The Development of E-Commerce

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Table of Contents

The concept of e-commerce
E-commerce industry
Factors contributing to the development of e-commerce
Conclusion
References

The concept of e-commerce

Electronic commerce, often shortened to e-commerce, simply refers to commerce over electronic systems. However, complex scholarly definitions do exist for e-commerce. Momin, Nirantar, Zagade, & Deshmukh (2012) define e-commerce as “…any form of business in which the parties interact electronically over the internet rather than physical exchange or conduct “(p.65).

On the other hand, Totonchi & Kakamanshadi (2011) defines e-commerce as “…use of electronic communication and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals” (p.6).

In the past, the term e-commerce and e-business were used interchangeably and were understood to imply the same meaning. However, scholars have in the recent past sought to differentiate the two by offering a more detailed definition for e-business. While e-commerce has been taken to mean the buying and selling over digital media, e business on the other hand has been taken to mean the enhancing of the traditional ‘brick and mortar’ business through electronic means.

The common telecom networks via which the e-commerce takes place include emails, electronic data interchange, faxes, radio, Short Message Services (SMSes) etc. The payment methods for e-commerce do vary and include plastic cards, electronic funds transfer, and electronic cash. Plastic cards include both the credit and debit cards though credit cards are widely used.

The major advantage of e-commerce over the traditional ‘brick and mortar’ means of commerce is the reduction of the cost of doing business and the significant expansion of business. The e-commerce reduces several business costs. It reduces transportation costs of looking for information on different suppliers of various components of business.

This is done through e-procurement sites, brokering sites and infomediary websites. These sites have already compiled vast information available at the click of a mouse. The online stores also reduces the costs associated with putting up or renting physical structures for shops and other costs associated with them such as security, water bills and electricity bills etc.

The e-commerce further reduces the costs associated with the middlemen as buyers and sellers can interact directly. This translates into cheaper prices for the goods and services being offered. The e-commerce also harnesses the power of mass market in a way that the traditional commerce wouldn’t be able to achieve.

The prices for the commodities are easily available to all making it difficult for the sellers to charge differently to different buyers. The e-markets can also push the prices down by mobilizing a large number of buyers into demanding for a discount.

The e-commerce greatly expands the market reach of the online businesses in various ways. For the digital goods such as music, movies and software the goods can easily be delivered to any part of the world to a buyer with a computer and internet connection. The online seller displays his goods in his online kiosk of which the buyer pays through credit cards and downloads the content. In instances where the goods being sold are not digital goods, the use of courier services is employed to deliver the goods.

The development of e-commerce can be viewed from two major perspectives; the diversity of the transactions executed through e-commerce channels and the factors leading to an increased number of people turning to e-commerce.

E-commerce industry

In order to have an in depth understanding of the e-commerce, it is critical to examine the different forms of e-commerce in general. There are several types of

e-commerce categorized into business to business (B2B) e-commerce, business to consumer (B2C) e-commerce, business to government (B2G) e-commerce, Consumer to consumer (C2C) e-commerce, consumer to business (C2B) e-commerce, and mobile commerce.

The business to business (B2B) e-commerce involves the e-commerce between one business to another as opposed to a business to the end consumer of the product or service. A good example of the B2B e-commerce websites are the company websites. Other examples are the brokering sites.

Company websites are websites developed by specific companies giving information on the company and its services and products. Some of the information on the company sites may be targeted to corporate clients. The e procurement sites serve as product supply and procurement exchanges for purchasing agents of specific industries. The sites are set up to enable purchasing agents’ source their products from several vendors over the net.

Infomediary sites are critical in the provision of the information on a certain industry for example horticulture industry. The sites would compile information on the specific industry for industry players and other interested parties. These sites are mostly directories and search engines. The last category of business to business e-commerce sites are the brokering sites. These sites act as link between suppliers of a product or services and consumers of those products or services.

The business to Government (B2G) e-commerce refers to the type of e-commerce between the government and the different companies. The e-commerce in the context of B2G may involve e procurement sites, legislative sites etc. On the other hand, the consumer to consumer (C2C) e-commerce is the type of commerce between consumers.

This largely functions as the online equivalent of on print classified advertisement and auctions for example e bay. The Consumer to business (C2B) e-commerce empowers the consumer to negotiate his price, mode of delivery and the business that may supply the product or service at the set parameters bid for the same.

For example the job seeker may post his curriculum vitae with a set of qualifications in which interested companies would hire him. The Mobile commerce often shortened to M commerce, is a form of e-commerce that is strongly gaining currency especially in Africa. This is the form of business that involves commerce over handheld devices such as cell phones.

Factors contributing to the development of e-commerce

In the recent times the internet has emerged as a powerful communication tool dominating all spheres of our lives from education, spirituality, health, romance and economic spheres. According to a research by Nielsen as cited by PayPal (2011) over 200 million Americans use internet. Due to the huge number of internet users, the internet is fast becoming an attractive business platform.

The widespread use of internet, the information superhighway, has spurred a new form of business; electronic commerce. This is a business platform that has hugely become attractive to the young emerging entrepreneurs. The market for e-commerce is also huge. According to a research by Nielsen as quoted by Pay Pal, in 2003 the American online shoppers spent 17.2 billion dollars in the last three months of the year.

There has been a hugely untapped market in Africa in the context of the technological advancement. One such area includes the increase of the mobile phone users in Africa and an increasing use of the mobile money transfer platforms through mobile phone networks. Such mobile money transfer platforms have been instrumental in the development of the m-commerce a critical component of e-commerce in Africa. Kenya is one of the countries that can be used for illustration of the role of the mobile money transfer platforms in enhancing e-commerce growth in Africa and other third world countries.

In Kenya, mobile money transfer platforms and primarily Safaricom’s Mpesa have accelerated the development of e-commerce in the country. Statistics from Safaricom indicate that Mpesa has enjoyed phenomenal growth since its introduction into the market in 2007. For example in April of 2007 the service had 52,453 customers and 355 agents (Safaricom, 2012). This was the first full month of operation.

By the end of the first year of operation, the Mpesa had a customer base of 2,057, 527 customers, and 2,329 agents. This represented a 3822% increase in customer base and 556% increase in agent network. By the end of the fourth year of full operations the service had managed to attract 13,798,695 customers and 26,948 agents (Safaricom, 2012).

Mpesa in particular and mobile transfer payments channels have been instrumental in the m-commerce and e-commerce in Kenya. This is because the service was instrumental in giving the majority of the unbanked Kenya population access to financial services. This empowerment was seen as a threat by the mainstream banking institutions forcing them to enter into collaborations with the telecommunication firm.

The above scenario was best captured by the CBK (2012) in its 2011 banking report. Over 18 million Kenyan mobile bank users opined, “…Increased permeation of mobile financial services with an increased number of banks entering into partnership with mobile service providers to provide financial phone platforms to make payments and send remittances; and over 40,000 agents facilitating transactions of up to USD 41 million per day at the end of December 2011” (CBK 2012, p.35).

Conclusion

The development of the e-commerce is often hinged on embracing the platform of the exchange of value. In this context, the expansion of the internet usage and mobile phone users is critical in the development of the e-commerce.

The human factors that are critical in the development of the e-commerce include the provision of appropriate services as well as embracing the payment methods by the customers. It is evident that the development of the e-commerce is taking different directions in developed countries and developing countries. In developed countries the e-commerce is taking the shape of the internet based transactions while in developing countries the same is taking shape inform of mobile phone based transactions.

References

Central Bank of Kenya (CBK). 2012. Bank Supervision Annual Report 2011. Web.

Momin, A., Nirantar, V., Zagade, A. & Deshmukh, A. (2012). Effects of Software Agents on Decision Support System. IOSR Journal of Business and Management, 5. Web.

PayPal. (2011). E commerce safety guide. Web.

Safaricom MPesa customer and agent banking. Web.

Totonchi, J. & Kakamanshadi, G. (2011). Globalization and E-Commerce. 2nd International Conference on Networking and Information Technology, 17. Web.

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