Electronic Commerce Fundamentals: Definitions, Benefits, Risks, and Impacts
Electronic Commerce: Core Concepts & Impact
Electronic commerce (E-commerce) is the use of computer networks, mainly the Internet, to buy and sell goods and services and exchange information.
Key E-commerce Definitions
- B2B (Business-to-Business): Refers to transactions made between companies, which can include private companies, nonprofit organizations, or governments.
- B2C (Business-to-Consumer): Transactions between businesses that sell and private customers who buy.
- C2C (Consumer-to-Consumer): Sales that occur through electronic bulletin boards, classifieds, or online auction sites. In such transactions, both the buyer and seller are private customers.
- C2B (Consumer-to-Business): Transactions between clients or individuals who sell products or services to companies.
Benefits of E-commerce
Business Benefits
- Improved Distribution: E-commerce sites offer certain types of providers the opportunity to participate in an interactive market where distribution or sales costs tend towards zero.
- Electronic Commercial Communications: Most companies now use the web to inform customers about the company, its products, or services. This facilitates business relationships through internal communications with other companies and customers.
- Operational Efficiencies: The business use of the web reduces errors, time, and cost overruns in information processing.
- Customer Retention Capability: Through the implementation of communication protocols and strategies, the end-user of the company’s website can raise concerns, submit requirements, or simply comment on products or services.
Customer Benefits
- Access to more information.
- Facilitated market research and comparison.
- Lower costs and prices.
Risks in E-commerce
- Changing Business and Technological Environment: Companies and customers desire the flexibility to change business partners, platforms, and networks according to their will.
- Legal, Political, and Social Issues: There are open issues concerning electronic commerce, such as electronic signature validity, legality of electronic contracts, violation of trademark and copyright, loss of trademark rights, loss of trade secret rights, and responsibilities. Additionally, laws, economic policies, and government censorship must be considered.
- Privacy and Security Concerns: Most users do not fully trust the web as a transaction channel. Currently, purchases are often made using credit card numbers, but entering this information online without sufficient knowledge of security measures is not yet universally safe.
Impacts of E-commerce
- Virtual Enterprises: E-commerce provides an opportunity to utilize external business partners without a physical location, establishing relationships based on electronic transactions.
- Small Sellers Entering the Global Market: Traditionally, global markets have been open only to multinationals. E-commerce makes them accessible to smaller companies due to the low amount of resources required to operate abroad.
- Transformation of Retail Stores: The growth of home shopping and direct sales by manufacturers leads to a drop in prices and, consequently, a reduction in commissions for traditional retailers.
- Pressure on Customer Service, Development Cycle, and Costs: E-commerce increases the need for rapid and direct delivery. The value chain becomes less tolerant of the need for inventory and storage. This inevitably leads to increasing competition and the need for electronic money.