PDF of this tutorialElectronic commerce is coming of age. Retail on-line buying will be in the billions of dollars in 1998. Electronic sales in a recent quarter are double those of the entire previous year. In some instances, companies create electronic-commerce capabilities out of a fear of falling behind competitors or as a result of the general momentum to expand the use of an existing Internet presence. But the primary value proposition is the prospect of increased revenue from new markets and creation of new, lower-cost, electronic-distribution channels.
Internet service providers (ISPs) are beginning to launch, or are at least evaluating, electronic-commerce hosting services. These services position the service provider as the outsourcer of the customers' electronic-commerce capabilities, managing the networking and server aspects of the initiative. This allows the ISP's customers to concentrate on their core businesses and expands the relationship of the customer and the ISP. An ISP's ability to offer a rich electronic-commerce environment, on its own or in partnership with an electronic-business provider, will be important in differentiating high-value ISPs from lower-value, access-only ISPs.
Customer's Perspective
From a customer's perspective, the purpose of an electronic-commerce system is to enable that customer to locate and purchase a desired good or service over the Internet when the customer is interested in making the purchase. Its function is no more or less than providing a virtual store.
Merchant's Perspective
From a merchant's perspective, the key function of an electronic-commerce system is to generate higher revenues than the merchant would achieve without the system. In order for this to happen, the electronic-commerce system must recreate or utilize existing data and business processes. All of the same processes that the merchant must have in place to support an in-store or catalog purchase must also be in place for an electronic purchase: product information, inventory systems, customer service, and transaction capabilities (including credit authorization, tax computation, financial settlement, and shipping).
Additional functions of an electronic-commerce system, related to revenue generation, are to help redefine and enhance an enterprise's brand strength, customer-service capability, and supply-chain effectiveness. An electronic-commerce system is one of the areas of an enterprise's infrastructure that is open to customers via the Web, but it should be linked with other information technology (IT) systems that affect customer service (i.e., inventory and billing).
Basic Components
Provision of this basic system requires Internet access and an access device at the location of the home shopper, a Web-application server and electronic-commerce software (enabling catalog creation and transaction processing), security gateways to limit external access to internal data systems, and integration software to pull data from the appropriate support systems into the commerce environment (see Figure 1).
Figure 1. Electronic-Commerce Model
