A strict definition of ecommerce would be any commerce carried out using computer networks. In practice, ecommerce typically means commerce using the Internet.
E-commerce could mean different things for small and large businesses. For small businesses, the focus could be on reaching wider markets and achieving lower costs. Large businesses might see e-commerce as integrating customer and supplier systems with their own systems for more efficient operations.
The definition of ecommerce could also differ depending on the stage of your online business. Small businesses usually start their ecommerce adventure with e-mail and progress in stages to a full-fledged online business as described below and in more detail in the article Ecommerce and Small Business.
Practical Definition of Ecommerce
When we speak of ecommerce for small business, we usually mean selling products over the Net. This usually progresses in stages
- You select a product suitable for selling online. Digital produts are best for e-commerce. Next comes compact merchandise like books and CDs. Niche products like adventure gear might be sold online even if bulky.
- You create a catalog Web site displaying and desribing your products. This could save you catalog printing and mailing costs.
- Facing the problem of lack of visitors to your site, you find ways to promote your Web site among prospective customers. This might begin with banner ads at Web portals and on ezines.
- You incorporate online ordering facilities. The orders might be paid for through checks or online through third parties such as Paypal.
- If the online business prospers, you might open a merchant bank account and install a secure payment acceptance page to accept credit cards online.
- When the volume increases, you might automate credit card verification and order execution. You could now be doing business 24/7, all over the world. This ofcourse assumes that the necessary backend infrastructure exists to service the orders received.
- You might soon face the problem of remote customer support. You incorporate FAQs and Contact Us forms at your Web site for the use of customers. You might have to provide contact telephone and even live chat facility if the situation warrants it.
You have now finally put up a complete online shop – with display, selection, ordering, payment and order execution facilities. This is the practical definition of ecommerce. Let us now look at the elements of e-commerce practice in a little more detail.
Digital products are ideal for online selling because they could be downloaded by the customer from the ecommerce Web site. This could be automated to allow 24/7 business. As soon as the payment is verified, the customer is provided a key that enables the person to download a copy of the product (multiple downloads should be prevented by locking the facility when one copy is downloaded).
Compact products such as books, CDs, art prints and trinkets are also good products for ecommerce. It would be easy to ship these products to customers, that too at little cost.
Even bulky products might be good for ecommerce if they have not become commodities available everywhere. Niche products like adventure gear are good examples.
It is the convenience of ordering from home, at any time of day or night, that tempts many customers to shop online. Comparison shopping i.e. comparing the offers of different merchants is also far easier on the Net.
Ecommerce Web Site
An enabling Web site has become the defining element of ecommerce these days. Doing ecommerce using using e-mails alone has become extremely difficult owing to the problem of spam.
Creating an e-commerce Web site involves:
- Selecting a name for your Web site (domain name) that tells people what the site is about.
- Checking for the availability of the name. Domain names must be unique across the entire Internet.
- Designing a Web site that is easy to use. It should be easy to select a product to examine, review full details of the selected product, order it if desired and pay for it.
- Developing the contents of the Web site – Pictures, descriptions, specifications, prices, and all the other elements of good sales copy.
- Putting the Web site on the Internet by hiring disk space on a computer running a Web server program (Web host).
- Incorporating a shopping cart (or order page), and different payment options into the Web site. These require specialized software. Accepting credit cards directly would also involve an expensive merchant account. An alternative (for beginners) is to use third party services to accept credit cards.
- Bringing prospective customers to your Web site through effective publicity.
Let us now look at shopping carts, secure Web pages and merchant accounts in a little more detail. These are essential elements for a Web site to come under the definition of an ecommerce site.
If you sell only one or very few products, a simple order page should prove adequate. If there are more than a few products, you would need a ‘shopping cart’. Shopping cart is a piece of software that allows customers to add products to their online ‘shopping baskets’ and view the contents of the baskets at any time.
A good shopping cart would provide for quick additions of products, and also removals (in case the customer changes his or her mind). After adding selected products, the customer can checkout by paying for the purchases, or carry over the contents of the cart to the next shopping session. The final checkout might be done only after a number of online shopping sessions.
You increase your chances of a sale if you provide different kinds of payment options. Most online customers might prefer to pay by credit cards. That means you have to provide facilities to accept customer credit card details, authenticate them and accept or reject the payment.
Payment processing is a little complex, involving:
- Opening an Internet Merchant Account with a major bank or specialist institution.
- Installing credit card processing software that would send the credit card details to a Payment Gateway. The Gateway would connect to a processing house. The latter would then contact the Credit card issuer and authenticate the credit card and sufficiency of credit. The results go back the same route to reach the merchant.
- Accepting or rejecting the payment based on the authentication results.
Customers might be unwilling to enter credit card details unless your Web site offers a secure environment. Such a secure environment would mainly include:
- Encrypting the details entered by the customer before transmitting them to your server. Such encryption prevents hackers from getting sensitive information such as credit card details even if they manage to intercept the transmitted data.
- Assuring the customer that he or she is dealing with an authentic business establishment and not an impostor pretending to be someone else.
There are established companies that would arrange such a secure environment for you, offering 40 bit or 128 bit SSL security. They might either verify and certify your site, or host a secure order page for you on their server.
When you attend to all these issues, you would not only have a Web site that falls under the definition of ecommerce but is also successfully getting business.