Management Strategies for E-Commerce Industry

Ecommerce industry offers hassle free way of purchasing items. Broadly, e-commerce is of three types B2B i.e., among two business entities, B2C i.e., between a company and individuals and C2C i.e., among different individuals. E-commerce management is the broad area of integration of all stakeholders associated with the business i.e., consumers, employees, management and vendors. With advancement of web based technologies, many new challenges to payment system of e-commerce companies also cropped in. These challenges should be mitigated by adopting latest internet security tools.

Table of Contents

1. Introduction

2. Literature Review

3. Global Electronic Commerce

3.1 Factors Influencing E-Commerce Sector

3.1.1 Supply Chain

3.2 Customer Demand

3.3. Network Tools and Resources

4. Cyber Security Management in E-Commerce

5. Case Analysis of E-Commerce Industry in United States

6. Conclusion

Reference

1. Introduction

The journey of E-commerce started two decades ago. It is a convenient and quick way of shopping over internet and getting delivery of booked items at doorsteps. With the new innovation in the digital technologies, e-commerce business has also diversified and leaped forward to a new height. Business to customer (B2C), Business to business (B2B) and customer to customer (C2C) are diversified forms of ecommerce business. B2C e-commerce is online business transactions between the e-commerce firm and consumer, which is most popular form of online business in the world. When a firm do business with an e-commerce company, it is called B2B e-commerce (Kabbaj, 2018).

Online chats, internet banking and electronic data interchange are the key constituents of an E-commerce website or online store. These three components ensure complete satisfaction of online buyers of an e-commerce store. Recent analysis of the global e-commerce industry reveals that the large electronic commerce companies are now setting up global network of suppliers and manufacturers and now their business is not restricted to one specific region or country. Big e-stores invest into varied internet and communication technologies to attract new customers and increase their sales revenues. The international telecommunication union (ICU) estimated that the global B2C sales of e-stores in 2017 amounted to $3,851 billion while B2B sales in the same year amounted to $25,516 billion. Interestingly, China topped among all other leading countries of the world in B2C sales volume in 2017 (UNCTAD, 2019).

E-commerce management is a comprehensive mechanism of managing network resources, supplier and producers’ chain and online marketing strategies. An e-portal is integration of sophisticated web based technologies such as SSL security encryption, online merchant payment systems, HTML, Joomla, Wordpress, Drupal, X.25 technology for virtual area network, Adobe flash player etc. SSL security encryption marks the website with lock icon, which ensures that payment made on this website is fully secure. Credit and Debit card payment are the widely accepted transaction methods in E-commerce business. However, some companies also offer cash-on-delivery (COD), paypal and online wire transfers options for online purchase of goods and services.

Threat perceptions always remain in any form of online transaction. Mitigating cyber frauds or data manipulation remains a stiff challenge for e-commerce companies. As e-store runs through a web portal, both suppliers and buyers are remotely connected with the company. Customers should be very cautious while using online platform for purchasing items as viruses and worms present in the personal computer network may steal the card information used in purchasing. This information reaches to hacker who can deplete the customer’s account balance. The main purpose of this research paper is to list the factors influencing the online retail sector, management of online store business, current challenges to the network managed resources of e-commerce company and case study analysis of e-commerce industry in United States.

2. Literature Review

B2B E-commerce depends on the association between the customers and online stores (Cullen & Webster, 2007). The key drivers of the B2B integration are suppliers, competitive edge, diversified IT technology, knowledge of IT management resources and centralized IT infrastructure (Ranganathan et al., 2004). Benefits of doing B2C business in terms of low transaction costs, convenience considerably reduces the probable risks such as financial loss, data manipulation and customer’s satisfactions. Therefore, B2C e-stores procure items from trusted vendors only so that they can mitigate possible risks of online business (Egger, 2000). Many buyers refrain from online purchase because of possible risks involved in e-commerce (Melacini et al., 2018).

3. Global Electronic Commerce

Internet and communication technology (ICT) has paved the way for a new type of marketing experiment i.e., online marketing. Latest ICT technology for online payment ensures high data security of customers and is major factor behind the remarkable success of online marketing industry. Actually, E-commerce entities are just like retail stores and use web based tools to sell products and services in the market. Almost all activities of internet store except procurement, maintenance and order delivery are executed from a designated website. During the past some years, large e-commerce organizations in collaboration with small retail stores through virtual area network (VAN) have enhanced their presence in the globe.

According to UNCTAD report presented on 29 March, 2019, global business of e-commerce companies in 2017 amounted to $29 trillion, which was a 13% surge in total sales volume registered in 2016. The number of customers buying from e-store also jumped by 12% in 2017 and was 1.3 billion. The global B2B sales in 2017 were $25,516 trillion, 88% more than the B2C sales during the same year. The number of customers of the global e-commerce industry during the three consecutive years is listed in the following column bar chart:

Total Number of Online Buyers

Total Number of Online Buyers

Fig 1 Source: UNCTAD

3.1 Factors Influencing E-Commerce Sector

E-commerce business is influenced by a set of factors mentioned below:

3.1.1 Supply chain

The supply chain of e-commerce industry refers to the network of suppliers, manufacturers, distributors and online vendor management resources (Kabbaj, 2018). Many researches on e-marketing business revealed that renowned brands such as Wal-Mart, Amazon, eBay and Alibaba are able to expand their overseas e-commerce business only due to their robust supply chain.

Supply chain (SC) is also known as demand chain because the entire process of supply, storage and order delivery is linked with customer demand. At present, SC is the value adding process that involves optimized use of technology, resources and materials and cost cutting methods to fulfil customer needs. The efficient e-procurement mechanism of the renowned E-commerce entities enables them to fulfil bulk orders in the limited time fashion. Small and medium enterprises (SMEs) can also expect large orders through well-structured infrastructure and strong vendor management capabilities. Many hiccups present in the e-procurement such as high inventory costs, fluctuating labour supply etc. can be easily mitigated by SMEs as well as big E-commerce companies with latest networking technologies and better human resource management (Kawa & Maryniak, 2018).

3.2 Customer Demand

In both B2B and B2C e-commerce, customer demand is most significant factor. It also depends on set of factors such as price, quality, substitutes of products, income and preferences of consumers. The demand of online buyers fluctuate region wise and country wise. The highest number of online shoppers is in United States followed by Japan, Britain and Germany. Some popular e-commerce commodities that are in high demand, are garments, sports items, cooking ware, electronic gadgets and leather shoes and bags. The consumer demand in B2C ecommerce is quite low in comparison to demand in B2B segment. The reason is that B2B ecommerce involves two business entities, where a buying firm place large order to e-commerce firm. But the order size put by individual buyers at e-store is significantly small usually few pieces of items (Zhang, 2018).

3.3. Network Tools and Resources

Online retail firm runs through a full-fledged website, where all categories of items of an e-store are displayed. A well-developed e-commerce portal is an integration of various network resources such as content management system (CMS), social media optimization, online chats, electronic payment system and electronic data interchange (EDI). CMS is the web tool like HTML to manage content pages of E-store such as press releases, product descriptions, blogs and website contents. Apart from contents, CMS system can also manage templates, banners, search and user management. Some widely used CMS systems are Drupal, Wordpress and Joomla (Patel et al., 2011).

Social media optimization (SMO) is the online marketing tool used by E-commerce companies to consolidate their market base. EDI is inter-exchange of electronic data between two or more enterprises that may be data transfers between suppliers and E-commerce company or between online purchasers and E-commerce company. An electronic message is transmitted to the recipient through four stages i.e., mapping, extraction, translation and communication. The EDI system is capable of processing large data volume on organization network (Yazdanifard et al., 2012). Electronic payment system (EPS) is the core constituent of the networking retail store and it works either through online payment system of merchant banks such as Paypal, HDFC or inbuilt payment system of e-commerce company. The E-commerce network of various stakeholders are shown in the following chart:

The E-commerce network of various stakeholders

Fig 2

4. Cyber Security Management in E-Commerce

Like all online works, data on e-commerce network are always at a risk of possible cyber-attacks. Online offenders often use low level to sophisticated attacks on the organization network for disruptive objectives such as stealing valuable data, bank details of customers and blocking network activities and inflicting financial loss to the company. The most common type of cyber intrusion is malware intrusions that are transmitted from hacker’s computer to the targeted company. Protecting the EPS system from unidentified cyber-attacks is therefore key task of cyber security personnel in E-commerce company. Most online retailers manage online payment facilities in collaboration of merchant banks. Each merchant bank has its own SSL encrypted website that ensures secure online transactions of customers.

Other networking security tools such as biometric and intrusion detection systems (IDS) also are employed to prevent any unauthorized entry into the EPS system of online store.

5. Case Analysis of E-Commerce Industry in United States

The journey of E-commerce industry in United States began 20 years ago. The B2C e-commerce is well flourished in the country. Some renowned online retailers are Amazon, eBay and Wal-Mart each one managing a large virtual network of small retailers across the globe. Other small e-retailers in the country are Amway and Netflix. According to the report of Amazon store, the company achieved highest sales turnover of $80 million in the home country. The total sales of US online retailers crossed $305 billion as against $263.3 billion in 2013 (Nisar & Prabhakar, 2017).

Many e-retailers in United States offer products with free home delivery. The online retailers categorize products as locals and international and make separate listing and packaging for each product category. Amazon started its online fruits and vegetable store in 2018. The biggest qualities that online buyers see in locally grown fruits and vegetables are freshness, high nutritional value and good tastes. The online survey on US consumers conducted some years back, revealed that 55% consumers prefer to buy local produce to support domestic companies, 41% buys locally grown fruits and vegetable for its freshness whereas the 17% says that they are willing to purchase local fruits and vegetables due to its high calorific value (Gumirakiza & Choate, 2018).

6. Conclusion

Growing number of internet buyers and hassle free shopping experience led to remarkable process of global E-commerce industry. Both B2B and B2C e-commerce registers continuous increase in its sales volumes and number of customers over the years. The key networking components of an e-store are CMS, EDI and EPS. Large e-commerce stores are incorporating the state-of-the-art web technologies such as virtual area network to expand their business across the world. EPS system of online retailers though simple, involves cyber threats. Therefore, e-commerce units take many networking security tools such as IDS, biometrics and SSL security encryption to prevent any cyber intrusion into their payment system.

Many research studies such as UNCTAD report state that the growth in B2B online business is more than the B2C E-commerce. This may be due to the fact that demand of individual firm is quite higher than the demand of individual person. Demand, supply chain and networking tools are three major pillars of the E-commerce business. Low cost items such as garments, cooking ware and leather items are in high demand in USA and European countries. Many e-retailers such as Amazon also sells fresh vegetables and fruits that are in great demand in US market. There is marked difference between the large e-retailers and SME e-commerce primarily due to technological advantages, superior vendor management and cost competitiveness of one over the latter.

Reference

Cullen, A.J. and Webster, M. (2007), “A model of B2B e-commerce, based on connectivity andpurpose”,International Journal of Operation & Production Management, Vol. 27 No. 2,pp. 205-25. https://www.researchgate.net/profile/Andrea_Cullen/publication/27313101_A_Model_of_B2B_E-Commerce_Based_on_Connectivity_and_Purpose/links/5624ce6708ae93a5c92d29d3.pdf

Egger, F. N. (2000, April). " Trust me, I'm an online vendor" towards a model of trust for e-commerce system design. In CHI'00 extended abstracts on Human factors in computing systems (pp. 101-102). http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.33.8610&rep=rep1&type=pdf

Gumirakiza, J. D., & Choate, T. (2018). The Willingness to Pay for Local, Domestic, and Imported Bundled Fresh Produce by Online Shoppers. Journal of Agricultural Science, 10(12). https://www.semanticscholar.org/paper/The-Willingness-to-Pay-for-Local%2C-Domestic%2C-and-by-Gumirakiza-Choate/f07880de6991364a27c3c9297bcaf0bef52d1a01

Kawa, A., & Maryniak, A. (2018). Lean and agile supply chains of e-commerce in terms of customer value creation. In Modern approaches for intelligent information and database systems (pp. 317-327). Springer, Cham. 

Kabbaj, M. W. (2018). The Major Factors That Contribute To E-Commerce Growth In The US And China: Analyses And Adoption By Morocco. https://digitalcommons.salemstate.edu/cgi/viewcontent.cgi?article=1204&context=honors_theses

Melacini, M., Perotti, S., Rasini, M., & Tappia, E. (2018). E-fulfilment and distribution in omni-channel retailing: a systematic literature review. International Journal of Physical Distribution & Logistics Management. https://re.public.polimi.it/retrieve/handle/11311/1060975/304159/E-fulfilment%20and%20distribution%20in%20omni-channel%20retailing_a%20systematic%20literature%20review%20-%20FINAL.pdf

Nisar, T. M., & Prabhakar, G. (2017). What factors determine e-satisfaction and consumer spending in e-commerce retailing?. Journal of Retailing and Consumer Services, 39, 135-144. https://uwe-repository.worktribe.com/preview/883285/PaperECommerceRetailers.pdf

Patel, S. K., Rathod, V. R., & Prajapati, J. B. (2011). Performance analysis of content management systems-joomla, drupal and wordpress. International Journal of Computer Applications, 21(4), 39-43. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.206.3027&rep=rep1&type=pdf

Ranganathan, C., Dhaliwal, S. J., & Teo, T. S. H. (2004). Assimilation and diffusion of web tech-nologies in supply-chain management: an examination of key drivers and performance impacts.In-ternational Journal of Electronic Commerce,9(1), 127–161. https://dl.acm.org/doi/abs/10.1080/10864415.2004.11044319

United Nations Conference on Trade and Development. https://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=505

Yazdanifard, R., Baruani, B. M., & Mohseni, S. (2012). Review of Electronic Data Interchange in Business to Business E-Commerce in a Competitive Global Market. RNIS: Research Notes in Information and Service Sciences, 9(1), 48-53. 

Zhang, M. (2018). Further Investigation on the Regulation of B2C E-commerce Industry Structure in China--Analysis Based on the Theory of Contestable Markets. https://www.webofproceedings.org/proceedings_series/ESSP/SSAH%202018/SSAH_0611040.pdf

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