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E-commerce: Exactly What Is It?

Dr. Jerry Allison is founder of Kairos Advising and Consulting and has worked with businesses and teaching students business for 30+ years.


A concise definition of e-commerce is developed in this article. This definition agrees with the research definitions presented and provides a more solid basis of measurement for research. The e-commerce definition review examines e-commerce along two different dimensions: an electronic economic transaction and an exchange of value through electronic means. A third dimension, technology, must also be incorporated into the definition since technology underlies all of e-commerce.

E-Commerce Definition Review

When viewing the first dimension of e-commerce as an electronic transaction, one finds the definitions to be similar. The broadest definition is that e-commerce refers to any transaction that is handled electronically1. Though not stated explicitly, these transactions are commercial transactions where economic value is exchanged. This definition is consistent with Lo & Everett2 who suggest that e-commerce consists of any commercial transaction. Both authors imply that commercial transactions involve the transfer of value between two parties. The preceding views coincide with other definitions, namely, electronic exchange transactions3 and electronic exchanges of value4. Implicit in these views is that e-commerce includes electronic transactions that are conducted through some form of automated, electronic network.

A second dimension of the e-commerce definition is an electronic exchange of value. Some definitions only view the transaction as an exchange5 acceptable to all parties involved. While some authors incorporate exchange of value in the definition, others also include the exchange of ownership6. A few speak of the transference of value through electronic means7. Nevertheless, the transfer of value may be an integral part of e-commerce. Transfer of economic value is a broader concept than ownership. Consider a web site that supplies information to the general public. Ownership in the information has not changed hands. However, both parties receive value. The user receives information with utility and the web site owner gets revenue.

The third, and arguably most important, dimension of e-commerce is technology. The creation of computers and the development of sharing data through communication lines are at the heart of e-commerce. While many individuals consider only the Internet when speaking of e-commerce, using e-commerce to conduct business is much more extensive. Firms such as Coles Meyer set up electronic data interchanges (EDIs) for the purpose of replenishing inventory efficiently and quickly8. But beyond material acquisition, this technology allows the timely collection of information previously not possible. A firm employing e-commerce has the capability of collecting microeconomic sales data that could anticipate future purchases. E-commerce encompasses the entire realm of computing that involves transfer of value, transmission of data, and collection of data for the purpose of transacting business.


E-Commerce Definition

This paper makes the following definition for e-commerce: the electronic contracting for the exchange of value through the use of computing and communication technology. This definition not only incorporates the major aspects of the above-mentioned definitions but also is applicable to current studies. The major themes of electronic contracting, the exchange of value, and automation found in other definitions are included. This definition also confines e-commerce to the transaction level and, importantly, is consistent with other literature that provides definitions of e-commerce9.

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1Sterrett, C., & Shah, A. (1998). Going global on the information super highway. SAM Advanced Management Journal, 63(1), 43-48

2Lo, W. C., & Everett, A. M. (2001). Thriving in the regulatory environment of e-commerce in China: A Guanxi strategy. SAM Advanced Management Journal, 66(3), 17-26.

3Wood, M. (2001). Prentice Hall's guide to e-commerce and e-business. Upper Saddle River, NJ: Prentice Hall.

4Senn, J. A. (2000). Electronic commerce beyond the "dot com" boom. National Tax Journal, 53(1), 373-380.

5Oelkers, D. B. (2002). E-commerce: Business 2000. Mason, OH: South-Western.

6VanHoose, D. (2003). E-commerce economics. Mason, OH: South-Western.

7Rosen, A. (2000). The e-commerce question and answer book: A survival guide for business managers. New York, NY: AMACOM.

8Johnston, R. B., & Mak, H. C. (2000). An emerging vision of Internet-enabled supply-chain electronic commerce. International Journal of Electronic Commerce, 4(4), 43-59.

9Pillutla, A., & Allison, J. (2002). E-commerce 1.0: Nature of competition and suggestions for effective strategies. Paper presented at the Strategic Management Society, San Francisco, CA.

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