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E-Commerce

Man using a Nokia 9300

Image: The opportunities for contacting customers have increased as technology has developed. E-commerce is not just for selling! Copyright: Ed Tilsley

This resource is designed specifically for Unit 6 of the Edexcel BTEC qualification, 'Business Online'.

E-commerce is business activity conducted through some electronic medium. This is becoming an increasingly important method for business to be involved in and many businesses will have taken the opportunity of setting up a Web site as a means of establishing a presence - electronically.

It might be that this presence is merely to provide information to customers; it could be that the presence is part of the total presence the business has, i.e. it might have stores on the high street as well as a method of purchasing online. In other cases, the business might be just an online service only.

Whatever form it takes, an online presence and the opportunity to do business using technology is increasingly important especially as business goes global. It is not just personal computers (PCs) that are the medium through which business can trade. The development of mobile devices such as phones and PDAs also allows businesses to be in touch with their customers 24 hours a day wherever the customer might be.

The transmission of information and the range of services that can be provided are subsequently much greater and this can help a business expand.

It also has risks - the competition is much greater, the speed with which customers can access information about rival firms, prices and so on is that much more efficient and just having an online presence is no guarantee to business success.

Types of e-commerce

There is a certain amount of jargon associated with e-commerce that it will be useful to know.

  • b2c - This refers to businesses engaged in servicing consumer demand directly - this could be a firm like Dixons, who now have an internet presence, or it could be a small village café. b2c refers to 'business to consumer'. Even small businesses will have to think about some element of e-commerce because they might have to think about using credit and debit card services which use electronic means of funds transfer.
  • b2b - This refers to businesses that service the requirements of other businesses. They will be suppliers of machinery, equipment, spare parts and other services such as payroll, insurance, banking services and maintenance.
  • Clicks and mortar - These are businesses that might combine high street presence with an internet presence. Some, like amazon.co.uk and lastminute.com, might be wholly dedicated to an online presence only.

Considerations in developing an e-commerce strategy

A credit card transaction

Image: Setting up payment systems can be complicated - most credit card companies will make some charge for using their services and these have to be considered along with security issues. Copyright: Lotus Head

If a business is thinking of expanding into e-commerce there are a number of factors that it should consider.

The first might be the need to develop a Web site for the business. This is not something that should be entered into lightly and to be effective a great deal of thought will need to go into it. You can get full details of this process in our pages on the principles of online presence(http://www.bized.co.uk/educators/16-19/business/marketing/lesson/online1.htm).

Apart from the issues involved in getting an appropriate and effective Web presence, there are many other factors to consider:

  • Payment systems - How will your customers be able to pay for the goods/services they want to buy?
  • Security - How will you convince customers that buying from you online is safe and secure?
  • Distribution methods - How will you get your goods to your customers - having an online presence may reduce some overheads but delivery costs can be very high especially for bulky items. Will you deliver internationally or just to the UK or Europe? If you do go international, what are the implications of such methods for tax and import licence/duties?
  • Maintenance and updating of the site - How will you manage the day to day running of the site? If there are problems and the site is down it can lose you potential customers!
  • After sales service - What measures are you gong to put in place to cater for after sales service/customer queries? What happens if a customer does not like the product - this might be highly relevant to those businesses where customers are not able to see the product before they buy?
  • Legal issues - What are the legal requirements involved in setting up e-commerce systems? Are you aware of the range of legal provisions you will have to satisfy? What are the rules about the use of any databases of customer details that you possess? What role does the EU play in regulating e-commerce? What is the difference between marketing your business by e-mail and SPAM?

Task

You are considering starting up a new business. You can use one that you might have been working on for other units or use one of the suggestions below.

You are considering setting up purely as a Web based business and have been asked by your bank to provide a short report outlining the costs and benefits of this business model.

The Department for Trade and Industry publish a range of guides(http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073861197&r.s=tl&topicId=1073866263) regarding e-commerce that will help you in preparing for the report as well as the guidelines given above.

When constructing your report ensure you meet the following:

  1. State clearly the business's aims and objectives.
  2. Identify the expected costs associated with using e-commerce (you are not expected to be precise in financial terms here but to give an outline only).
  3. Identify the expected benefits of using e-commerce as the basis for your business model.
  4. Explain how your business will expect e-commerce to help it achieve the aims and objectives of the business.

References

Football fans

Image: Is there money to be made online from arranging travel for these fans? Copyright: Ingrid Müller

The following Web sites might give you some further information on which to base your report:

Suggested business ideas

  • A business selling details of concerts, plays, leisure activities, clubs and pubs to young people in the 18-35 age group. This business has tailored information depending on where the customer lives.
  • A business that searches databases from local newspapers around the country and puts car sellers in touch with car buyers. Car buyers pay a small registration fee to join for the duration of their search and the business takes a commission if a deal is made.
  • A business selling hard to find CDs and DVDs in fringe genre music and media.
  • A travel business dedicated to helping sports fans journey to sporting events more easily. This business will make all the arrangements for you including cheap accommodation. All you have to do is tell them where you want to go, where you are starting from and what the event is.