E-commerce and its situation

2.1.1. E-commerce Definition of E-commerce

In deed, there are a variety of definitions of e-commerce.

Firstly, electronic commerce, or e-commerce, as defined by the World Trade Organization (WTO), is the manufacturing, distribution, advertisement, sale, or shipping of products and services by electronic means. Participants who take part in an e-commerce transaction could be businesses, individuals, groups, goverments, etc.

According to IBM, a multinational computer technology and IT consulting corporation, expresses that e-commerce is a part of e-business, which involves e-franchising, e-mailing, and e-marketing. E-commerce also refers to business transactions in which trading partners use technological means to advertise, negotiate, or exchange goods and services. Those technologies like e-mail, Internet and Extranet could be used to support e-commerce activities (‘‘Introduction to Internet Business’’, 2001).

In business, e-commerce is defined as the use of electronic means and technologies to run commerce (selling, purchase or exchange of products, services or information). The delivery of a product or service might take place either on or off the internet ( Manzoor, 2005). On the other hand, Manzoor (2005) said that the phrase ‘e-commerce’ refers to the process of conducting business in the internet environment. This author has provided a basic definition of e-commerce and showed an overview of this concept.

E-commerce, or electronic commerce, often known as e-business, refers to the exchange of products and services using electronic communication. Although it is said that e-commerce has become aware of in the last decade or so, it has been operating for more than 30 years (Tian &

Stewart, 2018).

Tian & Stewart (2018) suppose that e-commerce is linked to the terms ‘internet economy’ and

‘digital economy’. These two notions are concerned with the use of modern information and communication technologies in economic activity, despite their diverse focus. The internet economy involves economic activities that gain revenue from the internet or internet-related products and services. For instance, even building internet connections for business purposes is part of the internet economy, it is not e-commerce. Digital technology such as computers,

4 software, and digital networks mainly contribute to the digital economy. Generally, the terms

‘digital economy’ and ‘e-commerce’ are the same. But, few digital economy operations are not e-commerce activities. Therefore, while there is a connection between e-commerce, the internet economy, and the digital economy, they still have different points. Nowadays, e-commerce has become the most commonly used term, as well as completely changing the way people do business (Yan & Concetta, 2018).

Characteristics of e-commerce

Q. Nguyen & K. Nguyen (2006) explain that there are four main characteristics of e-commerce.

First of all, parties doing e-commerce transactions do not have to face-to-face with each other.

For example, online consumers most often are invisible to sellers on the internet enviroment.

Secondly, e-commerce transactions take place in a market that has no boundaries (global market), which means online consumers can buy goods and services from any where in the world. E-commerce thus has a direct impact on the worldwide competitive environment. Thirdly, at least three parties are included in e-commerce transactions. They are customers, retailers, and a network service provider like e-commerce sites. Lastly, the market in e-commerce is the information network (Q. Nguyen & K. Nguyen, 2006).

Types of e-commerce

There are commonly three kinds of e-commerce including business-to-business (B2B) and business-to-consumer (B2C), and customer-to-customer (C2C).

Firstly, B2B is a form of transaction among businesses, such as suppliers, distributors, and other relevant partners. While in B2C, businesses provide products or services to customers (Tian &

Stewart, 2018).

In fact, B2B and B2C e-commerces have become more and more popular, accounting from 90%

to 95% of e-commerce all over the world (Kumar & Sareen, 2011). Agreeing with Tian &

Stewart (2018), Kumar & Sareen (2011) state that B2C is more well known but B2B is more profitable. Additionally, their study explains these two concepts in more detail. Both of them use computer networks and various digital technologies during buying and selling processes.

However, the parties involved in business activities are not the same. Buyers in B2C are individuals purchasing items for personal use, while in B2B, buyers are companies purchasing items for business purposes (Kumar & Sareen, 2011).

Nemat (2011) expresses that B2B (business-to-business) concerns transactions that occur between businesses, such as enterprises, manufacturers, wholesalers, or retailers. One of contrasting term is business-to-customer (B2C). Now, e-commerce sites, or social media are chosen by businesses to reach their customers (B2C). The B2C model, or business-to-customer, decribes companies that provide products and services to customers over the internet. B2C refers to all types of sales to customers.

5 The third type of e-commerce is customer-to-customer (C2C). Unlike those above models, C2C refers to a business model that is conducted between individuals. According to Sun & Funnie (2004), in C2C, both buyers and sellers are individuals, and they directly exchange goods and services on the internet via a third party, such as e-commerce software. As there are many different types of companies operating on e-commerce platforms, C2C is pretty insignificant.

Furthermore, C2C, or citizen-to-citizen, is a e-commerce model concerning transactions between consumers that are enabled electronically by a third party. Individuals, or users are usually charged a fixed fee or a commission by the third party. The main feature of the sites is to connect consumers together. And this e-commerce model is predicted to grow in the future as it reduces the management cost of a company, or a business (Nemat, 2011).

Yet, C2C e-commerce is worthy of expectation. Thanks to the internet’s growth, geographical distances and communication are not a big problem in trading now, which causes further development of C2C e-commerce. Hence, C2C is expected to play a strong role in supporting B2B and B2C e-commerce.

2.1.2. E-commerce platform

Generally, Albrecht et al. (2007) describes e-commerce platforms is a collection of technologies capable of handling huge volume of commerce transactions. Those transactions could be e-procurement systems, B2B hubs or company websites. In most case, an online buyer places a product purchase order across e-commerce platforms. This purchasing procedure have three steps. The buyer discover potential sellers on e-commerce platforms, which recommend a list of retailers, or companies that sell the product. Following that, if e-commerce platforms are successful in connecting the buyer to the right seller, they need to negotiate technical and business agreements with the supplier. E-commerce sites, for example, should provide full instructions on how to place an online order to the buyer, while confirm and inform the supplier proccessing the order. Finally, thanks to the user support features of e-commerce platforms, the buyer and the seller execute a transaction with another (Albrecht et al. ,2007).

‘’E-commerce platform’’ (n.d.) states that an e-commerce platform is a software where business activities including buying and selling products or services via the internet happen. On this online platform, sellers and buyers are the two main participants.

According to ‘’Online platforms’’ (2016) , the online platform is similar to an online marketplace where trading activity between sellers and buyers can carry on. In order to gain a commission, it provides ‘virtual space’ to third-party sellers of products and services, along with effective tools to support those transactions. For example, online platforms can minimize transaction costs by bringing diverse sellers together in one area, at the same time giving suitable product recommendations to customers, and providing convenient payment methods. Thus, there are some similarities between online platforms and physical marketplace in terms of characteristics.

6 Besides, SaaS (software-as-a-service) platforms, PaaS (platform-as-a-service) platforms, and on-premises platforms are mentioned as three basic types of e-commerce platforms. While some companies choose on-premises platforms to take more control on their own, SaaS and PaaS platforms are more preferable for small companies or retailers. Compared to PaaS platforms, SaaS platforms without hardware elements, like Shopee, primarily include only software (‘’E-commerce platform’’, n.d.).

Indeed, the online platform plays an important role in e-commerce. Schwarz (2016) suggests that e-commerce software is a cost-effective solution for businesses. It combines all necessary business functionality into a single online platform via a software-as-a-service (SaaS), which helps to optimize business activity and promote customer engagement and satisfaction.

Furthermore, for customers, any e-commerce platform allows them to buy products and services online and a truly efficient one can provide more than that. By running on a standalone and professional platform, customers should have a comprehensive view. They also have access to a variety of shopping channels and stores, as well as a wide range of product options. As a result, e-commerce software enables customers to have more creative experiences (Schwarz, 2016).

To summarize, the above section has clearly shown definitions of e-commerce and some relevant components from different perspectives. Also, knowledge about e-commerce platforms and their types has been provided, which supports the parts that follow. E-commerce refers to trading activities on the internet via commerce platforms between parties. And the model of e-commerce depends on which kind of parties take place in business activity including individuals and businesses.

2.1.3. E-commerce in Asia

The previous part has pointed out the basic understanding of e-commerce and its value to the digital economy. In more detail, the following section will describe how e-commerce performs in the Asian market.

Currently, the rise of internet technology has made a substantial shift in the digital economy. The digital economy is believed to increase efficiency and profitability as the traditional economy has saturated (Yi & Ngo, 2019).

As mentioned above, e-commerce contains exchange activities through the internet, usually products transactions. Yi & Ngo (2019) also agree with this statement. Moreover, by showing actual parameters, they state that within the next five to ten years, many countries are expected to have double-digit growth. The top three e-commerce retail countries with the biggest development are India, Indonesia, and Malaysia. Their annual growth rate is over 20%. The region’s overall e-commerce income has increased from 310 billion USD to over 900 billion USD in the last six years. Under this circumstance, it is expected that by 2025, Asia certainly will be the biggest point in terms of e-commerce all over the world (Yi & Ngo, 2019).

7 As a result, the tremendous expansion of e-commerce is indisputable in Asia. And Asia will become the most promising e-commerce market.

2.1.4. E-commerce in Vietnam

In more detail, in the Asian market, Vietnam is one of the countries which achieve the most significant development in e-commerce. In comparison to other Southeast Asia countries, Vietnam has the highest speed in the retail market, especially online shopping. This leads Vietnam to be ranked second place and achieved a 36% growth rate of the digital economy, following Indonesia with 41% (“Overview of Vietnam’s e-commerce market’’, 2021).

Particularly, one of the components contributing to the success of the e-commerce market in Vietnam is the expansion of big e-commercial sites such as Shopee, Lazada and Tiki. In November 2021, Shopee.vn ranked the first as the most frequented E-commerce and Shopping website in Vietnam, follwowed by Lazada.vn in second place, and Tiki.vn in third place as the leaders of th commerce and Shopping websites in Vietnam (‘‘Vietnam most visited E-commerce and Shopping Websites’’, 2021 November 1st).

In recent years, Shoppee is a comparatively e-commerce platform that has experienced rapid growth and is now available in 15 Asian countries. Lazasa is a well-known e-commerce site in Vietnam, having been created in 2012. It is true that Vietnam is one of the most promissing e-commerce markets in terms of future growth. Another common e-e-commerce site in Vietnm is Tiki. It is not a global e-commerce platform, hence it is available in Vietnam only. Apart from these three largest e-commerce websites, new and rapidly expanding websites such as Sendo and Thegioididong can be evaluated (‘‘Top 3 e-commerce websites in Vietnam’’, 2020 October 30).

There is no doubt that Vietnam has experienced an explosive boom in e-commerce. With a population of 96 million people and continuously rising incomes, Vietnam is truly a potential commerce market. Thanks to the major e-commerce platforms, such as Shopee, Tiki, Lazada, etc, more and more Vietnamese consumers are familiar with online shopping. As a result, there are more opportunities for domestic businesses, consumers, and society, but also more challenges (Duong et al., 2019).

Not only those reasons, but the COVID-19 pandemic is also contributing to an increase in the number of online buyers. Because of the Government's strict social distancing, it is crucial for Vietnamese consumers to be ready for remote shopping without no need to leave their houses, followed by ‘’E-commerce floors’’ (2021). And the article states that with a growth rate of 41%, Vietnam has the most new users from e-commerce platforms among Southeast Asia countries during this time. Despite the COVID pandemic is over, 91% of users are satisfied with using e-commerce sites.

In addition, ‘’E-commerce floors’’ (2021) and ‘’Overview of Vietnam’s e-commerce market’’

(2021) have shown several parameters, including: with 53% of the population buying online,

8 Vietnam’s e-commerce market reached 18% in 2020, achieving 11.8 billion USD, accounting for 5.5% of total retail consumer goods and services sales. In the next few years, the number of people participating in shopping online is expected to increase by 2% more by 2025.

In short, we can accept that e-commerce in Asia in general, and in Vietnam in particular, is an extremely strong and promising market. This is achievable due to the development of the internet, the rise in the number of youthful users, and their ability to keep up with the trend. In addtion, the COVID-19 pandemic is one of the relevant factors in the expansion of the e-commerce market.