Fundamental Considerations of Electronic Commerce

Electronic commerce (EC) is a relatively recent phenomenon in the history of business with the term first appearing in business vocabulary in the 1970s. EC became possible by the proliferation of inexpensive information technology (IT) devices and reliable telecommunication systems but despite the new technology, businesses had to change their idea of the retail business paradigm. Businesses had to realize that EC does not only have potential to generate new business, but rather, it changes the point of purchase.

Some of the macro-level considerations that should be addressed before launching an EC project, especially a retail project, is that customers need to trust the purchase mechanism or website, there must be an adequate product or service mix, the shopping experience must be convenient to customers, and there must be satisfaction with the purchase.

Trust is a particularly important issue because if customers feel that the EC system is unreliable or perceived to be too risky for monetary transactions, they will refrain from using it. As shown in Figure 1, the higher an EC system’s reliability and the lower the perceived risk, the higher the customer’s level of trust and the greater the success of the EC site.


Figure 1: Relationship of Reliability and Risk to Customer Trust
In addition to having access to an electronic delivery system, businesses had to clearly define how they planned to incorporate the new business channel into their existing operations. The EC delivery system, whether based on telephony or Internet, had be designed relative to the organization’s goals in order to ensure it interacted well with the way the organization was doing business; i.e. form fits function. Rupple (2003) suggested that the purposes of a successful EC site are, “. . . 1) promotion of product and service, 2) provision of data and information, and 3) processing business transactions” p. 28. With these purposes in mind, the successful EC site will satisfy the business need for electronically promoting a product, providing information, and providing appropriate transactions in a secure, reliable, and trustworthy manner.
Ruppel, C. U.-Q. (2003). E-Commerce: The role of trust, security, and type of e-commerce involvment. e-Service Journal, 2(2), 25-44.

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