Electronic Commerce
E-commerce is a sphere of the digital economy, which includes all financial and trade transactions carried out using computer networks, and business processes associated with such transactions.
E-commerce includes:
- electronic information exchange (Electronic Data Interchange, EDI),
- electronic movement of capital (Electronic Funds Transfer, EFT),
- e-commerce ( English e-trade ),
- electronic money (e-cash),
- electronic marketing (e-marketing),
- electronic banking (e-banking),
- electronic insurance services (e-insurance).
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| What is E-commerce in 2022? |
History of e-commerce development
The first systems and methods of e-commerce owe their birth to the emergence of sales automation technologies and the introduction of automated corporate resource management systems.
In 1960, the American companies American Airlines and IBM begin to create a system for automating the procedure for reserving seats on flights. The SABER (Semi-Automatic Business Research Environment) system has made air travel more accessible to ordinary passengers, helping them navigate the ever-growing fares and flights. Due to the automation of the process of calculating tariffs when reserving seats, the cost of services has decreased, and passenger traffic has increased. The joint project of American Airlines and IBM is one of the first examples of e-commerce.
In 1971, students at Stanford University and the Massachusetts Institute of Technology set up a marijuana sale using the Stanford Artificial Intelligence Laboratory's ARPANET computer network (the forerunner of the Internet). Later, these transactions were considered the first online transactions, the beginning of e-commerce.
In 1979, Michael Aldrich demonstrates the first online shopping system.
In 1981, Thomson Holidays UK was created - the first online shopping system for businesses.
In 1982, the French Minitel system was introduced by France Telecom throughout the country and used for online bookings.
In 1983, the California State Legislature holds the first electronic commerce hearings in Vulcan, California.
In 1995, Jeff Bezos launches Amazon.com and launches the first commercial-free 24-hour radio stations, Radio HK and Net Radio. In the same year, eBay (as Auction Web) was created by programmer Pierre Omidyar.
After 4 years, Alibaba Group was founded in China. Business.com was sold to companies for $7.5 million, which was acquired in 1997 for $149,000. The peer-to-peer file-sharing program
In 2003, Amazon.com posts its first annual profit.
In 2004, DHgate.com, China's first b2b online transaction platform, was launched and became an incentive for other b2b marketplaces to move away from the yellow pages model.
In 2007, Business.com was acquired by RH Donnelley for $345 million.
In 2015, Amazon.com is driving more than half of all e-commerce growth, selling nearly 500 million SKUs in the US.
In 2017: Worldwide e-commerce retail sales reached $2.304 trillion, up 24.8% from the previous year.
The e-commerce market has been developing most dynamically over the past 20 years, which is due to the rapid growth in the number of Internet users, the increasing influence of social networks and other interactive online platforms, the dynamic development of electronic payment systems, and the transition of leading market players to new technological platforms for e-commerce (from Web 1.0 to Web 2.0 to Web 3.0 ).
In 2012, the volume of e-commerce sales for the first time in history exceeded $1 trillion, and the number of online stores in 2012 (about 2011) increased by 30% and amounted to 32.5 thousand.
In 2011, the total turnover of online stores was estimated at 258 billion rubles. The growth of the market volume increased by 36%. According to the results of the RAEC study for 2012, the volume of the online trading market amounted to 284.96 billion rubles.
Gradually, access via mobile devices began to play an increasingly important role in e-commerce and accounts for more than 25% of the market. Many companies have invested heavily in mobile applications.
Modern 3D graphics technologies have made it possible to create fairly compact 3D models that have received standardization, including when posting on social networks (for example, Facebook 3D Posts).
Several consider this form of advertising to be the preferred topic for photos. Some brands, such as Sony, are already experimenting with augmented reality ads. Wayfair allows you to view a 3D version of your furniture at home.
Types of e-commerce
There are several generally recognized categories into which e-commerce is divided. As a rule, such a delimitation is carried out according to the target group of consumers.
Classification
Commercial organizations
- B2B (Business-to-Business) - "relationships between commercial organizations."
- B2C (Business-to-Consumer) - "the relationship between a commercial organization and consumers."
- B2E (German)(Business-to-Employee) - "the relationship between commercial organizations and employees (employees)".
- B2G (Business-to-Government) - "the relationship between the organization and the government."
- B2O (Business-to-Operator) - "the relationship between the organization and the telecom operator."
- C2A (Consumer-to-Administration) - "the relationship between consumers and administrators."
- C2B (English)(Consumer-to-business) - "the relationship between consumers and commercial organizations."
- C2C (Consumer-to-Consumer) - "relationships between consumers."
Administration
A2A (Administration-to-Administration) - “relationship between administrations”.Other business models
D2C (Decentralized-to-Consumer) - “decentralized relationships based on Blockchain technology ( eng. Blockchain ) between consumers.”In addition to traditional e-commerce, the terms m-Commerce (mobile commerce) around 2013 t-Commerce were also used.
B2B scheme
B2B - abbreviation "business-to-business" - trade between enterprises using applications through the site. Instead of receiving orders through sales representatives over the phone or email, orders are received digitally, reducing overhead.
Internet platforms make it possible to significantly simplify operations at all stages, and make trading more efficient and transparent. Often, in such cases, the representative of the customer's side can interactively control the order fulfillment process by working with the seller's databases.
Information about goods can be presented both on sites accessible to all users on the Internet and on web resources accessible only to authorized users. An example of a B2B transaction would be the sale of website templates to companies for later use as the basis for the design of the company's own web resource. Of course, this includes any interactions involving wholesale deliveries of goods or similar order fulfillment.
B2C scheme or business-to-consumer
Retailing refers to the activity of selling goods or services directly to consumers or end-users. In several jurisdictions or regions, legal definitions of retail specify that at least 80 percent of sales must be made by end end-users
Retailing is often carried out in retail stores or service establishments, but may also be carried out through direct sales, such as vending machines, door-to-door sales, or, electronic channels. Although the idea of retail is often associated with the purchase of goods, the term can be applied to service providers who sell goods to consumers.
Retail service providers include retail banking, tourism, insurance, private healthcare, private education, private security firms, law firms, publishing houses, public transportation, and others.
For example, a travel service provider may have a retail division that books travel and lodging for consumers, and a wholesale division that purchases accommodation, hospitality, transportation, and sightseeing units that are subsequently bundled into a holiday tour for sale to retail travel agents.
Some retailers refer to their stores as "wholesale outlets", offering "wholesale prices". Although, in a strictly legal sense, a store that sells the bulk of its merchandise to end consumers is considered a retail store, not a wholesale store. Different jurisdictions set the parameters for the ratio of consumer to commercial sales that define the retail business.
Scheme С2С or consumer-consumer
This way of carrying out e-commerce involves transactions between two consumers, neither of which is an entrepreneur in the legal sense of the word. Internet platforms for such trade are something between market traded and a column of ads in a newspaper.
As a rule, C2C commerce is carried out on Internet auction sites, which are becoming increasingly popular in our time, therefore this type of e-commerce is considered one of the most dynamically developing in recent times. For customers of such systems, the main convenience lies in the lower price of the product, compared with its cost in stores.
In addition to the most common e-commerce schemes described above, there are several others. They are not so popular, but, nevertheless, they are used in some specific cases. We are talking about the interaction of both entrepreneurs and consumers with government agencies.
Recently, many operations for collecting taxes, filling out questionnaires, forms for ordering supplies, and working with customs began to be carried out using Internet technologies. This makes it possible to significantly facilitate the work of civil servants, on the one hand, and enable payers to get rid of a certain amount of paperwork, on the other.
Logistics
Logistics in e-commerce is mainly about order fulfillment. Online marketplaces and retailers must find the best way to fulfill orders and deliver goods. Smaller companies usually control their own logistics operations because they don't have the option of hiring a third-party company. Most large companies hire contractors or a contractor company that takes care of the company's logistical needs.
Contrary to popular belief, there are significant barriers to entry into e-commerce.
Benefits of e-commerce
For organizations
- global scope
- Cost reduction
- Supply Chain Improvement
- Business is always open (24/7/365)
- Personalization
- Fast time to market
- Low-cost distribution of digital products
For consumers
- Ubiquity
- Anonymity
- Large selection of goods and services
- Personalization
- Cheaper products and services
- Prompt delivery
- Electronic socialization
For society
- Wide range of services provided (e.g. education, healthcare, utilities)
- Raising the standard of living
- Boosting national security
- Closing the Digital Divide
- Online sale/ordering of goods/services reduces car traffic and reduces environmental pollution
Disadvantage of e-commerce
For organizations
- Possible doubts of the parties about the ownership of a particular project by the company (negative anonymity)
- Some difficulty in maintaining and legitimizing the activities of the enterprise on the Internet
For consumers
- Consumer distrust in services sold via the Internet
- The inability to "touch" the product with your hands
- Waiting for delivery of purchased products
- Possible difficulties and costs when returning the goods
- Additional shipping cost
- The need to provide personal data
- A large number of scammers on the Internet
For society
- Attractive scam platform (lowering network security)
- Displacement from the market of commercial offline enterprises
For the state
- Shortfall in tax payments to the state budget when maintaining "gray" accounting schemes
E-commerce in the world
E-commerce has become an integral part of the modern economy. More and more consumers are purchasing goods via the Internet, and commercial organizations in one way or another use the capabilities of this network in their business activities. Total global sales in consumer e-commerce alone exceeded $1 trillion in 2012 and are growing steadily.
The e-commerce market in Europe reached 312 billion euros in 2012.
According to forecasts, by 2017, 10.3% ($370 billion in monetary terms) of the total spending of the US population on consumer goods will be accounted for by e-commerce and more than 60% of all sales will be somehow related to the Internet.
Russia ranked fifth in terms of e-commerce market after the UK, Germany, France, and Spain, while Russia's share was about 10.3 billion euros in 2012 with an increase of 35% compared to 2011. These dry numbers show that the e-commerce phenomenon has great potential, both worldwide and in Russia.
The impact of e-commerce on markets and retailers
The e-commerce markets are growing at a remarkable pace. The online market is expected to grow by 56fromin 2from5-2020.
In 2017, e-commerce retail sales worldwide were $2.3 trillion, and e-commerce revenues are projected to rise to $4.88 trillion in 2021.
Traditional markets expect only 2% growth at the same time. Offline retailers are struggling with the ability of an online store to offer lower prices due to lower costs (no store or showroom rental required, except for a warehouse and office). Many large retailers can maintain an offline and online presence by linking physical and online offerings.
E-commerce allows customers to overcome geographic barriers and allows them to buy goods anytime, anywhere. Online and traditional markets have different business strategies. Traditional retailers offer fewer product ranges due to limited shelf space. Online retailers often do not take inventory, but send customer orders directly to the manufacturer.
Pricing strategies are also different for traditional and online stores. Traditional retailers base their prices on the number of visitors to the store, the average purchase price, the number of transactions completed, the cost and of renting the premises. Online stores also take into account the number of purchases made, they also set prices for the speed of delivery.
Security is a major concern for e-commerce in developed and developing countries. E-commerce security protects websites and customers from unauthorized access and use of data. The threat type includes malware, unwanted programs (adware, spyware), phishing, hacking, and cyber vandalism. Traditional stores also use the online space to save customer data, implement loyalty programs and transfer customers to the online space to notify them bout promotions and, discounts, and deliver advertising info to order to effectively interact outside the offline store, retain customers and increase sales.
Impact on the labor market
On the one hand, e-commerce helps create new jobs through information services, necessary software developments, and digital products.
On the other hand, the emergence of online stores also leads to job cuts. The areas with the most projected job losses are marketplaces, postal, and travel agencies.
The development of e-commerce will also create new jobs that require highly skilled workers to manage large amounts of information, customer need,s and production processes. People with poor technical skills cannot take them.
E-commerce technologies reduce transaction costs, allowing both producers and consumers to work without intermediaries. This is achieved by expanding the scope of the search for the best price offers and group buying. The success of e-commerce at the city and regional levels depends on how local firms and consumers have adopted e-commerce.
However, e-commerce lacks human interaction with customers, especially those who prefer face-to-face communication. Customers are also concerned about the security of online transactions and tend to remain loyal to established retailers.
State regulations of e-commerce
In 1997, US President Clinton signed the Fundamentals of Global E-Commerce.
In 1999, the United States passed the Model Law on Electronic Messages (Uniform Electronic Transactions Act, UETA) and the Electronic Signature Act (E-Sign Act). They equated the electronic digital signature in the contract with the usually written signature. The form of a written contract was considered to be complied with in the presence of an electronic signature. Even earlier, in 1995, the state of Utah became the first US state to adopt a law on electronic digital signatures.
In the European Union, the Directive on Electronic Commerce was issued in 2000. Later, it and the Electronic Signatures Directive were supplemented with additional instruments aimed at creating a legal framework for electronic commerce within the EU.
UNCITRAL issued recommendations as early as 1985 on the legal value of electronic records. Subsequently, the UNCITRAL model laws on electronic commerce and on electronic signatures appeared.
