The Definition of E-Commerce

So what does e-commerce mean anyway? E-commerce is the pre-eminent buzzword of the online business revolution. It captures the excitement and focus of this fast emerging market. But it is more than a slogan or glib party line. At its core it embodies a concept for doing business online.

Electronic commerce is the paperless exchange of business information using electronic data interchange (EDI), e-mail, electronic bulletin boards, fax transmissions, and electronic funds transfer. It refers to Internet shopping, online stock and bond transactions, the downloading and selling of “soft merchandise” (software, documents, graphics, music, etc.), and business-to-business transactions.

The concept of e-commerce is all about using the Internet to do business better and faster. It is about giving customers controlled access to your computer systems and letting people serve themselves. It is about committing your company to a serious online effort and integrating your Web site with the heart of your business. If you do that, you will see results!

The Internet’s role in business can be compared to that of the telephone. It is a way for people to communicate with each other. It is also a way for a consumer to communicate with a company’s computer systems without human intervention. In fact, the Internet is a communication medium like the many others we use in business every day.

Think of the ways you communicate with people in business. The best way is face to face. Body language, tone of voice, and facial expressions all help you understand what the other person is trying to say. When you cannot meet face to face, you may use any of a number of different means to communicate: a telephone, a fax machine, Federal Express, the U.S. Postal Service, or maybe even a messenger service. These are all ways to deliver or receive information, authorization, even shipments of goods and merchandise.

The Internet is a reasonable alternative to all of those means of communication. Any place and any way that your business communicates with its customers, you should think about how you could have done it online. That is the power of e-commerce.

Can’t meet face to face? Send an e-mail with an attached photograph. When it comes time to pay for merchandise, use a secured server to pay by credit card, or even digital cash! The opportunities and situations in which online business is possible are limitless.

Components of an Internet Business
Every era of business yields new strategies and new ways of doing business. With the advent of radio and television came the first mass-market advertising. Now, the Internet has so radically changed business that the rules for corporate strategy that held for the last 50 years (since the dawn of television) have begun to crumble.

There are some literal elements of commerce that are necessary for any transactions to take place, which are as true for regular bricks-and-mortar commerce as they are for e-commerce. First, whether you are doing business online or in the real world, you have to have a product to sell or a service to offer. Then, you must have a place from which to do business. In the traditional world of commerce this can be a physical store or, in a more figurative sense, a catalog or phone number. In the world of e-commerce the place from which you do business is your Web site.

Most businesses already exist in the bricks-and-mortar world of commerce. Adding a Web site is a means to enhance their business. For Internet startups, the Web site is the only place that they do business.

In both regular commerce and e-commerce you need to find a way to attract customers to your place of business. This is embodied by your marketing strategy, and everything from advertising to word of mouth fits into this category.

In order to do business, you also need a way to take orders and process payment. In a retail store there are no orders. Customers simply find the products they want, get in a line at the register, and pay the cashier. In e-commerce, orders have to be placed and items shipped. Orders are usually handled through interactive, online forms. Money is another issue easily handled in traditional commerce. Customers in a retail store pay by check, cash, or credit or debit cards. Online customers cannot pay by cash or check, only through electronic means. Also, there are issues of security that surround online payment that do not come into play in the traditional bricks-and-mortar world. E-commerce transactions have to take place through secure electronic connections and special merchant accounts for accepting payment.

Once payment is collected, delivery of the product must take place. Fulfillment in traditional stores is as easy as putting the item in a bag and handing it over to the customer. Fulfillment in the world of e-commerce is more difficult, requiring shipping and transportation similar to catalog and mail order businesses. For businesses that integrate e-commerce into their existing business plan, fulfillment is as easy as hiring an extra employee to ship online orders. In Internet startup businesses, fulfillment must often be outsourced to a facility that can handle order processing and shipping in a more timely and professional manner.