Electronic commerce or E-commerce is the buying, selling, marketing, and servicing of products or services over computer networks. It is an electronic business application aimed at commercial transactions. E-commerce is the conduct of business commercial communications and management through electronic methods, such as electronic data interchange and automated data collection systems. Electronic commerce may also involve the electronic transfer of information between businesses (EDI). According to Forrester Research (as cited in Kessler, 2003), electronic commerce is a 12.2 billion USD industry, as of 2003.

Historical development

The meaning of the term electronic commerce has changed over the years. Originally, "electronic commerce" meant the facilitation of commercial transactions electronically, usually using technology like Electronic Data Interchange (EDI) to send commercial documents like purchase orders or invoices electronically.

Today it includes things that may more correctly be termed "Web commerce" -- the purchase of goods and services over the World Wide Web via secure server (HTTPS, a special server which encrypts confidential ordering data for customer protection) with e-shopping carts and electronic pay services, like credit card pay authorizations.

Key success factors in e-commerce

There are several factors that are critically important to the success of any e-commerce venture. They include:

  1. Provide value to customers. This can be done by offering a product or product line that is attractive to potential customers and available at a competitive price.
  2. Provide service and performance. This can be done by offering a fast, user-friendly purchasing experience.
  3. Provide an attractive site. This can be done by the tasteful use of colour, graphics, animation, photographs, fonts, and white space percentage.
  4. Provide an incentive to buy and to return. This can be done with sales promotions like coupons, special offers, and discounts. Cross-linked web sites, and advertising affiliate programs can also be used.
  5. Provide personal attention. This can be done by personalized web sites, purchase suggestions, and personalized special offers.
  6. Provide a sense of community. This can be done with chat-rooms, message boards, soliciting customer input, and affinity programs.
  7. Provide reliability and security. This can be done by parallel servers, fail-safe technology, information encryption, and firewalls.
  8. Provide a 360-degree view of the customer relationship. This can be done by ensuring that all employees, suppliers, and partners have a complete view, and the same view, of the customer.
  9. Own the customerís total experience. This can be done by treating any contacts with a customer as part of a total experience, an experience that becomes synonymous with the brand.
  10. Streamline business processes. This can be done through re-engineering and information technologies.
  11. Let customers help themselves. This can be done by providing a self-serve site that is easy to use without assistance.
  12. Help customers do their job. This can be done by providing ample comparative information and good search facilities.
  13. Construct a sound business model. If this key success factor would have been included in the textbooks in 2000, many of the dot.coms might not have gone bust.
  14. Engineering an electronic value chain in which you focus on a limited number of core competencies.
  15. Operate on or near the cutting edge of technology and stay there as technology changes.
  16. Create an organization that is alert enough, and agile enough to quickly respond to any changes in the environment.

E-commerce problems

Even if these sixteen key factors are used to devise an exemplary e-commerce strategy, there could still be problems. Sources of problems include:

  1. Failure to understand the customer, why they buy, and how they buy. Even a product with a sound value proposition can be a failure if customer habits, expectations, and motivations are not understood. This potential problem could be mitigated with proactive and focused marketing research.
  2. Failure to consider the competitive situation. You may be able to construct a viable book e-tailing business model, but do you really want to compete with Amazon.com? This problem can be mitigated with competitor, industry, and market research.
  3. Inability to predict environmental reaction. What will competitors do? Will they introduce fighting brands or fighting web sites. Will they supplement their service offering? Will they try to sabotage your site? Will there be price wars? What will the government do? This can be mitigated with a 360 degree continuous environmental scanning system.
  4. Over-estimation of resource competence. Can your staff, hardware, software, and processes handle the new strategy? Have you failed to develop new employee and management skills? This can be mitigated with thorough resource planning and employee training.
  5. Failure to coordinate. Are your reporting and control relationships adequate? This can be mitigated by an organizational structure that is flat, accountable, and flexible.
  6. Failure to obtain senior management commitment. This often results in a failure to obtain sufficient company resources to accomplish the task. This can be mitigated by getting top management involved right from the start.
  7. Failure to obtain employee commitment. The strategy is not well explained to employees. Employees are not given the whole picture. This can be mitigated by training and by creating incentives for workers to embrace the strategy.
  8. Under-estimation of time requirements. Setting up an e-commerce venture could take considerable time and money, and failure to understand the timing and sequencing of tasks can lead to significant cost overruns. This can be mitigated with critical path, critical chain, or PERT analysis.
  9. Failure to follow the plan. Poor follow-through after the initial planning, and no tracking of progress against the plan. This can be mitigated with benchmarking, milestones, variance tracking, and penalties for negative variances and rewards for positive variances and remedial realignments.

Product suitability

Certain products/services are more suitable for online sales and others are more suitable for offline sales. The best purely virtual companies are those that deal with digital products. This includes information storage, retrieval, and modification, music, movies, education, communication, software, photography, and financial transactions. Examples of this type of company are : Schwab, Google, eBay, Paypal, Egghead, and Morpheus.

There are some non-digital products/services that can be successful for virtual marketers. They are products that have a high value to weight ratio, and/or are embarrassing purchases, and/or are typically purchased by people in remote locations, and/or are typically purchased by shut ins.

One product that is both virtual (or if non-virtual, generally high-value) and a potentially embarrassing purchase is pornography and other sex-related products and services; it is unsurprising that these services have been the most profitable e-commerce businesses.

Products that are not suitable for e-commerce include products that have a low value to weight ratio, products that have a smell, taste, or touch component, products that need to be tried on for fit, and products where colour integrity is important.

Acceptance of e-commerce

Consumers have been slower accepting the e-commerce business model that people originally thought. Even in product categories suitable for e-commerce, electronic shopping has been slow to catch on for several reasons including:

  • Concerns about security. Many people will not use credit cards over the net due to concerns about theft and fraud.
  • Lack of instant gratification with most e-purchases (non-digital purchases). Much of our reward for purchasing a product is the instant gratification of using, and being seen to use the product. This is missing when our purchase does not arrive for days or weeks.
  • The problem of access, particularly in poor families and poor countries. Low penetration rates of PC/Internet access in some sectors greatly reduces the potential for e-commerce.
  • There is also the social aspect of shopping. Some people enjoy talking to sales staff, other shoppers, or cohorts and this social reward is missing from online shopping.


See also

Finding related topics

External Links

Further reading

  • Customers.com by Pat Seybold