What is Electronic commerce (E-commerce)?

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What is E-commerce?

Electronic commerce or e-commerce (sometimes written as eCommerce) is defined as the actual buying and selling of goods or services electronically online.

Products are displayed in an online store and potential customers can read information about the products, see them on the website and have the option to purchase them online. Any product can be sold online and all the principles of business apply to this also.

The important requirements to conduct the e-commerce business are as follows:

  • Website either owned or supplied by cart provider.
  • A shopping cart programme to list out product or services and means to collect purchaser information.
  • A method to get the funds into the bank account.

E-commerce Definition

E-commerce is a system that consists of buying and selling of products or services over electronic systems such as the Internet and other computer networks.

The amount of trade conducted electronically with widespread Internet usage. The use of commerce is conducted in this way, encouraging and drawing on innovations in 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 at least at some point in the transaction’s lifecycle, although it can encompass a wider range of technologies such as e-mail as well.

Benefits of E-commerce

The benefits of e-commerce are as follows:

  1. Save Time
  2. Low Cost
  3. Vast Market
  4. Cheapest
  5. Competitions
  6. Tangible Benefits
  7. Strategic Benefits
  8. Operational Benefits

Save Time

E-commerce allows people to carry out businesses without the barriers of time or distance. One can log on to the Internet at any point of time, be it day or night and purchase or sell anything one desires at a single click of the mouse.

Low Cost

The direct cost-of-sale for an order taken from a website is lower than through traditional means (retail, paper based), as there is no human interaction during the on-line electronic purchase order process. Also, electronic selling virtually eliminates processing errors, as well as being faster and more convenient for the visitor.

Vast Market

E-commerce is ideal for niche products. Customers for such products are usually few. But in the vast market place, i.e., the Internet, even niche products could generate viable volumes.


Another important benefit of E-commerce is that it is the cheapest means of doing business.


The day-to-day pressures of the marketplace have played their part in reducing the opportunities for companies to invest in improving their competitive position. A mature market, increased competitions have all reduced the amount of money available to invest.

If the selling price cannot be increased and the manufactured cost cannot be decreased then the difference can be in the way the business is carried out. E-commerce has provided the solution by decimating the costs, which are incurred.

Tangible Benefits

From the buyer’s perspective also e-commerce offers a lot of tangible advantages.

  • Reduction in buyer’s sorting out time
  • Better buyer decisions
  • Less time is spent in resolving invoice and order discrepancies
  • Increased opportunities for buying alternative products.

Strategic Benefits

The strategic benefit of making a business ‘e-commerce enabled’, is that it helps reduce the delivery time, labour cost and the cost incurred in the following areas:

  • Document preparation
  • Error detection and correction
  • Reconciliation
  • Mail preparation
  • Telephone calling
  • Data entry
  • Overtime
  • Supervision expenses.

Operational Benefits

Operational benefits of e-commerce include reducing both time and personnel required to complete business processes, and reducing strain on other resources. It’s because of all these advantages that one can harness the power of e-commerce and convert a business to e-business by using powerful turnkey e-commerce solutions made available by e-business solution providers.

Application of E-commerce

Today e-commerce is being used in different fields, which are as under:

  • Transaction Processing System: All data, which comes under any sort of transaction, make use of e-commerce like—airline reservation, stock trading, insurance policy, etc.

  • Education and Medical: Today e-commerce is playing a vital role in improving the technologies used in education and medical department. There are many different online facilities, which allow the users to collect information regarding this field.

  • Information Services: There are many different information services available today like—American online, which helps in gathering latest information.

  • Value Aided Network: With this facility the business information is being converted from one network to other network.

  • Electronic Payment: Today anyone having the ATM, internet banking or credit cards can be directly involved in the transaction of money. It is one of the latest technologies, which allows the users to freely perform the marketing jobs.

Advantages of E-commerce

The advantages of e-commerce are as following:

  1. It is very easy to reach the customers throughout the world at any time via internet or via an Electronic Data Interchange (EDI) system.
  2. Throughout the year, on all the days this system can be operated.

  3. The cost of setting up of an e-commerce website is very low when compared with retail outlet.

  4. There is more flexibility in a website to add and remove a product than in catalogues or brochures.

  5. It potentially gives exposure to previously untapped market segments.

  6. It offers wide choice and wastage of time can be avoided.

Disadvantages of E-commerce

The disadvantages of e-commerce are as following:

  • There is no possibility of touching and feeling merchandise.

  • With growing importance of e-commerce and computer communication technologies the social contacts of the consumers are going to be reduced.

  • Since online stores do not exist for long periods, many companies do not know exactly the set-up of store.

  • There is a possibility for intercepting transactions and cause problems to consumers and companies who operate on the internet.

E-commerce Models

The first step in the development of an e-commerce website is to identify the e-commerce model. Depending on the firm involved in the transaction, e-commerce can be classified into four models. These are:

  1. Business-to-Business Model (B2B)
  2. Business-to-Consumer (B2C) Model
  3. Consumer-to-Consumer (C2C) Model
  4. Consumer-to-Business (C2B) Model

Business-to-Business Model (B2B)

B2B e-commerce is between different business entities. It reduces the number of suppliers and facilitates business partnership by reducing purchase orders, processing costs and inventory cycle timings.

B2B directly supports commerce transactions involving products, services, or information between two businesses or parties. Typical B2B direct transactions occur between buyers, suppliers, manufacturers, resellers, distributors, and trading partners. B2B business purchases goods or services directly from another business. The selling business can be a wholesaler, a distributor, a manufacturer, or a retailer who sells to buyers from other businesses.

Organizations that are not traditionally considered businesses, such as the government, may sometimes implement sites based on the B2B direct business model. This occurs in such cases where the government provides goods and services directly to businesses.

Business-to-Consumer (B2C) Model

The B2C model involves transactions between business organizations and consumers. It applies to any business organization that sells its products or services to consumers over the Internet. These sites display product information in an online catalogue and store it in a database. The B2C model also includes services like online banking, travel services, and health information.

Consumer-to-Consumer (C2C) Model

The C2C model involves transaction between consumers. Here, a consumer sells directly to another consumer. Bazee.com is a common example of online auction websites that provide a consumer to advertise and sell his products online to another consumer.

However, it is essential that both seller and buyer must register with the auction site. While the seller needs to pay a fixed fee to the online auction house to sell his products, the buyer can bid without paying any fee. The site brings buyer and seller together to conduct deals.

Consumer-to-Business (C2B) Model

The C2B model is the most recent e-commerce business model. In this model, individual customers offer to sell products and services to companies who are prepared to purchase them. This business model is the opposite of the traditional B2C model and involves a transaction that is conducted between a consumer and a business organization.

In this kind of a transaction, the consumers decide the price of a particular product rather than the supplier. This category includes individuals who sell products and services to organizations.

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