E-commerce (EC) made EC

E-commerce (EC) made EC

Introduction:

Electronic Commerce (EC), more popularly known as E-com is the most familiar and yet most perplexing stuff for many a business house today. Especially, if you happen to be a metroite (someone living in a metro like Mumbai/Chennai etc), you cannot afford to close your eyes and ears to all the big plays happening around you. This article is aimed at explaining the basic founding principles of e-com and sets out to analyze the impact of e-com in India and its future in the light of current living conditions in India.

E-Commerce everywhere:

Electronic Commerce seems to be everywhere these days. It's nearly impossible to open a newspaper or magazine without coming across an article about how E-Commerce is going to change all our lives. Similarly, one cannot pass by a road (however small it may be) in any metro without seeing atleast 5 to 10 dot.com banners. Businesses of all sizes are bombarded with adverts that seem to imply that any company not investing in E-commerce will be left behind.

Whoever named the Internetwork as the "World Wide Web" (WWW) did it so a bit prophetically. This name suits so well because so many small business people trying to make fast money get on to the web without any strong business principles and revenue models and finally fall a prey to the giant spiders that have spun the web and were waiting for an opportunity to catch a victim. The problem for many small businesses is that while they appreciate the potential of doing business on the Net, it is difficult to determine the best way to start off.

What is E-Commerce?

Getting down to business, one has to know what essentially is connoted by the term E-Commerce. We practically have come across businessmen establishing a branch or a division called as "E-commerce Consultancy services" within their manufacturing / trading setup which do nothing beyond bearing the title board.

Put in crude terms, E-commerce is an electronically enabled version of age-old commerce that all of us are familiar with. Just to refresh your memory, you may like to note this all-famous definition of commerce by J.Stephenson- Commerce is "the sum total of those processes which are engaged in the removal of hindrances of person, place and time in the exchange of commodities."

There is nothing great about E-Commerce nor is it an incomprehensible theory. The only major differentiating factor is that in E-Commerce, all the transactions take place without direct face-to-face interaction or immediate human intervention in all processes of the transaction. The complete transaction happens over the internet (the web) in an automated environment and in some cases, extends till actual physical delivery of goods to the buyer's place.

B2B and B2C E-commerce:

The most prevalent and talked about types of e-commerce are B2B and B2C E-commerce groups. In these abbreviations, 'B' stands for business and 'C' stands for consumer.

The B2B Segment:

Worldwide business-to-business (B2B) electronic commerce reached US $145 billion in the year 1999. By the year 2004, it is projected to reach $7.29 trillion with North America accounting for nearly 40% of this (Source: Gartner Group).

Pretty soon most business will be E-business to some extent. It is clear that B2B E-commerce involves businesses selling things to each other over the Net, but there's a lot more to it than that. Let us take a look at what B2B E-Commerce is all about, and why it is becoming so important.

A significant proportion of business has been carried out for many years electronically by using EDI (Electronic Data Interchange), proprietary purchasing systems and email. The difference the Internet has made is that instead of expensive and complicated point-to-point links or proprietary networks having to be set up, there is a standard, (reasonably) reliable and secure universal communications system which companies can utilize to transact business – the Internet. It is, in effect, a kind of virtual universal market square on which any business can set up its own stall and begin trading.

It’s easy to see that an on-line marketplace, which mirrors the physical marketplace, will make it easier for companies to transfer information, and make financial transactions quicker and more efficient. The real point about business on the Net is that it allows completely new ways of doing business to develop.

The B2C Segment:

This segment covers all those famous on-line shopping portals or e-malls as they like to call themselves, which aim at selling products or services to the ultimate consumer rather than to any intermediary. A business house can be an end-customer in one case and be an intermediary in another.

Step-by-step explanation of the process:

The e-commerce process can be explained in plain terms with a simulated example as under:

  • A probable buyer (browser / user) logs on to the e-commerce site or the commerce enabled web site of the seller / dealer.

  • The buyer takes a look at the various products available on the site and selects one that can satisfy his needs.

  • Before finalizing his purchase, the buyer takes a peek at all the information available on the selected product and all other competitive products available on the net, including but not limited to the same web site where he has finalized his purchase.

  • On being satisfied about the quality or brand of the product, the quality or brand image of the dealer / e-tailer, and about the safety and security of having a on-line financial transaction over the web, the buyer finalizes his purchase by closing his shopping cart and going to the payment processing page on the web site which normally is kept on a "secure site". (Many Internet sites are set up to prevent unauthorized people from seeing the information that is sent to or from those sites. These are called "secure" sites.)

  • The buyer verifies the total quantity of purchases and the related value and then submits his credit card information on the payment processing web page. (If you are about to send information (such as your credit-card number) to an unsecure site, your browser can warn you that the site is not secure. Again, if the site claims to be secure but its security credentials are suspect, your browser can warn you that the site might have been tampered with or might be misrepresenting itself.)

  • After verifying the availability of funds in the buyer's account, (this also is done automatically in most cases abroad but India is yet to adapt to this) the e-tailer completes his part of the promise by e-delivering the product (if it is a product that can be delivered online such as software key or an e-book etc) or by organizing physical delivery within the contracted time as may be appropriate.

  • If the buyer has any problems in the meantime, he gets in touch with the customer service department of the e-tailer by mailing them and gets an almost immediate response to his queries. (This customer service process is expected to create big businesses in the future as many e-tailers are willing to out-source this process to other Companies).

This completes the e-commerce process cycle.

E-Commerce in India:

E-Commerce in India has rather remained calm and has not reached the great predictions put forth earlier by the enthusiastic net watchers. This is basically because of the fact before putting their businesses online, none of the marketers have pondered on the obvious questions about the psyche governing the buying behaviour of Indian consumers. And it is only fair to accept that the "WYSIWYG" principle (What You See is What You Get) does not apply to Indian Conditions as there are so many incompetent dealers and untrustworthy Companies who promise to deliver something but deliver something else of a bad quality.

It may be worth noting at this stage that the world's largest e-tailer Amazon.com has recently posted a loss of $ 720 Million. However, losses to Amazon.com notwithstanding, e-commerce has progressed well in the Americas on two counts- faith in technology and the brands. We should take a lesson from the mistakes committed by others and learn to grow up with the help of these experiences.

In the current scenario, Indian Portals are totally dependent on Advertising revenues to support their living, which is not a right revenue model. The experience around the world show us that most of the giant portals are happy to restrict ad revenues to just about 20% of their total revenues and to gain the balance 80% through e-commerce activities, whilst in India, the reverse is true (at least in the current conditions).

Here is another lesson to be learnt. Instead of scouting around for garnering more advertisement contracts, the Portals should try to boost and develop their e-commerce activities by offering great deals on their sites (such as the ones recently done by Jaldi.com). However, they may try to immediately sever all sorts of advertising contracts as that might prove to be a suicidal effort. Instead, there should be a shifting of and re-alignment of priorities.

Crunching the Numbers:

According to International Data Corporation, the total number of Internet users worldwide is expected to grow from approximately 140 Million in 1998 to 400 Million by 2002. IDC also estimates that revenue from electronic commerce spending worldwide will grow at a rate that averages 98% from $50.4 Million in 1998 to $7336 Million in 2002. Out of these, Indian internet commerce revenues are expected to increase at an annualized growth rate of 260% from $3.5 Millions in 1998 to $593.6 Millions by 2002, according to an IDC Estimate.

The ability to exploit the E-commerce potential is constrained by certain factors such as the bandwidth limitations. Bandwidth refers to the measurement of the volume of data capable of being transported in a communications system in a given amount of time. Bandwidth rates are expressed in terms of KBPS (Kilobits per second, or thousand of bits of data per second) or MBPS (Megabits or millions of bits per second).

Internet usage in India is expected to explode in the next three or four years, from about three million now (estimated) to anywhere between 30 million (by 2004, according to a CLSA Report - India's Internet Revolution) and 70 million (by 2003, according to a Goldman Sachs Report - Asia Internet: Outlook and Issues). Some 55% of Indians who access the Internet do so today from their offices, 30% from cyber cafes and the rest from their homes. But usage at home is at least expected to soar. The CLSA Report predicts that advertising on the Net will leap from Rs.10 Crore last year to Rs.430 Crore by 2004.

The first report giving live numbers on e-tailing in India compiled by the Boston Consulting Group showed that in all of 1999, Indian surfers bought goods and services worth a measly Rs.9.3 Crores on the Internet. Indian surfers still buy reasonably safe, low-value products on the Net. Music, Cards, Gifts, Flowers and Books are among the largest selling items. Whereas in the $36 Billion US Market, personal finance, sporting goods, computer hardware and software are the largest selling items on the Net. However, IDC India, which researches online behaviour, reckons the country generated Rs.40 Crore in online retail sales in 1999.

The latest reports on e-commerce activities in India during the previous year indicate that the on-line revenues have remained somewhat stagnant. While there are no audited numbers, most industry observers and analysts reckon that it ought to be in the region of Rs.10-12 Crore. However, this figure does not include barters.

All of these numbers go to indicate that the Indian e-commerce has got a long way to tread on. But to make it tough or smooth depends more on the market players and their strategies than on the market itself.


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