II.

Types of E-Commerce

A variety of businesses are conducted online, including retail businesses that sell products to consumers, service providers that sell services to consumers, auctioneers that create a marketplace for products and services, and business-to-business commerce. Retail transactions make up the largest part of e-commerce. Consumers can find computers, automobiles, clothing, books, music, airline and event tickets, food, and just about anything else for sale on the Internet.

A.

Product Transactions

Retail Web sites typically include electronic catalogs that describe and display products for sale. Consumers can search for individual items or randomly browse electronic catalogs, some much larger than their mail order print counterparts. An Internet book retailer, for example, can offer millions of different book titles for sale on its Web site, far more titles than could fit into a store or that could be included cost-effectively in a print catalog.

Many online retailers allow customers to order products and then track the shipment of their order. Some computer manufacturers also allow consumers to choose different combinations of computer components, selecting the combination that best suits their budget and needs. Customers can then visit the company’s Web site to track the progress of their computer purchase as it is being built and shipped. Many online retailers also automatically notify their customers by e-mail when the product has been shipped.

B.

Service Transactions

Other e-commerce businesses offer services. Financial services represent a large segment of e-commerce. For a small fee, online investment brokerages trade stocks on behalf of their clients. Online stock brokerages typically charge customers lower fees than traditional stock brokerages. Other sites provide consumers with a way to research and obtain mortgages and other loans online.

Travel sites offer a method of scheduling airline flights, renting cars, and booking hotel rooms. Travelers can plan all the details of their vacation or business trip, make reservations, and purchase tickets at the same site. Such sites also offer maps, travel literature, and booking information for travelers.

C.

Auctions

Some e-commerce sites specialize in bringing buyers and sellers together, rather than selling products from their own inventories. Online auctioneers provide sellers a way to list and display items for sale and take bids from interested buyers. An online auctioneer may bring together millions of users and feature more than 700,000 items at any given time. In exchange for the auctioneer’s services, sellers pay the auctioneer a small fixed fee and a portion of the proceeds from the sale. Other sites invert this model. These sites enable bidders to name the price they are willing to pay for a particular product or service and then try to find a seller who is willing to meet that price.

D.

Business-to-Business Transactions

Business-to-business commerce represents one of the fastest growing segments of e-commerce. Businesses order supplies and coordinate complicated projects electronically. For example, construction companies use e-commerce to order construction materials and coordinate the work of subcontractors. Before e-commerce, this work was conducted via telephone, facsimile, and regular mail. Subcontractors often lost time waiting for necessary parts to arrive or for another part of the project to be completed. With e-commerce, however, software can automatically track the inventories of manufacturers and suppliers so that both have adequate supplies on hand and no longer need to have excess inventories. Reducing inventories enables both manufacturers and suppliers to lower costs. The labor-intensive method of printing and then faxing or mailing purchase orders can also be avoided because software can create purchase orders and send them electronically.

E-commerce helps trucking and shipping companies match shipments with shippers. Before e-commerce, it was not uncommon for trucks or ships to drop off a shipment and then return to their base of operations empty. This practice was inefficient and cost the trucking or shipping company money. Specialized e-commerce software, along with the Global Positioning System (GPS), enables trucking firms to track the whereabouts of their trucks at all times and make better decisions as to how their trucks are routed so they can respond efficiently and cost-effectively to companies that need their services, dramatically reducing the number of trucks returning empty.