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©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 1
Introduction to E-commerce
Alexander NTOKO, Project Manager, ITU Electronic CommerceITU Telecommunication Development Bureau (BDT)Email: [email protected] Web: http://www.itu.int/ecdc
Basic E-Commerce Training For Pakistan
Pakistan Telecommunication Authority (PTA)
Islamabad, Pakistan
31 March – 5 April
International Telecommunication Union (ITU)
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 2
Agenda
History of e-commerceOverview of various models A very simple definitionRequirements for B2COverview of B2BBenefits of e-commerce
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 3
History (how it started)
Commerce over the net started almost 30 years ago with the use of private networks (VANs) by large US corporations to exchange business information using EDI. Online retailing gained enormous popularity (some 6 years ago) with companies like AMAZON selling to consumers world-wide. Today, electronic commerce covers a broad range of business activities with an estimated 50% of U.S businesses online.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 4
Very simple Definition
Electronic Commerce: Can be simply defined as transactions conducted over public and private networks. It includes a broad range of activities such as: e-tailing, e-marketplaces
e-procurement, e-government, and e-banking, ERM, CRM and VCM services. In the simple and most common scenario a customer uses a Web browser to access a Web-based virtual store through the Internet and pays using a credit card.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 5
E-Commerce is...
The the result of the convergence of financial, networking and business services.
The emergence of new intermediaries in business relationships.
The transition from bricks and mortar to bricks and clicks – enhancing traditional business processes using new ICTs.
The breakdown of geographical and time barriers and the increase in market access.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 6
E-Commerce is...
The increased effectiveness of business relationships and the invention new ones.
The conduction of business transactions over public and private networks.
The emergence of a global electronic economy.
The opportunity for developing countries to leapfrog and compete in a global marketplace.
Models of e-commerce
GovernmentsBusinesses
Individuals
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 8
E-commerce models
o Business-to-businesso Business-to-governmento Business-to-consumero Consumer-to-consumero Government-to-citizen
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 9
Business-to-business
o Corporate Procurementso Customer Relationship Managemento Enhancing value chain (VCM)o Supply Chain Management (SCM)o Collaboration Serviceso Transportation and Logistics o Manufacturing and Distributiono E-commerce Marketplaceso Financial and Information Services
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 10
Business-to-consumer
o Direct sales (online retailing)o Marketing and advertisingo Customer serviceso Financial services o Product distribution
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 11
What is B2C E-commerce?
A simple definition:Includes the online marketing, distribution, sales and purchase of products and services: companies publish their catalogs online, and consumers order from the catalogs, make payments, and perhaps track the status of their orders online. In the typical scenario a customer uses a Web browser to access a Web-based virtual store through the Internet and pays using a credit card.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 12
Requirements for B2C (e-tailing)
o Payment, Trust and Security infrastructureo Banking services to merchants (MOTO,SET)o Merchant Web site with online catalogueo Goods and services which can be sold onlineo Information technology (hardware, software)o Legal, policy and regulatory frameworko Services and logistics (shipping/delivery for
physical and digital content)
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 13
Payment, Trust and Security
o Confidentiality of transactions Encryptiono Who am I dealing with? Authenticationo Message integrity Message Digesto Non-repudiation Digital Signatureo Evidence of authenticity X.509 Certificateo Trusted third party Certification Authoritieso Secure communication SSL, IPseco Secure payment systems SSL-based, SET, o Interface to banks ISO8583, CyberCash
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 14
Everything … must be accessed in money; for this enables men to always exchange their services, and so makes society possible.
Aristotle (384-322 B.C.)
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 15
Banking Services
o Merchant local bank accounto Acquiring banks for desired card brands
(Visa, MasterCard, Amex, Diners)o Mail Order Phone Order (MOTO) or SET
contract with partner bankso Host/Network enabled vPOS terminal
services for connecting to processors
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 16
Merchant Web Site
Payment, Trust and Security technologies and services
MerchantBank account
Credit Card Acquiring
bank
MerchantBusiness
MOTO contract
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 17
Merchant Web Site
o Web site accessible via the Interneto Online catalogue containing items description, price,
store policy and payment and shipping optionso Order capture and completion services (tax,
shipping/handling,online delivery for digital content)o Shopping basket features, catalogue managemento Advice of order services (email, fax) transactionso Email contact for pre and post transactional services
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 18
Goods and Services
o Legal to export/import at source/destinationo Price range within limits for payment typeo Weight and volume to facilitate deliveryo Reasonable shipping and delivery cost o Of interest to potentially large consumer baseo Easy to package and preserve as final product
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 19
ICT requirements
o Local support services for hardware and softwareo Information technology support for customer
serviceso Environment for application development and
integration (middleware, application integrators)o Applications, systems and network monitoring,
management and supporto BackOffice systems for inventory, catalogue
management, billing and invoicingo System, host and network security serviceso Trust services for merchant and customer
authentication.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 20
Legal Requirements
o Policies for the and use of digital signatureso Regulations for Certification Authoritieso Electronic contracts and notarizationo Privacy and confidentiality lawso Data and consumer protection policieso Procedures for parties in e-transactionso Intellectual property and trademark lawso Laws and regulations for settlement of
disputes
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 21
Potential benefits to DCs
o Enable businesses to trade at internationally acceptable prices by providing access to the global marketplace
o Provides a low-cost channel for the selling, marketing and distributing goods and services
o Provides 7 x 24 storefront availability (any hour of the day, any day of the year)
o Reduces the cost of processing transactions, orders and payments including credit and collection expenses
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 22
Potential benefits DCs
o Could provide the need to learn new technologies and build local capacity to maintain services and infrastructure
o Could act as a stimulus for the development of the information and communication technology (ICT) infrastructure
o Improvement in the ICT infrastructure could facilitate access to health and educational information available via the Internet
o Increase trade with developed countries and attract foreign investments
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 23
Potential benefits for customer
o From the comfort of home or officeo Any hour of the day, any day of the yearo Access to worldwide choiceso Reduced acquisition times and costo Access to extensive marketing
information on products of interesto Online test of digital products (e.g., CD)o Immediate download of digital productso Use of intelligent agents for correct order
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 24
B2C E-commerce sites
o Banking: www.ubs.como Books: www.amazon.como Cars: www.edmunds.como Clothes: www.eddiebauer.como Investment: www.etrade.como IT: www.dell.como Digital content: www.itu.into Travel: www.travelocity.como Wine: www.virtualvin.com
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 25
Business to Business E-Commerce
The Trading Community
BuyersBuyers
SellersSellers
MarketSiteMarketSite
3rd Party3rd PartyServicesServices
OtherOtherCommunitiesCommunities
Vision for B2B e-Maketplace
• Any company trading with any company
• Automation of the entire trading process
• Interoperable set of Global Marketplaces
Impact on FSPs
o Financial Service Providers (FSPs) are Buyers
o New Revenue Opportunities as Market Maker
o Route to Market for Electronic Financial Services
What is e-Procurement?
Automation of the Automation of the ENTIREENTIRE (indirect) supply chain from (indirect) supply chain from product selection through receipt.product selection through receipt.
select requisition approve status receive
Requires real-time interactivity with trading partners worldwideRequires real-time interactivity with trading partners worldwide
E-Procurement Opportunities
Reduced Cost of Goods…Reduced Cost of Goods…
Reduced Administration..Reduced Administration..
Shorter Cycle Times……..Shorter Cycle Times…….. Inventory Reduction….……Inventory Reduction….……
Automating the Entire Indirect Goods & Automating the Entire Indirect Goods & Services Supply Chain can Deliver:Services Supply Chain can Deliver:
3 - 5% or More3 - 5% or More
£50 to £4£50 to £4
From 7 Days to 2 Days From 7 Days to 2 Days Reduced or Zero-StockReduced or Zero-Stock
• A new sales channel
• More on-contract buying
Increased Revenue
• Lower inventory
• Less rework
• Fewer returns
More Accurate
• Order entry
• Customer service
• Invoicing, Accounts Receivable
Reduced Costs
• Content in existing form
• “Sharable” normalization
• One update for trading community
Efficient Operation
Supplier Return on Investment
Supplier ROIis Critical
Substantial ROI for both parties
Substantial ROI for both parties
Buyers Suppliers
Automate Process
Reduce Costs per Transaction
Increase Revenue per Customer
Eliminate Maverick Purchasing
Gain New Customers
Global economies
of scale
A Win—Win Solution
The Portal Modelo Single Point of Business
Integration For Buyer and Supplier
o Shared Content Mapped from multiple formats
o Real-Time Interactivityo Commerce Platform
Complex B to B process supporto Single “Plug In” for New Serviceso Totally Open
Applications, Trading Communities and Companies of All SizesBuyersBuyers
SellersSellers
MarketSiteMarketSite
Identify NeedsIdentify Needs
Find SourcesFind Sources
Build TrustBuild Trust
Configure SolutionConfigure Solution
Determine ValueDetermine Value
Negotiate TermsNegotiate Terms
Make TransactionMake Transaction
Fulfilment Fulfilment
Receive SupportReceive Support
Retire/UpgradeRetire/Upgrade
Identify Customers
Find Decision Makers
Build Trust
Offer Solution
Present Value
Negotiate Terms
Make Transaction
Fulfilment
Provide Support
Retire/Upgrade
A Portal Supports the Entire Breadth of “Trading Relationship” Process
The Buying Process The Selling Process
Portal Role
Business to Business to BusinessBusiness
Marketplace Marketplace
MarketSiteMarketSite
PortalPortal
Portals Drive the Network Effect
Maximum participation drives “network effect” and maximum value for everyone in the trading community:o Buyerso Supplierso Service Providers
Number of Number of UsersUsers
Eco
no
mic
E
con
om
ic
Val
ue
Val
ue
Rise of the Internet Market Maker
o Turn your supply chain into a revenue generation opportunity
o Proactive influence on power balance in electronic supply chain
o Leverage your industry domain expertise into strategic e-commerce value
o Examples: GM etc, Shell, Boeing etc, TD Bank, Banamex, Citigroup
Your Your PortalPortal
Traditional Lines of Business
o Cash management serviceso Credit insuranceo Physical insurance o Letters of credit and bills of exchangeo Payment guaranteeso Payment processingo Asset based financing e.g. factoring, invoice
discounting, forfeiting and financing based on bills of exchange
o Leasingo Loans
New Financial Services
o Identity serviceso Information services based on identity
• delivery address• credit rating
o Advice and guidance services
• tax• legal • jurisdiction
The Global Trading Web
Global Global TradingTrading
WebWeb
Connect once to trade with anyone,anytime, anywhere in the world.
©1998-2001 ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 40
Electronic commerce promises to be a major generator of new and skilled jobs and growth in the next century, through improvements in business productivity, growth in consumer transactions, and development of the supporting information technology infrastructure. Early adopters can quickly establish market dominance and help shape evolving rules as well as business and consumer behavior.
… But there are several challenges and pitfalls…