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The term Electronic commerce or e-commerce consists of all business activities

carried on with the use of electronic media, that is, computer network. It involves
conducting business with the help of the electronic media, making use of the
information technology such as Electronic Data Interchange (EDI). In simple
words, Electronic commerce involves buying and selling of goods and services
over the World Wide Web. Customers can purchase anything right from a car or a
cake sitting comfortably in his room and gift it to someone sitting miles apart just
by click of a mouse. Shipping method is generally used for the delivery of the
goods ordered. A 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. Online retailers are sometimes known as e-trailers and online retail is
sometimes known as m
. Almost all big retailers have electronic commerce
presence on the World Wide Web. Electronic commerce that is conducted between
businesses is referred to as business-to-business or B2B. B2B can be open to all
interested parties (e.g. commodity exchange) or limited to specific, pre-qualified
participants (private electronic market). Electronic commerce that is conducted
between businesses and consumers, on the other hand, is referred to as business-to-
consumer or B2C. This is the type of electronic commerce conducted by
companies such as Amazon.com. Online shopping is a form of electronic
commerce where the buyer is directly online to the seller's computer usually via the
internet. There is no intermediary service. The sale and purchase transaction is
completed electronically and interactively in real-time such as Amazon.com for
new books. If an intermediary is present, then the sale and purchase transaction is
called electronic commerce such as eBay.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It

also consists of the exchange of data to facilitate the financing and payment aspects
of the business transactions.
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The low cost of the PC and the growing use of the Internet has shown the
tremendous growth of Ecommerce in India, in the recent years. According to the
Indian Ecommerce Report released by Internet and Mobile Association of India
(IAMAI) and IMRB International, ³ The total online transactions in India was Rs.
7080 crores (approx $1.75 billion) in the year 2006-2007 and expected to grow by
30% to touch 9210 crores (approx $2.15 billion) by the year 2007-2008. According
to a McKinsey-Nasscom report the e-commerce transactions in India are expected
to reach $100 billion by the 2008. Although, as compared to the western countries,
India is still in is its initial stage of development.

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Home Internet usage in India grew 19% from April 2006 to April 2007. In April
2007 it became 30.32 million and the e-Marketer accepted that there will be 71
million total Internet users in India by 2011. India is showing tremendous growth
in the Ecommerce. Rival tradeindia.com has 700,000 registered buyers and it has
the growth rate of 35% every year which is likely to double in the year 2008.
Indiamart.com claims revenues of Rs. 38 crores and has a growing rate of 50 every
year. It receives around 500,000 enquiries per month. Undoubtedly, with the
middle class of 288 million people, online shopping shows unlimited potential in
India. The real estate costs are touching the sky. The travel portals' share in the
online business contributed to 50% of Rs 4800 crore online market in 2007-08.
The travel portal MakeMyTrip.com has attained Rs 1000 crores of turnover which
is around around 20% of total e-commerce market in India. Further an annual
growth of 65% has been anticipated annually in the travel portals alone.

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According to Outlook Business magazine (May 20, 2008), the total B2B
transactions in India in the year 2008 are likely to be US$100 billion and B2B
marketplaces could account for $15 to $20 billion out of that. India¶s largest B2B
portal Tradeindia, maintained by Infocom Network Ltd, also stated that e-
commerce transactions in India show a growth rate of 30 percent to 40 percent and
will soon reach the $100 billion mark. In near future, e-commerce is going to play
a major role in multimedia, entertainment and fashion industry. The foreign
branded companies are eager to take full advantage of the growing Indian market
and are trying to create market for their products over the net. Gucci Co. an Italian
iconic fashion and leather goods label is eager to make its hold in India with
Business to business transactions. Some of the key B2B exchanges in India are
tradeindia.com, matexnet.com, Alibaba.com, AuctionIndia.com, Indiamart.com,
TeaAuction.com, MetalJunction.com, etc.




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Although business-to-business transactions play an important part in e-commerce
market, a share of e-commerce revenues in developed countries is generated from
business to consumer transactions. Railway and Airlines have played a vital role in
e-commerce transactions in India. Travel portals are exploding in India. Recently
MakeMyTrip.com has shown Rs 1000 crores of turnover. Travel alone constituted
50% of Rs 4800 crore online market in 2007-08. In India, online services like
ticketing, banking, tax payment, bill payment, hotel room booking, entertainment,
online games, matrimonial sites, job sites, etc. are showing signs of development in
business-to-customer transactions. There has been tremendous boost in the online
business with the stock exchange coming online. Online valentine gifts and Diwali
gifts are also becoming popular along with the birthday cakes. No doubt, the total
value of the B2B transactions is much larger than that of the B2C transactions,
because typically B2B transactions are of much greater value than B2C
transactions. It seems that the B2C market in India will take time to grow as
compared to the B2B market.

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The government is aware of the increasing misuse of the electronic media and
online frauds. Therefore, the government of India has passed the Information and
Technology Act to keep a check on the transactions carried on via the electronic
media and to make the process of Ecommerce safe and reliable. The Act imposes
heavy penalties and punishment on those who try to misuse this channel for
personal benefit or to defraud others. The law has also established the
authentication of the electronic records. Increase in the Cyber crimes in
Ecommerce is causing concern among the credit card users in India. Now, the
government has opened Cyber Crime Police Station. The Government of India has
decided to impose service tax on E-Commerce transaction and that will result in
making the net shopping expensive.
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ëY Goods should have value for the customer along with quality.
ëY Security is promised.
ëY Selling Brand articles.
ëY Establishing trust and winning confidence.
ëY Providing easy guidance.
ëY Clear information regarding delivery time.
ëY Articles ordered and the article delivered should not vary.
ëY Giving discount offer and other gift items.
ëY Limited personal information.
ëY Providing value added service at lower prices.
ëY Full information regarding the product is simple words.
ëY Innovative products.
 ëY Social shopping phenomenon.
ëY Providing price comparison.
ëY Transparent information regarding the product.
ëY Indian customers want to buy things that do not cost them much.


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There are several approaches.

ëY A merchant account through a major bank is best for larger companies but a
bit pricey for small businesses. PaySeal (www.payseal.com) is the payment
gateway for ICICI Bank. Citibank India (www.citibank.com/india/) and
HDFC Bank
(www.hdfcbank.com/wholesale/sme/Payment_Gateway_Services.htm) also
offer a payment gateway and merchant account, but details aren't on their
websites.
ëY A second approach is to use third parties that take credit cards for your sales.
CCAvenue (www.ccavenue.com/indianrupees.jsp), an Indian company,
provides direct debiting for customers in India with accounts at: HDFC,
 Citibank, ICICI, IDBI, UTI, Global Trust Bank, Centurion Bank, and the
Federal Bank Ltd. In addition, credit cards can be received from customers
outside India. Typical costs are a Rs. 7,500/- set-up fee, Rs. 1,200/- annual
fee, and 7% to receive credit cards, 4% for net banking transfers. Transecute
(www.transecute.com) includes fraud detection and risk mitigation. They
charge a Rs. 30,000/- set-up fee and 5% per transaction. Also consider
companies mentioned in "E-Commerce When You Can't Get a Merchant
Account,". A third approach is to set up a PayPal account (available to
residents of India) and use PayPal's merchant tools to accept credit cards and
sell online. The downside is that you can't directly withdraw PayPal funds to
a bank in India (though you can request a check). But you can transfer US
dollars in a PayPal account to Remit2India (www.remit2india.com), a
service of the Times of India. They convert it into Indian Rupees and deliver
it to your designated recipient. Costs are the PayPal recipient fee of 2.95%
plus 3% to 5% fees for Remit2India.

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ëY India has shown itself to be competitive in information technology and in
services. E-commerce dealing in intangibles combines these two together.
Solving Y2K bugs was an excellent example of e-commerce. India can be
confident of doing well in the service side of e-commerce. After software, e-
commerce is likely to be the next wave of information technology business.
If India is not actively involved, its famed software industry will become a
historical relic.
ëY By eradicating the disability of geography, e-commerce allows service
providers to compete directly on labour costs and other factors like time
difference. India's labour prices are extremely competitive against any
Western country. And few third world countries have India's lead in
information based services. India is also nicely placed between east Asia,
Europe and the Americas to tap time zone difference. Already, Indians work
on projects for US companies while the latter sleep.
ëY E-commerce greatly reduces transaction costs and overcomes infrastructure
failures. For Indian companies, especially small companies, who have a hard
time with overhead costs and overcoming infrastructural bottlenecks, e-
commerce is a cheap way to become a global market player.
ëY E-commerce gives India an opportunity to rebuild a large portion of its
economy without the red tape and regulation that strangled its manufacturing
sector during the past 50 years. India's software industry has shown how
well information based industries can do if the government is not involved.
 E-commerce could expand that lesson to many other sectors of business
including retailing.

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ëY It should oppose international regulation. Self-regulation is probably the
best way. In other words, beyond a basic legal framework establishing the
authenticity of electronic signatures, contracts and so on. Let the market
generate the credit rating and security measures in the form of private firms.
These themselves will be forms of e-commerce which Indian companies can
profit from.
ëY There are two types of e-commerce. One is the business of intangible
services and products. These should be declared tariff and tax-free. This
would encourage such business and remove a major government headache
on how to regulate this. The other type of e-commerce will result in the
movement of a tangible product or good from one hand to another. India
should consider at least introducing a tax and tariff holiday in such services
for a few years, if not a total ban altogether. Taxes could perhaps be shifted
to consumption rather than transaction based means.
ëY India should reassure other third world countries about the importance of e-
commerce and the fact all countries will benefit greatly from allowing free
trade in cyberspace.

However, to take advantage of this new technology, a new mindset is

necessary. First, it would be necessary to realise that the industry grew
precisely because the state failed to realise the potential of software and
therefore, did not place the kind of obstacles that other sectors of the
economy had to go through. But now the state is planning to step in. While it
talks of promoting the IT sector, it now seeks to impose a 49% ceiling on
foreign investment in e-commerce ventures. Clearly the state has failed to
understand that e-commerce operates in a borderless world. A cap on foreign
investment will severely handicap the Indian operations right at the dawn of
this new era.

E-commerce is a very good example of brain drain in the other direction.

Foreign companies setting up in India a range of e-services, data
communication, backroom activity, ticketing, data processing, call services,
has the potential for a lot of employment, and income. Let us not close this
 window of opportunity on ourselves.

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The scope for Ecommerce in India is no doubt tremendous in the years to come,
but still there are some pitfalls in its way of success that should be taken care of.
They are:

1.Y Studies have revealed that 23% of the customers quit even before they
register themselves at a particular site because they hesitate to register
themselves.
2.Y The time of delivery stated is unclear.
3.Y The time taken for downloading is very long.
4.Y People in India have habit of buying goods only after feeling the goods. This
drawback can only be removed if matured companies enter the Ecommerce
in whom people have good faith.
5.Y The behavior of the Indian customer is very need driven as compared with
the US customers who are impulsive buyers.
6.Y Most of the entrepreneurs in India lack is sufficient capital or resources and
hence cannot wait for a long period of time for positive results.

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ëY Consistency in execution.
ëY Strong government policy against cyber crimes and frauds.
ëY Tight integration of the system by the online retailers.
ëY Stating clearly the time required for the delivery of the product and
delivering the goods within that time period.
ëY Making the payment mechanism more safer.

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Electronic marketplace is an online platform or website to facilitate transctions
between the buyers and the sellers at organizational level. After a seller registers
himself with a particular e-marketplace he can display information regarding his
product or services on that portal. Once a buyer registers itself with the e-
marketplace he can have access to all the information he wants. It is also known as
B2B exchanges. The first e-marketplace in India was established by New Delhi-
based SteelNext for trading "mild" or commodity steel in the year 2001. The E-
marketplace can:

ëY Reduce the time and cost of interaction for the transcationss.

ëY Facilitate distant trade with efficiency.
ëY Help in the payment procedure.
ëY Help the buyers to find new suppliers and place orders with them.
ëY Create a safe and friendly online deal process.


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The vertical e-marketplace is consistent buyer and seller of only one specific
industry such as leather, textile, steel, to display information regarding their goods
or services.

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The horizontal e-marketplace connects buyers and sellers of various industries to
display information regarding their goods and services.

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The entrepreneurs in India cannot rely on the online sales only, as it is only in
initial stages of development. They will have to plan an alternative channel to keep
up with the pace. Multi-channel sales will be most beneficial for the Indian
scenario. Indian middle class is equal to the entire customer base in the US.
Therefore, the future of Ecommerce in India is quite promising and the growing
Internet Service Providers (ISPs) have aided the process even more.