Electronic Business as Online Selling. Narrowly defined, electronic business means doing business online, or selling and buying products and services through Web storefronts. Products being traded may be physical products, such as used cars or services (e.g. arranging trips, online medical consultation, and remote education). Increasingly, they include digital products, such as news, audio and video, database, software and all types of knowledge-based products. It appears then electronic business is similar to catalog shopping or home shopping on cable TV.

Electronic Business as a Market. Electronic business is not limited to buying and selling products online. For example, a neighborhood store can open a Web store and find the world at its door step. But, along with customers, it will also find its suppliers, accountants, payment services, government agencies and competitors online. These online partners' demands change the way we do business from production to consumption, and they will affect companies who might think they are not part of electronic business. Electronic business will lead to significant changes in the way products are customized, distributed and exchanged, and in the way consumers search, bargain and consume products and services. 

In short, in the electronic business revolution, the greatest effects are on processes. Process-oriented definition of electronic business offers a broader view of what electronic business is. Within-business processes (e.g. manufacturing, inventorying, corporate financial management, operation), and business-to-business processes (e.g. supply-chain management, bidding) are affected by the same technology and network as are business-to-consumer processes. Even government functions, education and social and political processes undergo changes.

Two things make the Internet quite different from any other existing communications media. Unlike broadcasting media, the Internet (1) allows two-way communications and (2) is built around open standards. A two-way communication means targeting an audience and allowing feedback. Broadcasting sends out messages to "no one in particular" and the sender never quite knows who has gotten the message. (What do Nielson and a horde of market research firms do for their living?) An open standard (e.g. TCP/IP) means interoperability and the advantage of a large market and the possibility of integrating one product or process with another.

Both of these characteristics are being challenged.(1) To the WebTV generation, the digital future looks like another version of the passive one-way broadcasting. The "new media" sums up how publishers and media companies view the digital medium. We are so accustomed to "receiving random messages" that we often forget the fact that broadcasting was a 20th-Century phenomenon. Even "interactive television" envisioned by today's media is a way of providing more lively entertainment, offering more information "related to existing contents" (e.g. detailed information about characters, plots, and commercials shown on TV). Multi-channel, digital TV broadcasting may be a model for future entertainment, but it needs to be remembered that it is only one application of the digital communications network. (2) The commercialization of the Internet is forcing businesses to differentiate their products from others by making products incompatible. Unlike the public Internet where standards were open, firms attempt to capture and dominate the market with their proprietary products. In such an environment, TCP/IP would have had a very slim chance of becoming a standard and opening up the digital, networked economy. Whether markets driven by private interests can bring about a better result (e.g., more efficient, technologically superior, etc. system) is still a concern left for argument.

Perhaps telephone networks are quite similar to the Internet (and indeed most Internet traffic goes through telephone networks). But unlike telephones, the Internet's user interface (computers) is much more sophisticated and flexible. Because of its beginning as a public research network, the Internet lacks the pricing regime of telephone companies. The worldwide connection, then, may be considered to have been an accident. When usage-based, long-distance charges are implemented, the Internet may look quite similar to the telephone network.

While today's office business machines are not integrated (e.g. faxed orders have to be typed in on computers), the much-talked-about "convergence" will drive all this equipment into one digital platform, whether it be a computer connected to the Internet and intranets, or a new kind of device capable of interacting with other devices, because that device will prove to be more efficient and productive. (Although, will it be easier to use? That depends on how developers and industry leaders promote interoperability and standardization.)

The electronic marketplace resembles physical markets (the one we know) in many aspects. As in physical markets, components of the digital economy include:

• players (market agents such as firms, suppliers, brokers, shops and consumers)
• products (goods and services;) and
• processes (supply, production, marketing, competition, distribution, consumption, etc.).

The difference is that, in the electronic marketplace, at least some of these components are electronic, digital, virtual or online (whichever term you may prefer). For example, a digital player is someone with an email or a Web page. Purely "physical" sellers may be selling a digital product, e.g. digital CD-ROM. One that sells physical products at a physical store may offer product information online (thereby allowing consumers to "search online"), while production, ordering, payment and delivery are done conventionally. Currently, the emphasis is on the core of the electronic marketplace where everything (i.e. all value chains or business activities) is online. But, if any aspect of your business or consumption dwells upon the digital process, you are already part of the electronic marketplace. That is, almost all of us are already players in the electronic marketplace!

Does the Internet need to provide more security than physical markets? Probably so because the electronic marketplace lacks some elemental safeguards available in physical markets.

For example, buyers have certain assurances about a seller with a retail store, although that seller might be operating a bogus shop that particular moment. But bogus operations are more difficult to recognize on the Internet. Indeed, any online trading partner cannot be sure about the identity of the other person. Technologies and legal frameworks are needed to address such problems, e.g. nation-wide digital IDs.

Here are some cost entities:

• Hardware and software to connect to the Internet
• Web site construction
• Staff to maintain the Web site
• Web hosting and Internet service provider charges
• Online communications costs, e.g., phone lines, ISDN lines, cable
• Support staff for online order taking and customer care
• Marketing of Web site
• Credit card processing

A 'brochure' web site can be built for a few thousand dollars to allow contact and orders by email. This is the minimalist position. At the other end of the scale, Internet startups which rely on attracting millions of web site visitors each month to enable them to sell advertising and other products and services, invest millions of dollars in the enterprise.

How much you spend will depend on the results of a well considered business plan and the estimated return on investment; but be careful, the ROI may have to be calculated over the longer term.

Relationship building is paramount. Savvy Internet users know that if they cannot get good service, which also means an easily navigable web site, they can move on -- and quickly. The Internet is providing customers with growing power and purchasing control. Shopping agents will find the lowest price; scams or poor service will quickly be identified and passed on.

In addition there is still a strong ethic of 'free stuff' on the web. Consumers in particular are looking for free information and services. Providing these aspects is a crucial part of relationship building which will form the basis of electronic Business into the future.

With the potential speed and efficiency of electronic communications and transactions, the nature of inventory is changing. A virtual shop on the web may carry no stock at all, relying on suppliers to fulfill orders; a small, on-site inventory can be replenished with just-in-time manufacturing

Tip: Do not build an e-Business site without adequate backup for responding to email inquiries -- and it better be fast -- say within 24 hours at the outside, and preferably with an auto-response if it is to take longer.

The web brochure:
Simple product description web site. Relies on pushing customers to traditional outlets. Email contact is usually provided for further inquiry.

The enhanced web brochure:
Can take orders by email, fax, phone, including credit card purchases. Product is shipped. Credit card numbers usually are not secure when passed over the Internet.

The e-Business mall site
Places your web site on a web mall (host) with other e-Business merchants and usually includes shopping cart, secure server and credit card processing. A mall may or may not provide credit card authorization and end to end credit card transaction processing.

The e-Business host site
Similar to above except you are an independent entity on the web host and have more control of the setup and software yourself. May or may not provide credit card authorization and end to end credit card transaction processing.

The in-house site
You do the lot yourself, that is, setup and run the web servers, backup, and connectivity in-house. You can be as sophisticated as you like with electronic payment systems and end-to-end secure credit card processing. You need to be well resourced with technical support staff to ensure reliability and efficacy.

The business to business extranet
Business to business e-Business is predicted to be the largest value sector of the industry within a few years. This model may incorporate elements of the EDI (electronic data interchange) standard and will perhaps use XML (extensible markup language) as a content description language (XML-EDI).

E-Business extranets are secure Internet networks, usually with router encryption, over which merchants and customers can exchange order information and funds securely. Integration with the administrative backend may also be a feature. That is, order and financial information will be automatically incorporated into corporate accounts via the web interface.