E-COMMERCE

E-commerce

Business-centered electronic commerce began more than two decades ago with the introduction of electronic data interchange (EDI) between firms (sending and receiving order, delivery and payment information, etc.) Even consumer-oriented electronic commerce has a rather long history: each time you use automatic teller machines or present your credit cards, you transact business electronically. These EDI and ATM, however, operate in a closed system; they are of a more convenient communications medium, strictly between the parties allowed in.

The World Wide Web (WWW), the Internet's client-server, opened up a new age by combining the open Internet and the easy user interface. WWW was created at the CERN Lab for Particle Physics in Geneva in 1991 (with its Mosaic, the predecessor of Netscape). It took two years for Mosaic to penetrate the Internet, and another two years before businesses and the general public took notice of its potential.

Electronic Commerce As Online Selling

Narrowly defined, electronic commerce means doing business online or selling and buying products and services through Web storefronts. Products being traded may be physical products such as used cars or services (e.g. arranging trips, online medical consultation, and remote education). Increasingly, they include digital products such as news, audio and video, database, software and all types of knowledge-based products. It appears then electronic commerce is similar to catalog shopping or home shopping on cable.

Electronic Commerce As a Market

Electronic commerce is not limited to buying and selling products online. For example, a neighborhood store can open a Web store and find the world in its door step. But, along with customers, it will also find its suppliers, accountants, payment services, government agencies and competitors online. This online or digital partners demand changes in the way we do business from production to consumption, and they will affect companies who might think they are not part of electronic commerce. Along with online selling, electronic commerce will lead to significant changes in the way products are customized, distributed and exchanged and the way consumers search and bargain for products and services and consume them.

In short, the electronic commerce revolution is in its effects on processes. Process-oriented definition of electronic commerce offers a broader view of what electronic commerce is. Within-business processes (e.g. manufacturing, inventorying, corporate financial management, operation), and business-to-business processes (e.g. supply-chain management, bidding) are affected by the same technology and network as are business-to-consumer processes. Even government functions, education, social and political processes undergo changes.

The Internet different from other computer and network technologies

Computers and networks are nothing new. They have existed and business applications such as LAN and EDI are well established long before the World Wide Web took over. Then, why is the sudden talk of the Digital Age and the advance of electronic commerce?

Two things make the Internet quite different from any other existing communications media. Unlike broadcasting media, the Internet (1) allows two-way communications and (2) is built around open standards. A two-way communication means targeting audience and the possibility of feedback. Broadcasting sends out messages to "no one in particular" and without knowing quite who has gotten the message. (What do Nielson and a horde of market research firms do for their living?) An open standard (e.g. TCP/IP) means interoperability and the advantage of a large market and the possibility of integrating one product or process with another.

Both of these characteristics are being challenged.(1) To the WebTV generation, the digital future looks like another version of the passive one-way broadcasting. The "new media" sums up how publishers and media companies view the digital medium. We are so accustomed to "receiving random messages" that we often forget the fact that broadcasting was a 20th century phenomenon. Even "interactive television" envisioned by today's media is a way of providing a more lively entertainment, offering more information "related to existing contents" (e.g. detailed information about characters, plots, and commercials shown on TV). Multichannel, digital TV broadcasting may very well be a model for future entertainment, but it needs to be remembered that it is only one application of the digital communications network. (2) The commercialization of the Internet is forcing businesses to differentiate their products from others by making products incompatible. Unlike the public Internet where standards were open, firms attempt to capture and dominate the market with their proprietary products. In such an environment, TCP/IP would have had a very slim chance of becoming a standard and opening up the digital, networked economy. Whether markets driven by private interests can bring about a better result (e.g., more efficient, technologically superior, etc. system) is still a concern left for arguments.

Perhaps telephone networks are quite similar to the Internet (and indeed most Internet traffic goes through telephone networks). But unlike telephones, the Internet's user interface (computers) is much more sophisticated and flexible. Because of its beginning as a public research network, the Internet has no pricing regime of telephone companies. The world-wide connection, then, may be considered to have been an accident. When usage-based, long-distance charges are implemented, the Internet may look quite similar to the telephone network.

The electronic  marketplace

Electronic markets ordinarily refer to online trading and auctions, for example, online stock trading markets, online auction for computers and other goods. The electronic marketplace refers to the emerging market economy where producers, intermediaries and consumers interact electronically or digitally in some way. The electronic marketplace is a virtual representative of physical markets. The economic activities undertaken by this electronic marketplace collectively represent the digital economy. Electronic commerce, broadly defined, is concerned with the electronic marketplace.

The electronic marketplace resembles physical markets (the one we know) in many aspects. As in physical markets, components of the digital economy include: