Types of E-Commerce

Freshman (College 1st year) ・E-commerce ・APA ・3 Sources

Types of e-commerce activities 1
Advantages of e-commerce 1
Disadvantages of e-commerce 2
How to promote online 2
Shopping cart 2
Secure server 3
Payment processing 5
Internet merchant account 5
Third party charge processing software 5
Manual payment processing 6
Factors to consider when deciding on a payment option 6
Privacy and security issues 6
How to entice and retain online customers 7
Customer comments through e-commerce 8
Summary of the e-commerce process 8
References 10


E-commerce describes the whole technique of buying and selling of merchandise and services over the internet. E-commerce has gained lots popularity in the recent days due to the ease of get admission to to internet and the speed and comfort that it offers to buyers and sellers. The goal of e-commerce is to attract new customers and retain the existing customers through advertising, collecting information about customers and public relations (McLaren, 2003).

Types of e-commerce activities

There are three types of e-commerce activities, which are Business-to-Business (B2B), Business to Consumer (B2C) and business to administration. B2B involves the online exchange of products and services between businesses while B2C involves the online transactions of products and services between businesses and consumers. Business to administration involves transactions between businesses and government institutions

Advantages of e-commerce

E-commerce can help a business increase its market share and hence revenues in several ways. For instance, using the internet, a business can search for sale leads, call for tenders, apply for tenders, and sell products online through the website of the business or an e market place.
Doing transactions online helps to save time and money because in a single click, a business can find the best offers without having to incur travelling expenses. For example, B2B can greatly lower the costs involved in the selection of suppliers, establishment of prices, ordering and ending the transactions. The trading networks tremendously improve efficient exchange of information between suppliers and buyers.
E-commerce enables quick comparison of prices and real time update of products information such as quantity available and price
Additionally, transactions through e-commerce can be done at any time from any place.

Disadvantages of e-commerce

It is usually hard to convince customers to purchase products from your website due to such factors security and privacy issues, legality of the business and difficulty in being different from the competitors.

How to sell online

An online business transaction constitutes three main elements which are a shopping cart, a secure server and a means of processing payment

Shopping cart

A shopping cart application is used to keep a record of what the buyer picks from the website before they can check out. The shopping cart does not deal with the entire transaction. It only passes the information ordered by the customer to the payment gateway. The payment gate way is a different and separate service that links the shopping cart to the financial transactions involved in the transaction. Thus, the shopping cart application must be compatible with the payment gateway service. The merchants do not need to know the credit card number of their customers since the payment gateway links the transactions to an ID. A shopping cart is made of three fundamental elements that are product catalogue, shopping list and a checkout system (Laudon, 2017).
The product catalogue consists of all the information required to present the products to customers and hence complete the online transaction. The information found in the catalogue includes the price of the item, the product choices, image and identification number (SKU).
A shopping list is used to help customers keep track of the items they wish to purchase.
The checkout system enables the customer to confirm all the products and quantities they intend to buy and enables them to pay.

Secure server

The secure server is used to prevent the loss or unwanted modification of the user data. The most commonly used technology for securing the online transactions is Secure Socket Layer (SSL). SSL encrypts all the data transferred between the computers of the customer and the shop. The encryption makes it very difficult for third party applications to tap any information exchanged between the customer and the shop such as credit card number. For the SSL to work, an electronic device that assists in shoeing the credibility of a website is needed. This electronic device is known as Digital Certificate.

Some customers select the items they wish to buy then decide not to purchase. This is called shopping cart abandonment. A number of steps can be taken to avoid this situation. These steps are:
• Assure the customers that the business is reputable by making use of third party endorsements. It makes the customers feel that their personal information is secure.
• Let it be clear to the customers that they are in the checkout process by use of progress indicators on the screen.
• Keep the checkout process short and clear. Too many steps keep off the customers.
• Provide explicit instructions on how to proceed with the whole process
• Provide guarantees and warranties for the products.

Payment processing

There are three options, which can be used to process payments. These are Internet Merchant Account, Third party payment processing software and manual payment processing.

Internet merchant account

This is an account issued by a financial institution that enables businesses to accept credit card payments online. Different types of credit cards that is MasterCard, VISA and American Express have separate internet merchant accounts. Therefore, the business must obtain a different account for each card.
In order to open a business merchant account, the business needs to open a bank account with the bank of their choice. Different banks will require different security deposit amounts. This type of account has a fast transfer of money to the right account.
Merchant fees include onetime fee, monthly fee and transaction fee.

Third party payment processing software.

This service gives an alternative way of obtaining an Internet Merchant account. This method has an advantage in that it makes selling online easy and quick. However, the holdback period is usually longer before the balance of a sale is turned over to the merchant. The money from a transaction is deposited in an account of the service provider. The merchant has to initiate a transfer transaction for them to receive the money.
The fees involved in this method are registration fees, monthly fees and transaction fees. Both third party payment processing software and merchant accounts charge for a transaction. An example of third party payment processing software is PayPal.

Manual payment processing

Customers check the products or services in the website and then the payment is processed manually using credit cards. Credit card information is sent through a secured server. This method is feasible when the number of customers is limited.

Factors to consider when choosing a payment option

A number of factors must be taken into consideration when selecting the payment option. These factors are:
• All the costs that are associated with the payment method
• Privacy of the transaction data.
• Fraud protection methods put in place.
• The credibility of the service provider.
• Privacy and security issues

Privacy and security issues

There are a number of security and privacy treats involved when it comes to the e-commerce industry. They include spam, theft of personal information, fraudulent use of credit cards and phishing. Several steps can be used to minimize the security and privacy treats associated with online transactions. They include:
• Reviewing the security features offered by the website designer and hosting companies as well as the internet service provider.
• Installing the relevant security patches in the computer
• Updating the antivirus software on a regular basis
• Avoid storing customer information in the business systems
• Ensuring that the business has an SSL technology to encrypt all confidential information
• Obtaining a digital certificate for the website
• Verify the addresses of the customers

How to attract and retain online customers

• Offer an easy process of in store returns
• Offer discounts and incentives to online customers
• Ensure timely delivery of products
• Make sure that orders are accurate
• Respond to the queries of customers as soon as possible
• Clearly display a breakdown of the total costs
• Show the availability of stock and the estimated shipping duration
• Provide online receipts for all transactions.
• Use a similar name on the website and transaction receipt. If this is not possible, the customer should be informed how the name will be recorded.
• Disclose to the customer the country in which the business operates and the currency
• Ensure that the website is looks professional and the product information can be retrieved easily./p>

Customer feedback through e-commerce

If the website attracts customers and a large number of them exit without making a purchase, then the business will not be making profit. In the traditional business environment, the customers can be observed and then questioned on why they did not make a purchase. In ecommerce, this is not easy. However, data mining tools can be utilized to analyze the customers’ patterns and come up with a conclusion. Additionally, a feedback section can be provided at the end of a session.

Summary of the e-commerce process

The process of e-commerce can be summarized as shown below

1. The customer makes an order online
2. The web server sends the order of the customer to the order manager
3. The order manager queries the database to check if the product is in stock
4. The stock database orders new supplies if the product is out of stock
5. The stock database suggests an estimated delivery time
6. The order manager processes the order and communicates with the merchant system to take payment
7. The merchant system makes enquiries with the computer of the customer’s bank
8. The bank computer confirms if the funds in the bank are enough
9. The merchant system authorizes the transaction to proceed if there are enough funds
10. The order manager confirms that the processing is complete and notifies the web server
11. The web server shows the customer that the process is complete
12. The order manager requests the warehouse to dispatch the products to the customer
13. The products are collected for dispatch to the customer
14. The warehouse computer emails the customer that the products have been dispatched and they are on the way
15. Finally, the goods are delivered to the customer
E-commerce is largely dependent on the website functioning. Therefore, any website downtime should be avoided at all costs. Inaccessibility of the website poses a potential loss to a business that does its business online (Chaffey, 2011).


Chaffey, D. (2011). E-business & e-commerce management: Strategy, implementation and practice. Harlow: Financial Times Prentice Hall.
Laudon, K. C., & Traver, C. G. (2017). E-commerce: business, technology, society. Boston: Pearson.
McLaren, C. H., & McLaren, B. J. (2003). E-commerce: business on the Internet. USA: Thomson Learning.

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