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[JamesWilk]

This is for a project at school.


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Old November 23rd, 2005, 08:13 PM
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Default E-Commerce
This a report that for my group project for school about E-Commerce
What Works and What Doesn't in E-Commerce

With the rapid growth of Internet, people all over the world are getting connected. E-commerce is an attempt to make use of this facility to conduct transactions electronically. E-commerce is defined as the process of sharing business information, maintaining business relationships and conducting business transactions by means of telecommunication networks.

E-commerce originates from EDI. EDI(Electronic Data Interchange) is computer-to-computer exchange of standardized electronic transaction documents. However, E-commerce is not restricted to EDI. While EDI involves only business-to-business transactions, E-commerce involves business-to-consumer transactions also. E-commerce involves support for interpersonal communications, transfer of money and sharing of common databases.

Benefits of E-Commerce:

E-commerce has several benefits over the normal manual trade. As the reach of Internet is vast, the Merchant can sell goods to a larger number of people. Moreover, a merchant can reach a customer who is physically too far away. The customer, on the other hand, can buy something from a merchant who would otherwise not have been accessible to him. He has got a wider choice. Moreover, unnecessary delays that are involved in conducting a trade (like moving to the place where trade is conducted), can be cut short. This also reduces the overhead costs in certain cases. Take the case of a normal auction. You have to pay for the person conducting the auction and the place where the auction is being held. However, if the auction is conducted on the Internet, you just have to pay for the web application conducting the auction, which in general will be too cheap or might even come for free. The other advantage to the customer is round-the-clock availability of goods/services. The demands of customers can be met at awkward hours for there is no person needed to conduct the trade. The seller can have a web application selling his goods.

However, there are certain problems related to E-commerce that has greatly stalled the progress of E-commerce. The most obvious of these are those related to security and privacy. People won't like to give information over the internet related to finance unless they are very sure that the information cannot be accessed by someone not authorised to get the information. Money transaction has to be done securely. Moreover, some transactions demand anonymity of the customer. All these issues are very complicated and there has not yet been any universally accepted solution to it. The other reason for people being wary of E-commerce is that the legal framework for E-commerce is not properly defined.

A number of solutions are being proposed to take care of all these problems. Though none of them can be applied to every situation, E-commerce is surely catching up. Given the benefits it provides, the related problems must be solved (in a cheap and efficient manner) . There is no way out. However, till then this will remain restricted to the merchants who can afford to pay for installation of costly protocols that are made to solve their individual problem.

E-commerce framework is an established way to ****yze the issues related to E-commerce and to develop a complicated E-commerce system. This is a hierarchical structure comprised of several levels, with the lower levels providing functional support to the higher levels.

The three meta-levels are:

* Technological Infrastructure: This involves the software, hardware and telecommunication facilities that provide the backbone for all sorts of electronic transactions.
* Services: This involves such services as messaging, finding information and delivering information, negotiations, transactions and settlements.
* Products and Structures: This level is responsible for the direct provision of commercial services to consumers and business partners, inter-organization information sharing and collaboration, and organization of electronic markets and supply chains.

Most of the present work being done in this field is targeted at building services on the top of the existing technological infrastructure and then later combining these services to provide electronic market structures where a person can find a large number of goods supplied by different merchants.

The most important issue related to E-commerce is money transfer. How do I pay for a good bought over the Internet securely and without divulging any additional information regarding my financial status ? Several payment methods are currently being implemented by different vendors. These electronic payment protocols can classified into five categories. They are:

1. ATM-model Transactions involve only a Financial Institution and an account holder who deposits or withdraws money from his/her account.
2. Unmediated Two-Party Transactions involve those methods in which the buyers and the sellers are the only two parties involved in the transaction. This allows barter and service exchange.
3. Mediated Three-Party Transactions involve a mediator in the form of a Third party whom both parties can trust. This involves payments with credit or debit cards or cheques.
4. Micro-payments involves payment protocols specifically built to deal with electronic payments where service or information is metered out and charged on very small increments.
5. Anonymous digital cash involves such payment protocols that allow for the privacy of the cash user by allowing him to be anonymous. An enormous amount of work is being done in this field as it has the widest applicability. Some of the payment methods in this field are E-cash, NetCheque and Payme.


E-commerce may represent a small percentage of economic activity today, but private sector forecasts predict that the value of e-commerce will continue to have enormous growth. The International Data Corporation (IDC) estimates that the global e-commerce market will grow to about to $6.5 trillion by 2006. This would be a 333 percent increase since 2003. Canada is well positioned to take advantage of the e-commerce market, but must move quickly.

E-commerce provides many benefits such as expanded markets, lower-cost regional and transnational trade, reduced overhead costs, better inventory management, a greater ability to service niche markets, and the ability to better service customers.


"Three particular pitfalls or mistakes that will undercut or delay the benefits of e-commerce are:
1. Broad expectations.
We must avoid over-expecting—or over-promising—e-commerce lest we create a backlash when its promises are not fulfilled. E-commerce will not, in and of itself, correct all the industry's problems
2. Rote applications.
Little or no improvements will come from the rote imposition of e-commerce techniques on bad practices. Ensuring the appropriate application of e-commerce requires us to ask more than whether we can apply e-commerce to a practice and to consider whether we should... For example, it does little good, and may even do harm, if suppliers simply receive inaccurate information more quickly via the Internet.
3. Incomplete implementation
The benefits of e-commerce will be restricted if we do not recognize its full system implications, and instead implement it in limited ways that only partially meet its requirements. For example, some e-commerce benefits depend on replacing people with bytes. To the extent that we do not reduce headcount, or even worse, run parallel people/byte systems, e-commerce's benefits will be limited.

[the above three points come from University of Michigan Transportation Research Institute]


Selling Material Goods: Finding a Market Niche

E-commerce benefits in transferring an existing business online are obvious: you are building on established skills and an existing customer base.

New companies selling material goods won't have those advantages, but it's worth remembering that a brand name doesn't mean so much online, as every e-store is just a click away by the impatient customer. Reliability, price and delivery times are what customers look for.

No one should underestimate the resources needed to bring an e-commerce store into being. Even with the "all-in hosting" and "out of the box" solutions, it takes time, effort and flair to create a compelling website. And a good many more months to set up warehousing, office accommodation, fulfillment arrangements, staffing and a legal presence.

After that comes the long cash drain while traffic and sales slowly build.

Nonetheless, planned and built properly, the resulting good e-shop can be just as effective as its big chain counterpart -- provided it remembers the rules of Internet selling.

Most things have now been done. You can't compete with the likes of Amazon Books or eBay auctions unless you have their millions to play with, and even then you're very unlikely to catch up.

Your advantage lies in what they cannot accomplish, in what is called niche marketing.

Every city can support a few bookstores, for example, but never one that severely restricts its stock to a specialist interest. Yet this would be eminently suited to the Internet. Amazon carries only the smallest fraction of what's available, and devotees would be happy to patronize the specialist outlet.

The point is worth laboring. To compete in the free-for-all of the Internet, you need to establish your specific benefits, namely:



- establish sufficient demand for your product or products.


- research and define your own market niche.


- sell in a manner or at a price that your competitors cannot or would not wish to match, e.g.


unrivaled selection.


enthusiastic knowledge and expertise.


personalized service.


useful help sheets.


detailed information on products.


superb after sales service.


- maintain your selling advantage, when


sales really take off.


competitors move against you.


Competing in a Market Niche

Suppose you find your proposed market niche is already occupied, which is often the case. Other companies have got there first, and there seems hardly the opportunity for another player. That could be the end of your business, if it is only online, if you are adding an online component to your company, as in this case, then it shouldn't be a problem.

Recommendations

We would highly recommend using e-commerce for Maple Threads, clothing company, as it provides you with an expanded markets, lower-cost regional and transnational trade, reduced overhead costs, better inventory management, a greater ability to service niche markets, and the ability to better service customers.
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