Before we understand ecommerce, let's understand what is commerce. Commerce is nothing but buying and selling of goods. It has been around for many years. Starting from the barter system, where there was just exchange of goods to using precious metals to coins and then paper money and plastic money, traditional commerce used to happen face to face, so it was limited to particular geographical locations. There was a personal interaction and delivery of goods was instantaneous. It was limited to certain business hours, typically during daytime.
With the advent of the Internet came ecommerce. Ecommerce can be defined as the process of buying and selling of goods or services using an electronic medium such as Amazon, Flipkart, OLX etc. Here the sale happens online so you can potentially sail across the world. There is limited personal interaction and delivery of goods and services might take some time. It is available 24/7 and can be done day or night.
It requires an initial setup cost for hardware software and then training and maintenance cost. Sometimes there are problems with order fulfilment or returns. Security is also a key concern. There are different types of security risks that you might face and need to overcome. Some common issues are identity theft, malware attack and denial of service.
Here is a summary of the difference between traditional commerce and ecommerce which is popular today. Ecommerce is also extended to mobile and social media networks. When we say mobile commerce today you are able to do any transactions from your smartphone or tablet like mobile banking, bill payments, ticket booking etcetera. In addition, there is the rise of social commerce, which is the use of social media sites like Facebook, WhatsApp to promote and sell products and services.
There are multiple ways by which you can make payments online. You can use credit or debit cards like cards issued by MasterCard and Visa. You can use prepaid cards like gift cards. You can also do net banking where if you are enrolled in Internet banking you can choose your bank. And do direct bank transfer through NEFT and IMPS. You can also use the wallet, which is like a prepaid card or it is linked to your bank account, which you can use for online transactions.
Mobile payments using UPI are becoming common like Google Pay. Upcoming trends include digital currency like Bitcoin or Ethereum. The advantage of ecommerce is that it is available 24/7 and provides a global reach. Sellers and buyers can virtually meet anytime, anywhere. There is no need for any intermediaries and it provides the user with more options to compare and select cheaper and better options. It significantly reduces paperwork and lowers the transaction cost.
There are four major ecommerce business models. First, a business sells its products directly to a customer. A customer can view the product shown on the website and order. Next is the B2B model. Here the business sells its products to an intermediate buyer, who then sells the product to the final customer. For example, a company might sell its product to a wholesaler who will sell it to multiple retailers at some price mark-up. Next a consumer sale of any of their assets like property, cars, motorcycle etc. by publishing the information on a website where interested consumers can view and do the purchase. Example, buying and selling on OLX, Quickr or Craigslist. Then comes the consumer to business model. In this model, consumers have products or services of value that can be consumed by business. For example, social media influencers being paid by businesses to advertise their products.
Ecommerce follows a typical trade cycle or flow. Fast is pre-sales. It consists of 2 steps. First customer searches different websites for products to be purchased. The next step is negotiation. It is selecting a supplier who offers good quality product at write price and whose terms such as delivery dates etc. are agreeable to customers. Next step is execution. First it consists of an order phase where the customer places an order for the selected product. At this phase he might do the payment upfront or he might do the payment after the delivery. In the delivery phase, the supplier processes the order and then the customer receives the delivery of the product then comes settlement.