The Internet Economy (also sometimes called the "New Economy" or  the "Digital Economy" is being driven by the linking of individuals and organisations through the technology of the Internet. E-commerce creates new challenges to nearly all branches of the economy. That means the use of this technology and not only being present in the Web with an own website.

What Is E-Commerce?

Electronic commerce is the process of two or more parties making business transactions via computer and some type of network. This includes B2B (=business to business) transactions, online retail and the digitalisation of the the financial industry, too. Furthermore it also includes all the steps which occur in any business cycle, such as placing ads, completing invoices, and providing customer support. E-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers. This process, called Electronic Data Interchange (EDI), nearly replaced paperwork and human intervention. It was, and is, the foundation of electronic commerce. Today, electronic commerce increasingly refers to business conducted over the Internet. But the e-commerce, which you hear about on the radio, see on TV, and read in the papers and online refers to online retailing - using the Web to sell goods, services, and information to consumers. It will reach 20 % of the market share or even more. Online retailing, the typical web-shopping, began five years ago, and was pioneered largely by Internet companies that didn't perform traditional retailing, such as Amazon.com and CDNow.

Electronic commerce is actually a management issue, not just a technology issue. Therefore, the e-commerce strategy must be consistent with the business. It is important to realise that e-commerce will have a major influence on how business itself works in the future, and is not just another new channel for marketing products and services.

Webvertisements

To sell goods or services, advertisement is the first step to making them available to the public. The Web is a new way of presenting information to the public via the Internet, therefore advertising has to be redefined for it, too. Internet-advertising even seems to be the solution for the biggest problem of the industry of advertising: How can you reach the attention of the people between 25 and 35 with a high income?

However, the mode of advertising has so far been similar to that used on TV and in newspapers. The most popular way of advertising in the Web are banners, it's the most effective way of promoting a website. The structure of this direct marketing is simple: A banner, consisting of the textinformation and animated pictures, leads the webber by clicking on it directly to the website of the canvasser.

The advantage is obvious: Banners are much cheaper than conventional advertisements. In addition  a banner can tell WHO, WHEN and HOW someone reacts on an advertisement, which is very important for being even more successful on the Web.

Austria's webvertising for 1999 was about 10 million US$, that's under 1 % of the whole advertising-budget, this year it will rise to 35 million US$.

In the year 2004 33 Million $ should be invested in webvertising, which is about 5 % of the whole advertising-budget.

A recent problem for webvertiser are webwashers, programs that filter most advertisements on websites. A webwasher can be downloaded from the Internet without paying for it (freeware like many other programs, too), so everyone has the opportunity to avoid most webvertisements.

Viral Marketing is a new trend in online-marketing: PlanetRx.com, an online-drugstore from the U.S. was able to raise the number of customers with the promotion-strategy "3 for free" or "Tell a Friend". Viral Marketing is a cheap way of gaining new customers, it's original and quite profitable.

Benefits [=Nutzen] Of E-Commerce

Anytime, Anywhere - Constant change is a must and instant interactivity is highly valued. The marketplace is real-time and webbers expect it to be available for basic interactions 24x7, that means 24 hours per day, 7 days per week.

Unlimited Marketplace - Business can connect with customers around the world, competition that was once local is now international.

Online fast updating - Companies, who do business on the Web try to have the newest e-catalogues on the Web as possible (the comparison to traditional print catalogue is obvious). Constantly updated product information, price lists and product support information are standard.

Lower cost - Internet marketing is one of the lowest cost methods of marketing products. Companies can reach a world-wide audience at a fraction of the cost required by traditional methods.

Secure Payment Systems - This is a very important topic in e-commerce, because about 50 percent of online-shoppers feel uncomfortable in providing personal information over the Web. But recent advancements in payment technologies allow secure payment online.

Which Products Sell Best Online?

The target market on the Web are people from 25 to 45, who are mostly well-informed about the choices they have in the Internet. The first group of bestsellers are products like books, CDs, PCs and equipment for it, that means products, which people are informed about already. The e-shopper has the possibility to browse through the Web to search for the cheapest seller. The second group of products are the ones who were ordered by phone, after the consumer has browsed the Web site.

Online travel agencies are quite successful, too, and one of the latest news come from the Alaska Airlines, who want to introduce e-ticketing. All the customers would need for it would be a software for the PC, so they could do the whole check-in-process at home.

In America already 75 percent of new car dealers are online and the number is expected to grow in the future. Primarily they are focusing on disseminating information on their websites, rather than actually selling cars. Also consumers can locate dealers through a dealer locator service that way.

In Austria a second-hand car-exchange exists, and since January 1, 2000 there's even a website for new cars (www.cybasar.com).

Webshops

E-commerce is a new way of sale for small companies, too. Often it's quite expensive to buy the hard- and software inclusive of installation and programming that can cost more than 70.000 US$. But renting this equipment can be a good way to start doing business on the Web.

Webshops like the Yahoo! Store provide low cost e-commerce solutions: All you have to do is to fill out online forms with the most important information about your store, then you can already start doing business on the Web.

Problems In E-Commerce

Reality shows us that most companies are having problems following through on their online sales with prompt and efficient delivery. Even 20 percent of people who bought products online reported problems with the purchasing experience. Half of those said they had ordered products that were not delivered, while a quarter could not reach the seller's customer service department.

Just because a particular product sells well in retail stores, it is easy to think that it will sell well online, but it is not that way.

Companies are not competitive, because they simply take over old strategies. Often they have too high logistics-costs, but especially the ability of supplying and the delivery period are the most important things in satisfying the customers needs. Sellers will be forced to hire other services for this winding up, if they want to be successful in e-commerce.

Also most e-commerce models were built on the universal model in e-commerce, the Amazon.com-model, which called for no interaction between the company and the customer. But indeed even 90 percent of online shoppers want some sort of human interaction in the process and online stores that employ interactive tools see average sales orders increase by 15 percent.

A common mistake is to attempt to develop a site that turns out to be too complex to ever be implemented. Often, well-intentioned projects never get off the ground because of unrealistic plans.

It has been noted that international customers are three times more likely to buy a product if it is available and communicated to them in their own language. English is the language most widely used over the Internet. But to truly penetrate an international market, one has to communicate in the customer's language.

Security In E-Commerce

The lack of user confidence in e-business transactions is the greatest impediment obstructing the growth of e-commerce. Security with electronic datatransfer is possible through secure transcription, coding and digital certificates.

A growing number of organisations are building public key infrastructures to solve e-business security issues. A public key infrastructure (PKI) will protect data trough encryption and authenticate users through a certificate-based framework of digital signatures.

A PKI is a system of certification authorities (CA), registration authorities, certificate management services and directories: The CA establishes security policies and issues digital certificates to users. Registration authorities register users into a particular domain. A certificate management system is used to manage certificate lifecycles. Directories contain the public encryption keys and certificates that are used in verifying digital certificates, credentials and digital signatures. However, implementing a public key infrastructure is not enough. Once a digital certificate is issued to an individual or organisation it must be protected in much the same way you protect a passport or your credit cards.

Storing digital certificates on the LAN or on your computer makes it fairly easy for others to copy the certificate and then use it to impersonate you.

Storing multiple digital credentials such as certificates, private keys, logon IDs and passwords on a smart card solves a number of the security and issues. Smart cards are an ideal secure storage device. These are plastic cards, which have a chip inside and which will be used in mobile phones or computers. They are simple to use and almost impossible to duplicate. A user merely inserts the smart card into a reader, enters a PIN to unlock the card, the credentials are presented to the application and access is granted. Smart cards make it easy to carry digital credentials and use them with other computers at home, in remote offices or on public access terminals.

Businesses and consumers are attracted by the promise of the Internet but are also facing the realities of security and authentication. Companies that utilise smart card and public key infrastructure (PKI) technology to address e-commerce security issues will create user confidence in electronic business transactions will become the driving force behind the widespread growth of the electronic economy.

The Digital Signature

In Austria the digital signature, e-signature, is treated equivalent to the handwritten signature since January 1, 2000 (SigG). At the beginning of October 1999 the Austrian Chamber of Commerce already ordered 10.000 A-Sign certificates at the Datakom, who acts as the certification authority, to accelerate e-commerce in Austria. The European Union will give its members a time of eighteen months to do the same. Surely that will help the electronic correspondence and especially the e-commerce to boom even more.

The Year 1999 /Today's Situation

There are about 100 millions Internet-users all over the world, nearly seventy percent of them are from the U.S. Therefore of course America is the leading country in e-commerce: Even ¼ of America's population buys online regularly, mostly people between 25 and 45 with a yearly income of 14.000$ or more. Although the costs for Internet are even sixteen times higher than in America, Europe is starting to do better, especially Germany (leading with 6.3% e-shoppers), Great Britain (with 5.9%) and France are doing well. In Austria only 13 % of the population are even interested in online-shopping.

America's turnovers in e-commerce are about 6.3 million US$ this year. In the year 2003 there will be even 250 millions online-shoppers all around the world, that's five times more than it is now.

The year 1999 didn't start the best way for e-commerce, but till the end of the year it got better, at last the year's holiday traffic was up to 37 % over the year 98. The top categories remained unchanged: Primary categories are still computers, books, toys CDs and videos. Therefore Amazon.com was the reigning king again, with about 3.6 million visitors a week.

The Future Of E-Commerce

Until now e-commerce meant websites, online shops and perhaps a kind of customer relationship management, but e-chain-management will show e-commerce a new way: Reaching customers and selling products to them easy and quickly won't be the most important thing, but the enlargement of the electric business connections to suppliers, services and logistic partners.

The key word for that is the integration of all business processes. That sounds quite easy, but in real life it will produce a wide change of internal process.