26 E-Commerce and Entrepreneurship

Dr. Savita

1. Learning Outcome

After completing this module students will be able to:

i. Understand the concept of a E-Commerce

ii. Understand Various Approaches of E-Commerce

iii. Know the advantages and disadvantages of E-Commerce

iv. Understand the concept with the help of Success Stories

The internet remains a place where you can start with nothing and soon challenge the gods.

-Mark Di Massimo

2. Introduction

The past few years have seen a remarkable use of technology in e-commerce which has today led the e-business companies growing at a rapid pace. Innovation in technology has opened up new vistas for e-business companies interested in offering value added services. Deployment of technology, improved customer services and innovative product has brought required competition into the companies. Customers are more conscious for their rights and demanding more than ever before. The pressure on e-commerce companies is to find new ways to create and deliver value to the customer.

All kind of businesses conducted by means of computer networks are covered under E-commerce. The advancement in information and technology reshaped the structure of e-commerce around the globe. The information technology has revolutionized various aspects of our life. Competition and the constant changes in technology and lifestyles have changed the face of e-business. With the opening up of the Indian economy and current thrust of the Indian government towards privatization competition is going to be tough. Advancement in telecommunications and computer technologies in recent years has made computer networks an integral part of life. Today the number of companies which are facilitating transactions over web is increasing day by day. Online commerce provide multiple benefits to the consumers in form of availability of goods at their door step, lower cost, wider choice and also save time. People can buy goods with a click of mouse button without moving out of their house or office.

3. Meaning and Concept of E-Commerce

Technology is changing the landscape of entrepreneurship. Electronic Commerce has become the buzzword of present day business. E Commerce is the process of doing business electronically or over internet to improve operating efficiencies which in turn will strengthen the value to be provided to the customers and thereby giving competitive advantage over competitors. It includes business-to-business, business to consumer and consumer to consumer transactions that involve the buying and selling of goods and services. If Entrepreneurship is innovation, e-commerce adds fuel to the fire.

E-Commerce is a modern technique that addresses the need of entrepreneurs. It cuts costs while increasing the speed of service delivery. While the ecommerce offers entrepreneurs an opportunity to establish a new business, entrepreneurs with an established business should also make efforts to increase their online presence .Online presence has the ability to positively impact marketing and sales effort. The entrepreneurs should embrace these channels to discover how the Internet can transform and grow their businesses. For example a local grocery vendor who may be predominately servicing its surrounding community, could expand its customer base across the city by establishing its own website.

4. Approaches of E-Commerce

Business-to-Business (B2B) E-Commerce: E-commerce between companies is defined as B2B e-commerce. B2B approach of e-commerce deals with relationships between and among businesses. It takes into account e-procurement, supply chain management, and also negotiating purchase transactions over the internet for the companies. The two main components of B2B e-commerce are e-frastructure and e-markets. E-frastructure component of B2B primarily consists of the logistic-transportation, warehousing and distribution, application service providers. E-markets are web sites where buyers and sellers interact with each other and conduct transactions. The examples of B2B examples are IBM, Hewlett Packard (HP), Cisco and Dell. The B2B e commerce lowers transaction costs of conducting business and also helps to make savings in terms of time and effort.

Business-to-Consumer (B2C) E-Commerce: Business-to-consumer e-commerce is the second largest earliest form of e-commerce. It involves businesses introducing products and services to consumers via internet technologies. B2C e-commerce, involves customers gathering information; purchasing physical goods, information goods over an electronic network. Online retailing companies such as Flipkart.com, Snapdeal.com, and Firstcry.com are the examples of Business to Consumer E-Commerce. One of the important benefits of B2C e-commerce is that the entrepreneurs can increase its consumer base with minimum transactions costs. B2C e-commerce allows consumers to find the most competitive price for a product or service.

Consumer-to-Consumer (C2C) E-Commerce: Consumer-to-Consumer (C2C) approach of e-commerce is concerned with the use of e-commerce by individuals to trade and exchange information with other individuals. C2C of e-commerce is characterized by the growth of electronic market places and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers.

Business-to-Government (B2G) E-Commerce: The online commerce between companies and the public sector is defined as Business-to-government (B2G) e-commerce. Business-to-Government e-commerce is concerned with the need for business to sell goods or services to governments or government agencies. Such activities include supplying products and services to the army, police force, hospitals and schools.

Mobile Commerce: M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology such as mobiles. M-commerce is a faster, more secure, method of choice for digital commerce transactions. M-commerce includes financial services, including mobile banking, brokerage services, Telecommunications, bill payment etc.

5. Advantages of E-Commerce: The following are the advantages of e-commerce:

E- Commerce has dissolved all the limitations of geography. With an ecommerce website, the whole world is entrepreneur’s playground.
The E-entrepreneur can enhance its customer base by reaching new customers through various search engines.
One of the most specific advantages of ecommerce is the lowered cost. E-commerce entrepreneur need not maintain huge inventories or expensive retail showrooms. Their marketing and sales team is quite less that of physical retail businesses. The part of the benefit of this lowered cost can be passed on to the customers in the form of discounts.
Customer has now easy access to shopping 24/7/365. Ecommerce websites can run all the time. It increases the number of orders a merchant receive. From the customer’s point of view, an “always open” store is more convenient.
Consumers have a much wider choice available on the cyber market. On an ecommerce website, customers can click through intuitive navigation or use a search box to immediately narrow down their product search. Some websites remember customer preferences and shopping lists to facilitate repeat purchase.
Ecommerce facilitates comparison shopping. There are several online services that allow customers to browse multiple ecommerce merchants and find the best prices. Because of wide scale information dissemination consumer can compare products, features, prices and even look up reviews before they select what they want.
Consumer enjoys wider access to assistance and to advice from experts and peers. There are limitations to the amount of information that can be displayed in a physical store. Ecommerce websites make additional information easily available to customers.
Consumer also avails of fast services and delivery of products and services. They have the convenience of having their orders delivered right to their doorsteps.
E-commerce by minimising costs enables companies’ especially small ones to make information on its product and services available to all potential customers spread worldwide.

6. Disadvantages of E-Commerce: Though e-commerce is widely accepted all around the world but still it has certain disadvantages which are discussed as under:

Return on investment is difficult to calculate.
Many firms have had trouble recruiting and retaining employees with the technological design and business process skills needed to create an effective e commerce presence.
Difficulty of integrating existing databases and transaction processing software designed for traditional commerce into the software that enables e commerce.
Many businesses face cultural and legal obstacles in conducting e commerce.

7. Difference between Traditional Commerce and E-Commerce: Due to the advancement in information technology, many traditional small businesses are considering e-Commerce as an attractive and profitable sales channel. However, e-Commerce and traditional commerce are different from each other due to many reasons. Some of the reasons of difference are enumerated as below:

Direct Interaction with Customer: Traditional commerce is often based around face to face interaction. The customer has a chance to ask questions to the seller and the sales staff can work with them to ensure a satisfactory transaction. Often it gives seller an opportunity for upselling or encourages the customer to buy a more expensive item or related items, and increase his business profits. On the other hand, in e-Commerce seller and buyer are not in direct relation. Therefore, it doesn’t offer this benefit unless features such as related items or live chats are implemented.
Lower Costs: In e-Commerce seller is not required to set up his physical store in good location for increasing his sales. Therefore he can avoid certain standing charges such as commercial space rent, electricity charges etc. Opening an online store can be done at a fraction of the price. This can boost small business owners to start their ventures who do not have the start up capital to rent prime retail space and staff to be able to sell their goods.
Reach: With an online shopping you can do business from any part of the world, unlike traditional commerce where you are restricted to people who actually come to your shop. This also opens the door to many other forms of marketing that can be done entirely online, which often results in a much larger volume of sales and even foot traffic to the store. An online store has no capability limits, and you can have as many clients as your stock can serve.
Goods Return: In a traditional commerce the customer purchases the product in person from the business place, which has some benefits for both of them. The customer will be able to touch and check the items, to make sure they are suitable to him, which reduces the number of returned items or complaints due to an item not being as advertised on a catalogue or promotional leaflet. But if you start business online in the expectations of higher rate of return, many customers will just order and try the items at home, and won’t hesitate to return them as they can do it by post without having direct interaction with seller.
Credit Card Fraud: e-Commerce suffers from a major kind of electronic crime i.e. ‘credit card fraud’. Credit card fraud is also termed as ‘Identity Theft’ in which a person may use the identity of other person for exercising fraud of deception. Therefore, the problem of credit card fraud is serious and occurring by stealing the cards and the accompanying information at the time of transaction delivery. While traditional commerce is totally secure, it’s easy for seller to verify the identity of buyer by asking for photographic ID. However, banking sector is introducing new innovations against counterfeiting and fraud, which are highly sophisticated to beating these systems.

Selling online means learning new ways of dealing with customers, marketing your products and fulfilling your orders, but the benefits are great. You can keep your costs lower, reach a wider audience and do business 24/7, having time to focus on improving your products and services and your customer experience instead of being on the store floor waiting for clients. Some products sell better online than others: selling jewelry for cash online is much easier than trying to sell houses or cars. However, having an online store can increase the customers on traditional commerce as well, as people are now able to find you online and see what products you are offering.

8. Success Stories of Entrepreneurs using E-Commerce:

Success Story of Snapdeal

Snapdeal set a niche for itself in the sphere of e-commerce in India. In 2010, when Kunal Bahl and Rohit Bansal wanted to start their own business, they chose an offline couponing business and named it Money Saver. 15000 coupons were sold in three months and it was time to take the business to the next level. It was after they met investor Vani Kola that the venture really took off. The first meeting did not go well but after another round of discussion, Vani Kola’s venture capital firm decided to invest in Snapdeal. Initially started as an offline business, Snapdeal went online in 2010. It was a bumpy ride in the first few months. Mistakes were made, but lessons were learnt. It is this kind of hard work and diligent attempt to offer the best to the customers that gave Snapdeal its initial success.

However, the biggest decision of the founders came in November 2011. Inspired by the success of Alibaba, Rohit and Kunal wanted to create something on similar lines. The deals business was shut down and an online marketplace was opened instead.

It was a make or break decision. Snapdeal had a huge market share in the deals business at that time and starting something new was very risky and the move surprised the investors too. At that point of time, eBay was the only marketplace in India.

It was a decision that was not for the short term. When Rohit Bahl managed to gain the nod of board, the present form of Snapdeal took shape. The very fact that Snapdeal is valued at a billion dollars today is a testimony to the vision of its founders. Currently, more than 50,000 sellers sell around 5 million products on Snapdeal. The company’s phenomenal growth in a short span has been a remarkable journey. The company began to concentrate on building scale and improving speed. When eBay invested in Snapdeal, they brought immense experience to the table.

Snapdeal is one of the fastest growing e-commerce companies in India today with the largest online market place. In just two years, the company went from scrapping their group coupon business and starting an online marketplace to become a billion dollar company. Its year on year growth is almost 600%.The average age of the workforce at Snapdeal is 25. Their values – Innovation, Change, Openness, Honesty and Ownership drive them to press for greater success.

The company’s growth had been phenomenal but it is their continued effort to bring the best to the market and their zeal to succeed as the best B2C (Business to customer) marketplace is what sets them apart. Great ideas might be important for a business, but it is the confident implementation of those ideas and the right effort which are more important. It is action and not mere thought that gives results.

Source: http://successstory.com/companies/snapdeal

Success Story of FlipKart

A quick look into any success story shows a path breaking idea at the heart of the tale. Flipkart is no exception. It is not the idea itself but the conviction to convert ideas into action and action into results is what defines a true success story. Measured by that yardstick, Flipkart has been a hugely successful. Back in 2007, when Flipkart was launched, Indian e-commerce industry was taking its beginner steps. Sachin Bansal and Binny Bansal, who were working for Amazon had an idea to start an e-commerce company in India.

One can easily call that a risky move. In a country where people have various tastes and preferences, an ecommerce start-up will always have enormous challenges. In India, people often prefer to shop in person and buy goods they see and like. Today, thanks to Flipkart, e-commerce has become one of the fastest growing sectors in India.

Flipkart began selling books to begin with. It soon expanded and began offering a wide variety of goods. Innovating right from the start, Flipkart has been home to few of the striking features of Indian e-commerce. Flipkart was the first to implement the popular ‘Cash On Delivery’ facility, which every online shopping website in India offers as an option today.

In the first few years of its existence, Flipkart raised funds through venture capital funding. As the company grew in stature, more funding arrived. Flipkart repaid the investors’ faith with terrific performances year after year. In the financial year 2008-09, Flipkart had made sales to the tune of 40 million Indian rupees. This soon increased to 200 million Indian rupees the following year. Flipkart targets to hit the one billion mark by 2015. Going by their ever increasing popularity, it does not seem like a farfetched thought.

Back at the time when Flipkart was launched, any e-commerce company faced two major difficulties. One was the problem of online payment gateways. Not many people preferred online payment and the gateways were not easy to set up. Flipkart tackled this problem by introducing cash on delivery and payment by card on delivery in addition to others.

The second problem was the entire supply chain system. Delivering goods on time is one of the most important factor that determines the success of an ecommerce company. Flipkart addressed this issue by launching their own supply chain management system to deliver orders in a timely fashion.

Flipkart’s journey from a small book e-retailer to India’s largest e-commerce platform inspires a generation of start-ups.

Source: http://successstory.com/companies/flipkart

Summary: E-Commerce is a modern technique that addresses the need of entrepreneurs. It cuts costs while increasing the speed of service delivery. While the ecommerce offers entrepreneurs an opportunity to establish a new business, entrepreneurs with an established business should also make efforts to increase their online presence .Online presence has the ability to positively impact marketing and sales effort. The entrepreneurs should embrace these channels to discover how the Internet can transform and grow their businesses. For example a local grocery vendor who may be predominately servicing its surrounding community, could expand its customer base across the city by establishing its own website. All kind of businesses conducted by means of computer networks are covered under E-commerce. The advancement in information and technology reshaped the structure of e-commerce around the globe. The information technology has revolutionized various aspects of our life. Competition and the constant changes in technology and lifestyles have changed the face of e-Commerce.

Learn More

Suggested Readings

Business on the Net: What’s and How’s of E-Commerce, Agarwala, K.N. and Deeksha Ararwala Macmillan, New-Delhi.
Business on the Net: bridge to the online Storefront, Agarwala, K.N and Deeksha Agarwala: Macmillan, New-Delhi.
Mastering the internet, Cady, Glcc Harrab and Mcgregor Pat, BPB Publication, New-Delhi.
Electronic Commerce-A Manager’s Guide to E-Business Diwan, Prag and Sunil Sharma, Vanity Books International, Delhi.
On line Marketing I land Book, Janal, D.S, VNR.
Frontiers of Electronic Commerce, KALAKOTA Rav: and Whinston Andrew B, Addison Wesley.

Points to ponder

Business-to-Business (B2B)E-Commerce:E-commerce between companies is defined as B2B e-commerce.
Business-to-Consumer (B2C) E-Commerce: Business-to-consumer e-commerce is the second largest earliest form of e-commerce.
Consumer-to-Consumer (C2C) E-Commerce: Consumer-to-Consumer (C2C) approach of e-commerce is concerned with the use of e-commerce by individuals to trade and exchange information with other individuals.
Business-to-Government (B2G) E-Commerce: The online commerce between companies and the public sector is defined as Business-to-government (B2G) e-commerce.
Mobile Commerce: M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology such as mobiles.