E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as business-to-business, business-to-consumer, consumer-to-consumer or consumer-to-business. The terms e-commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to transactional processes for online shopping.
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History of e-commerce
The beginnings of e-commerce can be traced to the 1960s, when businesses started using Electronic Data Interchange (EDI) to share business documents with other companies. In 1979, the American National Standards Institute developed ASC X12 as a universal standard for businesses to share documents through electronic networks. After the number of individual users sharing electronic documents with each other grew in the 1980s, in the 1990s the rise of eBay and Amazon revolutionized the e-commerce industry. Consumers can now purchase endless amounts of items online, both from typical brick and mortar stores with e-commerce capabilities and one another.
E-commerce is conducted using a variety of applications, such as email, online catalogs and shopping carts, EDI, File Transfer Protocol, and web services. This includes business-to-business activities and outreach such as using email for unsolicited ads (usually viewed as spam) to consumers and other business prospects, as well as to send out e-newsletters to subscribers. More companies now try to entice consumers directly online, using tools such as digital coupons, social media marketing and targeted advertisements.
The benefits of e-commerce include its around-the-clock availability, the speed of access, the wide availability of goods and services for the consumer, easy accessibility, and international reach. Its perceived downsides include sometimes-limited customer service, consumers not being able to see or touch a product prior to purchase, and the necessitated wait time for product shipping.
The e-commerce market continues to grow: Online sales accounted for more than a third of total U.S. retail sales growth in 2015, according to data from the U.S. Commerce Department. Web sales totaled $341.7 billion in 2015, a 14.6% increase over 2014. E-commerce conducted using mobile devices and social media is on the rise as well: Internet Retailer reported that mobile accounted for 30% of all U.S. e-commerce activities in 2015. And according to Invesp, 5% of all online spending was via social commerce in 2015, with Facebook, Pinterest and Twitter providing the most referrals.
The rise of e-commerce forces IT personnel to move beyond infrastructure design and maintenance and consider numerous customer-facing aspects such as consumer data privacy and security. When developing IT systems and applications to accommodate e-commerce activities, data governance related regulatory compliance mandates, personally identifiable information privacy rules and information protection protocols must be considered.
Government regulations for e-commerce
In the United States, the Federal Trade Commission (FTC) and the Payment Card Industry (PCI) Security Standards Council are among the primary agencies that regulate e-commerce activities. The FTC monitors activities such as online advertising, content marketing and customer privacy, while the PCI Council develops standards and rules including PCI-DSS compliance that outlines procedures for proper handling and storage of consumers' financial data.
To ensure the security, privacy and effectiveness of e-commerce, businesses should authenticate business transactions, control access to resources such as webpages for registered or selected users, encrypt communications and implement security technologies such as the Secure Sockets Layer and two factor authentication.
Web fraud detection systems can secure e-commerce. This Buying Decisions series offers an introduction to Web fraud detection systems, and examines four scenarios where Web fraud detection is used in an enterprise, as well as purchasing criteria for Web fraud detection systems.
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What are the biggest business benefits and risks associated with companies' and consumers' increasing use of e-commerce practices?
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