E-Commerce
- A New Part Of Economy
The Internet Economy (also sometimes called the "New Economy" or the "Digital
Economy" is being driven by the linking of individuals and organisations
through the technology of the Internet. E-commerce creates new challenges to
nearly all branches of the economy. That means the use of this technology and
not only being present in the Web with an own website.
What Is E-Commerce?
Electronic commerce is the process of two or more parties making business
transactions via computer and some type of network. This includes B2B
(=business to business) transactions, online retail and the digitalisation of
the the financial industry, too. Furthermore it also includes all the steps
which occur in any business cycle, such as placing ads, completing invoices,
and providing customer support. E-commerce actually began in the 1970s when
larger corporations started creating private networks to share information with
business partners and suppliers. This process, called Electronic Data
Interchange (EDI), nearly replaced paperwork and human intervention. It was,
and is, the foundation of electronic commerce. Today, electronic commerce
increasingly refers to business conducted over the Internet. But the
e-commerce, which you hear about on the radio, see on TV, and read in the
papers and online refers to online retailing - using the Web to sell goods,
services, and information to consumers. It will reach 20 % of the market share
or even more. Online retailing, the typical web-shopping, began five years ago,
and was pioneered largely by Internet companies that didn't perform traditional
retailing, such as Amazon.com and CDNow.
Electronic commerce is actually a management issue, not just a technology
issue. Therefore, the e-commerce strategy must be consistent with the business.
It is important to realise that e-commerce will have a major influence on how
business itself works in the future, and is not just another new channel for
marketing products and services.
Webvertisements
To sell goods or services, advertisement is the first step to making them
available to the public. The Web is a new way of presenting information to the
public via the Internet, therefore advertising has to be redefined for it, too.
Internet-advertising even seems to be the solution for the biggest problem of
the industry of advertising: How can you reach the attention of the people
between 25 and 35 with a high income?
However, the mode of advertising has so far been similar to that used on TV and
in newspapers. The most popular way of advertising in the Web are banners, it's
the most effective way of promoting a website. The structure of this direct
marketing is simple: A banner, consisting of the textinformation and animated
pictures, leads the webber by clicking on it directly to the website of the
canvasser.
The advantage is obvious: Banners are much cheaper than conventional
advertisements. In addition a banner can tell WHO, WHEN and HOW someone reacts
on an advertisement, which is very important for being even more successful on
the Web.
Austria's webvertising for 1999 was about 10 million US$, that's under 1 % of
the whole advertising-budget, this year it will rise to 35 million US$.
In the year 2004 33 Million $ should be invested in webvertising, which is about
5 % of the whole advertising-budget.
A recent problem for webvertiser are webwashers, programs that filter most
advertisements on websites. A webwasher can be downloaded from the Internet
without paying for it (freeware like many other programs, too), so everyone has
the opportunity to avoid most webvertisements.
Viral Marketing is a new trend in online-marketing: PlanetRx.com, an
online-drugstore from the U.S. was able to raise the number of customers with
the promotion-strategy "3 for free" or "Tell a Friend". Viral Marketing is a
cheap way of gaining new customers, it's original and quite profitable.
Benefits Of E-Commerce
Anytime, Anywhere - Constant change is a must and instant interactivity is
highly valued. The marketplace is real-time and webbers expect it to be
available for basic interactions 24x7, that means 24 hours per day, 7 days per
week.
Unlimited Marketplace - Business can connect with customers around the world,
competition that was once local is now international.
Online fast updating - Companies, who do business on the Web try to have the
newest e-catalogues on the Web as possible (the comparison to traditional print
catalogue is obvious). Constantly updated product information, price lists and
product support information are standard.
Lower cost - Internet marketing is one of the lowest cost methods of marketing
products. Companies can reach a world-wide audience at a fraction of the cost
required by traditional methods.
Secure Payment Systems - This is a very important topic in e-commerce, because
about 50 percent of online-shoppers feel uncomfortable in providing personal
information over the Web. But recent advancements in payment technologies allow
secure payment online.
Which Products Sell Best Online?
The target market on the Web are people from 25 to 45, who are mostly
well-informed about the choices they have in the Internet. The first group of
bestsellers are products like books, CDs, PCs and equipment for it, that means
products, which people are informed about already. The e-shopper has the
possibility to browse through the Web to search for the cheapest seller. The
second group of products are the ones who were ordered by phone, after the
consumer has browsed the Web site.
Online travel agencies are quite successful, too, and one of the latest news
come from the Alaska Airlines, who want to introduce e-ticketing. All the
customers would need for it would be a software for the PC, so they could do
the whole check-in-process at home.
In America already 75 percent of new car dealers are online and the number is
expected to grow in the future. Primarily they are focusing on disseminating
information on their websites, rather than actually selling cars. Also
consumers can locate dealers through a dealer locator service that way.
In Austria a second-hand car-exchange exists, and since January 1, 2000 there's
even a website for new cars (www.cybasar.com).
Webshops
E-commerce is a new way of sale for small companies, too. Often it's quite
expensive to buy the hard- and software inclusive of installation and
programming that can cost more than 70.000 US$. But renting this equipment can
be a good way to start doing business on the Web.
Webshops like the Yahoo! Store provide low cost e-commerce solutions: All you
have to do is to fill out online forms with the most important information
about your store, then you can already start doing business on the Web.
Problems In E-Commerce
Reality shows us that most companies are having problems following through on
their online sales with prompt and efficient delivery. Even 20 percent of
people who bought products online reported problems with the purchasing
experience. Half of those said they had ordered products that were not
delivered, while a quarter could not reach the seller's customer service
department.
Just because a particular product sells well in retail stores, it is easy to
think that it will sell well online, but it is not that way.
Companies are not competitive, because they simply take over old strategies.
Often they have too high logistics-costs, but especially the ability of
supplying and the delivery period are the most important things in satisfying
the customers needs. Sellers will be forced to hire other services for this
winding up, if they want to be successful in e-commerce.
Also most e-commerce models were built on the universal model in e-commerce,
the Amazon.com-model, which called for no interaction between the company and
the customer. But indeed even 90 percent of online shoppers want some sort of
human interaction in the process and online stores that employ interactive
tools see average sales orders increase by 15 percent.
A common mistake is to attempt to develop a site that turns out to be too
complex to ever be implemented. Often, well-intentioned projects never get off
the ground because of unrealistic plans.
It has been noted that international customers are three times more likely to
buy a product if it is available and communicated to them in their own
language. English is the language most widely used over the Internet. But to
truly penetrate an international market, one has to communicate in the
customer's language.
Security In E-Commerce
The lack of user confidence in e-business transactions is the greatest
impediment obstructing the growth of e-commerce. Security with electronic
datatransfer is possible through secure transcription, coding and digital
certificates.
A growing number of organisations are building public key infrastructures to
solve e-business security issues. A public key infrastructure (PKI) will
protect data trough encryption and authenticate users through a
certificate-based framework of digital signatures.
A PKI is a system of certification authorities (CA), registration authorities,
certificate management services and directories: The CA establishes security
policies and issues digital certificates to users. Registration authorities
register users into a particular domain. A certificate management system is
used to manage certificate lifecycles. Directories contain the public
encryption keys and certificates that are used in verifying digital
certificates, credentials and digital signatures. However, implementing a
public key infrastructure is not enough. Once a digital certificate is issued
to an individual or organisation it must be protected in much the same way you
protect a passport or your credit cards.
Storing digital certificates on the LAN or on your computer makes it fairly
easy for others to copy the certificate and then use it to impersonate you.
Storing multiple digital credentials such as certificates, private keys, logon
IDs and passwords on a smart card solves a number of the security and issues.
Smart cards are an ideal secure storage device. These are plastic cards, which
have a chip inside and which will be used in mobile phones or computers. They
are simple to use and almost impossible to duplicate. A user merely inserts the
smart card into a reader, enters a PIN to unlock the card, the credentials are
presented to the application and access is granted. Smart cards make it easy to
carry digital credentials and use them with other computers at home, in remote
offices or on public access terminals.
Businesses and consumers are attracted by the promise of the Internet but are
also facing the realities of security and authentication. Companies that
utilise smart card and public key infrastructure (PKI) technology to address
e-commerce security issues will create user confidence in electronic business
transactions will become the driving force behind the widespread growth of the
electronic economy.
The Digital Signature
In Austria the digital signature, e-signature, is treated equivalent to the
handwritten signature since January 1, 2000 (SigG). At the beginning of October
1999 the Austrian Chamber of Commerce already ordered 10.000 A-Sign
certificates at the Datakom, who acts as the certification authority, to
accelerate e-commerce in Austria. The European Union will give its members a
time of eighteen months to do the same. Surely that will help the electronic
correspondence and especially the e-commerce to boom even more.
The Year 1999 /Today's Situation
There are about 100 millions Internet-users all over the world, nearly seventy
percent of them are from the U.S. Therefore of course America is the leading
country in e-commerce: Even ¼ of America's population buys online regularly,
mostly people between 25 and 45 with a yearly income of 14.000$ or more.
Although the costs for Internet are even sixteen times higher than in America,
Europe is starting to do better, especially Germany (leading with 6.3%
e-shoppers), Great Britain (with 5.9%) and France are doing well. In Austria
only 13 % of the population are even interested in online-shopping.
America's turnovers in e-commerce are about 6.3 million US$ this year. In the
year 2003 there will be even 250 millions online-shoppers all around the world,
that's five times more than it is now.
The year 1999 didn't start the best way for e-commerce, but till the end of the
year it got better, at last the year's holiday traffic was up to 37 % over the
year 98. The top categories remained unchanged: Primary categories are still
computers, books, toys CDs and videos. Therefore Amazon.com was the reigning
king again, with about 3.6 million visitors a week.
The Future Of E-Commerce
Until now e-commerce meant websites, online shops and perhaps a kind of
customer relationship management, but e-chain-management will show e-commerce a
new way: Reaching customers and selling products to them easy and quickly won't
be the most important thing, but the enlargement of the electric business
connections to suppliers, services and logistic partners.
The key word for that is the integration of all business processes. That sounds
quite easy, but in real life it will produce a wide
