Electronic commerce is the utilization of the internet to generate and execute business deals. Electronic commerce is a new area in global trade that involves trading of goods and services across borders electronically. It is the use of telecommunication networks to produce, advertise, or sell goods and services. With the advancement in technology, electronic commerce has been growing drastically, calling for the attention of the government and international organizations to ensure that it does not get out of hand.
Some few years ago, many people viewed E-commerce as an irrelevant business and unsuitable because of the use of Electronic Data Interchange (EDI) which had been introduced in the 1970s (Chan, et al 2001 p. 23). With EDI, businesses would send invoices and purchase orders over the internet but it was not a reliable method and many people had negative views toward it.
However, their views were abandoned when many retailers realized the significance of electronic commerce in reaching a large number of potential customers. To understand the advantages of e-commerce, it is good to look at a brief history, some of the requirements of E-commerce as a form of business, the benefits and opportunities that a business stands to gain from E-commerce, and also the limitations and challenges that businesses are faced with as result of trading over the internet.
History of e-commerce
Modern e-commerce started in the year 1990 when the World Wide Web. (WWW) was discovered by a scientist named Tim Berners-Lee. However, commercial trade was prohibited until five years later when security protocols were discovered.
These protocols allowed companies to trade using the internet and by the early 21st century, many companies all over the globe were offering services and products over the internet. Today, over one million businesses are trading over the internet and this is owed to the development of information technology. Customers have a wide variety of goods and services to choose from and purchases and payment transactions have become easy over the internet.
Requirements for E-commerce
Just like any other business, E-commerce requires many activities in its start-up. First, a business plan has to be designed that reflects the nature of the business, sources of income and expected income and expenditure. This kind of a business requires some funding to start it up just like any other form of business; it needs customers, marketing so as to reach potential customers, strong customer care, and proper management of finances, and human resources.
Before starting up the business, one has to be involved in intensive research in order to learn more of what is being offered on the internet. The internet provides good information which an entrepreneur can rely on before launching new products. This information helps one to be creative and come up with innovative products that are likely to attract a significant number of people (Wielclaw, 2008 p.1). One learns more about customer service and how to market new products over the internet.
To be an e-tailer, one requires an online store which can be outsourced or hired from the current ones. This store requires a merchant account where customers’ credit cards can be processed easily for quick transactions. This includes a secure server or a computer system that protects customers’ credit card numbers from being read by people who are not supposed to (Brandit, 2000 p. 64).
The online store goes hand in hand with an online order form, which is completed by customers while purchasing products. This ensures that there is proper documentation, and one can control the movement of his/her products. An online store ensures that both the customer and the retailer are safe from criminals and that confidential information remains private.
The most important thing in E-commerce is the use of a website. This is where products are advertised and marketed. It contains all the information related to a product, including their design, how they work, what they cost, and their importance, among other things. The website needs to be properly designed and promoted to ensure that it is up to standard. To do this, one requires to hire a professional who can design and maintain it regularly.
However, one can still rely on the free information available over the internet to help in designing and maintaining the website. At times the cost of hiring a professional is too high to be afforded by a small scale trader but one can rely on the information available to design a website.
With the current technology, there are many programs available that can allow a business to design its own website. The future looks more promising because there is now a new protocol called the Hot Java which makes use of video clips thus enhancing marketing (Chaudhury & Jean-Pierre 2002 p. 24).
The internet is a worldwide system of computer networks. The information posted on the internet can be accessed by anyone who knows how to use it. It is worth noting that when businesses decide to sell their products online they are attracting some risks which may come about as a result of exposing crucial information. This information can be used by fraudsters to imitate the company’s products or to destroy the reputation of a business.
To prevent this, every e-business has to install software known as 3-D secure protocol (Anon. “3-D secure merchant plug-in; Payment authentification for web shops” 2006 p.2). This ensures that unauthorized people are prevented from accessing the critical systems. This is done by the use of a merchant plug-in (MPI) which is connected to the centralized directory for authentication of enrollment of a card holder. With MPI, a cardholder browses through merchant shop to select goods or services for purchase.
After identifying the products, the merchant shop initiates a new payment transaction. The merchant shop then receives card details through an encrypted SSL, and it passes them to the MPI. If enrolled, the issuer is located by the MPI and is requested to authentify the card holder, and the results are transmitted to the merchant for purchases. If the card is not enrolled, the merchant has a right to continue or stop the transaction.
Benefits and Opportunities
The major advantages of e-commerce are increased sales volume and decreased costs. With the advancement in technology, millions of people are now relying on the internet for their day to day activities. This means that there are millions of customers who are likely to get exposed to a new product once it is launched over the internet. This increases the chances of a business succeeding in the current economic hardships.
Recent research shows that, there are approximately 10 million people who are using the internet today and this is expected to increase to 100 million in the next five years. With the high number of potential customers one is assured of success in the global world which may not be so if the products were sold locally.
The internet covers a wide global area thereby enabling businesses to send or receive messages from diverse geographical areas and explore markets and new opportunities. Businesses can now venture into markets that were inaccessible before and market their products. The internet offers a lot of information which a business can rely on to improve its products and learn more about customer service (Zuckerman, 2009 p. 20).
Transactions made over the internet consume less time than having to walk to the physical location of a business. Both parties save time which can be used for other productive work. The customer feels relieved off the burden of moving up and down looking for this or that. The internet markets a wide variety of both services and goods that can be purchased by a click of a button. The process has even been made easy by the invention of payment mechanisms and the whole process of purchase can be completed within a few hours.
The customer also benefits from reduced transport cost since the products are delivered to the doorstep. Another advantage is that a business or customers enjoy an extension of trading hours; one can trade for 24 hours a day in seven days using the internet as opposed to other forms of businesses which limits the time when businesses can operate or when customers can place orders.
Another benefit of e-commerce is reduced costs. The cost of running a business over the internet is much lower than running a shop. The marketing costs are much lower than running an actual shop which requires the vigorous advertisement to create public awareness. The internet covers a wide area and thus one is assured of a big coverage by just placing products on the website. Few employees are required for this business because of reduced paperwork (Bora, 2010).
One is relieved of the burden of paying monthly rent for the business since most of the transactions are conducted online which can be done from any place such as the house. With the current state of urbanization, rental houses have become expensive and consume a significant sum of money. A lot of businesses have shut down because of lack of money to pay rent.
This becomes worse if the business is located in major towns and cities where one incurs other costs apart from the normal rent. Also, a lot of businesses are concentrated in major cities and are involved in similar products and services; this reduces the number of potential customers.
With e-commerce, businesses can create process, distribute, store, and retrieve information at reduced costs. For instance, the use of e-mail and online advertising channels is cheaper than the use of television as an advertising media. Internet commerce provides customers with an opportunity to search for products that are offered in the global market.
With this information, they can make informed choices before deciding which products to go for. Since there is no limitation on how or when to access the internet, customers can carry out transactions in any shop of their choice from any location (Miller, 2002 p. 625). They can compare the prices and quality of goods and services before making purchases.
Challenges and Limitations
They are many people conducting businesses over the internet, and this call for unique products; one can not market the products that are sold by almost everyone and expect to thrive in the global market. Statistics show that more than 74% of businesses in North America are planning to go online for intercommunications, and about 23% are interested in E-commerce. This means that E-commerce is a competitive business, and only those who are fit survive.
There are so many large companies that are already selling their products over the internet, and if one is to succeed in this business, he has to be involved in a lot of research and creativity to make sure that his products have some unique features that attract a large number of people. Most e-tailers target the youths (aged 25-50 years) expecting to make income worth 30,000 dollars per year plus some few dollars of disposable income.
Majority of people who are using the internet today are covered in this age group and reaching this audience, businesses have to part with a significant amount of money (Utah, 2007). One of the marketing techniques to concentrate on in this case is the use of a well-designed website. This does not only attract a large number of potential customers but also brings in big rewards.
A business can even choose to place its logo at the top page of some of the popular internet sites with a link that directs customers to the business website for more details. Some internet sites have multiple pages that allow customers to view more details of the products and services being offered
E-commerce has a limitation on the type of products that can be sold over the internet. There are some products that can not be sold over the internet because they require face-to-face selling. These products are technical in some sense and others have some unique features that require the seller to explain to the customer. This can not be done over the internet because there is no direct communication. After a transaction has been completed in e-commerce, products are shipped to the customers.
However, they are some products with high shipping costs and it would be unprofitable to sell such products over the internet. While conducting E-business, one has to be extra careful on how the products are marketed and advertised because they are sold to many parts of the world where there are so many fraudsters who many are interested in the intellectual property (Turban, et al. 2004 p. 24). One has to learn how to control ideas and make sure they do not get out of hands.
The rate of crime has gone up and many people are using the internet to corn people. Some customers have been robbed off their money in the name of commerce. Others have lost significance sums of money trying to locate the fraudsters without success. This has reduced the level of trust in E-commerce, and many customers are afraid of trading over the internet.
Before making a purchase the customer needs to be reassured that the order placed on the website is authorized and comes from the indicated source. This can be done through the use of electronic signatures and trusted third party validation (Anon. “3-D secure merchant plug-in; Payment authentification for web shops” 2006 p.4).
Many E-businesses are confronted with the challenge of which mechanism to use to ensure that payments are simple and reliable. Businesses have to make sure that the mechanism adopted is safe to both parties and that it is reliable at all times.
Some banks charge high fees which can be costly to a business. E-business has to put this into consideration when choosing the payment mechanisms. Some of the mechanisms that can be used include but not limited to: Electronic cash mechanisms, virtual banks, and secure Electronic transactions (Brandit, 2000 p. 2).
Today, the Internet has become a public, self-sustaining, and a cooperative flair which many people all over the world can access. Many internet users use the electronic mail (e-mail) while others carry on live conversations using the Internet relay Chat (IRC). World Wide Web (WWW) or sometimes called the Web is the mostly used Internet part where a lot of information can be accessed. With the way technology is growing, it seems the world will become more dependent on the internet for the day to day operations.
Information technology has advanced to a level such that even organizations rely on it for their operation. The government has introduced e-government where all the information relating to government issues can be found on the internet. It has also become a medium for advertisement and new products are launched on the internet.
E-commerce is faster, convenient, and reliable in the transmission of information. This helps in increasing productivity in companies. Monitoring and evaluation become easy due to the use of computer networks. With information technology, a lot of information can be accessed using the web. Customers have a wide variety of goods and services to choose from before making purchases. They also benefit from reduced transport costs since most of the products are delivered to their door steps.
E-commerce is time-consuming for both the business and the customers since every thing is done online, and the trading process can go on for 24 hours seven days a week. However, e-commerce has some disadvantages, which include a limitation on the type of product to be sold, competition, increased crime rate, and payment mechanisms.
Many companies allover the globe are trading on the internet, and this has increased competition, and businesses have to conduct regular research so that they can improve their products before they reach the death phase. I would conclude that internet commerce is safe. It has many benefits than the disadvantages, and it is relatively safer to conduct business online than any other form of business.
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