Introduction to E-Commerce

E-Commerce Introduction

• Electronic Commerce (E-Commerce) began in the 1970s
• E-commerce became widespread with the increased use of the internet in the 1990s
• E-commerce is considered a modern activity shaped by advances in communication and information technology
• This revolution is key to generating many applications that significantly impact social, economic, and commercial activities
• Key applications include E-Commerce, E-Government, and E-Learning
• E-commerce includes the circulation of products and services between governments, organizations, or individuals
• Electronic refers to commercial activity and performance using electronic methods and media, primarily the internet

E-Commerce Defined

• E-commerce is made up of two words: Commerce and Electronic
• Commerce refers to the economic activity involving the exchange of products and services between entities
• Electronic refers to commercial activity and performance that uses modern electronic methods and media, primarily the internet
• E-commerce is a process where goods, services, and information are sold, bought, and exchanged over the Internet
• Activities falling under e-commerce include:
  • Electronic banking services
  • Electronic auctions
  • Online ticket booking portals
• The internet has made e-commerce very popular
• The COVID-19 pandemic highlighted e-commerce as a means for companies and institutions to continue and thrive
• Experts predict that by 2040, e-commerce purchases will constitute 95% of the global purchase volume
• E-retail sales are expected to reach 22% of total global retail sales in 2023

Kingdom of Saudi Arabia and E-Commerce

• Saudi Arabia has taken significant strides in promoting e-commerce, supported by Vision 2030 and artificial intelligence
• The Ministry of Commerce and Investment established a specialized e-commerce unit to monitor e-commerce developments
• The E-Commerce Council was formed in 2018, including representatives from 16 government agencies
• Their purpose is to oversee the e-commerce stimulus program and propose related policies and legislation
• E-commerce differs from traditional commerce through its unconventional method of reaching global consumers
• Information about products is obtained via web pages, requests are made electronically, documents are digital, and payments are through computerized networks

Advantages of E-Commerce

• Saves time, effort, and money through efficient communication
• Electronic transactions eliminate the need for physical meetings
• Reduces the role of human interaction by relying on information technology
• Creates new job opportunities for specialists in communications, IT, and e-commerce applications
• Reduces prices by avoiding the expenses of traditional markets, leading to lower prices for consumers and reduced marketing costs
• Increases the number of reachable customers by providing goods, services, and information
• Overcomes location and time constraints by providing a global marketing outlet available 24/7
• Allows the electronic delivery of goods and services, including programs, books, research, and consultations
• Eliminates paper documents, conducting all operations and correspondence electronically
• Emails serve as legal evidence in case of disputes
• Fights against monopolies by easing entry into e-commerce and promoting competition

E-Commerce vs E-Marketing

• E-commerce: Exchange of goods, services, and information through an intermediary, including electronic buying and selling operations using IT.
• E-marketing: Offering and marketing goods/services on the Internet to gain new customers globally while retaining existing ones.
• E-marketing is a vital part of e-commerce that requires advertising goods and services online
• Traditional marketing involves phone communication, physical meetings, billboards, magazines, newspapers, flyers, radio, television, advertising campaigns, and employing staff
• E-marketing has several advantages over traditional marketing

Advantages of E-Marketing

• Ease of use due to electronic communication and IT
• Quick access to customers worldwide with direct communication
• Reduced costs for displaying goods, eliminating the need for distributing, storing, and promoting goods using billboards or telephone calls
• Opens opportunities for everyone to market goods and services
• Allows sales beyond the company's traditional scope
• Provides sufficient time for customers to search for the right item
• Efficiently targets specific customer categories with relevant marketing offers
• Delivers goods and services to customers quickly and directly
• Enables handling a large number of customers simultaneously through a website
• Allows marketers to assess advertising campaign performance through e-marketing service statistics

Success Factors for E-Marketing

• Presenting a successful product
• Creating an attractive and constantly updated website
• Directing advertisements and marketing offers to a target group of customers in their native language
• Attracting attention
• Measuring customer satisfaction
• Understanding the customers' interest in the product
• Marketing today is identifying, desires, and needs of customers, providing services and related products while ensuring quality

Pillars of E-Commerce

• Business activity: Cornerstone of e-commerce
• Electronic documents: Uses electronic documents, eliminating paper-based correspondence
• Globalization/Internationalization: Enables the real implementation of globalization

E-Commerce and Saudi Law

• E-commerce is an integrated information system enabling commercial processes between partners using global networks.
• The Saudi Council of Ministers endorsed the Electronic Transactions Act in 1428
• This law promotes electronic transactions in trade, medicine, education, e-government, and payment
• It removes obstacles to transactions and electronic signatures
• Saudi law defines e-commerce transactions as "Any exchange freelancing or contract or any other procedure to be concluded or implemented fully or partially by electronic means"

Challenges in E-Commerce

• Lack of online stores supporting the Arabic language
• Difficulty in creating an online store
• Cost of setting up an online store
• Lack of interest in e-marketing
• Delivery time of products
• Customers' distrust of electronic payment methods
• Customers' distrust of paperless transactions

Impact of COVID-19 on E-Commerce

• The COVID-19 pandemic brought challenges to entrepreneurs and project owners:
  • Financial liquidity
  • Lack of raw materials
  • High rent
  • Fees for affected projects
  • Delays and cancellation of orders
• New problems included:
  • Increased prices
  • Product safety concerns
  • Deceptive consumers
  • Cyber security issues
  • Legal matters.

Types of E-Commerce

Business-to-Consumer (B2C)

• Electronic transactions between businesses and customers
• Organizations display, market, and sell goods/services through e-tailing
• Provide customer support and answer questions online
• Customers order products, pay online, and receive products electronically or traditionally
• Common examples:
  • Amazon
  • Walmart

Amazon

• It was founded in 1994 and then released on the internet in 1995
• It's famous for its multi products, starting with books to furniture and many other types of goods and materials

Walmart

• It was founded in 1962
• It's considered as the biggest companies in terms of revenue, according to Fortune 500 list of 2014
• Business-to-consumer activities are based on:
  • e-commerce Shopping
  • Online Banking
  • Online Customer Service
  • Charge Cards
  • Phone Bank
  • Digit Cash/E-Cash

Business-to-Business (B2B)

• Online purchasing of goods and services between organizations
• E-marketplaces facilitate buying and selling between organizations online
• Sellers and buyers communicate, exchange ideas, advertise, auction, and make payments through these markets
• This model is commonly used to:
  • Reduce costs
  • Increase business process efficiency
  • Achieve higher profit rates

Consumer-to-Consumer (C2C)

• Involves transactions between consumers
• A consumer sells directly to another via online advertising for personal belongings
• Electronic auctions conducted between individuals
• Examples:
  • eBay
  • Haraj

Consumer-to-Business (C2B)

• Individuals sell goods and services to business organizations
• Individuals work with companies to increase their profits.

Non-Business Model

• It involves humanitarian, and these institutions provide e-commerce to reduce the costs of running the institution, improve its management, or reduce its costs
• The following are types of e-commerce:
  • E-commerce within the organization (Intra Business)
  • E-commerce from Government to Citizen (G2C)
  • E-commerce from Citizen to Government (C2G)
  • E-commerce from Governments to Business (G2B)
  • E-commerce from Business to Government (B2G)
  • E-commerce between Governments to Government (G2G)
  • E-commerce from government to employees (G2E).

Payment and Settlement Systems

• They are important for the success and development of e-commerce
• Early e-commerce relied on payment and settlement systems along with the development of diverse payment methods and networking technology

Smart Card

• Made of flexible plastic processed by silicon and has a microchip and power memory to record all data about the cardholder

Advantages of Smart Cards

• Stores cardholder data: name, address, issuing bank, exchange method, transaction history, and banking history
• Clients choose the method of payment
• Protects against forgery, fraud, and misuse
• Card readers allow commercial premises to audit the financial accounts of owners, regardless of Visa or MasterCard association

Debit Card

• It allows cardholders to transfer money from their checking account to a seller's account with identity verification
• When a cardholder swipes their card in case of purchase, the seller's card reader sends an electronic transfer request to the consumer's bank
• The bank checks the customer's account balance and ensures the card hasn't been blocked

Advantage of Debit Card

• Saving time and effort of customers
• Increasing the revenue of the issuing bank
• In which the value of withdrawals or payments is deducted from the balance of the bank account

Credit Cards

• Banks issue them for payments, purchases, and debt-based cash withdrawals
• Customers can pay off the entire debt, part of it, or postpone the residue

Advantages of Credit Cards

• Provides instant purchase and postpaid
• Issued in local and foreign currencies
• Allows the cardholder to pay in local currency regardless of whether the purchasing process was in the country or abroad
• Saves time and effort of the cardholder
• Increases the income of the issuing bank

Infrastructure for Supporting Electronic Commerce

• Key components of the Electronic Infrastructure belong to the ICT sector, including:
  • Wired and wireless communication networks and devices
  • Computers
  • Application software
  • Operation and technical support services
• Human capital in e-commerce.
• Availability of information technology- producing sectors.
• These components support internet use and e-commerce
• The internet plays a key role as an electronic channel for commercial exchanges and processed transactions.