E-commerce (also written as e-Commerce, eCommerce or similar variants), short for electronic commerce, is trading in products or services using computer networks, such as the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction's life cycle, although it may also use other technologies such as e-mail.
E-commerce businesses may employ some or all of the following:
- Online shopping web sites for retail sales direct to consumers
- Providing or participating in online marketplaces, which process third-party business-to-consumer or consumer-to-consumer sales
- Business-to-business buying and selling
- Gathering and using demographic data through web contacts and social media
- Business-to-business electronic data interchange
- Marketing to prospective and established customers by e-mail or fax (for example, with newsletters)
- Engaging in pretail for launching new products and services
Timeline
A timeline for the development of e-commerce:
- 1971 or 1972: The ARPANET is used to arrange a sale between students at the Stanford Artificial Intelligence Laboratory and the Massachusetts Institute of Technology, later described as "the seminal act of e-commerce" in John Markoff's book What the Dormouse Said.
- 1979: Michael Aldrich demonstrates the first online shopping system.
- 1981: Thomson Holidays UK is first business-to-business online shopping system to be installed.
- 1982: Minitel was introduced nationwide in France by France Télécom and used for online ordering.
- 1983: California State Assembly holds first hearing on "electronic commerce" in Volcano, California. Testifying are CPUC, MCI Mail, Prodigy, CompuServe, Volcano Telephone, and Pacific Telesis. (Not permitted to testify is Quantum Technology, later to become AOL.)
- 1984: Gateshead SIS/Tesco is first B2C online shopping system and Mrs Snowball, 72, is the first online home shopper
- 1984: In April 1984, CompuServe launches the Electronic Mall in the USA and Canada. It is the first comprehensive electronic commerce service.
- 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer.
- 1992: Book Stacks Unlimited in Cleveland opens a commercial sales website (www.books.com) selling books online with credit card processing.
- 1992: St. Martin's Press publishes J.H. Snider and Terra Ziporyn's Future Shop: How New Technologies Will Change the Way We Shop and What We Buy.
- 1993: Paget Press releases edition No. 3 of the first app store, The Electronic AppWrapper
- 1994: Netscape releases the Navigator browser in October under the code name Mozilla. Netscape 1.0 is introduced in late 1994 with SSL encryption that made transactions secure.
- 1994: Ipswitch IMail Server becomes the first software available online for sale and immediate download via a partnership between Ipswitch, Inc. and OpenMarket.
- 1994: "Ten Summoner's Tales" by Sting becomes the first secure online purchase.
- 1995: The US National Science Foundation lifts its former strict prohibition of commercial enterprise on the Internet.
- 1995: Thursday 27 April 1995, the purchase of a book by Paul Stanfield, Product Manager for CompuServe UK, from W H Smith's shop within CompuServe's UK Shopping Centre is the UK's first national online shopping service secure transaction. The shopping service at launch featured W H Smith, Tesco, Virgin Megastores/Our Price, Great Universal Stores (GUS), Interflora, Dixons Retail, Past Times, PC World (retailer) and Innovations.
- 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24-hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb.
- 1996: IndiaMART B2B marketplace established in India.
- 1996: ECPlaza B2B marketplace established in Korea.
- 1996: The UK e-commerce platform Sellerdeck, formerly Actinic, is established.
- 1998: Electronic postal stamps can be purchased and downloaded for printing from the Web.
- 1998: Cbazaar formerly chennaibazaar.com, India's first B2C eCommerce portal launched by Rajesh Nahar and Ritesh Katariya.
- 1999: Alibaba Group is established in China. Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches. ATG Stores launches to sell decorative items for the home online.
- 2000: The dot-com bust.
- 2001: Alibaba.com achieved profitability in December 2001.
- 2002: eBay acquires PayPal for $1.5 billion. Niche retail companies Wayfair and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal.
- 2003: Amazon.com posts first yearly profit.
- 2003: Bossgoo B2B marketplace established in China.
- 2004: DHgate.com, China's first online b2b transaction platform, is established, forcing other b2b sites to move away from the "yellow pages" model.
- 2007: Business.com acquired by R.H. Donnelley for $345 million.
- 2009: Zappos.com acquired by Amazon.com for $928 million. Retail Convergence, operator of private sale website RueLaLa.com, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012.
- 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites went ahead with an IPO on 4 November 2011. It was the largest IPO since Google.
- 2011: Quidsi.com, parent company of Diapers.com, acquired by Amazon.com for $500 million in cash plus $45 million in debt and other obligations. GSI Commerce, a company specializing in creating, developing and running online shopping sites for brick and mortar businesses, acquired by eBay for $2.4 billion.
- 2013: US eCommerce and Online Retail holiday sales reach $46.5 billion, up 10 percent.
- 2014: Overstock.com processes over $1 million in Bitcoin sales. India's e-commerce industry is estimated to have grown more than 30% from 2012 to $12.6 billion in 2013. US eCommerce and Online Retail sales projected to reach $294 billion, an increase of 12 percent over 2013 and 9% of all retail sales. Alibaba Group has the largest Initial public offering ever, worth $25 billion.
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Business applications
Some common applications related to electronic commerce are:
- Document automation in supply chain and logistics
- Domestic and international payment systems
- Enterprise content management
- Group buying
- Print on demand
- Automated online assistant
- Newsgroups
- Online shopping and order tracking
- Online banking
- Online office suites
- Shopping cart software
- Teleconferencing
- Electronic tickets
- Social networking
- Instant messaging
- Pretail
Governmental regulation
In the United States, some electronic commerce activities are regulated by the Federal Trade Commission (FTC). These activities include the use of commercial e-mails, online advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive. Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers' personal information. As result, any corporate privacy policy related to e-commerce activity may be subject to enforcement by the FTC.
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law in 2008, amends the Controlled Substances Act to address online pharmacies.
Conflict of laws in cyberspace is a major hurdle for harmonisation of legal framework for e-commerce around the world. In order to give a uniformity to e-commerce law around the world, many countries adopted the UNCITRAL Model Law on Electronic Commerce (1996)
Internationally there is the International Consumer Protection and Enforcement Network (ICPEN), which was formed in 1991 from an informal network of government customer fair trade organisations. The purpose was stated as being to find ways of co-operating on tackling consumer problems connected with cross-border transactions in both goods and services, and to help ensure exchanges of information among the participants for mutual benefit and understanding. From this came Econsumer.gov, an ICPEN initiative since April 2001. It is a portal to report complaints about online and related transactions with foreign companies.
There is also Asia Pacific Economic Cooperation (APEC) was established in 1989 with the vision of achieving stability, security and prosperity for the region through free and open trade and investment. APEC has an Electronic Commerce Steering Group as well as working on common privacy regulations throughout the APEC region.
In Australia, Trade is covered under Australian Treasury Guidelines for electronic commerce, and the Australian Competition and Consumer Commission regulates and offers advice on how to deal with businesses online, and offers specific advice on what happens if things go wrong.
In the United Kingdom, The Financial Services Authority (FSA) was formerly the regulating authority for most aspects of the EU's Payment Services Directive (PSD), until its replacement in 2013 by the Prudential Regulation Authority and the Financial Conduct Authority. The UK implemented the PSD through the Payment Services Regulations 2009 (PSRs), which came into effect on 1 November 2009. The PSR affects firms providing payment services and their customers. These firms include banks, non-bank credit card issuers and non-bank merchant acquirers, e-money issuers, etc. The PSRs created a new class of regulated firms known as payment institutions (PIs), who are subject to prudential requirements. Article 87 of the PSD requires the European Commission to report on the implementation and impact of the PSD by 1 November 2012.
In India, the Information Technology Act 2000 governs the basic applicability of e-commerce.
In China, the Telecommunications Regulations of the People's Republic of China (promulgated on 25 September 2000), stipulated the Ministry of Industry and Information Technology (MIIT) as the government department regulating all telecommunications related activities, including electronic commerce. On the same day, The Administrative Measures on Internet Information Services released, is the first administrative regulation to address profit-generating activities conducted through the Internet, and lay the foundation for future regulations governing e-commerce in China. In 28 August 2004, the eleventh session of the tenth NPC Standing Committee adopted The Electronic Signature Law, which regulates data message, electronic signature authentication and legal liability issues. It is considered the first law in China's e-commerce legislation. It was a milestone in the course of improving China's electronic commerce legislation, and also marks the entering of China's rapid development stage for electronic commerce legislation.
Forms
Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce.
On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are pressing issues for electronic commerce.
Aside from traditional e-Commerce, the terms m-Commerce (mobile commerce) as well (around 2013) t-Commerce have also been used.
Global trends
In 2010, the United Kingdom had the biggest e-commerce market in the world when measured by the amount spent per capita. The Czech Republic is the European country where ecommerce delivers the biggest contribution to the enterprises´ total revenue. Almost a quarter (24%) of the country's total turnover is generated via the online channel.
Among emerging economies, China's e-commerce presence continues to expand every year. With 384 million internet users, China's online shopping sales rose to $36.6 billion in 2009 and one of the reasons behind the huge growth has been the improved trust level for shoppers. The Chinese retailers have been able to help consumers feel more comfortable shopping online. China's cross-border e-commerce is also growing rapidly. E-commerce transactions between China and other countries increased 32% to 2.3 trillion yuan ($375.8 billion) in 2012 and accounted for 9.6% of China's total international trade In 2013, Alibaba had an e-commerce market share of 80% in China.
Other BRIC countries are witnessing the accelerated growth of eCommerce as well. Brazil's eCommerce is growing quickly with retail eCommerce sales expected to grow at a healthy double-digit pace through 2014. By 2016, eMarketer expects retail ecommerce sales in Brazil to reach $17.3 billion. India has an internet user base of about 243.2 million as of January 2014. Despite being third largest userbase in world, the penetration of Internet is low compared to markets like the United States, United Kingdom or France but is growing at a much faster rate, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point. In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.
E-Commerce has become an important tool for small and large businesses worldwide, not only to sell to customers, but also to engage them.
In 2012, ecommerce sales topped $1 trillion for the first time in history.
Mobile devices are playing an increasing role in the mix of eCommerce. Some estimates show that purchases made on mobile devices will make up 25% of the market by 2017. According to Cisco Visual Networking Index, in 2014 the amount of mobile devices will outnumber the number of world population.
In the past 10 years, e-commerce is in a period of rapid development. Cross-border e-commerce is called the Internet thinking along with traditional import and export trade. Cross-border e-commerce enables international trade towards more convenient and free open to cooperate between different countries in the world, incorporating developed and developing countries. In the short term, developing countries may be limited to IT, but in the long term, they would change the barrier to develop their IT facilities, and continuing to close to developed countries. The moment, developing countries like China and India are developing e-commerce very rapidly, such as China 's Alibaba, the financing capital (£15 billions) is the highest ever in e-commerce company. In addition, China is becoming the biggest e-commerce provider in the world. The number of Internet users in China which amounts to 600 millions, and which is doubled than USA users in total.
For traditional businesses, one research stated that information technology and cross-border e-commerce is a good opportunity for the rapid development and growth of enterprises. Many companies have invested enormous volume of investment in mobile applications.The DeLone and McLean Model stated that 3 perspectives are contributed to a successful e-business, including information system quality, service quality and users satisfaction. There is no limit of time and space, there are more opportunities to reach out to customers around the world, and to cut down unnecessary intermediate links, thereby reducing the cost price, and can benefit from one on one large customer data analysis, to achieve a high degree of personal customization strategic plan, in order to fully enhance the core competitiveness of the products in company
Impact on markets and retailers
Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend. Depending on the category, e-commerce may shift the switching costs--procedural, relational, and financial--experienced by customers.
Individual or business involved in e-commerce whether buyers or sellers rely on Internet-based technology in order to accomplish their transactions. E-commerce is recognized for its ability to allow business to communicate and to form transaction anytime and anyplace. Whether an individual is in the US or overseas, business can be conducted through the internet. The power of e-commerce allows geophysical barriers to disappear, making all consumers and businesses on earth potential customers and suppliers. Thus, switching barriers and switching costs my shift. eBay is a good example of e-commerce business individuals and businesses are able to post their items and sell them around the Globe.
In e-commerce activities, supply chain and logistics are two most crucial factors need to be considered. Typically, cross-border logistics need about few weeks time round. Based on this low efficiency of the supply chain service, customer satisfaction will be greatly reduced. Some researcher stated that combining e-commerce competence and IT setup could well enhance company's overall business worth. Other researcher stated that e-commerce need to consider the establishment of warehouse centers in foreign countries, to create high efficiency of the logistics system, not only improve customers' satisfaction, but also can improve customers' loyalty.. A recently published comprehensive meta-analysis shows that e-service quality is determined by many different factors, and influences customer satisfaction and repurchase intentions among customers.
Some researcher investigated that if a company want to enhance international customers' satisfaction, where cultural website need to be adapted in particular country, rather than solely depending on its local country. However, according to this research findings, the researcher found that German company had treated its international website as the same local model, such as in UK and US online marketing. A company could save money and make decision quickly via the identical strategy in different country. However, opportunity cost could be occurred, if the local strategy does not match to a new market, the company could lose its potential customer.
Impact on supply chain management
For a long time, companies had been troubled by the gap between the benefits which supply chain technology has and the solutions to deliver those benefits. However, the emergence of e-commerce has provided a more practical and effective way of delivering the benefits of the new supply chain technologies.
E-commerce has the capability to integrate all inter-company and intra-company functions, meaning that the three flows (physical flow, financial flow and information flow) of the supply chain could be also affected by e-commerce. The affections on physical flows improved the way of product and inventory movement level for companies. For the information flows, e-commerce optimised the capacity of information processing than companies used to have, and for the financial flows, e-commerce allows companies to have more efficient payment and settlement solutions.
In addition, e-commerce has a more sophisticated level of impact on supply chains: Firstly, the performance gap will be eliminated since companies can identify gaps between different levels of supply chains by electronic means of solutions; Secondly, as a result of e-commerce emergence, new capabilities such implementing ERP systems have helped companies to manage operations with customers and suppliers. Yet these new capabilities are still not fully exploited. Thirdly, technology companies would keep investing on new e-commerce software solutions as they are expecting investment return. Fourthly, e-commerce would help to solve many aspects of issues that companies may feel difficult to cope with, such as political barriers or cross-country changes. Finally, e-commerce provides companies a more efficient and effective way to collaborate with each other within the supply chain.
Along with the e-commerce and its unique charm that has appeared gradually, virtual enterprise, virtual bank, network marketing, online shopping, payment and advertising, such this new vocabulary which is unheard-of and now has become as familiar to people. This reflects that the e-commerce has huge impact on the economy and society from the other side. For instance, B2B is a rapidly growing business in the world that leads to lower cost and then improves the economic efficiency and also bring along the growth of employment.
To understand how the e-commerce has affected the society and economy, this article will mention three issues below:
1. The e-commerce has changed the relative importance of time, but as the pillars of indicator of the country's economic state that the importance of time should not be ignored.
2. The e-commerce offers the consumer or enterprise various information they need, making information into total transparency, will force enterprise no longer is able to use the mode of space or advertisement to raise their competitive edge. Moreover, in theory, perfect competition between the consumer sovereignty and industry will maximize social welfare.
3. In fact, during the economic activity in the past, large enterprise frequently has advantage of information resource, and thus at the expense of consumers. Nowadays, the transparent and real-time information protects the rights of consumers, because the consumers can use internet to pick out the portfolio to the benefit of themselves. The competitiveness of enterprises will be much more obvious than before, consequently, social welfare would be improved by the development of the e-commerce.
4. The new economy led by the e-commerce change humanistic spirit as well, but above all, is the employee loyalty. Due to the market with competition, the employee's level of professionalism becomes the crucial for enterprise in the niche market. The enterprises must pay attention to how to build up the enterprises inner culture and a set of interactive mechanisms and it is the prime problem for them. Furthermore, though the mode of e-commerce decrease the information cost and transaction cost, however, its development also makes human being are overly computer literate. In hence, emphasized more humanistic attitude to work is another project for enterprise to development. Life is the root of all and high technology are merely an assistive tool to support our quality of life.
The e-commerce is not a kind of new industry, but it is creating a new economic model. Most of people agree that the e-commerce indeed to be important and significant for economic society in the future, but actually that is a bit of clueless feeling at the beginning, this problem is exactly prove the e-commerce is a sort of incorporeal revolution. Generally speaking, as a type of business active procedure, the e-commerce is going to leading an unprecedented revolution in the world, the influence of this model far exceeded the commercial affair itself. Except the mentioned above, in the area of law, education, culture and also policy, the e-commerce will continue that rise in impact. The e-commerce is truly to take human beings into the information society.
Distribution channels
E-commerce has grown in importance as companies have adopted pure-click and brick-and-click channel systems. We can distinguish pure-click and brick-and-click channel system adopted by companies.
- Pure-click or pure-play companies are those that have launched a website without any previous existence as a firm.
- Bricks-and-clicks companies are those existing companies that have added an online site for e-commerce.
- Click-to-brick online retailers that later open physical locations to supplement their online efforts.
Examples of new e-commerce systems
According to eMarketer research company, "by 2017, 65.8 per cent of Britons will use smartphones" (cited by Williams, 2014).
Bringing online experience into the real world, also allows the development of the economy and the interaction between stores and customers. A great example of this new e-commerce system is what the Burberry store in London did in 2012. They refurbished the entire store with numerous big screens, photo-studios, and also provided a stage for live acts. Moreover, on the digital screens which are across the store, some fashion shows´ images and advertising campaigns are displayed (William, 2014). In this way, the experience of purchasing becomes more vivid and entertaining while the online and offline components are working together.
Another example is the Kiddicare smartphone app, in which consumers can compare prices. The app allows people to identify the location of sale products and to check whether the item they are looking for is in stock, or if it can be ordered online without going to the `real´ store (William, 2014). In the United States, the Walmart app allows consumers to check product availability and prices both online and offline. Moreover, you can also add to your shopping list items by scanning them, see their details and information, and check purchasers´ ratings and reviews.
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