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E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the Internet. E-commerce draws on technologies such as mobile commerceelectronic funds transfersupply chain managementInternet marketingonline transaction processingelectronic data interchange (EDI), inventory management systems, and automated data collection systems. E-commerce is in turn driven by the technological advances of the semiconductor industry, and is the largest sector of the electronics industry.

Defining e-commerce

The term was coined and first employed by Dr. Robert Jacobson, Principal Consultant to the California State Assembly’s Utilities & Commerce Committee, in the title and text of California’s Electronic Commerce Act, carried by the late Committee Chairwoman Gwen Moore (D-L.A.) and enacted in 1984.

E-commerce typically uses the web for at least a part of a transaction’s life cycle although it may also use other technologies such as e-mail. Typical e-commerce transactions include the purchase of products (such as books from Amazon) or services (such as music downloads in the form of digital distribution such as iTunes Store).[1] There are three areas of e-commerce: online retailingelectronic markets, and online auctions. E-commerce is supported by electronic business.[2] The existence value of e-commerce is to allow consumers to shop online and pay online through the Internet, saving the time and space of customers and enterprises, greatly improving transaction efficiency, especially for busy office workers, but also saving a lot of valuable time.[3]

E-commerce businesses may also employ some or all of the following:

There are five essential categories of E-commerce:[6]

  • Business to Business
  • Business to Consumer
  • Business to Government
  • Consumer to Business
  • Consumer to Consumer

Forms

Contemporary electronic commerce can be classified into two categories. The first category is business based on types of goods sold (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). The second category is based on the nature of the participant (B2BB2CC2B and C2C).[7]

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 pressing issues for electronic commerce.

Aside from traditional e-commerce, the terms m-Commerce (mobile commerce) as well (around 2013) t-Commerce[8] have also been used.

The XYZ Doohickey Company was founded in 1971, and has been providing quality doohickeys to the public ever since. Located in Gotham City, XYZ employs over 2,000 people and does all kinds of awesome things for the Gotham community.

Governmental regulation

In the United States, California’s Electronic Commerce Act (1984), enacted by the Legislature, and the more recent California Privacy Rights Act (2020) enacted through a popular election proposition, control specifically how electronic commerce may be conducted in California. In the US in its entirety, electronic commerce activities are regulated more broadly 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.[9] 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.[10] As a result, any corporate privacy policy related to e-commerce 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.[11]

Conflict of laws in cyberspace is a major hurdle for harmonization of legal framework for e-commerce around the world. In order to give a uniformity to e-commerce law around the world, many countries adopted the UNCITRAL Model Law on Electronic Commerce (1996).[12]

Internationally there is the International Consumer Protection and Enforcement Network (ICPEN), which was formed in 1991 from an informal network of government customer fair trade organisations. The purpose was stated as being to find ways of co-operating on tackling consumer problems connected with cross-border transactions in both goods and services, and to help ensure exchanges of information among the participants for mutual benefit and understanding. From this came Econsumer.gov, an ICPEN initiative since April 2001. It is a portal to report complaints about online and related transactions with foreign companies.

There is also Asia Pacific Economic Cooperation (APEC) was established in 1989 with the vision of achieving stability, security and prosperity for the region through free and open trade and investment. APEC has an Electronic Commerce Steering Group as well as working on common privacy regulations throughout the APEC region.

In Australia, Trade is covered under Australian Treasury Guidelines for electronic commerce and the Australian Competition & Consumer Commission[13] regulates and offers advice on how to deal with businesses online,[14] and offers specific advice on what happens if things go wrong.[15]

In the United Kingdom, The Financial Services Authority (FSA)[16] was formerly the regulating authority for most aspects of the EU’s Payment Services Directive (PSD), until its replacement in 2013 by the Prudential Regulation Authority and the Financial Conduct Authority.[17] The UK implemented the PSD through the Payment Services Regulations 2009 (PSRs), which came into effect on 1 November 2009. The PSR affects firms providing payment services and their customers. These firms include banks, non-bank credit card issuers and non-bank merchant acquirers, e-money issuers, etc. The PSRs created a new class of regulated firms known as payment institutions (PIs), who are subject to prudential requirements. Article 87 of the PSD requires the European Commission to report on the implementation and impact of the PSD by 1 November 2012.[18]

In India, the Information Technology Act 2000 governs the basic applicability of e-commerce.

In China, the Telecommunications Regulations of the People’s Republic of China (promulgated on 25 September 2000), stipulated the Ministry of Industry and Information Technology (MIIT) as the government department regulating all telecommunications related activities, including electronic commerce.[19] On the same day, The Administrative Measures on Internet Information Services released, is the first administrative regulation to address profit-generating activities conducted through the Internet, and lay the foundation for future regulations governing e-commerce in China.[20] On 28 August 2004, the eleventh session of the tenth NPC Standing Committee adopted The Electronic Signature Law, which regulates data message, electronic signature authentication and legal liability issues. It is considered the first law in China’s e-commerce legislation. It was a milestone in the course of improving China’s electronic commerce legislation, and also marks the entering of China’s rapid development stage for electronic commerce legislation.[21]

Global trends

In 2010, the United Kingdom had the highest per capita e-commerce spending in the world.[22] As of 2013, the Czech Republic was the European country where e-commerce delivers the biggest contribution to the enterprises’ total revenue. Almost a quarter (24%) of the country’s total turnover is generated via the online channel.[23]

Among emerging economies, China’s e-commerce presence continues to expand every year. With 668 million Internet users, China’s online shopping sales reached $253 billion in the first half of 2015, accounting for 10% of total Chinese consumer retail sales in that period.[24] The Chinese retailers have been able to help consumers feel more comfortable shopping online.[25] e-commerce transactions between China and other countries increased 32% to 2.3 trillion yuan ($375.8 billion) in 2012 and accounted for 9.6% of China’s total international trade.[26] In 2013, Alibaba had an e-commerce market share of 80% in China.[27] In 2014, there were 600 million Internet users in China (twice as many as in the US), making it the world’s biggest online market.[28] China is also the largest e-commerce market in the world by value of sales, with an estimated US$899 billion in 2016.[29] Research shows that Chinese consumer motivations are different enough from Western audiences to require unique e-commerce app designs instead of simply porting Western apps into the Chinese market.[30]

Recent research indicates that electronic commerce, commonly referred to as e-commerce, presently shapes the manner in which people shop for products. The GCC countries have a rapidly growing market and are characterized by a population that becomes wealthier (Yuldashev). As such, retailers have launched Arabic-language websites as a means to target this population. Secondly, there are predictions of increased mobile purchases and an expanding internet audience (Yuldashev). The growth and development of the two aspects make the GCC countries become larger players in the electronic commerce market with time progress. Specifically, research shows that the e-commerce market is expected to grow to over $20 billion by 2020 among these GCC countries (Yuldashev). The e-commerce market has also gained much popularity among western countries, and in particular Europe and the U.S. These countries have been highly characterized by consumer-packaged goods (CPG) (Geisler, 34). However, trends show that there are future signs of a reverse. Similar to the GCC countries, there has been increased purchase of goods and services in online channels rather than offline channels. Activist investors are trying hard to consolidate and slash their overall cost and the governments in western countries continue to impose more regulation on CPG manufacturers (Geisler, 36). In these senses, CPG investors are being forced to adapt to e-commerce as it is effective as well as a means for them to thrive.

In 2013, Brazil’s e-commerce was growing quickly with retail e-commerce sales expected to grow at a double-digit pace through 2014. By 2016, eMarketer expected retail e-commerce sales in Brazil to reach $17.3 billion.[31] India has an Internet user base of about 460 million as of December 2017.[32] Despite being the third largest user base in the world, the penetration of the Internet is low compared to markets like the United States, United Kingdom or France but is growing at a much faster rate, adding around 6 million new entrants every month.[citation needed] In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.[33][citation needed] The India retail market is expected to rise from 2.5% in 2016 to 5% in 2020.[34]

The future trends in the GCC countries will be similar to that of the western countries. Despite the forces that push business to adapt e-commerce as a means to sell goods and products, the manner in which customers make purchases is similar in countries from these two regions. For instance, there has been an increased usage of smartphones which comes in conjunction with an increase in the overall internet audience from the regions. Yuldashev writes that consumers are scaling up to more modern technology that allows for mobile marketing. However, the percentage of smartphone and internet users who make online purchases is expected to vary in the first few years. It will be independent on the willingness of the people to adopt this new trend (The Statistics Portal). For example, UAE has the greatest smartphone penetration of 73.8 per cent and has 91.9 per cent of its population has access to the internet. On the other hand, smartphone penetration in Europe has been reported to be at 64.7 per cent (The Statistics Portal). Regardless, the disparity in percentage between these regions is expected to level out in future because e-commerce technology is expected to grow to allow for more users.

The e-commerce business within these two regions will result in competition. Government bodies at the country level will enhance their measures and strategies to ensure sustainability and consumer protection (Krings, et al.). These increased measures will raise the environmental and social standards in the countries, factors that will determine the success of the e-commerce market in these countries. For example, an adoption of tough sanctions will make it difficult for companies to enter the e-commerce market while lenient sanctions will allow ease of companies. As such, the future trends between GCC countries and the Western countries will be independent of these sanctions (Krings, et al.). These countries need to make rational conclusions in coming up with effective sanctions.

The rate of growth of the number of internet users in the Arab countries has been rapid – 13.1% in 2015. A significant portion of the e-commerce market in the Middle East comprises people in the 30–34 year age group. Egypt has the largest number of internet users in the region, followed by Saudi Arabia and Morocco; these constitute 3/4th of the region’s share. Yet, internet penetration is low: 35% in Egypt and 65% in Saudi Arabia.[35]

E-commerce has become an important tool for small and large businesses worldwide, not only to sell to customers, but also to engage them.[36][37]

Cross-border e-Commerce is also an essential field for e-Commerce businesses.  It has responded to the trend of globalization. It shows that numerous firms have opened up new businesses, expanded new markets, and overcome trade barriers; more and more enterprises have started exploring the cross-border cooperation field. In addition, compared with traditional cross-border trade, the information on cross-border e-commerce is more concealed. In the era of globalization, cross-border e-commerce for inter-firm companies means the activities, interactions, or social relations of two or more e-commerce enterprises. However, the success of cross-border e-commerce promotes the development of small and medium-sized firms, and it has finally become a new transaction mode. It has helped the companies solve financial problems and realize the reasonable allocation of resources field. SMEs ( small and medium enterprises) can also precisely match the demand and supply in the market, having the industrial chain majorization and creating more revenues for companies.[38]

In 2012, e-commerce sales topped $1 trillion for the first time in history.[39]

Mobile devices are playing an increasing role in the mix of e-commerce, this is also commonly called mobile commerce, or m-commerce. In 2014, one estimate saw purchases made on mobile devices making up 25% of the market by 2017.[40]

For traditional businesses, one research stated that information technology and cross-border e-commerce is a good opportunity for the rapid development and growth of enterprises. Many companies have invested an enormous volume of investment in mobile applications. The DeLone and McLean Model stated that three perspectives contribute to a successful e-business: information system quality, service quality and users’ satisfaction.[41] There is no limit of time and space, there are more opportunities to reach out to customers around the world, and to cut down unnecessary intermediate links, thereby reducing the cost price, and can benefit from one on one large customer data analysis, to achieve a high degree of personal customization strategic plan, in order to fully enhance the core competitiveness of the products in the company.[42]

Modern 3D graphics technologies, such as Facebook 3D Posts, are considered by some social media marketers and advertisers as a preferable way to promote consumer goods than static photos, and some brands like Sony are already paving the way for augmented reality commerce. Wayfair now lets you inspect a 3D version of its furniture in a home setting before buying.[43]