There has never been complete agreement on an exact definition of e-commerce. However, most would agree that e-commerce is a transaction between a business and customer, in which the transaction information is exchanged electronically. Under such a broad definition, there are many forms of exchange that could be called e-commerce. The use of a credit card at a department store, ATM transactions with a bank, EDI transactions between vendor and buyer, and Web-based transactions all fit into this definition of e-commerce. With the explosive growth of “Web-based” commerce in the last decade, e-commerce has widely come to be thought of as Web-based. That is, the average person thinks that e-commerce is Web-based commerce. Since Web-based commerce is the most common form of e-commerce, this section will focus on the Web-based form of e-commerce.
Hereafter, the references to e-commerce will be to Web-based e-commerce. Also, e-commerce will refer to business-to-consumer sales. The common term for business-to-consumer e-commerce is B2C. Conversely, the term e-business will include business-to-business electronic transactions. The common term for business-to-business electronic sales is B2B.
B2C sales are transactions between a business and a consumer, which usually involve a retail or service company whose customers are end-user consumers. While there are literally thousands of different types of B2C transactions, some examples are as follows:
The common aspect in these transactions in that the consumer interacts with the business via the business's website.
There are many advantages of B2C sales to the business and to the customer. Both parties benefit from the increased access to the market, the speed and convenience of e-commerce, and the ability to share information.
The major benefits to the customer of buying products or services relate to the increased access, speed, convenience, and information sharing mentioned previously. More specifically, the benefits to the customer are the following:
While there are significant advantages to e-commerce to the customer, there are also disadvantages. The free and open nature the World Wide Web allows the opportunity for fraud, theft of assets, or theft of data. Customers have concerns about the privacy and security of personal information shared with businesses during e-commerce transactions. Hackers and identity thefts can potentially steal credit card information, banking information, and private data. Because such concerns may prevent some customers from purchasing via e-commerce, businesses must respond by trying to ensure the security and privacy of customer data. The details of privacy principles are covered later in this chapter.
The other disadvantage for the customer is the inability to handle or try out the product. Compared with a store shopping experience, the customer does not have the same ability to see and handle the product.
Advantages to the business are as follows:
There are also some disadvantages to e-commerce, for businesses. The IT systems necessary to conduct e-commerce are usually much more complex and costly. The e-commerce software and systems must also be implemented in a way that integrates the existing general ledger, inventory, and payment IT systems. (The IT software and hardware infrastructure that supports e-commerce and e-business is discussed in the next chapter.) In addition, the free and open nature of the World Wide Web opens a business to greater chances for fraud, hackers, and compromised customer privacy.
Much of the preceding discussion focused on the comparison of e-commerce with traditional forms of commerce, namely, catalog and store commerce. However, in the retail environment of today, most retailers or service businesses use a combination of traditional commerce and e-commerce. For example, Walmart, Target, and Kmart are traditional store-based retailers that now also offer to customers Web-based shopping. Local, regional, and national banks all used to depend on customers' walking, riding, or driving to a bank branch office. Today, banks also offer Web-based banking. So, traditional forms of commerce have changed to incorporate e-commerce. However, the converse is true also. Many e-commerce retailers that began purely as e-commerce forms of business have found that they must add the traditional customer interaction in the form of stores or offices. For example, E*TRADE Financial Corp., a Web-based brokerage firm, found that to better service customers, it needed some physical office locations. E*TRADE opened offices around the country and placed a link on its website, called “Physical Locations.” The Web page that customers access by clicking on that link presents the addresses of regional offices of E*TRADE in large cities.
This merging and melding of forms of commerce has led to new terminology in the world of commerce. Companies that work from purely traditional stores, are called bricks and mortar retailers in e-commerce. At one point in the evolution of e-commerce, businesses that were purely Web-based were called e-tailers. As businesses merged the two, the resulting combined forms are referred to as clicks and mortar businesses. Alternatively, some call this form of business bricks and clicks.