Today you hear a lot about electronic commerce (or just E-Commerce) and even use this term in your everyday conversations, but do you know its full meaning? Chances that you know only a part of it are high, so get ready for the deeper study – in this post you will find information about the essence of e-commerce.
Electronic commerce is a specific type of industry which involves using the usage of electronic systems at least on one stage of selling and buying of products or services. It is also a way of sales gaining in e-business. Modern e-commerce often uses the World Wide Web, telephones, e-mail, mobile devices, social media and other technologies. Among them are:
Mobile Commerce – a store in your pocket;
EFT (electronic funds transfer) – money transfers within different accounts through different computer-based systems;
SCM (supply chain management) – management aimed at supply chain activities for the establishment of a competitive infrastructure;
Internet Marketing – products and services promotion and marketing over the Internet;
OLTP (online transaction processing) – a group of information systems which work with transaction-oriented applications;
EDI (electronic data interchange) – data interchange between computer networks and systems;
Inventory Management Software – different systems aimed to monitor deliveries, inventory levels, orders and sales;
E-commerce starts its history in 1979 with the invention of online shopping. Three years later France Telecom introduced Minitel – a pre-World Wide Web online service. Within the next few years e-commerce was represented by MCI Mail, CompuServe, Prodigy, CPUC and other services. In 1984 Electronic Mall was launched by CompuServe. It was the first e-commerce service which became comprehensive.
The year 1984 is also famous for the appearance of Electronic Commerce Act, by which consumer rights were protected online. Within the next ten years, the first web browser appeared. All these led to the emergence of online stores (www.books.com, 1992), online orderings (Pizza Hut, 1994), online banking (Stanford Federal Credit Union, 1994) and AppStores (Electronic AppWrapper, 1993).
1995 was the year of birth for Amazon.com, eBay.com and several internet radio stations. During next five years, various B2B (Business to Business) marketplaces appeared in India (IndiaMART), Korea (ECPlaza), China (Alibaba Group) and other countries.
2000 became the year of the dot-com bust with a culmination on March 10. The next decade was a time of rapid growth of e-commerce as a sector of economy: PayPal was acquired by eBay; Business.com – by R.H. Donnelley; Zappos.com – by Amazon.com; Retail Convergence – by GSI Commerce; Quidsi.com – by Amazon.com.
Forms, components and major applications
E-commerce can be separated into three subdivisions: business-to-consumer, business-to-business and consumer-to-consumer. B2C includes virtual storefronts. They can be represented on different websites, but more often virtual storefronts are gathered into one solid structure – a virtual mall. The second element of the business-to-consumer subdivision of electronic commerce is the collection and use of information about consumers in particular and the market as a whole. Much attention is paid to social media and web contacts for data gathering here. This topic also has an opposite one – communicating with old customers and searching for new ones. It also depends on social media and web contacts. B2B relies on buying and selling, data exchange and the security of transactions and other activities within companies. This scheme excludes the participation of the final customer in a whole process. C2C is associated with online auctions like eBay. A company plays the role of an online platform, where consumers interact with each other.
It is also possible to split e-commerce into three forms by the type of services and goods. The first one relies on consumption of digital content (B2C). For example, you buy applications on Google Play Store or music on iTunes. The second one is more traditional because it is based on ordering of common goods and services (B2C and C2C). Asos.com or other similar websites can be an example. The third one provides different meta services for other types of e-commerce (B2B). Electronic commerce which is based on common goods, is inextricably linked to the system of distribution channels. According to this constellation there are two different types of companies: Pure-Click and Bricks-and-Click. Pure-Click companies start their existence as a website without any antecedent activities in offline. Bricks-and-Click companies create websites to expand their influence on different markets.
Another very important aspect of electronic commerce belongs to business applications. They exist in a plethora of forms, so let’s have a look on the most common of them.
The first one is document assembly. It is a group of applications or systems which are used to create electronic documents on the basis of pre-existing data or text. Nowadays most popular solutions are Business Integrity, HotDocs, Intelledox, Xpertdoc and others.
Payment systems are operational networks which are used to link different bank accounts together to provide higher functionality of money exchange. There are international and domestic payment systems. For example, SWIFT is the global provider of such services.
Automated online assistants form a group of programs which are used to provide different customer services on a website. Such applications are based on artificial intelligence. On ikea.com you can find an icon at the top of the homepage which turns on the automated online assistant. Just click it, and you will see a good example for this group of programs.
Online shopping also forms the big group of applications which is often highly associated with order tracking and includes mobile shopping.
Another enabling environment for business applications is online banking.
This list can be supplemented by electronic tickets, teleconferencing applications, shopping cart software and other items.Special attention should be paid to group buying, as a highly important phenomenon in e-commerce which leads to price reduction in case a certain amount of customers intends to buy a product or service.
Market impact and future perspectives
During the next few years electronic commerce will significantly increase its impact on the market. As a result, we will see a slowdown of retail sales followed by its reduction in the total amount of sales and rapid growth of online sales. As a consequence, the number of jobs in offline retail will decrease, but this will be offset by new positions from the e-commerce sphere. According to Baynote, the industry in US jumped from $231 billion in 2012 to 262 this year showing a 13% growth. During the next 4 years, online sales will get 10% of the market, with the increase to $370 billion in 2017. This trend will lead to the emergence of 161,681 positions, so the total amount of jobs in online retail will surpass the 500,000 mark.
Significant role in this process is played by mobile commerce (m-commerce). The popularity of mobile devices is increasing rapidly. According to cnbc.com, over half a billion people will make purchases using their mobile devices.
The today’s leader in online retail is North America, but the Asia-Pacific region, led by China, is expected to overtake it in almost 2.5 times.
The other regions with high potential are CIS countries, India, South America and Africa. The increasing Internet audience of CIS countries is already the biggest one in Europe, but e-commerce is a relatively new phenomenon there. The main problem of India is its payment environment. Cash-on-delivery method is a great obstacle, which prevents the rapid growth of the e-commerce in the country. For South America and Africa electronic commerce is also a new trend. Two pillars of e-commerce here are mobile Internet and social commerce.
Now a few words about major trends of e-commerce for the nearest future. The first one is personalization. It will help to collect data about consumers and provide them with the most suitable information about services and goods that they could be interested in. Both sides of B2C relations will benefit from personalization. As a result, we will see a social media importance growth.
The other important thing is cross-channel integration. Major players of the market already use it. They sell their goods or services not only in stores, but also through websites on desktop computers and with the help of applications on mobile devices. Even now, we can see strict requirements to the design of websites and applications as a part of cross-channel integration.
Furthermore, changes will affect the delivery system, so that customers will get more options regarding the delivery time. The growth of competition among companies will either significantly increase the value of loyalty. This process is inevitable due to the fact that different brands will offer similar products, so loyalty will become one of the strongest weapons in a struggle for consumers.