E-Commerce

Electronic commerce ( English e-commerce) is a sphere of the digital economy , which includes all financial and trade transactions carried out using computer networks , and business processes associated with such transactions.

E-commerce includes:

• electronic information exchange (Electronic Data Interchange, EDI),
• electronic capital movement (Electronic Funds Transfer, EFT),
• electronic commerce ( eng.  e-trade ),
• electronic money (e-cash),
• electronic marketing (e-marketing),
• electronic banking (e-banking),
• electronic insurance services (e-insurance).

History of the development of e-commerce

The first systems and methods of e-commerce owe their birth to the emergence of sales automation technologies and the introduction of automated corporate resource management systems.

In 1960, the American companies American Airlines and IBM began creating a system to automate the procedure for reserving seats on flights. The SABER (Semi-Automatic Business Research Environment) system has made air travel more accessible to ordinary passengers, helping them navigate fares and flights, the number of which is constantly growing. By automating the process of calculating tariffs when reserving seats, the cost of services has decreased and passenger traffic has increased. The joint project between American Airlines and IBM is one of the first examples of e-commerce.

In 1971, students at Stanford University and the Massachusetts Institute of Technology organized the sale of marijuana using the ARPANET computer network of the Stanford Artificial Intelligence Laboratory (the predecessor of the Internet) . Later, these transactions were considered the first online transactions, the beginning of e-commerce.

In 1979, Michael Aldrich demonstrates the first online shopping system.

In 1981, Thomson Holidays UK was created, the first online shopping system for businesses.

In 1982, the French Minitel system was introduced nationwide by France Télécom and used for online orders.

In 1983, the California State Legislature holds its first hearings on "electronic commerce" in Vulcan, California.

In 1995, Jeff Bezos launched Amazon.com and the first 24-hour ad-free radio stations, Radio HK and NetRadio, began broadcasting. In the same year, eBay was created by programmer Pierre Omidyar (as AuctionWeb). 4 years later, Alibaba Group was founded in China . Business.com was sold to eCompanies for US$7.5 million, which was acquired in 1997 for US$149,000. The peer-to-peer file sharing program Napster is launched . ATG Stores has started selling decorative items for the home online. Alibaba.com achieved profitability in December 2001.

In 2002, eBay acquired PayPal for $1.5 billion.

In 2003, Amazon.com posts its first annual profit.

In 2004, DHgate.com, China's first online b2b transaction platform, was born and encouraged other b2b marketplaces to move away from the yellow pages model.

In 2007, Business.com was acquired by RH Donnelley for $345 million.

In 2015, Amazon.com accounted for more than half of all e-commerce growth, selling nearly 500 million SKUs in the United States.

In 2017: Worldwide e-commerce retail sales reached $2.304 trillion, up 24.8% from the previous year.

The e-commerce market has been developing most dynamically over the past 20 years, which is due to the rapid growth in the number of Internet users, the increasing influence of social networks and other interactive online platforms, the dynamic development of electronic payment systems and the transition of leading market players to new technological platforms for e-commerce (from Web 1.0 to Web 2.0 , then to Web 3.0 ).

In 2012, e-commerce sales for the first time in history exceeded $1 trillion, and the number of online stores in 2012 (compared to 2011) increased by 30% and amounted to 32.5 thousand. In 2011, the total turnover of online stores was estimated at 258 billion rubles. Market volume growth increased by 36%. According to the results of a RAEC study for 2012, the volume of the online trading market amounted to 284.96 billion rubles.

Gradually, access through mobile devices began to acquire an increasingly important role in e-commerce and accounts for more than 25% of the market. Many companies have made significant investments in mobile applications.

Modern 3D graphics technologies have made it possible to create fairly compact 3D models, which have been standardized, including when creating messages on social networks (for example, Facebook 3D Posts). A number of marketers consider this form of advertising preferable to static photographs. Some brands, such as Sony, are already experimenting with augmented reality in advertising. Wayfair allows you to view a 3D version of your furniture at home.

Types of e-commerce

There are several generally accepted categories into which e-commerce is divided. As a rule, such delimitation is carried out according to the target group of consumers.

Classification

Commercial organizations

• B2B (Business-to-Business) - “relationships between commercial organizations.”
• B2C (Business-to-Consumer) - “the relationship between a commercial organization and consumers.”
• B2E  (German)Russian)(Business-to-Employee) - “the relationship between commercial organizations and employees (hired workers).”
• B2G (Business-to-Government) - “the relationship between an organization and the government.”
• B2O (Business-to-Operator) - “the relationship between an organization and a telecom operator.”

Consumers

• C2A (Consumer-to-Administration) - “the relationship between consumers and administrators.”
• C2B  (Consumer-to-business) - “the relationship between consumers and commercial organizations.”
• C2C (Consumer-to-Consumer) - “relationships between consumers.”

Administration

• A2A (Administration-to-Administration) - “relationships between administrations.”
• A2B (Administration-to-Business) - “the relationship between the administration and commercial organizations.”
• A2C  (German)Russian)(Administration-to-Consumer) - “the relationship between the administration and consumers.”

Other business models

• D2C (Decentralized-to-Consumer) - “decentralized relationships based on Blockchain technology ( English  Blockchain ) between consumers.”
• G2B (Government-to-Business) - “the relationship between the government and the organization.” At the institutional level, large 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 e-commerce.
• P2P (Peer-to-Peer) - “relationships between persons.”

Besides traditional e-commerce, the terms m-Commerce (mobile commerce) were also used around 2013 t-Commerce.

B2B or business to business scheme

B2B  – abbreviation “business-to-business” – trade between enterprises using applications through the website. Instead of receiving orders through sales representatives by phone or email, orders are taken digitally, reducing overhead costs. Internet platforms make it possible to significantly simplify transactions at all stages, making trade more efficient and transparent. Often, in such cases, a representative of the customer has the ability to interactively control the order fulfillment process by working with the seller’s databases. Information about products can be presented both on sites accessible to all users on the Internet, and on web resources accessible only to authorized users. An example of a B2B transaction could be the sale of website templates to companies for subsequent use as the basis for the design of the company’s own web resource. Of course, this includes any interactions involving the wholesale supply of goods or similar order fulfillment. An example of such interaction could be placing an order online by a dealer in his personal account located on the distributor’s website.

B2C or business-to-consumer scheme

Retailing refers to the activity of selling goods or services directly to consumers or end users. In a number of jurisdictions or regions, legal definitions of retail indicate that at least 80 percent of sales must be made by end users.

Retail sales are often carried out in retail stores or service establishments, but can also be carried out through direct sales, such as vending machines, door-to-door sales or electronic channels. Although the idea of ​​retailing is often associated with the purchase of goods, the term can be applied to service providers who sell them to consumers. Retail service providers include retail banking, tourism, insurance, private healthcare, private education, private security firms, law firms, publishing houses, public transport and others. For example, a travel services provider may have a retail division that books travel and accommodations for consumers, and a wholesale division that buys units of accommodation, hospitality, transportation and sightseeing that are later combined into a holiday package for sale to retail travel agents.

Some retailers call their stores "wholesale outlets" and offer "wholesale prices." Although in a strict legal sense, a store that sells the bulk of its goods to end consumers is considered a retail store and not a wholesale store. Various jurisdictions set the parameters for the mix of consumer and commercial sales that define a retail business.

C2C scheme or consumer-to-consumer

This method of e-commerce involves transactions between two consumers, neither of whom is an entrepreneur in the legal sense of the word. Online platforms for such trading are something between a push market and an advertisement column in a newspaper. As a rule, C2C commerce is carried out on Internet auction sites, which are becoming increasingly popular nowadays, therefore this type of e-commerce is considered one of the most dynamically developing in recent years. For clients of such systems, the main convenience lies in the lower price of the product compared to its cost in stores.

In addition to the most common e-commerce schemes described above, there are several others. They are not so popular, but are still used in some specific cases. We are talking about the interaction of both entrepreneurs and consumers with government agencies. Recently, many operations for collecting taxes, filling out questionnaires, forms for ordering supplies, and working with customs began to be carried out using Internet technologies. This makes it possible to significantly facilitate the work of civil servants, on the one hand, and enable payers to get rid of a certain amount of paperwork, on the other.

Logistics

E-commerce logistics mainly deals with order fulfillment. Online marketplaces and retailers must find the best way to fulfill orders and deliver products. Small companies usually control their own logistics operations because they do not have the option of hiring an outside company. Most large companies hire contractors or a contracting company to take care of the company's logistics needs.

Contrary to popular belief, there are significant barriers to entry into e-commerce.

Benefits of e-commerce

For organizations

• Global scale
• Cost reduction
• Improving supply chains
• Business is always open (24/7/365)
• Personalization
• Fast product launch to market
• Low cost of distribution of digital products

For consumers

• Ubiquity
• Anonymity
• Large selection of goods and services
• Personalization
• Cheaper products and services
• Prompt delivery
• Electronic socialization

For society

• Wide range of services provided (for example, education, healthcare, utilities)
• Increasing standard of living
• Enhancing National Security
• Reducing the digital divide
• Online sale/order of goods/services reduces car traffic and reduces environmental pollution

Disadvantages of e-commerce

For organizations

• Possible doubts of the parties regarding the belonging of a particular project to the company (negative anonymity)
• Some difficulty in conducting and legitimizing the activities of an enterprise on the Internet

For consumers

• Consumer distrust of services sold via the Internet
• Inability to “touch” the product with your hands
• Waiting for delivery of purchased products
• Possible difficulties and costs when returning goods
• Additional cost for delivery of goods
• The need to provide personal data

For society

• Attractive platform for fraud (lowering network security)
• Displacement of offline commercial enterprises from the market

For the state

• Shortage of tax payments to the state budget when maintaining “gray” accounting schemes

E-commerce in the world

E-commerce has become an integral part of the modern economy. More and more consumers are purchasing goods via the Internet, and commercial organizations are one way or another using the capabilities of this network when carrying out business activities. Total global sales in the consumer e-commerce segment alone exceeded $1 trillion back in 2012 and are experiencing steady growth.

The e-commerce market in Europe reached €312 billion in 2012.

According to forecasts, by 2017, 10.3% ($370 billion in monetary terms) of the total spending of the US population on consumer goods will be accounted for by e-commerce and more than 60% of all sales will be in some way related to the Internet.

The impact of e-commerce on markets and retailers

Traditional markets expect only 2% growth at the same time. Offline retailers are experiencing difficulties due to the ability of an online store to offer lower prices due to lower costs (no need to rent store premises or showrooms, with the exception of a warehouse and office). Many large retailers can maintain an offline and online presence by linking physical and online offerings.

E-commerce allows customers to overcome geographical barriers and allows them to buy products anytime, anywhere. Online and traditional markets have different business strategies. Traditional retailers offer fewer products due to limited shelf space. Online retailers often do not carry out inventory, but rather send customer orders directly to the manufacturer.

Pricing strategies also differ between traditional and online retailers. Traditional retailers base their prices on the number of store visitors, the average purchase price, the number of transactions completed, and the cost of renting premises. Online stores also take into account the number of purchases made, and they also set prices for delivery speed.

Security is a major issue in e-commerce in developed and developing countries. E-commerce security protects sites and customers from unauthorized access and use of data. The type of threats includes: malicious codes, unwanted programs (adware, spyware), phishing, hacking and cyber vandalism. Traditional stores also use the capabilities of the online space to save customer data, implement loyalty programs and transfer customers to the online space to notify about promotions, discounts and convey advertising information in order to effectively interact outside the offline store, retain customers and increase sales.

Impact on the labor market

On the one hand, e-commerce helps create new jobs through information services, necessary software developments and digital products. On the other hand, the emergence of online stores also leads to job losses. The areas with the greatest projected job losses are retail, postal and travel agencies.

The development of e-commerce will also create new jobs that require highly skilled workers to manage large volumes of information, customer needs and production processes. People with poor technical skills cannot occupy them.

E-commerce technologies reduce transaction costs, allowing both producers and consumers to work without intermediaries. This is achieved by expanding the scope of searches for best price offers and group buying. The success of e-commerce at the city and regional levels depends on the acceptance of e-commerce by local businesses and consumers.

However, e-commerce lacks human interaction with customers, especially those who prefer face-to-face interaction. Customers are also concerned about the security of online transactions and tend to remain loyal to established retailers.

State regulation of e-commerce

In 1997, US President Clinton signed the Framework for Global Electronic Commerce. In 1999, the United States adopted the Uniform Electronic Transactions Act (UETA) and the E-Sign Act. They equated an electronic digital signature in a contract to a regular written signature. The form of the written contract was considered to be complied with if there was an electronic signature. Even earlier, in 1995, the first US state to pass an electronic digital signature law was the state of Utah.

In the European Union, the Electronic Commerce Directive was issued in 2000. Later, it and the Electronic Signatures Directive were supplemented with additional instruments aimed at creating a legal framework for electronic commerce within the EU.

UNCITRAL issued recommendations on the legal meaning of electronic records back in 1985. Subsequently, UNCITRAL model laws on electronic commerce and electronic signatures emerged.