E-Commerce

With the astonishing growth of the Internet, many companies are finding new and exciting ways to expand upon their business opportunities. There are very few successful companies that do not use computers in their everyday business activities, which also means there are few companies that do not use E-commerce. To emphasize the point that the effect of the Internet is so widespread in today's business communities, one online article stated that more than 100,000 companies have Internet addresses, and 20,000 companies have Web-sites on the Internet as of February 1999 (DataQuest, 1999). These numbers have more than tripled since 1995, and the trend shows no signs of slowing. But, what exactly is E-commerce? To most casual Internet surfers, E-commerce means online shopping; "for workaholics pointing their web browser to Amazon.com to order an emergency present because they forgot someone's birthday again." (Weiss, 1999) As we will soon find out, this is far from the case.

Simply put, E-commerce is the exchange of business information between two or more organizations. An example of this would be buying and selling products or services over the Internet. E-commerce became very popular soon after it proved to be an efficient means to conduct long distance transactions. The purpose of this report is to discuss some of the advantages and disadvantages of E-commerce, as well as examining its potential for the future of business.

Electronic commerce, or E-commerce has developed very rapidly in the last few years and has left some people wondering what it is all about. "Most people think E-commerce is just about buying and selling things over the Internet." (Wareham, 2000) E-commerce is a broad term describing the electronic exchange of business data between two or more organizations' computers. Some examples might be the electronic filing of your income tax return, on-line services like Prodigy, and on-line billing for services or products received. E-commerce also includes buying and selling any item over the Internet, electronic fund transfer, smart cards, and all other methods of conducting business over digital networks. The primary technological goal of E-commerce is to integrate businesses, government agencies, and contractors into a single community with the ability to communicate with one another across any computer platform." (Edwards, 1998)

History of E-commerce

Electronic commerce was built on a foundation that was started more than 125 years ago with Western Union's money transfer as an example of telegraph technology. In the early 1900's, the advent of credit cards as a payment system revolutionized the process of automated commerce functions. In the mid 1980's, the introduction of the ATM (automated teller machine) card was the latest improvement to electronic commerce. The Internet was conceived in 1969 when the Department of Defense began funding the research of computer networking. The Internet, as a means for commerce, did not become reality until the 1990's. Before this time, it was mainly a tool for the army, and a research device for some American universities. Its popularity grew when it proved to become a fast and efficient means to conduct long distance transactions, as well as an effective way to distribute information.

Economic Impact

Clearly, E-commerce will change the face of business forever. Companies that are thousands of miles away can complete business transactions and exchange information in a matter of seconds. As one online article explained:

"Dell Computers sells more than $14 million worth of computer equipment a day from its web-site. By taking their customer service department to the web, Federal Express began saving $10,000 a day. The Internet provides businesses with the opportunity to sell their products to millions of people, 24 hours a day." (Baxton, 1999)

Figure #1 shows the amount of revenues generated by the on the Internet dating back to 1996 as well as estimating possible revenues through the year 2002. With 1998, revenue equaling almost 74 billion dollars and experts predicting that it will climb to as much as 1,234 billion dollars by the year 2002, anyone can see that E-commerce is the wave of the future.

Figure #1- Internet generated revenues in US dollars. (Source: NUA Internet Surveys)

"Without a doubt, the Internet is ushering in an era of sweeping change that will leave no business or industry untouched. In just three years, the Net has gone from a playground for nerds into a vast communications and trading center where some 90 million people swap information or do deals around the world. Imagine: It took radio more than 30 years to reach 60 million people, and television 15 years. Never has a technology caught fire so fast." (Edwards, 1998)

Advantages of E-commerce

* Speed

* Reduced Per Transaction Cost

* Global Reach

* Customer Service

The number one advantage that E-commerce possesses is its speed. The Internet and World Wide Web give businesses opportunities to exchange messages or complete transactions almost instantaneously. Even with the slowest connections, doing business electronically is much faster than traditional modes. With increased speeds of communication, the delivery time is reduced and that makes the whole transaction from start to finish more efficiently. In addition, you can find practically any product available for sale on the Internet, as one author put it "from books and compact disks (from www.amazon.com) to French bread (available from www.sourdoughbread.com)" (Buskin, 1998). Even more significant is the fact that information appearing on the Internet can be updated continuously and rapidly. This gives business owners the ability to inform customers of any changes to the service that they are offering. This also allows them to update marketing and promotional materials as often and as frequently as possible.

The second advantage of the electronic commerce is the opportunity it offers to save on costs. As an advertising medium, promotion using a web site results in the sale of ten times the number of units of one-tenth of advertising budget. In addition, web based promotion cost roughly one quarter of direct mail expenditures. Colorful, graphical are always less expensive than four color printing and distributing printed materials. AMP International