Electronic commerce

Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online. It also includes the entire online process of developing, marketing, selling, delivering, servicing and paying for products and services. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices and telephones as well. A large percentage of electronic commerce is conducted entirely in electronic form for virtual items such as access to premium content on a website, but mostly electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers are now electronically present on the World Wide Web. Electronic commerce that takes place between businesses is referred to as business-tobusiness or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that takes place between businesses and consumers, on the other hand, is referred to as business-to-consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com. Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer usually via the internet. There is no intermediary service involved. The sale or purchase transaction is completed electronically and interactively in real-time such as in Amazon.com for new books. However in some cases, an intermediary may be present in a sale or purchase transaction such as the transactions on eBay.com. Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions.

Contents
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1 History o 1.1 Early development o 1.2 Timeline 2 Business applications

3 Governmental regulation 4 Forms 5 Global trends 6 Impact on markets and retailers 7 Distribution channels 8 See also 9 Notes 10 References 11 External links

[edit] History
[edit] Early development
Originally, electronic commerce was identified as the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. In 1990, Tim Berners-Lee invented the WorldWideWeb web browser and transformed an academic telecommunication network into a worldwide everyman everyday communication system called internet/www. Commercial enterprise on the Internet was strictly prohibited by NSF until 1995.[1] Although the Internet became popular worldwide around 1994 with the adoption of Mosaic web browser, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

[edit] Timeline

1979: Michael Aldrich invented online shopping[2] 1981: Thomson Holidays, UK is first B2B online shopping[citation needed] 1982: Minitel was introduced nationwide in France by France Telecom and used for online ordering.

1984: Gateshead SIS/Tesco is first B2C online shopping and Mrs Snowball, 72, is the first online home shopper[citation needed] 1985: Nissan UK sells cars and finance with credit checking to customers online from dealers' lots.[citation needed] 1987: Swreg begins to provide software and shareware authors means to sell their products online through an electronic Merchant account.[citation needed] 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb, using a NeXT computer. 1992: Terry Brownell launches first fully graphical, iconic navigated Bulletin board system online shopping using RoboBOARD/FX. 1994: Netscape releases the Navigator browser in October under the code name Mozilla. Pizza Hut offers online ordering on its Web page. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. Adult materials also become commercially available, as do cars and bikes. Netscape 1.0 is introduced in late 1994 SSL encryption that made transactions secure. 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24 hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use Internet for commercial transactions. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb. 1998: Electronic postal stamps can be purchased and downloaded for printing from the Web. 1998: Alibaba Group is established in China. And it leverage China's B2B and C2C, B2C(Taobao) market by its Authentication System. 1999: Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches. ATG Stores launches to sell decorative items for the home online. 2000: The dot-com bust. 2001: Alibaba.com achieved profitability in December 2001. 2002: eBay acquires PayPal for $1.5 billion.[3] Niche retail companies Wayfair and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal. 2003: Amazon.com posts first yearly profit. 2004: DHgate.com, China's first online b2b transaction platform, is established, forcing other b2b sites to move away from the "yellow pages" model.[4] 2007: Business.com acquired by R.H. Donnelley for $345 million.[5] 2009: Zappos.com acquired by Amazon.com for $928 million.[6] Retail Convergence, operator of private sale website RueLaLa.com, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012.[7] 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites plans to go ahead with an IPO in mid-2011.[8] 2011: US eCommerce and Online Retail sales projected to reach $197 billion, an increase of 12 percent over 2010.[9] Quidsi.com, parent company of Diapers.com, acquired by Amazon.com for $500 million in cash plus $45 million in debt and other obligations.[10] GSI Commerce, a company specializing in creating,

developing and running online shopping sites for brick and mortar businesses, acquired by eBay for $2.4 billion.[11]

[edit] Business applications

An example of an automated online assistant on a merchandising website. Some common applications related to electronic commerce are the following:

Document automation in supply chain and logistics Domestic and international payment systems Enterprise content management Group buying Automated online assistants Instant messaging Newsgroups Online shopping and order tracking Online banking Online office suites Shopping cart software Teleconferencing Electronic tickets

[edit] Governmental regulation

The examples and perspective in this United States may not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (March 2011) In the United States, some electronic commerce activities are regulated by the Federal Trade Commission (FTC). These activities include the use of commercial e-mails, online

advertising and consumer privacy. The CAN-SPAM Act of 2003 establishes national standards for direct marketing over e-mail. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive.[12] Using its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive practices, the FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers personal information.[13] As result, any corporate privacy policy related to ecommerce activity may be subject to enforcement by the FTC. The Ryan Haight Online Pharmacy Consumer Protection Act of 2008, which came into law in 2008, amends the Controlled Substances Act to address online pharmacies.[14]

[edit] Forms
Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce. On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce.

[edit] Global trends

Business models across the world also continue to change drastically with the advent of eCommerce and this change is not just restricted to USA. Other countries are also contributing to the growth of eCommerce. For example, the United Kingdom has the biggest e-commerce market in the world when measured by the amount spent per capita, even higher than the USA. The internet economy in UK is likely to grow by 10% between 2010 to 2015. This has led to changing dynamics for the advertising industry[15] Amongst emerging economies, China's eCommerce presence continues to expand. With 384 million internet users,China's online shopping sales rose to $36.6 billion in 2009 and one of the reasons behind the huge growth has been the improved trust level for shoppers. The Chinese retailers have been able to help consumers feel more comfortable shopping online.[16] E-Commerce has become an important tool for businesses worldwide not only to sell to customers but also to engage them.[17]

[edit] Impact on markets and retailers

Economists have theorized that e-commerce ought to lead to intensified price competition, as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms have grown at the

expense of smaller ones, as they are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend.[18]

[edit] Distribution channels

E-commerce has grown in importance as companies have adopted Pure-Click and Brick and Click channel systems. We can distinguish between pure-click and brick and click channel system adopted by companies.

Pure-Click companies are those that have launched a website without any previous existence as a firm. It is imperative that such companies must set up and operate their e-commerce websites very carefully. Customer service is of paramount importance. Brick and Click companies are those existing companies that have added an online site for e-commerce. Initially, Brick and Click companies were skeptical whether or not to add an online e-commerce channel for fear that selling their products might produce channel conflict with their off-line retailers, agents, or their own stores. However, they eventually added internet to their distribution channel portfolio after seeing how much business their online competitors were generating

Electronic data interchange

From Wikipedia, the free encyclopedia This article relies on references to primary sources or sources affiliated with the subject, rather than references from independent authors and third-party publications. Please add citations from reliable sources. (August 2007) Electronic data interchange (EDI) is the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents or business data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention. It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages. It also refers specifically to a family of standards. In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media." It distinguishes

mere electronic communication or data exchange, specifying that "in EDI, the usual processing of received messages is by computer only. Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations. For example, the transmission of binary or textual data is not EDI as defined here unless the data are treated as one or more data elements of an EDI message and are not normally intended for human interpretation as part of online data processing."[1] EDI can be formally defined as the transfer of structured data, by agreed message standards, from one computer system to another without human intervention.

Contents
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1 Standards 2 Specifications 3 Transmission o 3.1 Value-added networks o 3.2 Internet/AS2 4 Interpreting data 5 Advantages over paper systems 6 Barriers to implementation 7 See also 8 References 9 External links

[edit] Standards
EDI is considered to be a technical representation of a business conversation between two entities, either internal or external. Note that there is a perception that "EDI" constitutes the entire electronic data interchange paradigm, including the transmission, message flow, document format, and software used to interpret the documents. EDI is considered to describe the rigorously standardized format of electronic documents. EDI is very useful in supply chain. The EDI standards were designed to be independent of communication and software technologies. EDI can be transmitted using any methodology agreed to by the sender and recipient. This includes a variety of technologies, including modem (asynchronous and synchronous), FTP, e-mail, HTTP, AS1, AS2, etc. It is important to differentiate between the EDI documents and the methods for transmitting them. When they compared the synchronous protocol 2400 bit/s modems, CLEO devices, and value-added networks used to transmit EDI documents to transmitting via the Internet, some people equated the nonInternet technologies with EDI and predicted erroneously that EDI itself would be replaced

along with the non-Internet technologies. These non-internet transmission methods are being replaced by Internet protocols such as FTP, telnet, and e-mail, but the EDI documents themselves still remain. As more trading partners use the Internet for transmission, standards have emerged. In 2002, the IETF published RFC 3335, offering a standardized, secure method of transferring EDI data via e-mail. On July 12, 2005, an IETF working group ratified RFC4130 for MIME-based HTTP EDIINT (a.k.a. AS2) transfers, and is preparing a similar RFC for FTP transfers (a.k.a. AS3). While some EDI transmission has moved to these newer protocols, the providers of the value-added networks remain active. EDI documents generally contain the same information that would normally be found in a paper document used for the same organizational function. For example an EDI 940 shipfrom-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. It typically has a ship to address, bill to address, a list of product numbers (usually a UPC) and quantities. Another example is the set of messages between sellers and buyers, such as request for quotation (RFQ), bid in response to RFQ, purchase order, purchase order acknowledgment, shipping notice, receiving advice, invoice, and payment advice. However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (e.g., patient records and laboratory results), transport (e.g., container and modal information), engineering and construction, etc. In some cases, EDI will be used to create a new business information flow (that was not a paper flow before). This is the case in the Advanced Shipment Notification (856) which was designed to inform the receiver of a shipment, the goods to be received and how the goods are packaged. Some major sets of EDI standards:

The UN-recommended UN/EDIFACT is the only international standard and is predominant outside of North America. The US standard ANSI ASC X12 (X12) is predominant in North America. The TRADACOMS standard developed by the ANA (Article Numbering Association) is predominant in the UK retail industry. The ODETTE standard used within the European automotive industry

All of these standards first appeared in the early to mid 1980s. The standards prescribe the formats, character sets, and data elements used in the exchange of business documents and forms. The complete X12 Document List includes all major business documents, including purchase orders (called "ORDERS" in UN/EDIFACT and an "850" in X12) and invoices (called "INVOIC" in UN/EDIFACT and an "810" in X12). The EDI standard says which pieces of information are mandatory for a particular document, which pieces are optional and give the rules for the structure of the document. The standards are like building codes. Just as two kitchens can be built "to code" but look completely different, two EDI documents can follow the same standard and contain different sets of information. For example a food company may indicate a product's

expiration date while a clothing manufacturer would choose to send color and size information.

[edit] Specifications
Organizations that send or receive documents between each other are referred to as "trading partners" in EDI terminology. The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable specifications (also called Message Implementation Guidelines). While the standards are analogous to building codes, the specifications are analogous to blue prints. (The specification may also be called a "mapping," but the term mapping is typically reserved for specific machine-readable instructions given to the translation software.) Larger trading "hubs" have existing Message Implementation Guidelines which mirror their business processes for processing EDI and they are usually unwilling to modify their EDI business practices to meet the needs of their trading partners. Often in a large company these EDI guidelines will be written to be generic enough to be used by different branches or divisions and therefore will contain information not needed for a particular business document exchange. For other large companies, they may create separate EDI guidelines for each branch/division.

[edit] Transmission
Trading partners are free to use any method for the transmission of documents. In the past one of the more popular methods was the usage of a bisync modem to communicate through a value added network (VAN). Some organizations have used direct modem to modem connections and bulletin board systems (BBS), and recently[when?] there has been a move towards using some of the many Internet protocols for transmission, but most EDI is still transmitted using a VAN. In the healthcare industry, a VAN is referred to as a "clearinghouse".

[edit] Value-added networks

In the most basic form, a VAN (value-added network) acts as a regional post office. They receive transactions, examine the 'from' and the 'to' information, and route the transaction to the final recipient. VANs provide a number of additional services, e.g. retransmitting documents, providing third party audit information, acting as a gateway for different transmission methods, and handling telecommunications support. Because of these and other services VANs provide, businesses frequently use a VAN even when both trading partners are using Internet-based protocols. Healthcare clearinghouses perform many of the same functions as a VAN, but have additional legal restrictions that govern VANs also provide an advantage with certificate replacement in AS2 transmissions. Because each node in a traditionally business-related AS2 transmission usually involves a security certificate, routing a large number of partners through a VAN can make certificate replacement much easier.

Value-added networks are the go-between in EDI communications.

The VAN is responsible for routing, storing and delivering EDI messages. They also provide delivery reports Depending on the VAN type, messages may need extra envelopes or may be routed using intelligent *VANs which are able to read the EDI message itself. VANs may be operated by various entities: o telecom companies; o industry group consortia; o a large company interacting with its suppliers/vendors.

[edit] Internet/AS2
This section may contain promotional material and other spam. Please remove any content which is not encyclopedic, and any promotional external links in accordance with the external links guideline. (June 2011) Until recently[when?], the Internet transmission was handled by nonstandard methods between trading partners usually involving FTP or email attachments. There are also standards for embedding EDI documents into XML. Many organizations are migrating to this protocol to reduce costs. For example, Wal-Mart is now requiring its trading partners to switch to the AS2 protocol.[2] AS2 (Applicability Statement 2) is the draft specification standard by which vendor applications communicate EDI or other business-to-business data (such as XML) over the Internet using HTTP, a standard used by the World Wide Web. AS2 provides security for the transport payload through digital signatures and data encryption, and ensures reliable, non-repudiable delivery through the use of receipts.

[edit] Interpreting data

EDI translation software provides the interface between internal systems and the EDI format sent/received. For an "inbound" document the EDI solution will receive the file (either via a Value Added Network or directly using protocols such as FTP or AS2), take the received EDI file (commonly referred to as a "mailbag"), validate that the trading partner who is sending the file is a valid trading partner, that the structure of the file meets the EDI standards, and that the individual fields of information conform to the agreed upon standards. Typically the translator will either create a file of either fixed length, variable length or XML tagged format or "print" the received EDI document (for non-integrated EDI environments). The next step is to convert/transform the file that the translator creates into a format that can be imported into a company's back-end business systems or ERP. This can be accomplished by using a custom program, an integrated proprietary "mapper" or to use an integrated standards based graphical "mapper" using a standard data transformation language such as XSLT. The final step is to import the transformed file (or database) into the company's back-end enterprise resource planning (ERP) system. For an "outbound" document the process for integrated EDI is to export a file (or read a database) from a company's back-end ERP, transform the file to the appropriate format for

the translator. The translation software will then "validate" the EDI file sent to ensure that it meets the standard agreed upon by the trading partners, convert the file into "EDI" format (adding in the appropriate identifiers and control structures) and send the file to the trading partner (using the appropriate communications protocol). Another critical component of any EDI translation software is a complete "audit" of all the steps to move business documents between trading partners. The audit ensures that any transaction (which in reality is a business document) can be tracked to ensure that they are not lost. In case of a retailer sending a Purchase Order to a supplier, if the Purchase Order is "lost" anywhere in the business process, the effect is devastating to both businesses. To the supplier, they do not fulfill the order as they have not received it thereby losing business and damaging the business relationship with their retail client. For the retailer, they have a stock outage and the effect is lost sales, reduced customer service and ultimately lower profits. In EDI terminology "inbound" and "outbound" refer to the direction of transmission of an EDI document in relation to a particular system, not the direction of merchandise, money or other things represented by the document. For example, an EDI document that tells a warehouse to perform an outbound shipment is an inbound document in relation to the warehouse computer system. It is an outbound document in relation to the manufacturer or dealer that transmitted the document.

[edit] Advantages over paper systems

EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry. Another advantage of EDI is reduced errors, such as shipping and billing errors, because EDI eliminates the need to rekey documents on the destination side. One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. For this reason, EDI can be an important component of just-in-time production systems. According to the 2008 Aberdeen report "A Comparison of Supplier Enablement around the World", only 34% of purchase orders are transmitted electronically in North America. In EMEA, 36% of orders are transmitted electronically and in APAC, 41% of orders are transmitted electronically. They also report that the average paper requisition to order costs a company $37.45 in North America, $42.90 in EMEA and $23.90 in APAC. With an EDI requisition to order costs are reduced to $23.83 in North America, $34.05 in EMEA and $14.78 in APAC.

[edit] Barriers to implementation

There are a few barriers to adopting electronic data interchange. One of the most significant barriers is the accompanying business process change. Existing business processes built around slow paper handling may not be suited for EDI and would require changes to accommodate automated processing of business documents. For example, a business may receive the bulk of their goods by 1 or 2 day shipping and all of their invoices by mail. The existing process may therefore assume that goods are typically received before the invoice. With EDI, the invoice will typically be sent when the goods ship and will therefore require a process that handles large numbers of invoices whose corresponding goods have not yet been received. Another significant barrier is the cost in time and money in the initial set-up. The preliminary expenses and time that arise from the implementation, customization and training can be costly and therefore may discourage some businesses. The key is to determine what method of integration is right for the company which will determine the cost of implementation. For a business that only receives one P.O. per year from a client, fully integrated EDI may not make economic sense. In this case, businesses may implement inexpensive "rip and read" solutions or use outsourced EDI solutions provided by EDI "Service Bureaus". For other businesses, the implementation of an integrated EDI solution may be necessary as increases in trading volumes brought on by EDI force them to re-implement their order processing business processes. The key hindrance to a successful implementation of EDI is the perception many businesses have of the nature of EDI. Many view EDI from the technical perspective that EDI is a data format; it would be more accurate to take the business view that EDI is a system for exchanging business documents with external entities, and integrating the data from those documents into the company's internal systems. Successful implementations of EDI take into account the effect externally generated information will have on their internal systems and validate the business information received. For example, allowing a supplier to update a retailer's Accounts Payables system without appropriate checks and balances would be a recipe for disaster. Businesses new to the implementation of EDI should take pains to avoid such pitfalls. Increased efficiency and cost savings drive the adoption of EDI for most trading partners.