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1. Introduction and Basic Overview of E-Commerce
Electronic Commerce, commonly known as (electronic
marketing) e-commerce or ecommerce, consists of the
buying and selling of products or services over electronic
systems such as the Internet and other computer networks.
The amount of trade conducted electronically has grown
etraordinarily with widespread Internet usage. The use of
commerce is conducted in this way, spurring and drawing on
innovations in electronic funds transfer, supply chain
management, Internet marketing, online transaction
processing, electronic data interchange (!"I), inventory
management systems, and automated data collection
systems. #odern electronic commerce typically uses the
$orld $ide $eb at least at some point in the transaction%s
lifecycle, although it can encompass a wider range of
technologies such as e&mail as well.
' large percentage of electronic commerce is conducted
entirely electronically for virtual items such as access to
premium content on a website, but most electronic
commerce involves the transportation of physical items in
some way. (nline retailers are sometimes known as e&
tailors and online retail is sometimes known as e-tail.
'lmost all big retailers have electronic commerce presence
on the $orld $ide $eb.
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E-COMMERCE
!lectronic commerce that is conducted between businesses
is referred to as business&to&business or )*). )*) can be
open to all interested parties (e.g. commodity echange) or
limited to specific, pre&+ualified participants (private
electronic market). !lectronic commerce that is conducted
between businesses and consumers, on the other hand, is
referred to as business&to&consumer or )*,. This is the type
of electronic commerce conducted by companies such as
'ma-on.com.
!lectronic commerce is generally considered to be the sales
aspect of e&business. It also consists of the echange of data to
facilitate the financing and payment aspects of the business
transactions.
%Electronic Commerce (!,) is the paperless echange of
business information using Electronic Data Interchange
(!"I) and related technologies. If you are familiar with
Electronic Mail (!&#ail), computer bulletin boards, facsimile
machines (faes), Electronic Funds Transfer (!.T) /ou
can very well understand what is e&commerce. These are all
forms of !,. 'll !, systems replace all or key parts of
paper&based work flow with faster, cheaper, more efficient,
and more reliable communications between machines. In
today%s "efense "epartment procurement arena, however
the most important !, technology to know about is
!lectronic "ata Interchange, or !"I.
E-Commerce is like Any Other Business, except...
34 34
E-COMMERCE
"eveloping a business over the Internet re+uires many of
the same ma0or activities as starting any other business.
/ou should do some basic business planning. 'fter all, you
need a product. /ou may need funding to get your business
going. /ou need customers. /ou need to market products to
your customers. /ou need strong customer service. /ou
need to manage purchases by customers, finances, staff
and other resources.
Not All Products Are Very Compatible to ales o!er
the "nternet
)ut there are some features uni+ue to e&commerce. 1ot all
products are real compatible to be sold over the Internet.
.or eample, they may re+uire a lot of face&to&face selling.
They may cost a lot to ship (a primary practice in e&
commerce is that customers buy products, and you ship the
products to them). /ou need to make sure that, because
your product may be advertised to the world, that you
remain in control of your ideas, or 2intellectual property2.
#ou Need an Online $tore$
)asically, you need an 2online store2 to be an 2e&tailor2.
("on%t fret. /ou may be able to outsource, or hire, a current
store to work with you.) /our store will need a 2merchant2
account, or the ability to process your customers% credit card
transactions over the Internet. This includes needing a
2secure server2, or that your online store is on a computer
system that ensures that customers% credit card numbers
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E-COMMERCE
cannot readily be read by people who are not supposed to
read these numbers. /ou%ll probably need some kind of
online order form that customers can complete, in order to
purchase your products. /ou may even want your the
processing of customers% order to include processing the
customers% credit card numbers right away while they%re still
online and connected to your $ebsite.
3et%s read on to understand the very basics of e&commerce.
Ob!iously, #ou Need a %ebsite
/ou need to design and promote a $ebsite. /ou%ll need
access to epertise that can regularly design and maintain
this $ebsite for you && and it will re+uire ongoing attention.
.ortunately, there is a great deal of free information
available to help you with this design and promotion.
History
Early de!elopment
The meaning of electronic commerce has changed over the
last 34 years. (riginally, electronic commerce meant the
facilitation of commercial transactions electronically, using
technology such as !lectronic "ata Interchange (!"I) and !lectronic .unds
Transfer (!.T). These were both introduced in the late 5674s,
allowing businesses to send commercial documents like
purchase orders or invoices electronically. The growth and acceptance
of credit cards, automated teller machines ('T#) and telephone banking in the 5684s
were also forms of electronic commerce. 'nother form of e&
34 34
E-COMMERCE
commerce was the airline reservation system typified by 9abre
in the :9' and Travicom in the :;.
(nline shopping, an important component of electronic
commerce, was invented by #ichael 'ldrich in the :; in
5676. The world%s first recorded )*) was Thomson <olidays
in 5685
=5>
The first recorded )*, was ?ateshead 9I9@Tesco
in 5684
=*>
The world%s first recorded online shopper was #rs
Aane 9nowball of ?ateshead, !ngland
=3>
"uring the 5684s,
online shopping was also used etensively in the :; by auto
manufacturers such as .ord, Beugeot&Talbot, ?eneral
#otors and 1issan.
=4>
'll these organi-ations and others
used the 'ldrich systems. The systems used the switched
public telephone network in dial&up and leased line modes.
There was no broadband capability.
.rom the 5664s onwards, electronic commerce would
additionally include enterprise resource planning systems
(!CB), data mining and data warehousing.
'n early eample of many&to&many electronic commerce in
physical goods was the )oston ,omputer !change, a
marketplace for used computers launched in 568*. 'n early
online information marketplace, including online consulting,
was the 'merican Information !change, another pre
Internet
=clarification needed>
online system introduced in 5665.
In 5664 Tim )erners&3ee invented the $orld $ide $eb and
transformed an academic telecommunication network into a
worldwide everyman everyday communication system called
internet@www. ,ommercial enterprise on the Internet was strictly
prohibited until 5665 .
=D>
'lthough the Internet became
popular worldwide around 5664 when the first internet online
34 34
E-COMMERCE
shopping started, it took about five years to introduce
security protocols and "93 allowing continual connection to
the Internet. )y the end of *444, many !uropean and
'merican business companies offered their services through
the $orld $ide $eb. 9ince then people began to associate a word
2ecommerce2 with the ability of purchasing various goods
through the Internet using secure protocols and electronic
payment services
2. Ecommerce definition and types of ecommerce
Ecommerce (e-commerce) or electronic commerce, a
subset of ebusiness, is the purchasing, selling, and echanging
of goods and services over computer networks (such as the
Internet) through which transactions or terms of sale are
performed electronically. ,ontrary to popular belief,
ecommerce is not 0ust on the $eb. In fact, ecommerce was
alive and well in business to business transactions before
the $eb back in the 74s via !"I (!lectronic "ata
Interchange) through E'1s (Ealue&'dded 1etworks).
!commerce can be broken into four main categoriesF )*),
)*,, ,*), and ,*,.
B&B 'Business-to-Business(
,ompanies doing business with each other such as
manufacturers selling to distributors and wholesalers
selling to retailers. Bricing is based on +uantity of order
and is often negotiable.
B&C 'Business-to-Consumer(
)usinesses selling to the general public typically
through catalogs utili-ing shopping cart software. )y
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E-COMMERCE
dollar volume, )*) takes the pri-e, however )*, is
really what the average Aoe has in mind with regards to
ecommerce as a whole.
<aving a hard time finding a bookG 1eed to purchase a
custom, high&end computer systemG <ow about a first
class, all&inclusive trip to a tropical islandG $ith the
advent ecommerce, all three things can be purchased
literally in minutes without human interaction. (h how
far we%ve comeH
C&B 'Consumer-to-Business(
' consumer posts his pro0ect with a set budget online
and within hours companies review the consumer%s
re+uirements and bid on the pro0ect. The consumer
reviews the bids and selects the company that will
complete the pro0ect. !nlace empowers consumers
around the world by providing the meeting ground and
platform for such transactions.
C&C 'Consumer-to-Consumer(
There are many sites offering free classifieds, auctions,
and forums where individuals can buy and sell thanks
to online payment systems like BayBal where people
can send and receive money online with ease. !)ayIs
auction service is a great eample of where person&to&
person transactions take place everyday since 566D.
,ompanies using internal networks to offer their employees
products and services online&&not necessarily online on the
$eb&&are engaging in )*! ()usiness&to&!mployee)
ecommerce.
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E-COMMERCE
?*? (?overnment&to&?overnment), ?*! (?overnment&to&
!mployee), ?*) (?overnment&to&)usiness), )*?
()usiness&to&?overnment), ?*, (?overnment&to&,iti-en),
,*? (,iti-en&to&?overnment) are other forms of ecommerce
that involve transactions with the government&&from
procurement to filing taes to business registrations to
renewing licenses. There are other categories of
ecommerce out there, but they tend to be superfluous.
3. Getting a Computer System for our Business
/ou%ll need a computer system to manage information for
your business. The si-e of the system depends on how
much you want to do with it. <owever, today%s desktop
personal computers (especially if they%re configured as part
of a client&server system) can handle many of the demands
of e&commerce. (1ote that you may need a different
computer system to actually host your $ebsite, conduct
financial transactions with customers, etc.)
Blanning and )uying a 9mall ,omputer 9ystem (including information for nonprofits)
9oftware for 9mall ,omputer 9ystems (including general and nonprofit&specific information)
3earning 'bout 9mall ,omputer 9ystems
)asic, Technical 9upport and #aintenance of 9mall ,omputer 9ystems
,omputer and 1etwork 9ecurity
!. Computer and "etwor# Security
,omputer and 1etwork 9ecurity (including worms, viruses, hoaes and spam)
Bolices about :sing ,omputers and 1etworks
$. Eti%uette in On&ine Communications
1eti+uette & Techni+ues and styles of writing e&mail
messages
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E-COMMERCE
'. (nderstanding E&ectronic )ata Interc*ange +E)I,
!"I appears to be the current standard format used by
businesses to echange documents between computers.
The following links will give you a basic understanding of
!"I.
$hat is !"IG
-. )eve&oping and .anaging a /irtua& 0eam
If you are conducting business over the Internet, it%s not
unlikely that you%ll use the Internet for most, if not all, of your
communications with employees. /ou are also likely to use
the Internet to communicate with collaborating
organi-ations, suppliers, etc. /ou%ll benefit from reading
about virtual teams, or groups of people working together
primarily by using the Internet for means of communications.
Eirtual Teams
1. 2*at3s Invo&ved in )esigning and .anaging a 4roduct5
It will benefit the reader to have some basic sense of what%s
involved in developing and managing a product or service.
Cead the section
)asic Introduction to Broduct #anagement (read this section, not the entire topic)
(Optional Reading)
It%s common for businesses to develop a business plan
whenever they start a ma0or new venture, for eample, a
new organi-ation, product line, etc. /ou might review the
basics of business planning. These basics will include
information needed in the following sections, including
product creation, marketing, advertising and promoting, and
34 34
E-COMMERCE
sales and service, as well. 9ee
)usiness Blanning
6. 4roduct Creation and )eve&opment
The 3ibrary topic Broduct and 9ervice #anagement provides a complete
overview of how to develop an idea into a product, how to
build and regularly produce that product and how to
advertise, promote and sell the product. 9ee the following
sections in that topicF
Broduct Idea
('re /ou Blanning a 1ew )usiness 'round /our 1ew IdeaG)
Broduct !valuation && ,an /our Idea )ecome a Eiable Broduct or 9erviceG
Broduct "evelopment && )uilding /our Broduct or 9ervice
Broduct Broduction && (ngoing )uilding of Broducts or 9ervices
17. On&ine Stores -- Basics
1ow you%re read to begin selling your product over the
Internet. The following links will help you set up your 2virtual
store2 to begin transactions with customers.
!&,ommerce 9!( ?uideF 9earch engine accessibility
challenges and solutions for online stores and database
driven product catalogs
<ow "oes 9tore&)uilding 9oftware $orkG (Eery good
overview)
,reating the Eirtual 9toreF Taking your $ebsite from
)rowsing to )uying
#aking Beople $ant to )uy in /our Cetail $eb store
(There will be more about online marketing, advertising and
sales, later on below.)
11. On&ine Credit Card 4rocessing
The ability to process credit card orders over the Internet is
a ma0or convenience to customers && if they believe their
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E-COMMERCE
credit card numbers will remain private to the transaction.
$hy /ou 1eed to Take ,redit ,ards on /our $ebsite
:nraveling the #ysteries of #erchant ,redit ,ard 'ccounts
for $eb ,ommerce
<ow to "ecide $hether /ou 1eed Ceal&Time ,redit ,ard
'uthori-ation for /our 9ite
/ou can learn about these services 0ust by looking at some
of the ads from businesses that offer merchant accounts.
Internet #edia 9olutions
5&888&#erchant'ccounts.com
12. On&ine .ar#eting8 9dvertising and 4romotion8 Sa&es
and Service
There is a great deal of information in the library about
marketing, advertising and promoting, and sales and
service. <owever, when these activities are carried out over
the Internet, they have uni+ue features.
#arketing
'dvertising and Bromotion
9elling (nline
,ustomer 9ervice
,ustomer 9atisfaction
13. Genera& :esources wit* .ore Information for ou
There are an increasing number of online resources about
e&commerce.
Introductory and ?eneral !&,ommerce 'rticles & !lectronic ,ommerce Cesearch Coom
!lectronic ,ommerce Cesource ,enter
!&,ommerce "ictionary
,apterra%s listing of ecommerce software
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E-COMMERCE
1!. E-Commerce +news,

#ou)ube *o!in+ to,ard Paid Content

=9eptember 3, *446> the top online video service is
reportedly in talks with movie studios to offer streaming
rentals.
Consumer -roups Outline Pri!acy .a, %ish .ist
=9eptember 5, *446> Brivacy advocates pitch policy
framework to <ouse leaders drafting bill that could
reshape online advertising.
ocial Net,orks /ominate in Online /isplay Ads
=9eptember *, *446> 9ocial media giants #y9pace and
.ace book command a fifth of all online display ads
seen by $eb users, according to a new study.
Eyin+ Ama0on, %al-*art Expands E-Commerce
=9eptember 5, *446> The nation%s largest retailer 0oins
partners in unveiling a new e&commerce push that
could see it better competing with 'ma-on.
EBay ells kype, 1eeps *inority take
=9eptember 5, *446> the e&commerce giant finally
unloads Internet phone unit 9kype for J5.6 billion.
On ource )akes on Ama0on, "B*, and 2ack space
='ugust *8, *446> the challenger takes on the big
players with some sharp words for the cloud
incumbents.
-oo+le Opens Ad Plat3orm to )hird-Party Net,orks
='ugust *8, *446> (utside ad networks approved by
34 34
E-COMMERCE
?oogle in coming months will get a crack at the
company%s 'd 9ense publisher sites.
ony 4n!eils 5- E-Book 2eader, .ibrary )ie-"n
='ugust *D, *446> 'n epanded ecosystem promises to
challenge the e&reader competition.
6ea!y 6itters )ake ,in+s at -oo+le Book earch
='ugust *5, *446> #icrosoft, /ahoo and 'ma-on
0oining new coalition aiming to block ?oogle%s
settlement agreement with authors and publishers.
7ace book )ests Branded Virtual, 2eal-%orld -i3ts
='ugust *4, *446> )ritney 9pears is the latest 2licensed
gift2 in .ace book%s epanding virtual goods offerings,
which the company hopes to parlay into a revenue
stream via its virtual currency system.
Apple Accounts 3or &89 o3 All *usic ales
='ugust 58, *446> 1B" ?roup finds iTunes gaining
ground and looks for digital sales to pull close to even
with ,"s by end of *454.
EBay Opens *ark place 3or )hird-Party Apps
='ugust 57, *446> The online auction giant%s new app
store is available for e)ay sellers, giving developers
new revenue opportunity.
Are Bin+ earches till )urnin+ 4p "llicit *eds:
='ugust 54, *446> #icrosoft is doing a better 0ob of
policing sponsored ads for illicit drugs but a new report
shows some still slip through the cracks.
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E-COMMERCE
martphone App /o,nloads to )riple by &;<=
='ugust 54, *446> 's the 9martphone sector continues
to grow, so does the app store phenomena, which
might be too big for mobile players to handle solo.
ony Plans Ne, 1indle 2i!al, Adopts Open 7ormat
='ugust 53, *446> The electronics giant may unveil
plans for a wireless e&reader while ditching proprietary
digital book formats in a new assault on front&runner
'ma-on.
-oo+le .ooks beyond 1ey,ords
='ugust 5*, *446> 're big changes coming to ?oogle
'd $ordsG 't 9!9, the search giant drops some
tantali-ing hints.
#ahoo >oins /i+ital Coupon Cra0e
='ugust 5*, *446> /ahoo is the latest company betting
that online bargain hunting is a trend ready to take off
as it unwraps new "eals site.
%eb earch 6eaded 3rom -4" to .4"
='ugust 5*, *446> ' smarter $eb could be a boon for
marketers and users alike.
Economy ends E-sales "nto Ne+ati!e )erritory
='ugust 5*, *446> (verall online retail spending
continues to slip in the second +uarter, though some
categories still post solid gains.
EBay, -* to .aunch ite 3or Ne, Cars
='ugust 54, *446> !mbattled automaker takes to the
34 34
E-COMMERCE
$eb in partnership with e&commerce giant to 2reinvent
the car&buying eperience.2
enator *ounts Ne, Push to .e+ali0e Net Poker
='ugust 7, *446> Cevisiting testy online gambling fight,
Cobert #enende- looks to separate the legit sites from
the scams in the eyes of the law.
%eb trends 4ps the Analytics Ante
='ugust 4, *446> the pioneering $eb analytics
company says its latest version unlocks the value of
analytic data with a more visual interface.
Android -ets Ama0on App, Enterprise 7ocus
='ugust 4, *446> CI# may have more than 'pple to
worry about as 'ndroid aims for the workplace.
Ama0on?s Patents Point to 1indle E-Book Ads
='ugust 4, *446> 'ds in ;indle e&books bring with them
a host of issues that will impact publishers, authors,
readers, marketers and device makers.
E-commerce advantages
9ome advantages that can be achieved from e&commerce
includeF
Being able to conduct business 2 ! " ! #$% . !&
commerce systems can operate all day every day.
/our physical storefront does not need to be open in
order for customers and suppliers to be doing business
with you electronically.
&ccess the global mar'et(lace . The Internet spans
the world, and it is possible to do business with any
business or person who is connected to the Internet.
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E-COMMERCE
9imple local businesses such as specialist record
stores are able to market and sell their offerings
internationally using e&commerce. This global
opportunity is assisted by the fact that, unlike traditional
communications methods, users are not charged
according to the distance over which they are
communicating.
)(eed* !lectronic communications allow messages to
traverse the world almost instantaneously. There is no
need to wait weeks for a catalogue to arrive by postF
that communications delay is not a part of the Internet @
e&commerce world.
Mar'ets(ace* The market in which web-based businesses operate is the global
market. It may not be evident to them, but many businesses are already facing international
competition from web-enabled businesses.
+((ortunity to reduce costs* The Internet makes it very easy to 'shop
around' for products and services that may be cheaper or more effective than we might
otherwise settle for. It is sometimes possible to, through some online research, identify
original manufacturers for some goods - thereby bypassing wholesalers and achieving a
cheaper price.
Com(uter (latform-inde(endent . 'Many, if not most, computers
have the ability to communicate via the Internet independent of operating systems and
hardware. Customers are not limited by eisting hardware systems' !"ascoyne # $%cubukcu,
&''()*(+.
Efficient a((lications develo(ment environment - 'In
many respects, applications can be more efficiently developed and distributed because the
can be built without regard to the customer's or the business partner's technology platform.
,pplication updates do not have to be manually installed on computers. -ather, Internet-
related technologies provide this capability inherently through automatic deployment of
software updates' !"ascoyne # $%cubukcu, &''()*(+.
&llo,ing customer self service and -customer
outsourcing-* .eople can interact with businesses at any hour of the day that it is
convenient to them, and because these interactions are initiated by customers, the customers
also provide a lot of the data for the transaction that may otherwise need to be entered by
business staff. This means that some of the work and costs are effectively shifted to
customers/ this is referred to as 'customer outsourcing'.
)te((ing beyond borders to a global vie,* 0sing aspects
of e-commerce technology can mean your business can source and use products and
services provided by other businesses in other countries. This seems obvious enough to say,
but people do not always consider the implications of e-commerce. 1or eample, in many
ways it can be easier and cheaper to host and operate some e-commerce activities outside
,ustralia. 1urther, because many e-commerce transactions involve credit cards, many
34 34
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businesses in ,ustralia need to make arrangements for accepting online payments. 2owever
a number of ma3or ,ustralian banks have tended to be unhelpful laggards on this front,
charging a lot of money and making it difficult to establish these arrangements - particularly
for smaller businesses and4or businesses that don't fit into a traditional-economy
understanding of business. In some cases, therefore, it can be easier and cheaper to set up
arrangements which bypass this aspect of the ,ustralian banking system. ,dmittedly, this
can create some grey areas for legal and taation purposes, but these can be dealt with. ,nd
yes these circumstances do have implications for ,ustralia's national competitiveness and
the competitiveness of our industries and businesses.
's a further thought, many businesses find it easier to buy
and sell in :.9. dollarsF it is effectively the ma0or currency of
the Internet. In this contet, global online customers can find
the concept of peculiar and unfamiliar currencies
disconcerting. 9ome businesses find they can achieve
higher prices online and in :9 dollars than they would
achieve selling locally or nationally. ?iven that banks often
charge fees for converting currencies, this is another reason
to investigate all of your (national and international) options
for accepting and making online payments.
In brief, it is useful to take a global view with regard the
potential and organisation of your e&commerce activities,
especially if you are targeting global customers.
& ne, mar'eting channel* The Internet provides an
important new channel to sell to consumers. Beterson
et al. (5666) suggest that, as a marketing channel, the
Internet has the following characteristicsF
the ability to inepensively store vast amounts of
information at different virtual locations
the availability of powerful and inepensive means of
searching, organising, and disseminating such
information
interactivity and the ability to provide information on
demand
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the ability to provide perceptual eperiences that are
far superior to a printed catalogue, although not as rich
as personal inspection
the capability to serve as a transaction medium
the ability to serve as a physical distribution medium for
certain goods (e.g., software)
relatively low entry and establishment costs for sellers
no other eisting marketing channel possesses all of
these characteristics.
9ome of these advantages and their surrounding issues are
discussed below in further detail.
E-commerce disadvantages and constraints
9ome disadvantages and constraints of e&commerce include
the following.
Time for delivery of (hysical (roducts . It is possible
to visit a local music store and walk out with a compact
disc, or a bookstore and leave with a book. !&
commerce is often used to buy goods that are not
available locally from businesses all over the world,
meaning that physical goods need to be delivered,
which takes time and costs money. In some cases
there are ways around this, for eample, with electronic
files of the music or books being accessed across the
Internet, but then these are not physical goods.
.hysical (roduct/ su((lier 0 delivery uncertainty .
5hen you walk out of a shop with an item, it's yours. 6ou have it/ you know what it is, where
it is and how it looks. In some respects e-commerce purchases are made on trust. This is
because, firstly, not having had physical access to the product, a purchase is made on an
epectation of what that product is and its condition. 7econdly, because supplying
businesses can be conducted across the world, it can be uncertain whether or not they are
legitimate businesses and are not 3ust going to take your money. It's pretty hard to knock on
their door to complain or seek legal recourse8 Thirdly, even if the item is sent, it is easy to
start wondering whether or not it will ever arrive.
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.erishable goods . 1orget about ordering a single gelato ice cream from a
shop in -ome8 Though specialised or refrigerated transport can be used, goods bought and
sold via the Internet tend to be durable and non-perishable) they need to survive the trip from
the supplier to the purchasing business or consumer. This shifts the bias for perishable
and4or non-durable goods back towards traditional supply chain arrangements, or towards
relatively more local e-commerce-based purchases, sales and distribution. In contrast,
durable goods can be traded from almost anyone to almost anyone else, sparking
competition for lower prices. In some cases this leads to disintermediation in
which intermediary people and businesses are bypassed by consumers and by other
businesses that are seeking to purchase more directly from manufacturers.
1imited and selected sensory information* The Internet is
an effective conduit for visual and auditory information) seeing pictures, hearing sounds and
reading tet. 2owever it does not allow full scope for our senses) we can see pictures of the
flowers, but not smell their fragrance/ we can see pictures of a hammer, but not feel its weight
or balance. 1urther, when we pick up and inspect something, we choose what we look at and
how we look at it. This is not the case on the Internet. If we were looking at buying a car on
the Internet, we would see the pictures the seller had chosen for us to see but not the things
we might look for if we were able to see it in person. ,nd, taking into account our other
senses, we can't test the car to hear the sound of the engine as it changes gears or sense
the smell and feel of the leather seats. There are many ways in which the Internet does not
convey the richness of eperiences of the world. This lack of sensory information means that
people are often much more comfortable buying via the Internet generic goods - things that
they have seen or eperienced before and about which there is little ambiguity, rather than
uni9ue or comple things.
2eturning goods* -eturning goods online can be an area of difficulty. The
uncertainties surrounding the initial payment and delivery of goods can be eacerbated in this
process. 5ill the goods get back to their source: 5ho pays for the return postage: 5ill the
refund be paid: 5ill I be left with nothing: 2ow long will it take: Contrast this with the offline
eperience of returning goods to a shop.
.rivacy/ security/ (ayment/ identity/ contract* Many
issues arise - privacy of information, security of that information and payment details, whether
or not payment details !eg credit card details+ will be misused, identity theft, contract, and,
whether we have one or not, what laws and legal 3urisdiction apply.
Defined services 0 the une!(ected . ;-commerce is an effective
means for managing the transaction of known and established services, that is, things that
are everyday. It is not suitable for dealing with the new or unepected. 1or eample, a
transport company used to dealing with simple packages being asked if it can transport a
hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka
dot paper with a bow. 7uch re9uests need human intervention to investigate and resolve.
.ersonal service . ,lthough some human interaction can be facilitated via the
web, e-commerce can not provide the richness of interaction provided by personal service.
1or most businesses, e-commerce methods provide the e9uivalent of an information-rich
counter attendant rather than a salesperson. This also means that feedback about how
people react to product and service offerings also tends to be more granular or perhaps lost
using e-commerce approaches. If your only feedback is that people are !or are not+ buying
your products or services online, this is inade9uate for evaluating how to change or improve
your e-commerce strategies and4or product and service offerings. 7uccessful business use of
e-commerce typically involves strategies for gaining and applying customer feedback. This
helps businesses to understand, anticipate and meet changing online customer needs and
preferences, which is critical because of the comparatively rapid rate of ongoing Internet-
based change.
34 34
E-COMMERCE
)i3e and number of transactions* ;-commerce is most often
conducted using credit card facilities for payments, and as a result very small and very large
transactions tend not to be conducted online. The si%e of transactions is also impacted by the
economics of transporting physical goods. 1or eample, any benefits or conveniences of
buying a bo of pens online from a 07-based business tend to be eclipsed by the cost of
having to pay for them to be delivered to you in ,ustralia. The delivery costs also mean that
buying individual items from a range of different overseas businesses is significantly more
epensive than buying all of the goods from one overseas business because the goods can
be packaged and shipped together.
34 34
E-COMMERCE

1. ;istory
#obile commerce was born in 5667 when the first two
mobile phone enabled ,oca ,ola vending machines were
installed in the <elsinki area in .inland. They used 9#9 tet
messages to send the payment to the vending machines. In
5667 also the first mobile phone based banking service was
launched by #erita bank of .inland also using 9#9.
In 5668, the first digital content sales were made possible as
downloads to mobile phones when the first commercial
downloadable ringing tones were launched in .inland by
Cadionlin0a (now part of !lisa)
In 5666, two ma0or national commercial platforms for m&
commerce were launched with the introduction of a national
m&payments system by 9mart as 9mart #oney in the
Bhilippines and the launch of the first mobile internet
platform by 1TT "o ,omo in Aapan, called I&#ode. I&#ode
was revolutionary also in offering a revenue&sharing deal
where 1TT "o ,omo only kept 6K of the content payment
and returned 65K to the content owner.
#obile commerce related services spread rapidly in early
*444 from 1orway launching mobile parking, 'ustria offering
34 34
E-COMMERCE
mobile tickets to trains, and Aapan offering mobile
purchases of airline tickets.
The first conference dedicated to mobile commerce was
held in 3ondon in Auly *445 and the first book to cover m&
commerce was Tomi 'honen%s #&profits in *44*. The first
university short course to discuss m&commerce was held at
the :niversity of (ford in *443 with Tomi 'honen and
9teve Aones lecturing.
B"'s and cellular phones have become so popular that
many businesses are beginning to use m&commerce as a
more efficient method of reaching and communicating with
their customers. 'lthough technological trends and
advances are concentrated in 'sia and in !urope, ,anada
and the :nited 9tates are also beginning to eperiment with
early&stage m&commerce.
The less price sensitive early adopters from the 53&*D age
groups could drive the initial growth. ?rowth in mobile
products such as ringtones, games, and graphics may
displace spending on many traditional youth products such
as music, clothing, and movies. This would radically change
the dynamics of all visual entertainment and product&service
distribution world wide so marketers could target end&users
with diverse youth mind sets. The youth market has
historically shown rapid viral growth which later gains
acceptance in the mass market. $hile emerging markets
are proving to be the ideal solution for sustaining revenues
in the face of falling 'CB: average price per unit, analysts
say the rapid commerciali-ation of 3? services is likely to
open up new opportunities in developed markets.
In order to eploit the m&commerce market potential,
handset manufacturers such as 1okia, !ricsson, #otorola,
and Lualcomm are working with carriers such as 'TMT
$ireless and 9print to develop $'B&enabled smart phones
34 34
E-COMMERCE
and ways to reach them. :sing )luetooth technology, smart
phones offer fa, e&mail, and phone capabilities.
2Brofitability for device vendors and carriers hinges on high&
end mobile devices and the accompanying killer
applications,2 said )urchett. Berennial early adopters, such
as the youth market, which are the least price sensitive, as
well as more open to premium mobile content and
applications, must also be a key target for device vendors.
Mobile ticketing
Tickets can be sent to mobile phones using a variety of
technologies. :sers are then able to use their tickets
immediately by presenting their phones at the venue.
Tickets can be booked and cancelled on the mobile with the
help of simple application downloads or by accessing $'B
portals of various Travel agents or direct service providers.
#obile ticketing for airports, ballparks, and train stations, for
eample, will not only streamline unepected metropolitan
traffic surges, but also help users remotely secure parking
spots (even while in their vehicles) and greatly facilitate
mass surveillance at transport hubs.
Mobile vouchers, coupons and loyalty cards
#obile ticketing technology can also be used for the
distribution of vouchers, coupons and loyalty cards. The
voucher, coupon, or loyalty card is represented by a virtual
token that is sent to the mobile phone. Bresenting a mobile
phone with one of these tokens at the point of sale allows
the customer to receive the same benefits as another
customer who has a loyalty card or other paper
coupon@voucher. ,oupons may be sent to a customer
utili-ing location based services when he is in a certain
physical proimity (e.g. passing by the store).
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E-COMMERCE
#obile delivery enablesF
economy of scale
+uicker and easier delivery
effective target marketing
privacy&friendly data mining on consumer behavior
environment&friendly and resources&saving efficacy
Content purchase and delivery
,urrently, mobile content purchase and delivery mainly
consists of the sale of ring&tones, wallpapers, and games for
mobile phones. The convergence of mobile phones, mp3
players and video players into a single device will result in
an increase in the purchase and delivery of full&length music
tracks and video. "ownload speeds, if increased to 4? levels,
will make it possible to buy a movie on a mobile device in a
couple of seconds, while on the go.
Location-based services
:nlike a home B,, the location of the mobile phone user is
an important piece of information used during mobile
commerce transactions. ;nowing the location of the user
allows for location based services
9uch asF
local maps
local offers
local weather
people tracking and monitoring
Information services
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E-COMMERCE
' wide variety of information services can be delivered to
mobile phone users in much the same way as it is delivered
to B,s. These services includeF
news services
stock data
sports results
financial records
traffic data and information
Barticularly, more customi-ed traffic information, based on
users% travel patterns, will be multicast on a differentiated
basis, instead of broadcasting the same news and data to all
:sers. This type of multicasting will be suited for more
bandwidth&intensive mobile e+uipment.
Mobile baning
)anks and other financial institutions are eploring the use
of mobile commerce to allow their customers to not only
access account information, but also make transactions, e.g.
purchasing stocks, remitting money, via mobile phones and
other mobile e+uipment. This service is often referred to as
#obile )anking or #&)anking.
Mobile broerage
9tock market services offered via mobile devices have also
become more popular and are known as #obile )rokerage.
They allow the subscriber to react to market developments
in a timely fashion and irrespective of their physical location.
!uctions
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E-COMMERCE
(ver the past three years mobile reverse auction solutions have
grown in popularity. :nlike traditional auctions, the reverse
auction (or low&bid auction) bills the consumer%s phone each
time they place a bid. #any mobile B9#9 commerce solutions
rely on a one&time purchase or one&time subscriptionN
however, reverse auctions are high return applications as
they allow the consumer to transact over a long period of
time.
Mobile purchase
#obile purchase allows customers to shop online at any
time in any location. ,ustomers can browse and order
products while using a cheap, secure payment method.
Instead of using paper catalogues, retailers can send
customers a list of products that the customer would be
interested in, directly to their mobile device or consumers
can visit a mobile version of a retailerIs ecommerce site.
'dditionally, retailers will also be able to track customers at
all times and notify them of discounts at local stores that the
customer would be interested in.
Mobile mareting and advertising
#obile marketing is an emerging concept, but the speed
with which it%s growing its roots is remarkable. #obile
marketing is highly responsive sort of marketing campaign,
especially from brandsI eperience point of view. 'nd almost
all brands are getting higher campaign response rates.
,orporations are now using m&commerce to epand
everything from services to marketing and advertisement.
'lthough there are currently very few regulations on the use
and abuses of mobile commerce, this will change in the net
few years. $ith the increased use of m&commerce comes
increased security. ,ell phone companies are now spending
more money to protect their customers and their information
from online intrusions and hackers.
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E-COMMERCE
2. .o<i&e Commerce3s Inf&uence on out* .ar#ets
The hierarchy of mobile media is changing very rapidly and
mobile $i#a or other technologies may increase the
impact of, for eample, location&based mobile ecommerce.
's of *447 many companies have been trying to penetrate
this market. !arly pioneers in this new #obile advertising
are companies such as Eodafone, (range .rance Telekom,
9; Telekom and several others. Three mimetic researchers
and early pioneers of mobile advertising are 3eveious
Colando, Aohn 9okol and ?ibran )urchett with their early
eperimentation of "E)&< in 5666 with 9ony )#?%s group
$u Tang. In *447 on a trip to 9outh ;orea 3eveious created
a Eenn&diagram model of rapid youth life style@trends. The
diagram made eplained the vital aspects of mobile
adoption and sales of mobile global products@services in the
mobile space. They performed an eperiment in which the
uses of viral mobile marketing within the contet in the form
of mobile commercials or mobisodes were created to attract
an audience and retention. The two tested a theory of rapid
mimetic dissemination. )y observing the youth cultural
styles and trends combined with the rate at which they
passed on particular information given to the test sub0ects.
?roup sub0ects were given words and phrases and meeting
points to be used regularly in conversation. The other group
the control group produced a random sampling that provided
a measure of the rate at which ideas and phrases were
transmitted.
(ther eperiments he conducted would take place in
!urope&9outh ;orea and Aapan involving viral straight to the
end&user mobile integrated campaigns for the delivery of
products and coupons with instant savings from #obile
hand&held devices. This was commissioned by top #obile
providers like "utch Telekom (?erman T mobile) and
34 34
E-COMMERCE
(range with music artists &"0s and #obile youth street
teams that not only drove instant purchases of event tickets
sales but also drove the sales of purchase of three different
viable youth products to over *44,444 end&users in 8 days.
This test showed how the ?lobal youth mobile market can
react autonomously and create trends. It also showed how
products&applications take on new life because of youth
mindsets who are the early adopters of any form of social
engaging technology services. 3eveious Colando along with
?ibran )urchett researched fashionable products in order to
engage the end&consumer the m&commerce market
potential, handset manufacturers such as 1okia, !ricsson,
#otorola, and Lualcomm are working with carriers such as
'TMT $ireless and 9print to develop $'B&enabled smart
phones, the industry%s answer to the 9wiss 'rmy ;nife, and
ways to reach them.
(ther notable places where mobile devices are being used
to conduct mobile commerce heavily are 9outh ;orea.
Through using )luetooth technology, smart phones offer fa,
e&mail, and phone capabilities mobile companies in 9outh
;orea believed that mobile technology would become
synonymous with youth life style. This was based on
generations of 9outh ;oreans driving content back and forth
world wide including music to drive the mobile market.
2Brofitability for device vendors and carriers hinges on high&
end mobile devices and the accompanying killer
applications,2 said )urchett. 2Berennial early adopters, such
as the youth market, which are the least price sensitive, as
well as more open to premium mobile content and
applications, must also be a key target for device vendors
this was discussed by both 3eveious Colando and ?ibran
)urchett at a #obile ,ommerce meeting in Aapan 'ugust
*447. The early worked was transformed through
dissemination they are along with few others have
developed methodology to be deployed global through
concerts and events and any form of youth related culture
34 34
E-COMMERCE
from 9outh ;orea to Aapan to !urope, 'merica in *448 with
world leading mobile software provider and world leading
mobile provider. ,ompanies such as !uropean giant
www.orange.com and www.overcell.com and world leading
personal mobile software provider www.vidiator.com and
other companies in 9outh ;orea, Aapan and )ritain,
?ermany lead this evolutions of #obile advertising.
"ayment methods
The main payment methods used to enable mobile
commerce areF
Bremium&rate calling numbers,
,harging to the mobile telephone user%s bill or
"educting from their calling credit.
Cegistration of a credit card that is linked to a 9I# card.
3. 9"9=SIS
in .o<i&e 9dvertising8 E>perimentation Is t*e "ame of t*e
Game
It%s plain to see that smart phones and the mobile $eb
have taken off over the past few years. <owever, a time&
tested model for using these devices and services for the
purpose of marketing hasn%t yet solidified. #arketers looking
to take advantage of mobile advertising have a few success
stories from which they can take notes, but there%s still
plenty of room for new ideas.
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E-COMMERCE
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0ust how much youIll save with our T,( Impact ,alculator.
The proliferation of smart phones, alongside the growth in
number of subscribers of 3? network data plans (or newer
wireless services), is having a ripple effect on multiple
markets, from mobile apps to hardware enhancements. 's
media becomes increasingly fragmented, advertisers are
focused on multiplatform media strategies in order to
capture and retain consumer attention.
9mart phones && and all the advanced applications that
come with them && offer the user a rich, dynamic eperience
for both utilitarian and entertainment applications, moving
well beyond the capabilities of a standard cell phone. 's a
result, advertisers will begin to incorporate mobile into their
overall media campaigns as this advertising channel
matures into a viable marketing tool.
<ow to integrate mobile into a campaign (i.e., how to use
the mobile platform effectively) is a lingering point of
concern. 'dvertisers have to make a choice when
committing to this medium, and there isn%t much history of
successful (and unsuccessful) campaigns to guide one%s
decision. 's a result, mobile advertising in 1orth 'merica
and abroad is in a time of eperimentation and (potential)
innovation.
'dvertisements delivered over the mobile phone come in
various types and formats, with the final form depending on
the specific needs of the advertiser. (f course, the industry
is still in need of time&tested data on which forms work best
for what ends, so it is currently eperimenting with different
forms of mobile ads. The vast ma0ority of mobile advertising
ependitures currently go to tet&message ads because
messaging is the most common mobile data activity. 's a
result, tet&messaging campaigns offer a simple way for
34 34
E-COMMERCE
advertisers to mobili-e eisting media plans from creative
and budget perspectives.
#rand vs$ "erformance-%riven
In general, advertisements across all media fall into two
distinct categories && performance&driven ads and brand ads.
Berformance&driven mobile ads focus on increasing return
on investment (C(I) for the client and include audience
measurement data. )rand ads focus on increasing overall
brand awareness or brand affinity. #obile media campaigns
fall into both categories. <owever, industry eecutives
generally agree that the mobile platform performs much like
traditional direct&response media and is therefore more
valuable when used as a performance&based medium. The
most common mobile ad formats fall into the following
categoriesF Tet messaging
9earch
"isplay
In&application
The main advertising categories on the mobile platform are
automotive, entertainment, consumer package goods (,B?)
retailers and travel. #obile media campaigns on a single ad
network range from :9JD4,444 to J544,444, but some
advertisers allocate more, depending on specific call&to&
action and measured performance. Aaguar and 3and Cover
announced an unprecedented J5.P million mobile media
deal with ad network 'd #ob for *446, based on positive direct&
response results from previous mobile media campaigns.
In general, the amount a company spends on mobile media
is difficult to determine. Industry eecutives generally
consider information on mobile budget allocations to be
proprietary, and there is no average digital media spend
assigned to mobile media initiatives. #obile ad ependitures
34 34
E-COMMERCE
are directly linked to individual client strategies and
ob0ectives, and they are conducting a host of different
eperiments on format, spending and messaging. It will
re+uire several years to sort out which approaches work for
which companies and for which industries.
&oring 'trategies
.or now, several high&profile campaigns are already seeing
positive results.
(ne advertising strategy is to develop a mobile application
to build brand awareness and interactivity. ;raft (1/9!F ;.T)
.oods created its own branded application, the ifood
'ssistant, which allows consumers to streamline shopping
and food&preparation processes. The application includes
recipe ideas and directions, simple shortcuts, a shopping list
organi-er, and cooking videos, all on an easy&to&navigate
mobile interface. ;raft charges users 66 cents for the
application and advertises its food products within the
application. ;raft also uses the solution as a research tool to
gain information and feedback on its consumers. $ithin a
month of availability, the application was in the top 544 paid
apps in 'pple%s (1'9"'LF ''B3) 'pp 9tore, showing
consumer willingness to pay for utility and convenience.
The travel category is reaping high C(I by providing mobile
phone access to its service offerings. $hile not a direct form
of advertising (more an etension of marketing), #arriott <otels,
<ilton, and (mni <otels have developed mobile $'B (wireless
application protocol) sites to drive hotel bookings from
mobile phones. #arriott claims to have generated J* million
in gross revenue from the launch of its mobile Internet site in
'ugust through the end of *448.
(mni <otels claims consumer use of its mobile site grew 8D
percent within si months, with a *D percent C(I, and
34 34
E-COMMERCE
maintains that its current mobile conversion rates far eceed
the company%s online $eb site. The success of this hotel
chain%s mobile media strategies further illustrates the value
of marketing on the mobile channel, especially for
companies operating in the retail and service fields.
,ontinued success rates will push more companies into
strategic partnerships with complementary third&party
advertisers, which will further epand the mobile advertising
space and lead to more eperimentation with format, style
and messaging.
!. Goog&e .o<i&i?es 4roduct Searc* for i4*one8 9ndroid
(sers
?oogle has made it easier to use mobile devices while
shopping by ramping up the capabilities of its Broduct
9earch feature for iBhone and 'ndroid users. The
functionality isn%t fully baked, according to ;elsey ?roup
analyst #ichael )oland, but it%s a step in the right direction,
now that handsets are becoming the new desktop.
9uccess is 0ust a matter of knowing the right 2secrets, 2The
!dge of 9uccessF 6 )uilding )locks to "ouble /our 9ales.2
/ou will discover the fastest, most effective ways to grow
your business and still have time to live your life.
?oogle (1'9"'LF ?((?) has rolled out a mobile&friendly
version of its Broduct 9earch feature for iBhone and 'ndroid&
powered devices.
?oogle Broduct 9earch is a search engine that works much
as the name indicatesF :sers type in keywords relevant to
what they%re seeking && 2garnet rings,2 for instance && and the
feature deliver likely prospects from various shopping sites,
along with product reviews and ratings.
34 34
E-COMMERCE
?oogle%s enhancements are a nod to the change in the way
many people are using their cell phones && basically, as
mobile desktops. #obile Broduct 9earch would come in
handy for someone shopping at a store that had a +uestion
about design specs or comparison prices, for eample.
The advantage of m&commerce isF
5& providing wider reach.
*& reducing transaction cost
3& streamline business processes.
4& competitive pricing.
D& reducing time to order.
The disadvantages of m-commerce.
5& small screens of most devices still limit types of file and
data transfer (i.e. streaming videos, etc.)
*& standards guiding applications and technology
development and connection(s)
3& $'B and 9#9 limited to small number of characters and
tet.
4& use of graphics limited
D& less functionality for mobile Internet over mobile phones
and eisting generation of handhelds than for mobile
computers (laptops and net generation handhelds)
P& user interface is often difficult to learn how to use
7& limited bandwidth
34 34
E-COMMERCE
8& limited roll out of higher bandwidth mobile networks and
devices (i.e. 3g networks and wireless broadband networks
are predominantly located in cities)
6& cost of establishing mobile and wireless broadband
infrastructure
54& technology constraints of mobile devices (memory,
processing power, display capabilities, input methods)
55& security of data moved across some mobile and wireless
networks
5*& businesses investment in hardware and infrastructure is
seen as riskier as rapid evolution of mobile and wireless
technologies continues.