History And Background Of Electronic Commerce

Published Date: 02 Nov 2017

According to Kalakota & Whinston (1997), "electronic commerce functions are to make better use of computing and to better apply computer technology to improve customer interaction, business processes, and information exchange both within an enterprise and across enterprises". It began in 1970s with the introduction to electronic fund transfer (EFT) which was used by large corporations, financial institutions, and very few small daring businesses. It optimizes electronic payments with electronically provided remittance information. (Kalakota & Whinston, 1997).

Later on, electronic data interchange (EDI) is introduced to expand the scope from financial transactions to other types of transactions, which allowed manufacturers, retailers, and other services to be involved in using it. It is also expanded into different applications ranging from stock trading to travel reservation system. (Bushry, n.d.).

At first, EFT and EDI were carried out through private networks or virtual private networks (VPNs). However, with the commercialization of internet in the early 1990s and its rapid growth, the term electronic commerce was adapted and the applications expanded rapidly. The fast growing applications of electronic commerce was the result of development in networks, protocols, software, and specification for e-commerce activities. Besides that, the other reason of the rapid application of e-commerce was the increase in competition and business pressures. Since then, innovations of e-commerce have been growing into many different types in order to make businesses remain competitive. (Bushry, n.d.).

The most basic definition of e-commerce is the conducting business activities electronically over computer networks. It involves transaction which operated electronically between companies, companies and consumers, consumers and other consumers, public sector and business, and public sector to citizens.

Business to business e-commerce is more complex than business to consumer e-commerce as it involves a large number of buyers making bulks of transactions per day. (Stair & Reynolds, 2012). It helps to remove barriers raised by geographic fragmentation of the market, promotes information flow, and makes supply chain management more convenient. Moreover, it reduces order processing costs and lower cost of interacting as they can contact and make payment electronically. Alibaba is a good example of B2B e-commerce. This company sells a lot of products manufactured in different countries in bulks quantity and they are currently focusing on the development of an open, collaborative and prosperous e-commerce ecosystem. (Alibaba).

Furthermore, business to consumer e-commerce which is a form of e-commerce in which customers deals directly with an organization and avoids intermediaries. (Stair & Reynolds, 2012). B2C e-commerce is about mass marketing whereby manufactures and producers can reach their ultimate customers directly, and this brings a big impact in achieving excellent marketing and sales process. By eliminating the middlemen or intermediaries, company can reduce the cost and it leads to the higher profits. (Botha, Bothma & Geldenhuys, 2008). For example, Cold Storage online shopping which is designed to target customers that do not have time to go to the actual supermarkets, therefore they can pick products, make payment, give delivery information electronically, and finally they will receive their products through delivery services.

In business to consumer e-commerce, company must be able to make sure that consumers are able to reach them. In this case, they should create websites. In the process of creating the website, company will need the help of a website development team and a promotion team to work together. The development of website can be done internally by the company or outsourced to the company that is specializing in this service. The pictures above represent the internally and outsourcing way of creating website. (Botha, Bothma & Geldenhuys, 2008).

In addition, consumer to consumer e-commerce involves electronic transactions between consumers using a third party to facilitate the process. C2C has a big advantage in reducing the use of paper based advertising. For instance, e-bay is the world’s biggest online market place which adapts the C2C e-commerce, where anyone can buy and sell any product or services. (Stair & Reynolds, 2012).

The other subset of e-commerce is e-Government. According to Stair & Reynolds (2012), "e-Government is the use of information and communication technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizens and government". It includes applications between government to citizens, government to business, and government to citizens. One of the best examples of e-government is my Tax Portal. Citizens can log in into the website using SingPass or IRAS PIN for personal tax matters, organization or business tax matters, and client’s tax matters. (my Tax Portal, n.d.).

There are some stages that must be fulfilled in order to achieve a successful e-commerce system. The first step is search and identification. Business and customers access the supplier’s homepage so that they can find items that are match with their need. The buyers will compare the same item with different online store or suppliers in terms of quality, quantity, price, and delivery services. Secondly, the buyer will examine all of the data given, select for the right choice and fill up delivery information. Moreover, the purchasing and services electronically. This is where the customers make payment through credit card.

Next is the product and service delivery. Some of the product can be distributed electronically such as music via iTunes, software, and others. However, there are items that cannot be distributed electronically. Therefore, many suppliers outsource the physical logistic of delivering merchandise to cybershoppers such as DHL, FedEx, and others. For example, the orders of printers from buyers through Hewlett-Packard (HP) website, that orders actually goes to FedEx, which all of the online products of HP are stored in the FedEx storage. FedEx will be responsible in packaging and delivering all the orders to the customers.

Finally, it is important for a company to build good relationship with customers through feedback and other services which are called after-sales service. At this stage, company will provide some information of how to use the products and feedbacks from customers on its website. It is important to capture all the information of customers’ order including name, telephone number, and others to keep in touch with consumers. For example, when costumers complain about products, company will be able to serve them. (Stair & Reynolds, 2012).

There are other real life applications of e-commerce such as online booking for air tickets. Nowadays, people seldom go to the travel company to buy air tickets. For example, www.airasia.com that enables customers to buy tickets without the need to go to the travel agent, choose the seats they want, and buy extra weight limit for luggage. They even have special travel package and some hot deals on their website. (AirAsia, n.d.)

Ecommerce today has already transformed traditional shopping into a better way of shopping that has already attracted a lot of people. Today, we are even offered to look closer to the actual product. Ecommerce today also offers so much luxury and it is predicted it might replace the "brick and mortar" stores. However, it will still be a long way to go. (Ecommerce Today, 2004). For example, www.zara.com which provides pictures that can be zoomed in and out to look at the detailed design of the clothes before making any purchase. (Zara, n.d.).

However, with the development of mobile commerce, there are high possibilities that e-commerce will shift to m-commerce. M-commerce is the use of mobile, wireless devices, such as cell phones and smartphones to do transactions. As we can see, today people are beginning to use smartphones such as Apple, Samsung, and others to do transaction via internet website or apps.

For example, Tesco’s South Korean network of shops, called Home Plus has chosen to expand their online sales rather than spending money on new shops. As South Korea has more than 10 million smartphones users, it made sense for them to focus on mobile shopping. South Korea is also known as the one of the busiest countries. Therefore, Tesco found a big opportunity by plastering the glass walls of subway stations with pictures of their products and QR codes which can be scanned by the traveler’s mobile phone, building up basket in the few minutes before train arrives. (The telegraph, 2011).

Google Project Glass is a computerized glasses designed to let wearers use apps, capture images and video, use the internet and social networks on the move. How can a wearable mobile device such as Glass change e-commerce? This type of mobile computing can extends the relationship between customers and business as well. Imagine a shopping experience where customers can access real-time information about the product and services such as product specs, reviews, and comparative pricing is available without needing to use their hands. There are also other special features which are much easier to access rather than using e-commerce. (Robbins, 2012).

In conclusion, e-commerce will shift slowly into m-commerce. As we can see people surrounding us are more often using smartphone to interact with each other and make transactions. However, it will still be along way to go. The reason is that not all the countries have the same technology that enables users to shift quickly. For example, in some countries people still prefer to use e-commerce to do transaction as they feel more safe and secured. Moreover, from the Google Project Glass and new ray technology, we can see that people will no longer use e-commerce in the future.