E-Commerce and Factors Influencing the Evolution of Electronic Commerce

Electronic commerce has revolutionized the traditional business process of buying and selling on the high street shops by deploying the Internet and technology to reach a vast customer base. The increased use of Internet by the general public and the growth of information technology products to support effective and service transaction over the Internet have apparently fueled the growth of electronic commerce. This statement makes it clear that the electronic commerce has achieved a key position in the business process of an organization.

The critical factors that contribute the growth of electronic commerce are:

  1. Growth of Internet:  The Internet has seen a tremendous growth in the past five years making it a potential place for communicating to many customers both efficiently as well as cost effectively. The process of e marketing by which a customer over the Internet is reached through electronic mails or other form of adverts in the websites that attract the attention of the target customers eventually conducting a potential sale. The fact that the Internet can effectively communicate to a mass segment of people irrespective of age, cast, color or sex makes it a potential tool to promote the products and services offered by n organization.
  2. Security and Data Protection:  The presence of strict laws enforcing the data protection and privacy of information along with the legal restrictions and guidance to conduct transactions over the Internet in a secured fashion is the major accelerating force for the growth of electronic commerce especially by providing the customers with the confidence and faith of severe action against any fraudulent activities or misuse of personal/financial information. This initiative of the government as not only encouraged the customers but especially the business organizations competing in the market to identify new customers and reach a wider demography with their products.
  3. Growth in Technology:  The growth of Internet was mainly due to the tremendous growth and innovation in Information Technology products that enable secure and fast transaction over the Internet. The growth of high-speed communication systems like Integrated Services Digital Network (ISDN) and security systems like Asynchronous Transfer Mode (ATM) etc., has immensely contributed for the unrivaled growth of Internet and Internet based business initiatives across the globe. Furthermore, the presence of sophisticated IT architectures like .Net Framework, etc., has further eased the process of developing applications and software packages that enable secure communication and transaction over the Internet thus providing the customers with the ‘Peace of Mind’ about the security of their information.
  4. Convenience Factor:  The customers opt for electronic transactions more due to the convenience associated with the process of shopping itself thus reducing the snag of commuting to the high street shops and eliminating congestion in busy places like London. Alongside, the authors further stress that the convenience is not only the physical rest but mainly the time factor whereby a customer can place the order for a product over the Internet at anytime he/she finds it convenient thus eliminating the major issue of time keeping and scheduling more important activities effectively. This justifies that the electronic commerce and especially the growth of commercial transactions have grown tremendously through appealing to the continence factor of the customers.
  5. Innovation in Business and Competition:  The growth of information technology has also opened the doors for innovative methods like data mining and Customer Relationship Marketing whereby an organization can identify potential customers and tailor its products based on the customer needs purely by means of the customer information held in their databases has apparently increased the competition to sky-high levels in every sphere of business across the globe. The companies competing in the market have thus started deploying the Internet as a potential source of revenue through the extensive implementation of the electronic commerce technologies.
  6. Reduced Operating Costs:  The costs involved with the operating of the stores in the high-streets and costs associated with the labor are greatly reduced by the one-time investment on the electronic commerce technology to deploy a robust and secure system in their company websites for conducting commercial transactions. The fact that the costs associated with the maintenance of the IT system so deployed is comparatively low to the costs associated with the establishing and management of stores/offices at numerous geographical locations. Alongside, the costs associated with the storage and transportation of the products to the stores are also eliminated in the electronic version of the business where the company holds the products in a central location in most of the cases with the manufacturer itself. This obviously reduces the financial overhead for an organization thus enabling it to invest upon more constructive areas for business development.

The aforementioned factors make it clear that the electronic commerce is increasingly replacing the trivial method of business transaction itself thus revolutionising the entire business process itself.

Electronic commerce is broadly classified into two major areas. They are;

  1. Business-to-Business (B2B) Electronic commerce: This is the type of electronic commerce that enables transaction between two business organizations over the Internet. This kind of transaction is mainly conducted between companies and the banks with which they operate their finance and commercial transactions. Alongside, the commercial transactions between organizations increase the speed as well as the security of the transaction thus enabling quick response to a critical situation in the business. Since this report is focused on the analysis of the retail business where the transaction is with the consumers comprising the general public, a detailed analysis of B2B electronic commerce is out of the scope of this report.
  2. Business-to-Consumer (B2C) Electronic Commerce: This is the process of electronic commerce where the commercial transaction is conducted between the consumers in the general public with the company selling the products and services. The transaction in primarily through the plastic payment (i.e.) payment through credit/debit cards or through electronic money transfer. It is evident that electronic commerce is achieved only when the transaction is conducted online over the Internet. The B2C mode of commerce is the one that is deployed in the retail sector business organizations which is discussed in the next section.

The B2C mode of electronic commerce is a very sensitive issue for the companies involved because of the reason that the entire process of ordering and payment transaction is not face-to-face and hence the need to develop the confidence among the customers to rely upon the Internet services to use their credit/debit cards or other plastic payment option to conduct the transaction across the Internet. The B2C mode of electronic commerce must not only address the customer demand but also develop the reliability of the entire process through efficient management and secure processing of payments. This makes it clear that the B2C mode of electronic commerce must address security as well as flexibility issues in order to gain sustainable competitive advantage in the market.

Furthermore in this mode of electronic commerce, a negative impression created among one customer is enough to ruin the entire system itself because of the fact that the consumers always demand 100% reliability with respect to the payment and transaction issues both in the traditional face-to-face shopping as well as across the Internet.

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