E-commerce

http://www.accaglobal.com/en/student/acca-qual-student-journey/qual-resource/accaqualification/p3/technical-articles/E-commerce.html by Jim Stone 01 ay !00" E-commerce is now synonymous with the #nternet. $sers - pri%ate or corporate - can communicate with web-based online stores using a web browser such as icrosoft E&plorer or 'etscape (ommunicator. )n #nternet store pro%ides all the facilities a customer needs* including a product catalogue* a %irtual shopping bas+et* and a secure credit card payment system. #n theory* the #nternet has no geographical* political or temporal boundaries. #t has a common infrastructure a%ailable to all. ,he uni%ersal a%ailability of access to the #nternet* while not radically changing logical processes* has created new opportunities and remo%ed some of the physical limitations of traditional methods of conducting business. (), -aper " and )(() .ualification -aper /1 students may be interested in the social and employment consequences of e-commerce. /or -aper -3 candidates* e-commerce is now a weapon of competiti%e strategy* offering the possibility of new products and ser%ices* more efficient ways of performing traditional business processes* and new distribution channels.

Business-to-business (B2B)
E-commerce E-commerce can be simply defined as conducting business transactions o%er electronic networ+s by way of lin+ed computer systems. 0hen the concept was originally introduced* it was en%isaged that it would mainly in%ol%e business organisations lin+ing their computer systems to conduct business with each other more speedily* efficiently and economically. 1!1 e-commerce is well-established and is still a fast-growing area. E&amples include companies lin+ing to their suppliers to facilitate 2ust-#n-,ime 32#,4 stoc+ control. ,o enable this to happen* participating companies ha%e had to agree on interface and application standards. any office equipment and consumable suppliers can now ta+e orders online and pro%ide direct deli%ery to business customers. 5ne of the +ey dri%ers associated with 1!1 e-commerce is the o%erhaul of inefficient trading processes. (ompanies can lin+ directly to suppliers* chec+ a%ailability of products* and then place orders and trac+ shipments without delay or human assistance. #n an increasingly competiti%e world* the best businesses are using new technologies to clarify customer demand* target mar+eting efforts more precisely* tighten business processes* and in%estigate new methods of distribution.

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Business-to-consumer (B2C)
E-commerce ,he %olume of 1!1 e-commerce has been o%erta+en in the last fi%e years by the growth of consumer ecommerce applications as the general public 31!(4 increasingly conduct business o%er networ+s with commercial and public sector organisations. ,he catalyst for 1!( e-commerce has been the growth in the number of people who ha%e access to both a home computer and the #nternet. ost e-commerce applications are now #nternet-based* trading goods and ser%ices. 5ther terms used to refer to this practice include e-business* e-tailing and e-trading. Business activities (ommerce refers to the acti%ities in which an organisation or indi%idual engages in order to complete a transaction. ost stages in the lifecycle of a product or ser%ice can be conducted in an e-commerce en%ironment. /or e&ample* a boo+ retailer might underta+e the following e-commerce acti%ities: mar+et research ad%ertising pro%iding product information contacting customers ta+ing orders trac+ing shipping recei%ing and processing payments ordering stoc+ from publishers.

,he list of acti%ities or logical processes does not differ significantly from the list of business acti%ities that the organisation has always carried out. ,he difference is that the company can conduct its retail business by using computers and telecommunications technologies instead of* or in addition to* operating stores.

Benefits for business

6ome of the organisational benefits of doing business o%er the #nternet include the following: 1usiness can be conducted !7-hours-a-day* 8-days-a-wee+. -roducts can be supplied to anyone* anywhere in the world 3as long as there is an economic and reliable distribution channel4. 6uppliers can respond quic+ly to customer requirements. 6uppliers can build a one-to-one relationship with customers. ,hrough search tools and customer profiles* information can be tailored to customer requirements on demand. 9irect communication results in impro%ed pre and post-sales support. (ustomers can access up-to-date information - e&pensi%e printed catalogues and ser%ice guides can be replaced by a single electronic product database 3which must be +ept up to date at all

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times4. E-mail distribution is cheaper than direct mail* and pro%iding the information on a website is cheaper still if users can be encouraged to access it for themsel%es. ,he o%erheads of maintaining a physical retail outlet are reduced. :outine business operations can be automated* sa%ing time and money - the supply chain is shortened so deli%ery times and costs are reduced. 6taff costs can be reduced - standard enquiries and sales can be handled automatically %ia software* lea%ing staff with time to handle the difficult or higher added-%alue transactions. Entirely new ser%ices can be de%eloped - for e&ample* software and music can be deli%ered instantaneously and cheaply %ia the #nternet.

The self-serve economy

E-mail and websites are as easily* and readily* accessible as telephones and fa&es. )s a result* consumers are becoming more confident in the use of electronic media to conduct all +inds of transactions* from transferring money between ban+ accounts* to reser%ing film or theatre tic+ets* to ordering boo+s online. ,he willingness of consumers to help themsel%es* and to ma+e new technologies part of their daily li%es* bypassing the shop assistant and customer ser%ice representati%e* is the principal characteristic of the self-ser%e economy. 6elf-ser%e characteristics* %alued and required from an e-commerce ser%ice include a%ailability* reliability* choice* speed* and con%enience. ) well-run and efficient e-commerce operation will deli%er the following benefits to consumers. !7-hour shopping* 8-days-a-wee+. ;lobal choice and access to a wider range of goods and ser%ices than in any local retail store or shopping centre. <ower prices - because of reduced operating costs and wider competition. Ease of use when identifying and browsing the choices a%ailable. :apid response to orders - not as fast as retail off-the-shelf* but few retail chains pro%ide their complete product offering at e%ery outlet* and frequently products ha%e to be ordered. /or products that can be deli%ered electronically* such as software* %ideo* newspapers and music* supply is instantaneous without any delay caused by intermediaries.

Social and employment costs of e-commerce

)lthough the benefits of e-commerce are significant* they do not come without the ris+ of some longerterm social costs. #f substantial numbers of residents of small communities choose to shop on the #nternet* local stores may not be able to compete and may ha%e to close. /or those who do not ha%e* or do not wish to ha%e access to the #nternet* such closures could lead to social depri%ation. any aspects of electronic shopping are automated and fewer staff are needed to process orders* leading to a possible rise in unemployment in certain economic sectors. E-commerce businesses ha%e access to global mar+ets but they are also subject to global

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competition. ,his means that costs and wor+ing practices need to remain fle&ible to cope with changing consumer demands and competitor acti%ity. 6uppliers can choose to operate from offshore low-cost bases. ,his has a particular impact on high wage/high social cost economies which may find that jobs are e&ported to lower cost economies. /le&ibility to operate offshore and to buy internationally means that it is %ery difficult for national go%ernments to police the legality of operations and to ensure the quality and safety of some products supplied 3eg medicines4. Ensuring the reliability* security and integrity of data and operations can be a problem electronic hac+ing is often one step ahead of the security industry.

E-commerce - a glossary of terms

nternet development E-commerce would not ha%e de%eloped so rapidly without the global networ+ of computers which we now call the #nternet. #n the 1=>0s* the $6 go%ernment de%eloped the connecti%ity standards to networ+ computers for defence research purposes. ,he agency responsible for managing and de%eloping the networ+* and lin+ing together uni%ersities and defence research establishments* was called the )d%anced :esearch -roject )gency 3):-)4. ,he ):-)'E, became the #nternet. )t the core of its design philosophy was fle&ibility and resilience - enabling new computers to be easily lin+ed and* in the e%ent of any catastrophe destroying one or more computers* for the remainder of the networ+ to be able to continue to function. 5%er the following 30 years* the $6 'ational 6cience /ederation 3'6/4 played a guiding role in de%eloping the networ+. ,he de%eloping #nternet was mainly used as a communications tool in the scientific and academic communities for electronically transferring and e&changing research materials. #n 1=?=* the '6/ opened the #nternet to commercial networ+ traffic. ,hen* in 1==!* ,im 1erners <ee* wor+ing at the European <aboratory for -article -hysics* created the 0orld 0ide 0eb 3www4. 0hile we tend to use the terms #nternet and 0orld 0ide 0eb interchangeably* the #nternet describes the entire system of networ+ed computers and the 0orld 0ide 0eb describes the method used to access information contained on computers connected to the #nternet. ,he a%ailability of a common #nternet infrastructure - of computers* networ+s and protocols - and the de%elopment of an easy to use ;raphical $ser #nterface 3;$#4 ha%e been the catalysts for the growth of e-commerce. #t has created an open community - easy to join and easy to use. !yperlin" ,his is the highlighted te&t on a web page. @ou can clic+ on a hyperlin+ and be routed to another web page* either on the same website or to a different website anywhere in the world. Ayperlin+s are designed and set up to enable consumers to easily na%igate and find information and purchase products. ntranet ,his term refers to a closed community of users* often within an organisation. #ntranets are designed to

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be used for internal business purposes only. #t uses the same standards and protocols as the #nternet* but with increased password and security protection. #ntranet websites can loo+ just li+e the #nternet websites* but normally a firewall surrounds the #ntranet to pre%ent access by unauthorised users. ) firewall e&amines all requests and messages entering and e&iting the #ntranet and bloc+s any not conforming to specified criteria. E#tranet )n E&tranet is an e&tension of an organisationBs #ntranet. ,he difference is that an E&tranet is accessible to selected people or groups outside the organisation. any 1!1 transactions are made o%er E&tranets. )n indi%idual can enter an organisationBs public website on the #nternet* obtain a password authorisation and then be routed to the organisationBs E&tranet to conduct transactions and obtain information not a%ailable to the public. E&tranets are frequently used to connect an organisationBs corporate #ntranet with the #ntranets of the organisationBs suppliers* distributors and corporate customers. $eb bro%sers #nternet users 3pri%ate or corporate4 communicate through their web browsers 3such as icrosoft E&plorer or 'etscape (ommunicator4 with websites. ,he web browser is a software utility program with a ;raphical $ser #nterface which helps users na%igate through the web. #t ta+es a request and then transmits and recei%es information from other users or information pro%iders. $sing a browser* the user does not need to +now the format and location of the information required. ,hey can jump from site to site by clic+ing on hyperte&t lin+s.

&avigation aids 0ebsite de%elopers create na%igation aids to enable customers to na%igate their way around a website. ) na%igation aid can be hyperlin+ te&t* buttons* and tables of contents or graphical symbols such as icons or pictures. 'a%igation aids are designed to allow users to %isit a website and conduct their transactions instincti%ely* quic+ly and easily* mo%ing between pages and re-tracing steps as necessary. $ebsite search tools )n online store can use a search tool to help customers quic+ly find products. ,echniques include simple features such as drop-down lists* where customers clic+ a downward pointing arrow to display a list of products or specifications from which they may choose. )nother technique is in%iting the entry of +ey words which trigger a site search. ,he challenge for the designer is to pre-identify as many alternati%e 3or e%en misspelt4 %ersions of potential +ey words as possible. ost website search tools use inde&ing robots - software which electronically %isits a site* follows all lin+s contained therein* and automatically inde&es the contents.

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'atabases 5nline businesses need to access* store* retrie%e* amend* and generate data in a wide %ariety of formats. ) database is defined as a collection of information that is organised so that the required information can be quic+ly retrie%ed* amended if necessary* and then the electronic image updated. ,here are a number of proprietary database management systems that can pro%ide the necessary functionality - and operate in a real time processing en%ironment* with high %olumes - while maintaining security and a%ailability. (orm design )n e-commerce enabled website must include mechanisms for customers to enter information such as their name* address* and credit card number. ,his information is then stored in a database. 0ebsite de%elopers create forms for customers to complete. ost electronic forms comprise te&t bo&es combined with drop-down lists to simplify tas+s for the customer and to a%oid transcription errors where possible. Shopping carts and chec"out any online stores use the image of a shopping cart 3or trolley4 to characterise the online shopping process. ,he shopping cart is now considered a standard component of all online stores. ) shopping cart records the ongoing results of the ordering process* generated from a database* and is effecti%ely the interface between the customer and the database. #n the browser* these results appear on a web page that is updated e%ery time a customer adds an item to the cart. 6hopping carts are usually set up so that the customer can %iew all details of the ongoing transaction on request* at any time. 0hen all transactions are complete* the customer is in%ited to go to the chec+out to complete the purchasing process. ,he chec+out is usually located on a secure ser%er that protects customer payment information during its transmission. /or small businesses* standard software modules can be bought in for the shopping cart and chec+out processes. #n such cases the payment process is routed to a secure ser%er managed by a specialist company* eg -ay-al. )lthough a small number of products and ser%ices can be distributed electronically* most products need to be physically deli%ered. 5nce a commitment to purchase has been made* ensuring that distribution is controlled* speed and %isibility are critical success factors for the online store. ost online stores offer a %ariety of shipping methods with different timescales and prices. 6ome online stores will choose shippers who ha%e Btrac+ and traceB monitoring procedures a%ailable online. (ustomers are pro%ided with the identity of the shipping agent and a reference for their pac+age. ,hey can then trac+ its progress. Jim Stone is sub)ect coordinator for the business management papers