hallowed corridors of Harvard Business School as well as the poorest lanes of Hoshiarpur, Punjab, India. The reasons for this are not far to seek. The two powerful concept of anytime-anywhere and virtualization of the companies have demonstrated their tremendous potential to improve business reach, to reduce costs and cycle times, and to enhance productivity in organizations across the globe. Consequently, consumers can hope for better comfort and greater value-for-money.

In today’s economic scenario, the market place is increasingly global and competitive with the growth of internet and web based technologies. As mentioned above the turn of the last millennium saw the emergence of what is, probably, the most powerful paradigm that the world has witnessed in recent years – e-Commerce. Advances in communications and computing, and the realization of the power of the internet have made e-Commerce the most revolutionary instrument for improving the productivity of both corporations and individuals.

Therefore, the business process requires efficient coordination of information between partners/suppliers/support partners and customers. This objective is achievable if the networks of these parties integrate them effectively to be able to communicate better and faster for transacting business. Without e-Commerce, the transaction cycle becomes long resulting in delayed response and higher cost, resulting in decreased customer satisfaction. Internet provides a faster information highway to transact business.

Thus e-Commerce is a method to gain and maintain competitive advantage in business transactions. It is a new way of conducting, managing and executing business transactions and services through electronic media and networks. It is a modern methodology that addresses the needs of organisations, consumer, banks and financial institutions to cut costs while improving the quality of goods and services and improving the delivery system.

Instead of the traditional paper based transactions in commerce, the electronic media like computers and communication networks, web-sites, e-mails are restored to. The World Wide Web allows suppliers to create a web presence for providing product and service information directly to the customer. A customer can go directly to a vendor to download the latest information with no human intervention. Many businesses establish this type of web presence through an Internet Service Provider (ISP).

The ultimate purpose of e-Commerce is to ensure better customer satisfaction which is an overall psychological state that reflects the evaluation of a relationship between the customer/consumer and a company-environment-product-service.

REFERENCES

1.      http://www.raifoundation.org

2.      The Hindu Speaks on Management Volume II

3.      e-Commerce and e-Business, from www.eprimers.org

4.      The Power of E-Commerce, www.infy.com

5.      Introduction to computers-2, IDE, University of Kerala