Let us talk about E-Contracts (II): E-Commerce Business Models

Without any argument, new communication systems, especially digital payment technologies, have supplanted the snail-paced conventional systems of communication and transactions. Business communities and consumers are increasingly using digital means to send and receive information in electronic form. The reason is that the information technology (IT) has abridged the time and distance factor in transacting business. Nowadays, inflow and outflow of information have become instant and momentary. Therefore, one principal contribution of IT is in the field of contract-formation.

Electronic contracts (e-contracts) are born out of the need for speed, convenience and effectiveness. The law has already recognised contract-formation using facsimile, telex and other similar technologies.

Let us envision a contract between an Indian businessman and an English businessman. Away from digital means, one option is that one party first draws up two copies of the contract, signs them and sends (through postal or courier service) them to the other, who, in turn, signs both copies and sends one copy back. The other option would be that the two parties meet somewhere and sign the contract. However, within the digital world, the whole process can be completed in seconds, with both parties simply affixing their electronic signatures to the electronic copy of their contract. There is, thus, no need for tardy dispatching mechanism (postal or courier services) and/or supplementary travelling costs in such a situation.

Before proceeding with the E-Contracts, let us have a brief look at the basics of the business model and kinds of transactions under which e-contracts are mostly used.

E-Commerce Business Models

Electronic commerce (e-commerce), in a very general sense, refers to buying and selling products and services over the internet and the World Wide Web (www). E-commerce, however, in actuality, includes all forms of commercial transactions involving both—organisations and individuals—that are based upon the electronic processing and transmission of data including text, sound, and visual images; and involves transactions over the internet as well. In addition, e-commerce also refers to the effect that the electronic exchange of commercial information may have on the institutions and processes that support and govern commercial activities.

There are several ways of looking at e-commerce:

(1) From a communications perspective, it is the ability to deliver products, services, information, or payments via networks like the internet.

(2) From an interface view, it means information and transaction exchanges: business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), and business-to-government (B2G).

(3) As a business process, e-commerce means activities that support commerce electronically by networked connections. For example, business processes like manufacturing and inventory and business-to-business processes, like supply chain management is managed by the same networks as business-to-consumer processes.

(4) From an online perspective, e-commerce is an electronic environment that allows sellers to buy and sell products, services, and information on the internet. The products may be physical, like cars; or services, like news or consulting, etc.

(5) As a structure, e-commerce deals with various media: data, text, web pages, internet telephony, and internet desktop video.

(6) As a market, e-commerce is a worldwide network. A local store can open a web storefront and find the world at its doorstep—customers, suppliers, competitors, and payment services. Of course, an advertising presence is essential.

Types of Online Transaction

Online transactions can be recognised and categorised in four ways:

Business to Customer (B2C)

It is the transaction where a business entity on one side and an individual customer, on the other hand, conduct business. The expression B2C has been commonly used to refer to a sale by a business enterprise or retailer to a person or ‘consumer’ conducted through the internet. For instance, Flipkart.com which provides facilities for customers to buy goods from the website—is an example of a B2C e-business. In this situation, the website itself serves the purpose of a shop. The B2C transactions can be in relation to both—tangible and intangible products. The focal point of this e-commerce application is on the consumer’s use of a merchant’s web storefront or website. Consumers from any place can browse and order for goods and services online at any time. B2C is an electronic equivalent of the conventional mail-order or telephone-based ordering system.

Business to Business (B2B)

It is the type of e-commerce where there is an exchange of products, services, or information between businesses using the internet, rather than between businesses and consumers. Alibaba.com is the prominent example of B2B model.

Customer to Business (C2B)

Customer to Business (C2B), also known as Consumer to Business, is the most recent e-commerce business model, where individual customers offer to sell products and services to companies that are prepared to purchase them. It is the opposite of the traditional B2C model. Example of this model is blogs or internet forums where the author offers a link back to an online business facilitating the purchase of some product (like a book on Amazon.com), and the author might receive affiliate revenue from a successful sale.

Customer to Customer (C2C)

It is the transaction which involves two or more customers with business entity merely providing a web-based interface to facilitate the consumer to consumer transactions (B2C). The expression C2C generally refers to the sale of a product pertaining to a consumer to another consumer either directly or through an intermediary exclusively dedicated for this activity. One best example of C2C website is Ebay.com, which is an online auction site, where any person can buy and sell, and exchange goods and articles using this website. This website provides the web-based interface (i.e. the website with its database and other functions) and users can transact freely with each other. Another example is Amazon, which in fact, acts as both a B2C and a C2C marketplace.

Recommended Readings

  • Alan Davidson, The Law of Electronic Commerce, Cambridge University Press, (2009).
  • R K Singh, Law Relating To Electronic Contracts (2017)

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