Electronic Commerce

Lecture-1

Introduction of e-commerce:

Definition 1:

Ecommerce, also known as electronic commerce or internet commerce, refers to the

buying and selling of goods or services using the internet, and the transfer of money
and data to execute these transactions. Ecommerce is often used to refer to the sale
of physical products online, but it can also describe any kind of commercial transaction
that is facilitated through the internet.

Definition 2:

Electronic commerce (ecommerce) refers to companies and individuals that buy and
sell goods and services over the Internet. Ecommerce operates in different types of
market segments and can be conducted over computers, tablets, smartphones, and
other smart devices. Nearly every imaginable product and service is available through
ecommerce transactions, including books, music, plane tickets, and financial
services such as stock investing and online banking. As such, it is considered a
very disruptive technology.

Diff b/w E business and E commerce:

Whereas e-business refers to all aspects of operating an online business, ecommerce

refers specifically to the transaction of goods and services.
History of E-commerce:

The history of ecommerce begins with the first ever online sale: on the August 11,
1994 a man sold a CD by the band Sting to his friend through his website NetMarket,
an American retail platform. This is the first example of a consumer purchasing a
product from a business through the World Wide Web—or “ecommerce” as we
commonly know it today.

“This year, an estimated 2.14 billion people worldwide will buy goods and services

online, and the number of Prime members shopping Amazon stores now tops 150
million”

What is an ecommerce website?

An ecommerce website is your digital storefront on the internet. It facilitates the

transaction between a buyer and seller. It is the virtual space where you showcase
your products, and your online customers make their selections. Your website acts as
the product shelves, sales staff, and cash register of your online business channel.

Businesses might create a branded store experience on a store like Amazon, build their
own commerce site on a dedicated domain, or do it all for a multi-channel approach.
Where and how does ecommerce take place?

Online shopping evolves and shifts daily. People shop from their computers, phones,
tablets, and other devices. They patronize websites, visit social media pages, and
participate in thriving virtual channels. Here’s an overview of three distinct methods
of conducting ecommerce today.

M-commerce
Online transactions that take place on mobile devices are known as mobile commerce
or “m-commerce.” With portable devices in the hands of consumers worldwide, it's
no wonder m-commerce is expected to overtake non-mobile commerce in 2021.

Many people now do their product research and online purchasing through their
phones. This trend shows no signs of slowing, so it’s essential to optimize your online
store for mobile.

Enterprise ecommerce
Enterprise ecommerce is the buying and selling of products to large companies or
organizations. If a large business sells many different types of products or has multiple
brand lines and transitions into selling online, then it is participating in enterprise
ecommerce.

Social media ecommerce

Social media can help you market and promote ecommerce stores to a broad
audience. Just as social media enables you to connect with friends and family, it also
has the potential to attract customers to your business. Done well, social media
marketing engages customers in an informal setting.
 Social media can help you:

 Attract new customers

 Build brand awareness

 Generate online sales

Benefits of ecommerce

Conducting sales online has some significant advantages. Among the top benefits,
ecommerce:

 Is growing rapidly

 Offers global marketing reach

 Provides the ease of ordering products online

 Generally involves lower operating costs

 Gives direct-to-consumer access

 Speed of access

 Availability (24/7)

Challenges of ecommerce

 Limited customer service

 Limited product experience

 Security

 Return & refund policy

 Finding the right market

Types of Ecommerce Models

There are four main types of ecommerce models that can describe almost every
transaction that takes place between consumers and businesses.

1. Business to Consumer (B2C):

When a business sells a good or service to an individual consumer (e.g. You buy a
pair of shoes from an online retailer).

2. Business to Business (B2B):

When a business sells a good or service to another business (e.g. A business sells
software-as-a-service for other businesses to use)

3. Consumer to Consumer (C2C):

When a consumer sells a good or service to another consumer (e.g. You sell your old
furniture on eBay to another consumer).

4. Consumer to Business (C2B):

When a consumer sells their own products or services to a business or organization
(e.g. An influencer offers exposure to their online audience in exchange for a fee, or
a photographer licenses their photo for a business to use).
Examples of Ecommerce
Ecommerce can take on a variety of forms involving different transactional
relationships between businesses and consumers, as well as different objects being
exchanged as part of these transactions.

1. Retail:
The sale of a product by a business directly to a customer without any intermediary.
For example buying clothes from a store or doing grocery.

2. Wholesale:
The sale of products in bulk, often to a retailer that then sells them directly to
consumers. For example a shopkeeper buys clothes in bulk and than sell them to
consumers.

3. Dropshipping:
The sale of a product, which is manufactured and shipped to the consumer by a third
party. For example, you go to a retail store (like Walmart) to buy a t-shirt, then sell it
at a higher price online through your own website or Amazon.

4. Crowdfunding:
The collection of money from consumers in advance of a product being available in
order to raise the new organization financial necessary to bring it to market. For
example Seedout.org is first Crowdfunding Platforms in Pakistan run by Mr. Zain
Ashraf Mughal. Seedout is a registered as non-profit organization working as
crowdfunding platform and provides loans without charging any interest on their
loan.
5. Subscription:
The automatic recurring purchase of a product or service on a regular basis until the
subscriber chooses to cancel.
Subscription-based ecommerce is a buy-in service for membership or recurring
orders. Subscriptions can take many forms. Some include memberships to retailers
(like Amazon and Walmart.com), discounts (like Subscribe & Save), or buying boxes
or specialty products from boutique brands.

6. Physical products:
Any tangible good that requires inventory to be refilled and orders to be physically
shipped to customers as sales are made.

7. Digital products:
Downloadable digital goods, templates, and courses, or media that must be
purchased for consumption or licensed for use.

8. Services:
A skill or set of skills provided in exchange for compensation. The service provider’s
time can be purchased for a fee.
4- Stages of E Commerce:

1. Attract – Get People to Your Website

The first goal of your e-commerce site is to get people to visit your store. There are
many ways to accomplish this:

 Content Marketing – You can write valuable articles about your industry and
products. This content not only helps your search ranking but it also gives you
content to post on social media and in newsletters. The content can be about
the products themselves, the producers of the products, about the company,
or the industry you serve. Example: If you are selling fitness wear, you can
write articles about the top fitness trends or the 10 most popular fitness
 outfits for 2018. Anything that would be of interest to your target
demographic is fair game!
 Digital Advertising –Today, there are no shortages of ways to spend
advertising dollars online. You can use Google AdWords and target searches
related to your product. You can run Facebook ads and target your
demographic and people who like similar products. You can run YouTube ads
and display ads. The best thing to do in the beginning is to test platforms with
different messages and target audiences. Once you find the platform,
message, and target demo combination that present the highest conversion
rate, double down on what works. Stop any campaign that is not generating
positive returns.
 Affiliate Partnerships – You can find bloggers and influencers online that have
an audience that would be interested in purchasing your products. You can
reach out to these people and try and work out an affiliate deal. They can
either write an article about your products/shop or they can include ads on
their website directing people to your website. Finding audiences that will be
most receptive to your product offering is the key.
 Social Media – Producing content and posting on social media is a great way
to get exposure. If you consistently do this, you will have a handful of articles
or posts that might get shared out and reach a large number of people. When
posting on social media, you want to make sure you mix it up and you are not
just posting other people’s content. You want to post your own original
content that directs people to your website. Once there, make sure you have
clear call to actions to get people to buy or shop around.
2. Convert – Get People to Want to buy

Once someone comes to your website, the next step is to get them to make a
purchase. This is the biggest step, finding out what percentage of your customers
end up making a purchase.

 Trust – This a huge aspect of e-commerce that is often overlooked. If your

website looks outdated and you don’t have information about your company
on the site, people will not trust you enough to put down their card and make
a purchase. You have to design your site so people will not think twice about
putting down their card. If someone goes to your site and the layout is
outdated with a bunch of links/options, you have low-resolution photos, and
there isn’t an about us section, you will lose people who will not feel safe
shopping on your site.
 Split Testing – You have spent a lot of time and money to get people to your
website, make sure that you are showing the right messages and the right
products to generate the best conversion rates. Slightly changing a message, a
featured product, the layout, etc. can have a big impact on your conversion
rate. You can use software like Optimizely to setup different A/B test on your
site. Run these tests, see which one performs best, and repeat. Something as
simple as changing your call to action can have a huge impact on your sites
conversions.
 Search and Filter Functionality – If a potential buyer cannot find the products
they are looking for, they will never be able to make a purchase. Make sure
that it is easy to navigate through your products. Tag products and let your
visitors filter by these tags. Look at similar sites and see how they are filtering
their products.
3. Close – Get Them to Complete the Checkout Process

Once someone goes to checkout, this is where you need to absolutely make sure you
don’t lose them.

 Re-Targeted Ads – Yeah, your potential buyer left your site but this doesn’t
mean you’ve lost them for good. Setup retargeted ads to run if someone goes
to checkout but then leaves the page. They might have been interested but
weren’t ready to make the purchase. Follow them around with ads and you
will stay top of mind.

 No hidden Fees or Outrageous Shipping Amounts – When I ordered business

cards, I was ready to checkout and pay. At the very end, I finally was able to
see the different fees and high shipping price. If I would have known about the
high fees in the beginning, I would have been more comfortable with them at
the end. Showing hidden fees and large shipping cost at the last second is a
great way to lose a potential buyer. Be transparent about pricing up front.
 Up-Sell Opportunities – When someone is checking out, make it easy to add
additional items to their cart before checkout. This could be a popular item or
an item that other people buy when they purchase a particular item. You
don’t want to mess with a simple, easy checkout process. Focus on adding
value by making it easy to add an item they might be interested in to the
checkout. This is also a great way to increase your average purchase amount.

4. Retain – Get Them to Come Back and Buy More

You got someone to go to your website, put down a credit card, and pay you money.
This is huge. This person likes your products and trusted your site enough to buy. The
email address alone is a huge asset to your company. Treat it like gold. The goal is to
get somebody to come back and buy again or tell their friends.

 Valuable Emails – Make sure you are sending valuable emails. Don’t send
emails just to send them. You want to give your customer good content,
interesting articles, discounts, and important announcements about new
products. Keep the subject lines short and direct. Have clear call to actions
inside of the email. Overall, make sure you have a clear goal for why you are
sending this email. You can use email marketing software and setup a chain of
emails to go out automatically after a purchase is made.
 Offers – A customer that has already bought from you is a great prospect to
drive repeat purchase behavior. Give them a discount or an offer to bring
them back. Make sure to put a deadline on the offer to drive home a sense of
urgency. Also, make sure that the discounts are trackable so you can easily
measure campaign effectiveness.
 Absolutely No Spamming – This is the best way to get someone to
unsubscribe. If you are sending daily emails telling someone to buy more
product, they are going to unsubscribe. Send periodic emails that show value
to your subscriber. They like your site and your products, don’t blow it by
spamming them.
 Feedback – This one’s easy to do and can give you a lot of valuable feedback
on how to improve your ecommerce business. Once a customer’s order has
been received, send an email requesting feedback. You can use software
like SurveyMonkey to get this feedback. Once the order has been received by
the customer, trigger an email to go out requesting feedback. Keep the survey
 short and make sure you are collecting relevant data. You will get a
percentage of people that will answer this email and give you the feedback.

Revenue Models

What is a Revenue Model?

A revenue model is the means by which a business plans to make money. Depending
on the revenue model, which can be pretty standard or fairly complex, a company
may take into consideration manufacturing, purchasing, distribution, marketing, and
other costs, until the business arrives at a profit.

The revenue model is considered a high-level look at the revenue structure of a

business. Within this model, a company can have a number of different revenue
streams, i.e. different sources of income.
Advertising Revenue Model

The advertising revenue model is when popular platforms allow others to advertise
with them for a fee. Media sites, such as magazines, newspapers, and TV channels also
frequently use this model. While they may charge a flat fee for advertising, generally
cost is based on pay-per-click (PPC), which is the number of people who click on the
ad. Business following the Advertising Revenue Model presents an indirect way of
earning revenue through a digital platform and the conventional ways of putting up
ads generally include display marketing that includes a super banner, wallpaper,
skyscraper or rectangular ads.

Subscription Revenue Model

You must have heard of Netflix, Amazon Prime, YouTube Premium, etc who will let
you enjoy their unlimited services. These eCommerce business models charge their
users or rathers subscribers based on a certain interval of time (daily, monthly or
annual) to avail their services. The service offerings of these companies generally
include music, videos, TV channels, magazines, special services, etc. which is offered
to the subscribers for a price to watch/listen or get the latest edition.

Transaction Fee Revenue Model

This model charges a fee every time a transaction is made through their platform. For
example, eBay charges sellers a fee whenever an item is sold; PayPal charges users a
fee for transferring money; eTrade gains a transaction fee whenever a stock is sold;
and so on. While fees tend to be minimal, if people are making thousands of
transactions per day, the revenue can be substantial!
Sales Revenue Model

This is the most commonly followed eCommerce business model where wholesalers
and retailers sell their products over the internet intending to reach out to a larger
target audience. Also, more importantly, this model brings inconvenience for the
customer as well as saves them time. And the hassle to walk up to their physical store.
There is an extra cost.

The prices are often competitive in comparison to the actual store price. The business
following the online sales model often comes with marketplaces as common entry
points that allow them to deal with various product vendors allowing them to grow
the marketplace and therefore earn more.

Affiliate Revenue Model

Last but not least is affiliate marketing. With this model, businesses earn revenue just
by promoting and selling another person’s (or company’s) product on their site (as
opposed to the advertising revenue model, which doesn’t allow for purchase on the
host’s site). The concept of affiliate marketing is based on revenue sharing. If a
business has a product and wants to earn more, you can promote complementary
products or services of another company that will, in turn, pay you for your referrals.
It’s a win-win for both parties; the affiliate gains a new, passive revenue stream, and
the merchant gains new customers!
 Value Chain in E-Commerce

What Is a Value Chain?

A value chain is a series of consecutive steps that go into the creation of a finished
product, from its initial design to its arrival at a customer's door. The chain identifies
each step in the process at which value is added, including the sourcing,
manufacturing, and marketing stages of its production.

A company conducts a value-chain analysis by evaluating the detailed procedures

involved in each step of its business. The purpose of a value-chain analysis is to
increase production efficiency so that a company can deliver maximum value for the
least possible cost.

What are the Key Components of Value Chain

An organization's operations can be divided into two main categories: "primary" and
"support," which are presented below as primary and support activities. Depending
on the industry, the specific tasks in each category differs.

1) Primary Activities

There are 5 aspects to primary activities, which all are necessary for generating value
and gaining competitive advantage over competition:

 Inbound logistics: Receiving, storage, and inventory management are all part of
inbound logistics.
 Operations: Procedures for transforming raw materials into a final product are
included in operations.
  Outbound logistics: It refers to the activities involved in getting a finished
product to a customer.
 Marketing and Sales: Advertising, promotion, and pricing are all strategies used
in marketing and sales to increase visibility and target the right customers.
 Services: Customer service, servicing, restoration, refund, and exchange are
examples of service programmers that keep products running smoothly and
improve the customer experience.

2) Secondary Activities

The purpose of secondary activities is to increase the efficiency of primary activities.

When the efficiency of all the below-mentioned support activities becomes more
efficient, it enhances at least one of the five major activities

 Procurement: It refers to the process by which a corporation acquires raw

materials.
 Technological development: During the research and development (R&D)
phase of a company, technological advancement is utilized to create and
develop production procedures as well as automate processes.
 Human resource management (HR): It entails hiring and keeping workers
engaged who will help design, promote, and sell the product in accordance with
the company's business plan.
 Infrastructure: Company systems and composition of its management team,
like strategy, accountancy, financing, product testing, are examples of
infrastructure.
Value Chain Components Explained through Example

To understand how a value chain works, let’s consider the example of eCommerce
giant, Amazon. As part of its ambition to be the most client-centric corporation, the
company follows some of the below-mentioned primary activities:-

a) Inbound Logistics

Products supplied through Amazon's own fulfillment services, as well as data center
resources that power Amazon Web Services (AWS), are the company's key inputs.
Amazon can make use of its size as a major company to cut the cost per unit of items
by outsourcing.

b) Operations

Amazon can go beyond in-house distribution capabilities thanks to co-sourcing and

outsourcing from various local companies. Robotics is used at Amazon's 109
fulfillment centers to provide quick and cost-effective warehousing labor.

c) Outbound Logistics

This is the point at which Amazon converts its inputs into outputs. Amazon's
fundamental product, its ecommerce marketplace, provides a secure venue for both
users and merchants to conduct e-commerce transactions.

d) Marketing And Sales

Amazon spent billions on advertising and marketing in the last decade or so,
demonstrating the economic power of a large corporation to preserve its position
among the most recognized brands in the world.
How to Conduct a Value Chain Analysis in Ecommerce?

Organizations must conduct a value chain model analysis to determine where

improvements can be made to increase brand image and customer value. An analysis
that evaluates each and every activity that contributes to the value chain of a firm is
known as value chain model analysis.

Performing a value chain analysis consists of three steps:

1) Determine The Activities In The Value Chain

This is the initial step which includes learning about the basic and secondary actions
that go into generating a product or service. Because the interactions may differ, it's
critical for organizations that provide various products or services to undertake value
chain analysis for all of them.

2) Determine The Amount And Value Of Various Activities

The next stage is to figure out how much each specified activity contributes to the
overall value-chain process. It's also crucial to consider the costs associated with each
operation, as cutting them could increase the total transaction value.

3) Look For Ways To Get A Competitive Edge

You may assess the value chain via the perspective of whichever competitive
advantage you are seeking to create. For instance, a corporation looking to cut costs
would examine the eCommerce value chain from the standpoint of lowering costs and
enhancing efficiency. Perhaps, research will reveal operations that can be outsourced
or even deleted entirely to save money, or bottlenecks in the production process that
might be fixed to save time and money.