introduction: Meaning, Nature, Concepts, advantages and reasons for transacting online

The fast and dramatic changes in information technology specially in last one decade has given new concept of marketing in which buyer and seller do not see each other face to face nor see the goods physically; the whole transaction is carried out with the help of ‘on line’ communication. The entire deal is carried out with the help of computer – telecommunication and net working with associated hardware.

In the e – commerce internet provides information about goods and services “It is” a way of conducting imaging and executing business transactions and services through elec­tronic media and networking in computers and communication network, websites, e-mail are resorted.

Customers know about goods and services sitting at home. The manufacturers, distributors, suppliers and services providers let the consumers know about their products quality, price, size, color etc. through multi-colored catalogues on website. The consumers can ‘surface various web sites and compare their relative prices, quality characteristic, features etc.

These details can be obtained from suppliers around the globe. The websites are available beside for goods for direct selling, context selling, financial and other services such as hospitals, education, training, advertise­ments, property, entertainment, product demonstrations, bill payment, exchange and all other ser­vices which one can think of.

The types of selling through the use of internet and other electronic devices can be of following types:

  1. Business to Business (B2B):

This implies selling by one business manufactures to other business manufactures, trade, wholesaler or retailer. In India as yet most of the e-commerce is B2B. The number of companies like TELCO, IBM, C1TI BANK, BHEL, ESSAR, TVS, MARUTI, BAJAJ, and many others are doing B2B. In 1998 out of total e-commerce of us$ 210 billion us$ 100 billion was accounted for B2B.

  1. Business to Consumer (C2B):

When business sells to customers/consumers it is called B2C and is most important from our point of view. The products include items sold in departmental stores, chemist shops, grocery stores, books, stationery, clothes, vegetables, fruits and what not. As yet in India such sales are only of US$ 100 billion but are expected to go up to US$ 900 billion by 2005 i.e. the growth of 9000 percent. Many service sectors are adopting this mode.

  1. Consumer to Consumer (C2C):

Under this system when some consumer want to dispose off his old items, he can take the help of selling through internet. But this type of e-commerce is not very common at least in India and the business is negligible.

  1. Business to Government (B2G):

Business house or on individual business has to file income tax and sales tax returns and various types of other returns. As yet this requires filing of return in respective office and apply for approval in concerned office. But now many countries allow this type of activity through e-mail/e-commerce. However, as yet this is not being done in India.

  1. Government to Consumer (G2C):

In order to provide facilities to public and speed up information and records government in many cases provide record of information, through this system; sale of documents, passport forms, copies of returns etc are supplied through e-mail. The main features of e-commerce is that one does not physically feel an item nor sees it and places order on the basis of information supplied through website or in response to consumers inquiry, as yet e-commerce has last preference for daily consumption items.

It is largely limited to durable goods like computers, TV’s, automobiles, books, travel reservation. In case of service it is becoming popular for banking and share purchases. The growth of E-commerce is restricted as given in Table 20.1


Key players in e-commerce are consumers and sellers.

E-mail net work:

E-commerce requires visit of website, selection of products, select a payment mode, realization of money (which is done before dispatch) and dispatch of goods.

The process may be depicted as under:

  1. Visit of website:

Selection of a product

Selection of payment mode

  1. Credit card
  2. E-banking
  3. VP/courier (who collects the payment at the time of delivery, but this is discouraged.
  4. Placement of order through e-mail
  5. Realization of money.

Dispatch to the customer can be on line or through courier.

In order that consumer may visit particular website, sellers have to advertise about their website so that consumer may visit the website. The consumer decides which websites have to be visited and after getting the information from various sites he makes a choice and decides which one should be purchased. He then places an order intimating the mode of payment which is generally through credit card or e-banking and advise the bank where he has credit card to debit the amount to his account.

After the seller realizes the amount for the goods order he dispatches the goods. In most of the cases whole process takes couple of minutes and goods reaches the consumer within half an hour to one hour if he is a local consumer, it is claimed so by sellers. In India in this business Rediff(dot)com is most popular and sells products worth Rs. 1340 million every month.

Advantage to Consumers:

The consumer has number of advantages and convenience and therefore the system is becoming popular.

  1. Consumer has wider choice not from his town or country but also round the globe unless there are import restrictions.
  2. Customized or personalized product and service. For instance if some lady wants a bra of exact size, her size can be measured through internet and stored and she will be supplied bra of her requirement.
  3. In case of purchase, one is not required to go from store to store to see the products to collect their details, prices etc. Sitting at home he gets all the required information and that too very fast without spending much time.
  4. There is absolute flexibility of time, place and distance is no hurdle; one can open the site any time day or night to get details, there is no problem of shops/stores opening/closing hours. Website can be opened any time. In physical sales place and distance is also a problem which is no problem in e-commerce because one can see sites all over the world without moving out of the house.
  5. Goods are available at cheaper price because there are lot of economies of space, rent, interest to the seller Further, he manages with much lesser number of outlets and cost of marketing is reduced. Part of these savings is passed on to consumer and therefore, he gets the products cheaper than from conventional shops/departmental stores, grocers etc.
  6. It helps to globalize retail trading. One can buy things without geographical boundaries.
  7. It eliminates with the system of distributors, authorized dealers and retailers, the manufac­turer can deal with large territory with one store.
  8. The inventory is reduced, and so the cost of carrying goods and distribution cost.
  9. Exports to final consumers is possible through e-commerce, not only-just sales but procure­ment, accounts, logistics product development and other related services are also possible through e-commerce
  10. The net enables suppliers to introduce and promote new markets and new products to meet the needs of individual buyers.
  11. Long distance, travelling and delays, pollution all are avoided because one has not to travel to the shop.
  12. Consumer is better informed about products, price etc and therefore can make better choice.
  13. Suppliers, competitors and customers come under one roof through internet websites and massive exhibition of various items is possible.


  1. The biggest disadvantage of e-commerce is that one is not able to see and feel the product.
  2. Since consumers are not able to feel and touch the products and therefore business is on trust and as yet business is largely limited to travel, automobiles, PC’s, services, books and CD’s entertain­ment. As yet sales of apparel, food products is largely small percentage of total e-business. For instance in 1999 the maximum ownership of internet was 50 percent in USA, in other countries it varied between 1.8 percent to 45 percent (Table 20.2) But gradually this disadvantage is being reduced but still there is large percentage of population which does not own internet.1.2
  3. There is a big problem in on-line payment. It is with regard to time and legality of order to complete the transaction. As yet satisfactory system of payment has not been developed by banks and financial institutions in large number of countries.
  4. The electronic signatures acceptance has been legalized by large number of countries but still many more have to take steps in this direction. Further, there are great chances of fraud in-spite of all the precautions.
  5. The. e-commerce requires large investment to build a brand image on internet which is esti­mated around us$ 100 million or around Rs. 500 crores which can be invested only by big players. Thus small suppliers cannot get business through internet.
  6. The market is restricted to high income and educated population who own and know the use of internet. Thus in poor, illiterate or less educated countries it has limited access.
  7. Sometimes there could be flood of orders for any particular product which makes problem of timely supply to consumer. In 2000 there was YK2, problem and customers had to wait to get product of their choice.
  8. Consumer has number of problems. He has to search internet/websites information on internet, make the purchase domain and the payment. There are difficulties in searching, surfing, browsing and wandering around the internet which costs both time and money.
  9. Privacy of consumer is adversely affected specially in the matter of accounts; he is required to tell his credit card number to supplier or e-banker.
  10. E-commerce is good for branded products like automobiles, electronic goods, computers, electrical goods, branded garments, branded food products, music, books etc. If middle class or lower middle class want to buy non branded products which are generally cheaper, they cannot be bought through e-commerce.

In other words e-commerce is for effluent society i.e. why population in USA use is 50%, in Europe 13 percentage, in poor countries only 1-2 percent and in some countries it is negligible. Thus e-commerce is for classes and not for masses.

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