I. Electronic Commerce: The birth of electronic commerce can be traced to the mid-1990s. At first, growth was rapid but by 2000, the market experienced the "dot-com bust". E-commerce growth had slowed tremendously and many experts did not expect this new system to succeed. Many companies began to examine and adapt methods to streamline their processes in order to reduce costs and increase efficiency. As a result, by 2003 e-commerce experienced new growth (referred to as the second wave) and investors began to gain profits on their investments.
A. Electronic Commerce and Electronic Business: The term e-commerce "includes all business activities conducted using electronic data transmission technologies" (Schneider, pg. 5). These technologies include the Internet, the Web, and wireless transmissions. Business activities include the following:
- businesses trading with other businesses
- internal company processes (buying, selling, hiring, planning, etc.)
B. Categories of Electronic Commerce: There are five categories of e-commerce based on the parties involved in the processes or transactions. Figure 1-1 lists the categories and provides a brief description of activities. The first three categories are most used. The B2B category is often called e-procurement since the partnership between businesses focuses on supply management.
Category |
Description |
Example |
| Business-to-consumer (B2C) | Businesses sell projects or services to individual consumers. | Walmart |
| Business-to-business (B2B) | Businesses sell products or services to other businesses. | Grainger.com |
| Business processes that support buying and selling activities. | Businesses and other organizations maintain and use information to identify and evaluate customers, suppliers, and employees. Information is shared as needed. | Dell Computer |
Consumer-to- Consumer (C2C) |
Participants in an online marketplace can buy and sell goods to each other (these transactions are part of B2C electronic commerce). | Consumers and businesses trade with each other on eBay.com. |
| Business-to-government (B2G) | Businesses sell goods or services to governments and agencies (these transactions are part of B2C electronic commerce). | CAL-Buy |
FIGURE 1-1 Electronic commerce categories
(Source: Introduction to Electronic Commerce, Schneider)
With the categories defined, one can then examine the three main elements of e-commerce: B2C, B2B, and supporting Business processes. Figure 1-2 displays the relationship between these three elements and visually compares their dollar volume and transactions ratio.
FIGURE 1-2 Elements of Electronic commerce
(Source: Introduction to Electronic Commerce, Schneider)
C. The Development and Growth of Electronic Commerce: A deeper examination of business transactions reveals that e-commerce existed even before the mid-1990s in the forms of:
- electronic funds transfers (EFTs)/wire transfers: "electronic transmissions of account exchange information over private communications networks" (Schneider, pg. 8); and
- electronic data interchange (EDI): "one business transmits computer-readable data in a standard format to another business" (Schneider, pg. 8). Businesses who used EDI are referred to as trading partners and data can refer to purchase orders, invoices and shipping documents. In order to by-pass the high cost of computer equipment needed for EDI, many firms subscribed to a value-added network (VAN) which was an independent company that provided the means of transferring data.
D. The Dot-Com Boom, Bust, and Rebirth: The Dot-Com Boom covers the period from 1997- 2000. There were over 12,000 businesses that doubled/tripled their return on investments each year. The Bust (or correctly termed Rebirth) covers the period 2001-present with growth ranging between 20-30% a year. This lead to the closure of over 5,000 companies while others merged with stronger businesses in order to survive. Today, B2B online sales have grown more rapidly than B2C sales due to previously implemented EDI and the fact that this base is larger.
E. The Second Wave of Electronic Commerce: As mentioned earlier, e-commerce is now experiencing the second wave. Companies are now "focusing less on overall business models and more on improving specific business processes" (Schneider, pg. 43). Figure 1-3 compares the first and second waves of e-commerce. As new technologies emerge and combine with existing technologies, more opportunities will be available for existing companies, and smaller businesses (currently 60% in the US are without web sites), to reach new customers.
Characteristics |
First Wave |
Second Wave |
| International Character of electronic commerce | Dominated by U.S. Companies. | Global enterprises in many countries participate. |
| Language | Most electronic commerce Web in English. | Many Web sites available in multiple languages. |
| Connection technologies | Many new companies started with outside investor money. | Established companies funding electronic commerce initiatives with their own capital. |
B2B technologies |
B2B electronic commerce relied on a patchwork of disparate communication and inventory management technologies. | B2B electronic commerce increasingly integrated with radio-frequency identification and biometric devices to manage information and product flows effectively. |
| E-mail contact with customers | Unstructured e-mail communication with customers. | Customized e-mail strategies now integral to customer contact. |
| Advertising and electronic commerce integration | Over-reliance on simple forms of online advertising as main revenue source. | Use of multiple sophisticated advertising approaches and better integration of electronic commerce with existing business processes and strategies. |
| Distribution of digital products | Widespread piracy due to ineffective distribution of digital products. | New approaches to the sale and distribution of digital products. |
FIGURE 1-3 Key characteristics of the first two waves of electronic commerce
(Source: Introduction to Electronic Commerce, Schneider)