Opening Thoughts for Overview
- There is no universally accepted definition for
- To one person it means doing a monetary transaction
with a credit card while shopping at a website on the internet
- To another, it simply means having a web site that
augments usual business and generates a reasonable number of 800 number
phone calls and/or email requests for product information.
- To General Motors and Dell Computers e-commerce
means an entire arrary of electronic means to deal with customers, vendors,
dealers, stockholders and employees.
- To others it means B2B - business-to-business,
meaning purchase orders, inventory control and automatic manufacturing
Merriam-Webster's Collegiate Dictionary
defines commerce as follows:
com.merce n [MF, fr. L commercium, fr. com- + merc-, merx merchandise]
(1537) 1: social intercourse: interchange of ideas, opinions, or sentiments
2: the exchange or buying and selling of commodities on a large scale
involving transportation from place to place 3: sexual intercourse
Excluding #3 for the moment, commerce is, quite simply, the exchange
of goods and services, usually for money.
The Different Roles in Commerce
- Buyers - these are people with money who want to purchase a good or
- Sellers - these are the people who offer goods and services to buyers.
Sellers are generally recognized in two different forms: retailers
who sell directly to consumers and wholesalers or distributors
who sell to retailers and other businesses.
- Producers - these are the people who create the products and services
that sellers offer to buyers. A producer is always, by necessity, a
seller as well. The producer sells the products produced to wholesalers,
retailers or directly to the consumer.
The Details of Commerce boil down to a finite number
The following list highlights all of the elements of a typical commerce
activity. In this case, the activity is the sale of some product by
a retailer to a customer:
- If you would like to sell something to a customer, at the very core
of the matter is the something itself. You must have a product
or service to offer. The product can be anything from ball bearings
to back rubs. You may get your products directly from a producer,
or you might go through a distributor to get them, or you may produce
the products yourself.
- You must also have a place from which to sell your products.
Place can sometimes be very ephemeral - for example a phone number
might be the place. If you are a customer in need of a back rub, if
you call "Judy's Backrubs, Inc." on the telephone to order a back
rub, and if Judy shows up at your office to give you a backrub, then
the phone number is the place where you purchased this service. For
most physical products we tend to think of the place as a store or
shop of some sort. But if you think about it a bit more you realize
that the place for any traditional mail order company is the combination
of an ad or a catalog and a phone number or a mail box.
- You need to figure out a way to get people to come to your place.
This process is known as marketing, (largely by astute and
continuous search engine enlistments and enhancements for the small
business). If no one knows that your place exists, you will never
sell anything. Locating your place in a busy shopping center is one
way to get traffic. Sending out a mail order catalog is another. There
is also advertising, word of mouth and even the guy in a chicken suit
who stands by the road waving at passing cars!
- You need a way to accept orders. At Wal-mart this is handled
by the check out line. In a mail order company the orders come in
by mail or phone and are processed by employees of the company.
- You also need a way to accept money. If you are at Wal-mart
you know that you can use cash, check or credit cards to pay for products.
Business-to-business transactions often use purchase orders. Many
businesses do not require you to pay for the product or service at
the time of delivery, and some products and services are delivered
continuously (water, power, phone and pagers are like this). That
gets into the whole area of billing and collections.
- You need a way to deliver the product or service, often known as
fulfillment. At a store like Wal-mart fulfillment is automatic.
The customer picks up the item of desire, pays for it and walks out
the door. In mail-order businesses the item is packaged and mailed.
Large items must be loaded onto trucks or trains and shipped.
- Sometimes customers do not like what they buy, so you need a way
to accept returns. You may or may not charge certain fees for
returns, and you may or may not require the customer to get authorization
before returning anything.
- Sometimes a product breaks, so you need a way to honor warranty
claims. For retailers this part of the transaction is often handled
by the producer
- Many products today are so complicated that they require customer
service and technical support departments to help customers
use them. Computers are a good example of this sort of product. On-going
products like cell phone service may also require on-going customer
service because customers want to change the service they receive
over time. Traditional items (for example, a head of lettuce), generally
require less support that modern electronic items
You find all of these elements in any traditional mail order company.
Whether the company is selling books, consumer products, information
in the form of reports and papers, or services, all of these elements
come into play.
In an e-commerce sales channel you find all of these
elements as well, but they change slightly.
You must have the following elements to conduct e-commerce:
How a Big Guy uses E-commerce - Dell
The Lure of E-commerce
The following list summarizes what might be called the "lure of e-commerce":
- Lower transaction costs - if an e-commerce site is implemented
well, the web can significantly lower both order-taking costs up front
and customer service costs after the sale by automating processes.
- Larger purchases per transaction - Amazon offers a feature
that no normal store offers. When you read the description of a book,
you also can see "what other people who ordered this book also
purchased". That is, you can see the related books that people
are actually buying. Because of features like these it is common for
people to buy more books that they might buy at a normal bookstore.
- Integration into the business cycle - A Web site that is well-integrated
into the business cycle can offer customers more information than previously
available. For example, if Dell tracks each computer through the manufacturing
and shipping process, customers can see exactly where their order is
at any time. This is what FedEx did when they introduced on-line package
tracking - FedEx made far more information available to the customer.
- People can shop in different ways. Traditional mail order companies
introduced the concept of shopping from home in your pajamas, and e-commerce
offers this same luxury. New features that web sites offer include:
- The ability to build an order over several days
- The ability to configure products and see actual prices
- The ability to easily build complicated custom orders
- The ability to compare prices between multiple
- The ability to search large catalogs easily
- Larger catalogs - A company can build a catalog on the web
that would never fit in an ordinary mailbox. For example, Amazon sells
3,000,000 books. Imagine trying to fit all of the information available
in Amazon's database into a paper catalog!
- Improved customer interactions - With automated tools it is
possible to interact with a customer in richer ways at virtually no
cost. For example, the customer might get an email when the order is
confirmed, when the order is shipped and after the order arrives. A
happy customer is more likely to purchase something else from the company.
Easy and Hard Aspects of E-commerce
The things that are hard about e-commerce include:
The things that are easy about e-commerce
Especially for small businesses and individuals, include:
- Creating the web site
- Taking the orders
- Accepting payment
Building an E-commerce Site
The things you need to keep in mind when thinking about building an
e-commerce site include:
- Suppliers - this is no different from the concern that any normal
store or mail order company has. Without good suppliers you cannot offer
- Your price point - a big part of e-commerce is the fact that price
comparisons are extremely easy for the consumer. Your price point is
important in a transparent market.
- Customer relations - E-commerce offers a variety of different ways
to relate to your customer. E-mail, FAQs, knowledge bases, forums, chat
rooms... Integrating these features into your e-commerce offering helps
you differentiate yourself from the competition.
- The back end: fulfillment, returns, customer service - These processes
make or break any retail establishment. They define, in a big way, your
relationship with your customer.
Implementing an E-commerce Site
Let's say that you would like to create an e-commerce site. There are
three general ways to implement the site with all sorts of variations
in between. The three general ways are:
- Enterprise computing
- Virtual hosting services
- Simplified e-commerce,These are in order of decreasing flexibility
and increasing simplicity.
Enterprise computing means that you purchase hardware and software
and hire a staff of developers to create your e-commerce web site. Amazon,
Dell and all of the other big players participate in e-commerce at the
enterprise level. You might need to consider enterprise computing solutions
- You have immensely high traffic - millions of visitors per month
- You have a large database that holds your catalog of products (especially
if the catalog is changing constantly)
- You have a complicated sales cycle that requires lots of customized
forms, pricing tables, etc.
- You have other business processes already in place and you want your
e-commerce offering to integrate into them.
Virtual hosting services give you some of the flexibility of enterprise
computing, but what you get depends on the vendor. In general the vendor
maintains the equipment and software and sells them in standardized packages.
Part of the package includes security, and almost always a merchant account
is also an option. Database access is sometimes a part of the package.
You provide the web designers and developers to create and maintain your
Simplified e-commerce is what most small businesses and individuals
are using to get into e-commerce. In this option the vendor provides
a simplified system for creating your store. The system usually involves
a set of forms that you fill out online. The vendor's software then generates
all of the web pages for the store for you.
Brain's Incredible - "How Stuff Works" - One of the the world's
great web sites.