unit-1 E- Commerce

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1. Introduction to E-Commerce

Definition:

E-Commerce (Electronic Commerce) refers to the buying and selling of goods and services using the internet and electronic networks. It also includes online transactions, electronic payments, online marketing, and digital communication between businesses and customers.E-Commerce is the process of conducting commercial transactions such as purchasing, selling, transferring money, and exchanging information through electronic systems like the internet.

Examples of E-Commerce

·         Online shopping websites (Amazon, Flipkart)

·         Online ticket booking

·         Online banking and payments

·         Food delivery apps

·         Digital services subscriptions

Key Features of E-Commerce

·         Online buying and selling

·         Electronic payment systems

·         24/7 availability

·         Global market reach

·         Fast transactions

Evolution of E-Commerce

·         1990s – Basic websites

·         2000s – Online shopping growth

·         2010s – Mobile commerce (apps)

·         Present – AI, digital wallets, cloud computing

Limitations of E-Commerce

·         Security risks

·         No physical inspection

·         Internet dependency

·         Delivery delays

·         Technical issues

2. Types of E-Commerce Models

E-Commerce models describe how businesses, customers, and government organizations interact online for buying and selling goods or services.

2.1. Business to Business (B2B):

Transactions happen between one business and another business.

·         Large quantity orders

·         Long-term business relationships

·         Bulk transactions

Example: A wholesaler selling products to a retailer online.

2.2. Business to Consumer (B2C):

A business sells products or services directly to customers through the internet.

·         Direct selling

·         Online payments

·         Fast delivery

Example: Online shopping websites like Amazon or Flipkart.

2.3. Consumer to Consumer (C2C):

Customers sell products or services to other customers using online platforms.

·         Second-hand products

·         Platform acts as mediator

Example: Selling used items on OLX or eBay.

2.4. Consumer to Business (C2B):

Individuals provide products or services to businesses.

·         Freelancing work

·         Service-based transactions

Example: Freelancers designing logos for companies online.

2.5. Government to Citizen (G2C):

Online services provided by the government to citizens.

·         Digital public services, online documentation.

Example: Online tax payment, applying for certificates or licenses

3. E-Commerce Business Revenue Models

3.1. Advertising Revenue Model (E-Commerce):

The Advertising Revenue Modelis a business model in which a company earns money by displaying advertisements on its website, app, or digital platform.

·         A website or app attracts many visitors.

·         Companies place advertisements on that platform.

·         The platform earns revenue when users view or click the ads.

Types of Advertising Payments:

·         CPM (Cost Per Mile)       :               Payment for every 1000 ad views

·         CPC (Cost Per Click)         :               Payment when users click the ad

·         CPA (Cost Per Action)    :               Payment when users complete an action (signup/purchase)

Examples:

·         News websites showing banner ads

·         Blogs displaying Google Ads

·         Social media platforms showing sponsored posts

Advantages:

·          Generates income without selling products

·          Users can access content for free

·          Scalable business model

Disadvantages:

·         Needs high website traffic

·         Too many ads may reduce user experience

3.2. Subscription Revenue Model (E-Commerce):

The Subscription Revenue Model is a business model in which customers pay a regular fee (monthly, quarterly, or yearly) to access products, services, or digital content.

·         A company offers services or content online.

·         Customers register and choose a subscription plan.

·         Users pay periodically (monthly/yearly).

·         Access continues as long as payment is active.

Examples:

·         Online streaming platforms

·         Online learning platforms

·         Music streaming apps

·         Cloud storage services

Advantages:

·         Stable and predictable revenue

·         Customer loyalty increases

·         Regular updates and services

Disadvantages:

·         Customers may cancel subscriptions

·         Requires continuous quality content/service

3.3. Sales Revenue Model (E-Commerce):

The Sales Revenue Model is a business model in which a company earns money by selling products or services directly to customers online.

·         A business displays products or services on a website or app.

·         Customers select items and place an order.

·         Payment is made online.

·         Product or service is delivered to the customer.

Examples:

·         Online shopping websites selling clothes, electronics, or books

·         Software sold online

·         Online food ordering platforms

 

Advantages:

·         Easy to understand business model

·         Immediate revenue after sale

·         Suitable for all types of products

Disadvantages:

·         Revenue depends on number of sales

·         Requires inventory and delivery management

3.4. Affiliate Revenue Model (E-Commerce):

The Affiliate Revenue Model is a business model in which a person or company earns commission by promoting another company’s products or services online.

·         A company provides an affiliate link to promoters.

·         Affiliates share the link through websites, blogs, or social media.

·         Customers click the link and buy the product.

·         The affiliate earns a commission for each successful sale.

Examples:

·         Bloggers promoting products through review articles

·         YouTubers sharing product links in descriptions

·         Influencers recommending online products

Advantages:

·         Low investment required

·         No inventory or delivery responsibility

·         Can work from anywhere

Disadvantages:

·         Income depends on sales performance

·         High competition among affiliates.

4. Infrastructure for E-Commerce

4.1. Internet:

The Internet is a global network of interconnected computers and devices that allows people to share information and communicate with each other worldwide.

Role of Internet in E-Commerce:

·         Connects buyers and sellers globally

·         Enables online shopping websites

·         Supports online payments and banking

·         Allows communication through email and chat

·         Provides access to digital services

·         Online marketing and advertising

·         Product browsing and ordering

·         Electronic payments

·         Customer support services

·         Order tracking

Advantages:

·         Global market reach

·         Quick transactions

·         Reduced business cost

·         Easy access to information

4.2 Intranet:

An Intranet is a private network used within an organization that uses internet technologies (like web browsers and websites) to share information, communication, and resources only among authorized users such as employees.

Uses of Intranet:

·         Sharing company documents

·         Employee communication

·         Internal announcements

·         Project collaboration

·         HR and payroll information

Advantages:

·         Improves internal communication

·         Secure data sharing

·         Saves time and cost

·         Easy access to information

Disadvantages:

·         Setup and maintenance cost

·         Requires security management

·         Needs technical support

Example:

·         College student portal

·         Company employee dashboard

·         Internal company website

4.3 Extranet:

An Extranet is a private network that allows an organization to share selected information or resources with external users such as customers, suppliers, partners, or vendors using internet technology.

It is an extension of an Intranet that provides controlled access to outsiders.

Uses of Extranet:

·         Supplier and vendor communication

·         Online order tracking

·         Business collaboration

·         Sharing project data with clients

·         Customer service portals

Advantages:

·         Improves business collaboration

·         Faster communication with partners

·         Secure data sharing

·         Reduces paperwork

Disadvantages:

·         Security risks if not managed properly

·         Setup and maintenance cost

·         Requires strong authentication system

Example:

·         Vendor portal for suppliers

·         Customer login area on company website

·         Online banking customer portal

5. Payment Gateways & Digital Wallets

5.1 Payment Gateway

A Payment Gateway is a technology that processes online payments by securely transferring payment information between the customer, merchant, and bank.

Advantages:

·         Safe online transactions

·         Instant payment confirmation

·         Supports global payments

·         Reduces fraud risk

Examples:

·         Razorpay

·         PayU

·         PayPal

·         Stripe

5.2 Digital Wallet:

A Digital Wallet (E-Wallet) is an electronic application that allows users to store money digitally and make payments using mobile phones or computers.

Uses:

·         Online shopping

·         Mobile recharge

·         Bill payments

·         Money transfer

·         Store payments via QR code

Advantages:

·         Cashless transactions

·         Fast and convenient

·         Easy money transfer

·         Rewards and cashback offers

Examples:

·         Google Pay

·         PhonePe

·         Paytm

·         Amazon Pay

Difference Between Payment Gateway and Digital Wallet:

Feature	Payment Gateway	Digital Wallet
Meaning	Processes payments	Stores money digitally
Function	Connects bank & merchant	Allows users to pay directly
Usage	Used by businesses	Used by customers
Example	Razorpay, Stripe	Paytm, Google Pay

 

6. Legal & Ethical Issues in E-Commerce

6.1. Cyber Laws:

The laws and regulations that govern the use of computers, internet, digital communication, and online activities. They are designed to prevent cybercrime and protect users, organizations, and data in the digital world.

Cyber Law refers to the legal framework that deals with:

·         Internet usage

·         Online transactions

·         Digital communication

·         Data protection

·         Cyber crimes

Types of Cyber Crimes Covered:

·         Hacking – Unauthorized access to computer systems

·         Identity Theft – Stealing personal information

·         Online Fraud – Fake websites, phishing scams

·         Cyberbullying – Harassment through digital platforms

·         Data Theft – Stealing confidential data

·         Software Piracy – Illegal copying of software

Cyber Laws in India:

·         Information Technology Act, 2000 (IT Act 2000).

·         Cyber Laws ensure safe, secure, and legally protected use of the internet and digital technologies.

Advantages of Cyber Laws:

·         Safe digital environment

·         Secure online banking & payments

·         Legal protection for users

·         Encourages e-commerce growth

6.2. Data Privacy:

Data Privacy refers to the protection of personal information and sensitive data from unauthorized access, misuse, or sharing. It ensures that individuals have control over how their data is collected, stored, and used.

·         Information Technology Act, 2000

·         Digital Personal Data Protection Act, 2023 (DPDP Act)

Personal data includes:

·         Name

·         Address

·         Phone number

·         Email ID

·         Bank details

·         Aadhaar number

·         Photos and online activity

Objectives of Data Privacy:

·         Protect user information

·         Prevent identity theft and fraud

·         Maintain confidentiality

·         Ensure secure data usage

·         Build trust in digital services

Threats to Data Privacy:

·         Hacking

·         Phishing attacks

·         Malware

·         Data breaches

·         Unauthorized data sharing

Ways to Protect Data Privacy:

·         Use strong passwords

·         Enable two-factor authentication

·         Avoid sharing personal details online

·         Use secure websites (HTTPS)

·         Update software regularly

6.3. Intellectual Property Protection:

6.3.1. Copyright:

Copyright is a legal right given to creators to protect their original works from being copied, used, or distributed without permission.

·         Copyright Act, 1957

·         This law protects authors, artists, musicians, and software developers from illegal use of their work.

·         Valid for lifetime of the author + 60 years after death.

·         Copyright notice (©)

Copyright protects:

·         Books and articles

·         Music and songs

·         Movies and videos

·         Software programs

·         Paintings and photographs

·         Websites and digital content

6.3.2. Trademark:

A Trademark is a unique symbol, name, logo, word, design, or sign used by a business to identify and distinguish its products or services from others.

·         Trade Marks Act, 1999

·         This law provides registration and protection of trademarks in India.

·         Valid for 10 years, Can be renewed indefinitely every 10 years.

Examples of Trademarks:

·         Brand names

·         Company logos

·         Taglines or slogans

·         Symbols and designs

6.3.3. Patent:

A Patent is a legal right granted to an inventor that gives exclusive permission to make, use, or sell an invention for a specific period of time. Others cannot use the invention without the inventor’s permission.

·         Patents Act, 1970. This law governs patent registration and protection in India.

·         Patent protection lasts for 20 years from the filing date.

Patents protect:

·         New inventions

·         Machines and devices

·         Scientific processes

·         Technology products

·         Chemical formulas

·         Industrial methods

Advantages of Patents:

Exclusive market rights

Business and profit opportunities

Encourages innovation

Legal protection for inventions

Example: If a scientist invents a new medical device and gets a patent, other companies cannot manufacture or sell it without permission.

6.4. Taxation on E-Commerce:

Taxation on E-Commerce refers to the taxes applied to buying and selling goods or services through online platforms such as websites, mobile apps, and digital marketplaces.

·         GST (Goods and Services Tax)

GST applies to:

·         Online shopping websites

·         Digital services

·         Online marketplaces

·         App-based services

Example: Buying clothes online includes GST in the price.

Tax Collected at Source (TCS):

·         E-commerce platforms collect tax from sellers.

·         Platforms deposit tax to the government.

Example: Online marketplaces deduct a small percentage before paying sellers.

Income Tax:

·         Online sellers must pay income tax on profits earned.

Who Pays E-Commerce Taxes?

·         Online sellers/business owners

·         E-commerce companies

·         Service providers

·         Customers (indirectly through GST)

Challenges:

·         Cross-border transactions

·         Different tax rules in countries

·         Tracking digital services

·         Small seller compliance

Advantages:

·         Legal online business operations

·         Increased government revenue

·         Consumer protection

·         Fair market competition