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IT 204

E-Commerce

TU BBM · Semester 7 · BBM curriculum effective from 2021

Requirement
elective
Credits
3
Study Guide
8 units available

Chapter notes

Authoritative study guide across 8 syllabus units

Open a unit to read its study notes.

Unit 1: Introduction to E-Commerce· 3 LHs· ~4 marks

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Difficulty: ★★★ | High-yield focus: Master definitions of E-Commerce, Ubiquity, and Disintermediation in Part 1. Key exam mastery: Diagram the 8 Unique Dimensions of E-Commerce Technology, contrast Traditional Commerce vs E-Commerce in Part 3, and solve the Disintermediation Cost Reduction ladder in Part 4.

Part 1: Core Concepts (2 Marks)

  • ★ E-Commerce: Digitally enabled commercial transactions between and among organizations and individuals conducted primarily over the internet and the World Wide Web.
  • ★ Ubiquity: An e-commerce technical dimension meaning commercial availability everywhere, at all times, freeing consumer transactions from temporal and physical marketplace boundaries.
  • Digital Disintermediation: The displacement of traditional supply chain market intermediaries (wholesalers, distributors, brokers) by direct digital communication between producers and consumers.

Part 2: Structural Frameworks (10 Marks)

The 8 Unique Technical Dimensions of E-Commerce (Laudon & Traver)

  1. Ubiquity: Available everywhere from desktop to mobile screens 24/7/365.
  2. Global Reach: Seamlessly crosses national cultural and geographic boundaries.
  3. Universal Standards: Shared global internet technical standards (TCP/IP, HTTP) lower market entry costs.
  4. Information Richness: Video, audio, and textual messages can be delivered simultaneously to vast audiences.
  5. Interactivity: Two-way real-time communication between merchant and consumer.
  6. Information Density: Vastly increases total amount and timeliness of information while lowering search costs.
  7. Personalization / Customization: Dynamically tailoring marketing messages to individuals based on browsing history.
  8. Social Technology: Decentralized user-generated content and social network sharing.

Part 3: Distinction Tables

Basis of Comparison Traditional Physical Commerce E-Commerce
Location & Hours Physical retail premises; restricted by geographic proximity and store hours. Ubiquitous; accessible globally 24 hours a day on connected mobile devices.
Information Asymmetry High asymmetry; merchants possess superior pricing knowledge over consumers. Low asymmetry; consumers utilize price-comparison engines to find best prices.
Transaction Costs High search, travel, document processing, and physical shelf-space costs. Minimal search costs and near-zero marginal digital distribution overhead.

Part 4: Worked Problems & Exam Traps

★ Disintermediation Economic Payoff Calculation

Problem: A hand-woven textile manufacturer in Pokhara produces hemp backpacks with a factory manufacturing cost of NPR 800 per backpack.

  • Traditional Channel: Sells to Distributor for NPR 1,200; Distributor sells to Retailer for NPR 1,800; Retailer sells to Consumer for NPR 2,500.
  • E-Commerce D2C Channel: Manufacturer builds an online storefront; sells directly to consumers for NPR 2,000. Packing and courier shipping costs are NPR 250 per backpack; payment gateway fee is 2% of selling price; digital advertising cost is NPR 200 per order. Calculate: (1) Consumer price savings under e-commerce, (2) Manufacturer unit profit in traditional channel vs e-commerce channel, and (3) Percentage increase in manufacturer profit.

Solution:

  1. Consumer Price Savings:

    Traditional MSRP=NPR 2,500\text{Traditional MSRP} = \text{NPR } 2,500
    E-Commerce Direct Price=NPR 2,000\text{E-Commerce Direct Price} = \text{NPR } 2,000
    Consumer Savings=2,500−2,000=NPR 500 (20.0% Savings)\text{Consumer Savings} = 2,500 - 2,000 = \text{NPR } 500 \text{ (20.0\% Savings)}

  2. Manufacturer Unit Profit Comparison:

    Traditional Profit=Selling Price to Distributor−Factory Cost=1,200−800=NPR 400\text{Traditional Profit} = \text{Selling Price to Distributor} - \text{Factory Cost} = 1,200 - 800 = \text{NPR } 400
    E-Commerce Gateway Fee (2%)=2,000×2%=NPR 40\text{E-Commerce Gateway Fee (2\%)} = 2,000 \times 2\% = \text{NPR } 40
    E-Commerce Total Cost=Factory (800)+Shipping (250)+Gateway (40)+Ads (200)=NPR 1,290\text{E-Commerce Total Cost} = \text{Factory (800)} + \text{Shipping (250)} + \text{Gateway (40)} + \text{Ads (200)} = \text{NPR } 1,290
    E-Commerce Profit=2,000−1,290=NPR 710 per backpack\text{E-Commerce Profit} = 2,000 - 1,290 = \text{NPR } 710 \text{ per backpack}

  3. Manufacturer Profit Increase:

    Incremental Profit=710−400=NPR 310 per unit\text{Incremental Profit} = 710 - 400 = \text{NPR } 310 \text{ per unit}
    Percentage Increase=310400×100=77.50%\text{Percentage Increase} = \frac{310}{400} \times 100 = 77.50\%

TU Exam Trap: E-commerce does not eliminate all intermediaries. While traditional wholesalers may be eliminated, new digital intermediaries emerge (e.g. digital payment switches, courier delivery aggregators, search ad networks). This process is known as re-intermediation.

Students lose marks here because they claim e-commerce completely eliminates all intermediaries without acknowledging the rise of new digital platform intermediaries.