Significant E-Commerce Growth - Essay Example

E-commerce is gaining momentum in the current global market. E-commerce coupled with information technology (IT) is becoming the current trend and in maritime industry, it is changing the ways things are conducted. In United States, e-commerce is growing at a steady rate. In 2000, sales from e-commerce were $27.6 billion and in 2011 the sales from e-commerce were $46.0 billion. The major drivers of ecommerce are technological factors, political factors, social factors and economic factors. The impact of e-commerce on maritime is significant; it has affected the physical distribution systems and the mode and speed of business transactions. EDI is one of the latest technologies being used in the maritime industry. E-Commerce and IT / Maritime Industry Introduction E-commerce growth is significant in most countries, and in particular, the U.S. Interconnected with IT, it has affected the way and the speed of business transactions. Although the process is beneficial to the business, there are many changes that have to be made in the adoption of this technology. The paper will explore the growth and impact of e-commerce and IT on the maritime industry. Definition of Key Concepts E-Commerce E-commerce (electronic commerce) is defined as the continuous application of communication and information technology from its point of beginning to its endpoint along the whole value chain of business practices performed electronically and intended to enable the achievement of a particular business goal. These practices may be complete or partial and may entail business to business, business to consumer or consumer to business transactions (Basu 2007, p15). Information Technology National Oceanic and Atmospheric Administration (n.d., par. 7) defines information technology as any interconnected system or equipment or a subsystem of equipment that is utilized in the automatic procurement, storage, management, control, switching, transmission, manipulation, movement, display, interchange, or the reception of information or data. Information technology also entails ancillary equipment, firmware, software, computers and similar services (supporting services included), procedures, and other related resources. Networks A network contains two or more computers that are connected in order to distribute or share information (such as CDs and printers), permit electronic communication or exchange files. The computers on the network can be linked by telephone lines, satellites, cables, radio waves, or infrared light beams. There are two types of networks and they include local area network (LAN) and wide area network (WAN) (Florida Center for Instructional College of Education 2009, par. 1). Internet Internet is a network of disk drives, printers, computers or other devices that are connected in a network topology which permits the devices to communicate (American Heritage Dictionary 2006, p165). It is also defined as the matrix of networks that connect millions of computers (workstations, supercomputers, workstations, mainframes and handheld computers). A standard set communication protocols is used in internet and it permits any computer that is equipped with the basic hardware and software tools to communicate with each other through the internet. The internet is utilized for file transfer, remote login, email and it is the basis for www (World Wide Web) (American Heritage Dictionary 2006, p166). Evidence of Growth and Current Level of E-Commerce Activities In 2007, US online retail reached 175 billion U.S. dollars and it is estimated to grow to 335 billion U.S. dollars by the year 2012. B2C (business to consumer) is doubling its digit every year in terms of its growth rate. This is in part due to the online shoppers who are less sensitive to the intense economic conditions affecting the average US consumer and in part due to the shifting away from the stores (Strategic eCommerce Solutions 2011, par. 1). A close analysis of ecommerce in United States indicates a significant growth in the past years. The total sales through ecommerce have significantly grown from 27.6 billion U.S. dollars in 2000 to 143.4 billion U.S. dollars in 2009, a compound growth rate of 20.11% per year. However, the growth in total of ecommerce sales is steady though slowing down (Steve 2010, par. 4). In 2011 (the recent data released by the Census Bureau of the Department of Commerce), estimated the U.S. retail ecommerce sales to be $46.0 billion (the first quarter of 2011); this represents an increase of 3.4% from the 4th quarter of 2010. (Davie, Weidenhamer and Winters 2011, p1). According to the bureau, “E-commerce sales are sales of goods and services where an order is placed by the buyer or price and terms of sales are negotiated over an Internet, extranet, Electronic Data Interchange (EDI) network, electronic mail, or other online system. Payment mayor may not be made online” (Davie, Weidenhamer and Winters 2011, p2). Themes/Drivers Useful For the Understanding of the Changes Taking Place The key drivers of ecommerce are technological factors, political factors, social factors and economic factors. The technological factors are determined by the telecommunication infrastructure (such as internet service providers, ownership, type of services available and the backbone architecture and infrastructure), bandwidth, speed of implementation and development of novice technology by the industry sector, and the access to new technology innovations. Political factors are determined by the government programmes and incentives (the number and type) that support the utilization and innovation of new technology, legislation (restrictive or supportive laws that govern electronic contacts, financial statements and data), and public policies (based on whether the government restricts or supports electronic processes and transactions growth) (Sage 2003, p9). The social factors include number of users online, level of education (that is IT skills and computer literacy), skills of workforce, PCS penetration rate, and culture of technophilia (the ability and willingness to embrace new technology and the rate (speed) at which the technology accomplishes significant mass). Economic factors are determined by the average income, cost of accessing telecommunications infrastructure (that is the pricing rates and structures), innovative business models, economic growth (GDP), the cost of the technology (software and hardware), and commercial infrastructure (that is the advancement of the banking sector) (Sage 2003, p9). Impacts on Maritime, Transport and Logistics E-commerce is of great benefit to the consumers and companies: (a) E-commerce increases the market section from regional to international, (b) it utilizes electronic techniques rather than the use of paper works and this enhances the industry’s competitiveness and efficiency, (c) there is increment of the number of trips and reduction of the average single trip load, (d) the transport system will be affected due to the increased number of trips, and (e) it might minimize the number of warehouses and reduce the cost of stock; this can reduce the price of products and services (Taylor, Tseng and Yue 2005, 1666). Logistics is being affected by e-commerce and this in particular through its consumer to business section. The consequences of e-commerce on logistics are not well known but as it becomes accepted and utilized, the physical distribution systems are also experiencing the change. The new structure is challenging the standard retailing supply chain and the economies of scale (shopping malls and other larger stores) processes. The new system is dependent on the large warehouses that are located outside the metropolitan areas; it is from these areas that the big number of small parcels is transported by trucks and vans to the separate online buyers. Retailing distribution is disaggregated by this system and it reverses the consolidation trend that characterized retailing (Rodrigue 2011, par. 3). In the traditional system, the price of transferring the goods (items of purchase) from the store to home was covered by the shopper; however, e-commerce has integrated this section of supply chain into freight distribution process. The outcome potentially entails more tons-km of cargo transported and more packaging particularly in the urban areas. Thus, the traditional distributions systems are not fit to offer e-commerce logistical needs (Rodrigue 2011, par. 3). Internet Opportunities for Maritime, Transport and Logistics Businesses Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) is among the recent technologies used in maritime, transport and logistics business. It is utilized in the transport sector to control the flow of information and goods involved in the trade transaction using the structured data. Computers that get the tagged data elements are capable of interpreting the information and thus initiating the proper administrative or other transactions made automatically. It is utilized to transfer documents such as bills of manifests and lading, customs declarations, container loading plans, and purchase orders booking instructions. EDI is also used to transmit funds and transfer information to trace and track containers and cargo. EDI solutions are implemented through the installation of EDI software and the solutions are provided by a number of companies (Jaffeux and Perret 2007, p171). UNEDIFACT is the international standard for EDI and it is created and maintained by the UN (United Nations). EDIFACT is the recognized international standard; however, there are many other industry and national data standards. The new standard being developed includes the Extensible Markup Language (XML). The standard (XML) together with the internet has significantly assisted in the reduction of transaction and start up costs in comparison with the traditional EDI systems. Based on web technology and XML, different types of standards have emerged on a more sectoral or general basis. These standards aim at making sure there is automated recognition of the business transactions supported, contracting and processing, negotiation, encrypting and signing contents transferred through the Web, internet governance, and developing online dispute resolution methods. The EDI software can be improved or enhanced to cover things such as security check in the transportation of freight. Security of the cargo being transported is very important and if the software can track the freight in real time, the business can avoid most of the losses associated with the loss of cargo. Real time security check is a great internet opportunity for maritime, transport and logistics business. Other than securing the freight, the software should be capable of protecting the user’s information from cyber-attack since majority of the transactions are performed online. Real time cyber-attack protection mechanism will also be of benefit to the business since no business wants to loss the trust of the potential customers. Thus, real time cyber-attack protection mechanism is a great internet opportunity for maritime, transport and logistics business. Conclusion It is clear that there is a significant growth in e-commerce and in particular the United States. The maritime sector has been affected by these changes in business activities. There are drivers such as economic factors and technological factors that have contributed to the changes associated with e-commerce. There are greater opportunities for the internet on maritime, transport and logistics business such as real time security check and real time cyber-attack prevention mechanism. References American Heritage Dictionary. (2006) High definition: An A to Z guide to personal technology. Boston, MA: Houghton Mifflin Harcourt. Basu, S. (2007) Global perspectives on e-commerce taxation law. Burlington, VT: Ashgate Publishing, Ltd. Davie, W., Weidenhamer, D. & Winters, T. (2011) Quarterly retail e-commerce sales: 1st quarter 2011, Washington, D.C: U.S. Department of Commerce. Florida Center for Instructional College of Education. (2009) What is a network? [Online]. Available from: [Accessed on 15 Aug. 2011]. Jaffeux, C. & Perret, F. (2007) Essentials of logistics and management. Boca Raton, FL: EPFL Press. National Oceanic and Atmospheric Administration. (n.d.) Glossary of section 508 terms [Online], NOAA. Available from: [Accessed on 15 Aug. 2011]. Rodrigue, J. (2011) Logistics and e-commerce [Online], The Geography of Transport Systems. Available from: [Accessed on 15 Aug. 2011]. Sage. (2003) Introduction to e-commerce. Thousand Oaks, CA: Sage Publications, Inc. Steve. (2010) U.S. e-commerce growth 2000-2009 [Online], D. Steven White. Available from: [Accessed on 15 Aug. 2011]. Strategic eCommerce Solutions. (2011) ecommerce growth [Online]. Available from: [Accessed on 15 Aug. 2011]. Taylor, M. A., Tseng, Y. & Yue, W. L. (2005) The role of transportation in logistics chain, Proceedings of the Eastern Asia Society for Transportation Studies, 2005 pp1657-1672. Read More