Electronic Commerce technology

Summary

Electronic commerce (e-commerce) is the buying, selling, and transfer of products and services using the Internet. It offers enormous advantages for supply-chain management and the coordination of distribution channels, in addition to being convenient for consumers. Convenience is a big selling point. In 2015, online retail generated approximately US$1.5 trillion worldwide. By 2023, this figure had climbed to approximately US$5.8 trillion worldwide. A great amount of technology goes into supporting the online platforms used for e-commerce, facilitating financial transactions, and coordinating the logistics of inventory and shipping.

Definition and Basic Principles

E-commerce refers to the communications between customers, vendors, and business partners over the Internet. The term e-business incorporates the additional activities carried out within a business using intranets, such as communications related to production management and product development. Many also view e-business as referring to collaborations with partners and e-learning organizations.

In addition to online purchases of goods and services, e-commerce involves bill payments, online banking, e-wallets, smart cards, and digital cash. E-commerce depends on secure connections to the Internet. Many precautions to ensure security are necessary to maintain successful e-commerce, including public-key cryptography, Secure Sockets Layer (SSL) and Transport Layer Security (TLS) protocols, digital signatures, digital certificates, firewalls, and antivirus programs. New technology is constantly being developed to protect against computer worms and viruses and other cyber attacks.

Background and History

In 1969, the Advanced Research Projects Agency (now the Defense Advanced Research Projects Agency, or DARPA) of the US Department of Defense proposed a method to link together the computers at several universities to share computational data via networks. This network became known as ARPANET, the precursor of the Internet. As a result, electronic mail (email) was developed, along with protocols for sending information over phone lines in packets. The protocols for the transmission of these packets of data came to be known as Transmission Control Protocol (TCP) and Internet Protocol (IP). Together, these two protocols, known as TCP/IP, are still in use and are responsible for the efficient communication conducted through the network of networks referred to as the Internet.

Oxford University graduate Tim Berners-Lee (b. 1955) initially created the World Wide Web in 1989 while working at CERN, the European Organization for Nuclear Research, and made it available in 1991. During this time, Cisco Systems was growing to become the first company to produce the broad range of hardware products that allowed ordinary individuals to access the Internet. In 1993, Marc Andreessen (b. 1971) and Eric Bina (b. 1964), employees at the National Center for Supercomputing Applications (NCSA), created Mosaic, the first Web browser that supported clickable buttons and links and allowed users to view text and images on the same page. New software and programming-language developments rapidly followed, allowing ordinary consumers easy access to the Internet. As a result, companies saw the opportunity to gain customers, resulting in the creation of online businesses, including Amazon.com in 1994, eBay in 1995, and PayPal and Priceline in 1998.

How It Works

The engineers who developed ARPANET created digital packets to use for transmitting data via packet switching. The theory was that it would be faster and cheaper to transmit digital data using small packets that could be sent, or routed, to their destination in the most efficient way possible, even if the original message had to be split up into smaller packets that were then joined back together at their destination. In order to accomplish the packaging of data and transmission via the best routes, the engineers who developed ARPANET also developed TCP. The first and most common access method to the Internet was through the wiring that has transmitted telephone calls. However, wireless Internet connections can now be made much faster from many locations, even through cellular phones. The economy has become dependent on digital communication, and the companies that sell the most goods and services have a strong online presence. A great deal of planning goes into the maintenance of an effective website.

E-Commerce Business Establishment. After first developing a practical business plan, the process for establishing an online business that will be able to successfully compete for sales can be overwhelming. One way to start an e-business is by using a turnkey solution, which is essentially a prepackaged type of software specifically for a new business. An alternative is to use the services of an Internet incubator, which is a company that specializes in e-business development. An Internet incubator typically obtains ownership of at least 50 percent of the business and may also enlist funding help from venture capitalists to get started. Web-hosting companies sell space on a web server to customers, maintain enough storage space for the website, and provide support services. A domain name for the website must be chosen and registered. This domain name is to be used in the URL (uniform resource locator) for the website. The URL, or website's Internet address, consists of three partsthe hostname, which is shown by the "www" for World Wide Web; the domain name, which is usually the name of the company; and the top-level domain (TLD), which describes the type of organization that owns the domain name, such as ".com" for a commercial organization or ".gov" for a government organization. An initial public offering (IPO) of stock to assist with funding usually follows for enterprises that achieve a certain level of success.

Design of Markets and Mechanisms of Transactions. Initially, the primary e-commerce activities were business-to-business (B2B) transactions. These activities quickly expanded to include sales to consumers via electronic retailing (e-tailing), often called business-to-consumer (B2C). Since the late 1990s, e-commerce has expanded to include consumer-to-consumer (C2C) websites, including eBay, and consumer-to-business (C2B), such as Priceline, where several airlines or hotels will compete for the purchase dollars of consumers. Each of these types of transactions can be completed within the general structure of one of the many different types of e-commerce models to generate revenue.

Automated Negotiation and Peer-to-Peer Distribution Systems. Auction models allow an Internet user to assume the role of a buyer using either the reverse-auction model, where the buyer sets a price and sellers have to compete to beat that price, or the reverse-price model, where the seller sets the minimum price that will be accepted. Auction sites such as eBay update listings, feature items, and earn submission and commission fees, but they leave the processes of payment and delivery up to the actual buyers and sellers (though they often provide or incorporate methods to facilitate such transactions, like PayPal).

Dynamic pricing models include the name-your-price companies, such as Priceline, that use a shopping bot to collect bids from customers and deliver these bids to the providers of services to see if they are accepted. A shopping bot is a computer program that searches through vast amounts of information, then collects, summarizes, and reports the information. This is one example of the use of intelligent agents, or software programs that have been designed to gather information, by e-businesses. Priceline's immense success is due in part to its use of this technology.

Network Resource Allocation: Electronic Data Interchange (EDI). Portal models present a variety of news, weather, sports, and shopping all on one web page, allowing a visitor to see an overview and then choose to obtain more in-depth information. Vertical portals are specific for a single item, while horizontal portals function as search engines with access to a large range of items. Storefront models require a product line to be accessible online via the merchant server so that customers can select items from the database of products and collect them in the order-processing technology called a shopping cart. Businesses use EDI as a standardized protocol for communication to monitor daily inventory, shipments, and payments. Standardized forms for invoices and purchase orders are routinely accessible via the use of extensible markup language, or XML. Companies such as TIBCO Software and Commerce One (which was later taken over by Perfect Commerce) were created to help companies move their businesses to the web via B2B techniques. The transition of traditional brick-and-mortar stores to click-and-mortar stores has helped decrease lead time and has caused an increase of just-in-time (JIT) inventory management. JIT inventory management allows e-businesses to save money because the companies do not overbuy goods and create an inventory surplus that they then have to worry about storing and selling, which decreases overhead costs.

Applications and Products

E-commerce has spawned a variety of applications and products that both facilitate e-businesses and enhance people's lives.

Consumer Products. Several tablet computers have been among the most popular consumer digital purchases. Apple's iPad and iPhone, Samsung's Galaxy, and Amazon's Kindle are all capable of accessing the Internet and downloading magazines and books. The proliferation of mobile devices, including laptop computers and smartphones, boosts the e-commerce industry by giving consumers the means to remain almost constantly connected to the Internet, and therefore more likely to make online purchases. The rapid expansion of the market for application software, or apps, in the 2010s presented a major development in Internet retailing, including the controversial practice of in-app purchases. In the 2020s, developments such as augmented reality (AR) technology benefits e-commerce, especially fashion and décor industries, as it provides a virtual interaction with products before purchases. Other tools include artificial intelligence (AI) and progressive web applications (PWAs). AI helps e-commerce companies in making customer experiences very personalized and offers benefits like visual search allowing customers to submit pictures of products they are interested in.

Both contact and contactless "smart cards," which resemble credit cards, have been developed to store much more information (banking, retail, identification, healthcare) on a microprocessor embedded in the card. The E-ZPass, which is used by automobile commuters in the eastern United States to pay tolls, is an example of a contactless smart card. Smart cards are more secure than credit cards because they are encrypted and password-protected.

Security Applications and Products. Companies have been created to help merchants accept online credit card payments, called card-not-present (CNP) transactions. These companies, such as VeriFone's PAYware and the Digital River–owned CCNow, offer services to facilitate the authentication and authorization processes through SSL or TLS protocols to minimize fraud. Additional security features include firewalls, encryption, and antivirus software. Several companies, including many major credit card companies, have introduced digital wallets that allow customers to securely save their shipment address and payment information in an online database to make purchases with one click of the mouse instead of reentering the same information each time. In 1999, the Electronic Commerce Modeling Language (ECML) emerged as the protocol for merchants' digital wallet usage. PayPal allows users to transfer payments between consumers securely by creating an account using an email address and a credit card or checking account, which is then used to pay for goods and services. Other applications, such as Venmo, make person-to-person payments by phone easy.

Applications Using Wireless Transactions. Mobile e-commerce, or m-commerce, has become increasingly important due to significant advances in wireless technology. The fourth generation of mobile technology, called 4G, allows wireless devices to transmit data at peak speeds of one hundred megabits per second (Mbps) when mobile and one gigabit per second (Gbps) when stationary. This was rapidly supplanted by 5G technology beginning in the early 2020s, allowing download speeds of up to ten gigabits per second. The apps offered by Apple's iOS App Store and Android's Google Play make m-commerce an important segment of the e-commerce market. Mobile-based purchases account for tens of billions of dollars yearly in US e-commerce sales, with a significant percentage of revenue coming from mobile downloads and in-app purchases.

Careers and Course Work

Universities such as the University of California in Los Angeles and Arizona State University offer bachelor’s courses in digital and integrated marketing communication. Job titles, career paths, and salaries within the field of e-commerce vary greatly. Some of the typical job titles include website developer, web designer, database administrator, web analyst, website manager, and programmer. Jobs related to web content require skills in web development tools and software languages, including hypertext markup language (HTML), XML, Java, JavaScript, Visual Basic, Visual Basic Script, and Active Server Pages (ASP). Database administrators focus less on these web tools and languages and more on database-related tools, such as structured query language (SQL), Microsoft Access, and Oracle. Knowledge of computer networks and operating systems is also very helpful. Aspirants can work as e-commerce specialists, online sales consultants, customer service specialists, and operations logistics.

Social Context and Future Prospects

Due in part to the easy accessibility of goods and services via the Internet, online businesses have become increasingly competitive, with more made-to-order goods being produced by companies of all sizes and corresponding decreases in the costs associated with maintaining a large inventory. Since so much more data is exchanged digitally via stock trades, mortgages, purchases of consumer goods, payment of bills, and banking transactions, it is conceivable that digital cash and smart cards could replace traditional cash completely. Because consumers enjoy the comparison shopping among goods offered by global companies, as well as the twenty-four-hour-a-day, seven-days-a-week convenience of online shopping, sales at traditional brick-and-mortar stores will continue to decline, or at least migrate toward those goods that consumers prefer not to purchase online.

Online retailers like Amazon continue experimenting with methods for a more efficient supply chain and logistics system. One notable project involves MK30 drones used to deliver packages to consumers in some cities. Other shipping innovations include Amazon's partnership with the US Postal Service (USPS) to provide package delivery on Sundays and creating local centers where consumers can pick up purchased items rather than wait for local delivery.

Despite continuing growth, e-commerce does face important challenges. Security threats like hacking, identity theft, and other types of cyber theft have become problems, increasing the need for better security tools, such as digital certificates and signatures. Increased security needs will continue to fuel the ever-expanding Internet security industry.

The coronavirus (COVID-19) pandemic negatively affected global economic activities and industries due to lockdowns imposed by governments. The e-commerce sector grew during this period, as consumers and businesses used this channel to buy and sell products and services online. Experts believe that the pandemic's impact on the growth of the e-commerce sector would be long-term due to increased digitalization.

To keep pace with demand, e-commerce companies increasingly implemented emerging technologies, such as chatbots, intelligent virtual assistants, image search engines, supply chain visibility software, warehouse automation, and artificial intelligence–driven price monitoring tools. Online and physical stores increasingly use social media to advertise and sell products and services.

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