© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 1 Introduction to E-commerce Alexander NTOKO, Project Manager, ITU Electronic Commerce ITU Telecommunication Development Bureau (BDT) Web: Basic E-Commerce Training For Pakistan Pakistan Telecommunication Authority (PTA) Islamabad, Pakistan 31 March – 5 April International Telecommunication Union (ITU)

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 2 Agenda History of e-commerce Overview of various models A very simple definition Requirements for B2C Overview of B2B Benefits of e-commerce

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 3 History (how it started) Commerce over the net started almost 30 years ago with the use of private networks (VANs) by large US corporations to exchange business information using EDI. Online retailing gained enormous popularity (some 6 years ago) with companies like AMAZON selling to consumers world-wide. Today, electronic commerce covers a broad range of business activities with an estimated 50% of U.S businesses online.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 4 Very simple Definition Electronic Commerce: Can be simply defined as transactions conducted over public and private networks. It includes a broad range of activities such as: e-tailing, e-marketplaces e-procurement, e-government, and e- banking, ERM, CRM and VCM services. In the simple and most common scenario a customer uses a Web browser to access a Web-based virtual store through the Internet and pays using a credit card.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 5 E-Commerce is... The the result of the convergence of financial, networking and business services. The emergence of new intermediaries in business relationships. The transition from bricks and mortar to bricks and clicks – enhancing traditional business processes using new ICTs. The breakdown of geographical and time barriers and the increase in market access.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 6 E-Commerce is... The increased effectiveness of business relationships and the invention new ones. The conduction of business transactions over public and private networks. The emergence of a global electronic economy. The opportunity for developing countries to leapfrog and compete in a global marketplace.

Models of e-commerce Governments Businesses Individuals

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 8 E-commerce models o Business-to-business o Business-to-government o Business-to-consumer o Consumer-to-consumer o Government-to-citizen

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 9 Business-to-business o Corporate Procurements o Customer Relationship Management o Enhancing value chain (VCM) o Supply Chain Management (SCM) o Collaboration Services o Transportation and Logistics o Manufacturing and Distribution o E-commerce Marketplaces o Financial and Information Services

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 10 Business-to-consumer o Direct sales (online retailing) o Marketing and advertising o Customer services o Financial services o Product distribution

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 11 What is B2C E-commerce? A simple definition: Includes the online marketing, distribution, sales and purchase of products and services: companies publish their catalogs online, and consumers order from the catalogs, make payments, and perhaps track the status of their orders online. In the typical scenario a customer uses a Web browser to access a Web- based virtual store through the Internet and pays using a credit card.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 12 Requirements for B2C (e-tailing) o Payment, Trust and Security infrastructure o Banking services to merchants (MOTO,SET) o Merchant Web site with online catalogue o Goods and services which can be sold online o Information technology (hardware, software) o Legal, policy and regulatory framework o Services and logistics (shipping/delivery for physical and digital content)

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 13 Payment, Trust and Security o Confidentiality of transactions Encryption o Who am I dealing with? Authentication o Message integrity Message Digest o Non-repudiation Digital Signature o Evidence of authenticity X.509 Certificate o Trusted third party Certification Authorities o Secure communication SSL, IPsec o Secure payment systems SSL-based, SET, o Interface to banks ISO8583, CyberCash

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 14 Everything … must be accessed in money; for this enables men to always exchange their services, and so makes society possible. Aristotle ( B.C.)

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 15 Banking Services o Merchant local bank account o Acquiring banks for desired card brands (Visa, MasterCard, Amex, Diners) o Mail Order Phone Order (MOTO) or SET contract with partner banks o Host/Network enabled vPOS terminal services for connecting to processors

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 16 Merchant Web Site Payment, Trust and Security technologies and services Merchant Bank account Credit Card Acquiring bank Merchant Business MOTO contract

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 17 Merchant Web Site o Web site accessible via the Internet o Online catalogue containing items description, price, store policy and payment and shipping options o Order capture and completion services (tax, shipping/handling,online delivery for digital content) o Shopping basket features, catalogue management o Advice of order services ( , fax) transactions o contact for pre and post transactional services

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 18 Goods and Services o Legal to export/import at source/destination o Price range within limits for payment type o Weight and volume to facilitate delivery o Reasonable shipping and delivery cost o Of interest to potentially large consumer base o Easy to package and preserve as final product

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 19 ICT requirements o Local support services for hardware and software o Information technology support for customer services o Environment for application development and integration (middleware, application integrators) o Applications, systems and network monitoring, management and support o BackOffice systems for inventory, catalogue management, billing and invoicing o System, host and network security services o Trust services for merchant and customer authentication.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 20 Legal Requirements o Policies for the and use of digital signatures o Regulations for Certification Authorities o Electronic contracts and notarization o Privacy and confidentiality laws o Data and consumer protection policies o Procedures for parties in e-transactions o Intellectual property and trademark laws o Laws and regulations for settlement of disputes

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 21 Potential benefits to DCs o Enable businesses to trade at internationally acceptable prices by providing access to the global marketplace o Provides a low-cost channel for the selling, marketing and distributing goods and services o Provides 7 x 24 storefront availability (any hour of the day, any day of the year) o Reduces the cost of processing transactions, orders and payments including credit and collection expenses

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 22 Potential benefits DCs o Could provide the need to learn new technologies and build local capacity to maintain services and infrastructure o Could act as a stimulus for the development of the information and communication technology (ICT) infrastructure o Improvement in the ICT infrastructure could facilitate access to health and educational information available via the Internet o Increase trade with developed countries and attract foreign investments

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 23 Potential benefits for customer o From the comfort of home or office o Any hour of the day, any day of the year o Access to worldwide choices o Reduced acquisition times and cost o Access to extensive marketing information on products of interest o Online test of digital products (e.g., CD) o Immediate download of digital products o Use of intelligent agents for correct order

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 24 B2C E-commerce sites o Banking: o Books: o Cars: o Clothes: o Investment: o IT: o Digital content: o Travel: o Wine:

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 25 Business to Business E-Commerce

The Trading CommunityBuyers Sellers MarketSite 3rd Party Services OtherCommunities

Vision for B2B e-Maketplace Any company trading with any company Automation of the entire trading process Interoperable set of Global Marketplaces

Impact on FSPs o Financial Service Providers (FSPs) are Buyers o New Revenue Opportunities as Market Maker o Route to Market for Electronic Financial Services

What is e-Procurement? Automation of the ENTIRE (indirect) supply chain from product selection through receipt. selectrequisitionapprovestatusreceive Requires real-time interactivity with trading partners worldwide

E-Procurement Opportunities Reduced Cost of Goods… Reduced Cost of Goods… Reduced Administration.. Reduced Administration.. Shorter Cycle Times…….. Shorter Cycle Times…….. Inventory Reduction….…… Inventory Reduction….…… Automating the Entire Indirect Goods & Services Supply Chain can Deliver: 3 - 5% or More £50 to £4 From 7 Days to 2 Days Reduced or Zero-Stock

A new sales channel More on-contract buying Increased Revenue Lower inventory Less rework Fewer returns More Accurate Order entry Customer service Invoicing, Accounts Receivable Reduced Costs Content in existing form Sharable normalization One update for trading community Efficient Operation Supplier Return on Investment Supplier ROI is Critical

Substantial ROI for both parties BuyersSuppliers Automate Process Reduce Costs per Transaction Increase Revenue per Customer Eliminate Maverick Purchasing Gain New Customers Global economies of scale A WinWin Solution

The Portal Model o Single Point of Business Integration For Buyer and Supplier o Shared Content Mapped from multiple formats o Real-Time Interactivity o Commerce Platform Complex B to B process support o Single Plug In for New Services o Totally Open Applications, Trading Communities and Companies of All Sizes Buyers Sellers MarketSite

Identify Needs Find Sources Build Trust Configure Solution Determine Value Negotiate Terms Make Transaction Fulfilment Receive Support Retire/Upgrade Identify Customers Find Decision Makers Build Trust Offer Solution Present Value Negotiate Terms Make Transaction Fulfilment Provide Support Retire/Upgrade A Portal Supports the Entire Breadth of Trading Relationship Process The Buying ProcessThe Selling Process Portal Role Business to Business Marketplace MarketSite Portal

Portals Drive the Network Effect Maximum participation drives network effect and maximum value for everyone in the trading community: o Buyers o Suppliers o Service Providers Number of Users Economic Value

Rise of the Internet Market Maker o Turn your supply chain into a revenue generation opportunity o Proactive influence on power balance in electronic supply chain o Leverage your industry domain expertise into strategic e-commerce value o Examples: GM etc, Shell, Boeing etc, TD Bank, Banamex, Citigroup YourPortal

Traditional Lines of Business o Cash management services o Credit insurance o Physical insurance o Letters of credit and bills of exchange o Payment guarantees o Payment processing o Asset based financing e.g. factoring, invoice discounting, forfeiting and financing based on bills of exchange o Leasing o Loans

New Financial Services o Identity services o Information services based on identity delivery address credit rating o Advice and guidance services tax legal jurisdiction

The Global Trading Web Global Trading Web Connect once to trade with anyone,anytime, anywhere in the world.

© ITU Electronic Commerce for Developing Countries (EC-DC). All Rights Reserved. Page - 40 Electronic commerce promises to be a major generator of new and skilled jobs and growth in the next century, through improvements in business productivity, growth in consumer transactions, and development of the supporting information technology infrastructure. Early adopters can quickly establish market dominance and help shape evolving rules as well as business and consumer behavior. … But there are several challenges and pitfalls…