1 Chapter 1 Introduction to E-commerceYang lifan

2 CONTENTS 1.1 E-commerce Development: Past, Present and Future1.2 Concept and Classification of E-commerce 1.3 Basic Program Pattern of E-commerce 1.4 Legal Relationship of Participants in E- commerce 1.5 Impact and Role of E-commerce in the Modern Economy

3 1.1 E-commerce Development: Past, Present and FutureHistory of E-commerce Development Five stages: the beginning, rapid expansion, crisis and stagnation, recovery and rapid growth

4 1. Stage of Gestation and BeginningThe origin of electronic commerce can be traced to the 1970s. Since the 1990s, with breakthroughs in networking, communication and information technology, the Internet has spread rapidly around the world, requiring modern businesses to have a more rapid supply capability, more accurate customer service capability and stronger competitiveness in the market. In this new trend, E-commerce emerged and developed as a new business model.

5 2. Stage of Rapid DevelopmentOn December 16th, 1996, the 85th session of United Nations passed resolution 51/162, and published the UNCITRAL Model Law on Electronic Commerce On April 15, 1997, the European Union proposed the Action Plan of E-commerce of EU On December 14, 1999, Ziff-Davis, in collaboration with 301 top global Internet merchants, IT vendors, consumer and community advocates, analysts, journalists and academics, released The Standard for Internet Commerce, Version 1.0.

6 3. Stage of Crisis and StagnantEntering the 21st century, the Internet economy suffered a heavy blow for the first time. The slump of NASDAQ index and the depreciation of network stock made inventors worry. In particular, the deterioration of the stock price of Amazon Company and the bankruptcy of 8848 other E-commerce companies in China brought more fears to people. Facing the grim situation of E-commerce development, some relevant organizations of the United Nations began to strengthen the development work of E-commerce. In November 2001, the UN Conference on Trade and Development (UNCITRAL) released the E-commerce and Development Report On 24 January, 2002, United Nations General Assembly Fifty-sixth session passed the Model Law on Electronic Signature

7 4．Stage of Recovery On December 9, 2005, the 60th UN International Conference passed the United Nations Convention on the “Use of Electronic Communications in International Contracts” Meanwhile, individual national governments also launched various incentive policies and continued to support the development of E-commerce. By the end of 2006, the total number of Internet users reached billion The development of E-commerce returned to normal in the United States, the largest global E-commerce market. E-commerce sales continued to grow during 2005 and reached US$2400 billion for the year.

8 5. Stage of Rapid Growth From 2007 to now, the World E-commerce maintains rapid growth. The Internet users, the number of websites, E-commerce transactions surged the new highs repeatedly. Although the world economic slowdown, the demand decreases, but E-commerce still shows its tenacious growth. Not only in Asia, Africa and Latin America that the e-commerce transaction grows, but also in Europe and America. Countries like Japan, Russia and Malaysia ,which started relatively late, grows particularly significant. High-speed growth of global e-commerce market effectively delays the global economic recession

9 1.1.2. Current Situation of World E-commerce Development1. General Situation By the end of 2013, the Internet users of the world had reached billion, equivalent to 39% of the world population. The popularization of the internet had reached the rate of 31% in developing countries, the less developed countries had reached 10%. The global mobile phone registered users had reached billion ,closed to the number of the global population. The number of broadband mobile active users had reached billion (see Table 1-1)

10 1) Users of Internet and the number of websites continue to grow.

11 World Internet user penetration from 2005 to 2016It is expected that in 2014 the world  Internet penetration will reach 41.89%, in 2015 it will reach 44.88% World Internet user penetration from 2005 to 2016

12 According to Netcraft’s statistics, by August 2014 they received responses from 996,106,380 sites in the world, including 178,558,568 active sites. After the adjustment from August 2012 to March 2013, world Internet sites regained the trend of rapid development from April 2013, and the number of sites increased 57.19% compared to the

13

14 2) The scale of the global E-commerce reaching USD 33.4 trillionThe scale of the global E-commerce reached USD 33.4 trillion in 2013, which market transaction reached USD 30.1 trillion. Compared with 2012, the growth rate of industrial scale had reached 15.9%, which decreased slightly /From 2009 to 2013, the transaction of the global E-commerce 's CAGR is 19.3%.

15 The industrial scale and growth rate of the global E-commerce from 2009 to 2013 Source: CCID Consulting

16 3) The transaction of global B2C reaching USD 1.248 trillionAccording to eMarketer' s statistics ,the transaction of global B2C reached USD trillion, which increased 18.0% than 2012.The main growth power are from the rapid expansion of online and mobile users, the increasement of commercial disappearance, advanced logistics and means of payment, as well as the international expansion of the famous E-commerce websites. It is estimated that the global B2C will surpass USD 1.5 trillion.

17 The trend of global B2C development (2012-2017)

18 4) The global cross-border E-commerce market reaching USD 105 billion.According to the Paypal's research , the global cross-border e-commerce market has growth significantly in recent years. The global cross-border E-commerce market reached USD 105 billion in 2013, and it will reach USD 307 billion in 5 years. United States, Britain, Germany, Australia, China and Brazil are the world’s most developed areas of cross-border e-commerce, While China, Brazil, Argentina, Russia and other emerging countries develops fastest. Research shows that the scale of mobile cross-border online retail market grows faster than the whole cross-border e-commerce. The number of cross-border online shopping customer are more than 15 million in the single market in USA.

19 the main cross-border e-commerce countries’ transaction proportion in 2013(unit :%)

20 2 .The United States and EU countriesE-commerce transactions of America account for about a quarter of the global e-commerce transactions. In the context of the total retail sales in America continues to grow, the E-market accounts for more in the total sales.which shows a strong growth momentum.

21 Estimated Quarterly U.S retail sales: the total retail sales and E-commerce retail sales

22 The case of U.S E-commerce retail sales (1st Quarter 2004 – 4st Quarter 2013)

23 2)The EU countries By the end of 2013, nearly one-third of the European Internet users had used the online shopping, especially for Britain, Denmark, Luxembourg, the Netherlands and other countries. The proportion of online shopping of them exceed the average level of the 28 member states.

24 The proportion of the online shopping in the Internet users in the EU countries

25 Europe’s top five e-commerce developed countries

26 3. Asian countries 1) Japan Japan’s general e-commerce market of B2B reached trillion yen, which increased 25.7%. And narrow e-commerce market reached trillion yen, which increased 17.5%.

27 Japan’s B2B market scale and growth rate

28 Japan’s B2C market scale and growth rateThe market of B2C reached trillion yen, which increased 3.11% Japan’s B2C market scale and growth rate

29 2) South Korea The South Korea’s online retail transactions reached won trillion in 2st 2014, which increased 14.4% Compared to 2013 and accounts for 11.8% of the total sales.

30 The B2B transactions accounting for 90% in e-commerce and maintain the growth rate every year. Other types of e-commerce maintain the rapid growth rate as well.

31 3) Vietnam According to the statistics from ministry of Industry and Trade of e-commerce and VECITA in Vietnam, the e-commerce sales reached USD 2.2 billion in 2013, which increased 300% compared to 2012. The Internet users accounted for 36% of the total population of Vietnam in And it may reach 45% in It is estimated that Vietnam e-commerce sales will reach USD 4 billion in 2015.

32 4. Africa and Latin America1)Nigeria There are about 40 million internet users in Nigeria, and it grows rapidly. The need for online shopping in Nigeria is improving. In recent years, Nigeria has appeared different types of e-commerce websites, including food, drink, housing state, tourism, mobile transfer service and so on. “The African version of Ctrip” Hotels.ng also seize the online travel market rapidly.

33 2)Latin Amercia According to the statistics, Latin America’s annual e-commerce transactions has surpassed USD 60 billion. Latin America’s main business is the sale of e-product and cross-border transfers.

34 1.1.3 E-commerce Development in China1. History and Current Status The Chinese Government attaches great importance to the development of E-commerce Acutely recognizing its impact on the economic growth and the competitiveness of enterprises From the early 1990s, the Chinese government promoted the practical use of E-commerce, and achieved good results

35 1) Basic Environment of E-commerce(1)Banking system Since 1989, the banking system has gradually developed the National Electronic Banking System and Urban Clearing System Bank of China(1996) The first domestic Internet Banking system China Merchants Bank(1997) Online payment instrument named All in One Net The People’s Bank of China (PBC) (2005)The Large Value Payment System (LVPS) (2006)The Bulk Electronic Payment System (BEPS) in 2006. (2007 and 2008)The Check Imaging System and the Foreign Currency Payment System (2009) The PBC launched the Electronic Commercial Draft System (ECDS)

36 (2)Business of non-cash paymentIn 2008, various types of payment systems handled billion transactions in an amount of RMB 1131 trillion Yuan, equaling 37.6 times of GDP. The ratio of cash payment to GDP decreased from 14.8% in 2001 to 11.4% in 2008, of which cash payments dropped below 1 percent of the total payment. In 2010, the transactions of the payment and settlement systems were more than 1 million every day, with a total value of up to RMB 3 trillion Yuan.

37 (3)The cards Origin In October 1993, the Chinese State Golden Card Project started Scales in 2009 (1)The number: Commercial banks had issued million bank cards, including million debit cards and million credit cards. (2)Amount of the transactions: Reached RMB 3.5 trillion Yuan, increasing 69.9% over Credit card transactions were over 27% of total retail sales. (3)Application: Had expanded to retail, hotel, tourism, catering, communications, public utilities payment, family financial management and other relevant areas closely related to people living.

38 (4)Logistics information technologyDifferent types Global Positioning System (GPS), Electronic Ordering Systems (EOS), and Radio Frequency Identification (RFID). Scales in 2009 The amount of social logistics reached trillion Yuan, growing 7.4% over 2008, and still maintaining a rapid growth trend in the environment of the financial crisis.

39 (5)The Customs From the early 1990s, Chinese customs started the research and promotion of EDI (Electronic Data Interchange). In 1994, Chinese Customs started pilot work for the EDI application system in Beijing Capital International Airport and Shanghai Pudong Free Trade Zone Customs. By the end of 1997, more than ten EDI Customs, such as Beijing, Shanghai and Guangzhou, started using EDI Customs services. In 2009, 63 application projects have been finished and China E-Port has 470 thousand enterprise users. In 2009, 39 local governments have established a lead agency for e-port, 35 local e-ports have been opened, and more than 500 regional promotion projects all over China have been in operation on line. The goal of China E-Port is to build a unified information platform that can simultaneously manage customs clearance by law and provide the related logistics business services.

40 2) The Development of E-commerce(1) The shrink In early 2000, with the burst of the Internet bubble, the Chinese E-commerce market began to shrink. Mainly reflected in reducing the number of B2C Web sites. At the beginning of 2000, domestic shopping sites of B2C had reached about At the end of 2000, 1300 were left By the end of 2001, there were only 1188. By early November 2002, the number of China's online shopping sites had decreased by about 1 / 3.

41 (2) Grim situation, bright futureE-commerce websites constantly explored new ways of self-development through a variety of efforts The unique B2B business idea and model of Alibaba Network Technology Co., Ltd. have been twice included by Harvard University as MBA (Master of Business Administration) cases of management practices In 2002, the Sohu website started to expand in many areas, including online stock information, online shopping, Internet access and mobile phone Short Messaging Service (SMS) By the third quarter of 2002, Soho realized a net profit for the first time In 2004, E-commerce services in China were growing rapidly, and online services for tourism, ticketing, finance, real estate, employment, online education, entertainment, etc. achieved considerable scale.

42 (3) Steady period of developmentLarge enterprises continued to play a leading role in E-commerce Trading volume of Enegyahead.com of the China National Petroleum Corporation exceeded 200 billion Yuan The Internet procurement rate of Zhongyuan Oilfield, Yanshan Petrochemical Company, etc. was all more than 99% In 2009, the trading volume of E-commerce procurement of Baosteel exceeded 8.0 billion, in which the amount of 7.0 billion was on line action, and 1.3 billion was in electronic tendering In January 2010, Haier released the first “refrigerator of Things Internet" in the world SMEs (Small and Medium Enterprises) have become active practitioners of E-commerce

43 SMEs (Small and Medium Enterprises) have become active practitioners of E-commerceIn 2009, the E-commerce trade volume of small and medium enterprises reached 1.99 trillion Yuan, growing about 20% over the previous year Foreign trade was about 0.86 trillion Yuan, separately equivalent to 6% of the total sales of domestic goods and 8.9% of export in 2008 In 2009, the added value through E-commerce by SMEs accounted for 1.5% of GDP in China, which drove 0.13% growth in China’s GDP SMEs created more than 1.3 million new jobs through E-commerce, equivalent to 11.7% of urban new jobs in 2008 An additional 1% of SMEs using E-commerce will bring new jobs

44 A large number of E-commerce transaction services platforms have emergedE-commerce companies, such as Net Sun, and Alibaba, issue common stock one after another. By the end of June 30, 2009, Alibaba had 531,471 fee-paying members, an increase of 44.4% compared with the 2nd quarter of 2008, making it the world's largest B2B online market.

45 (4) Turnover of the online retail market also grew rapidlyThe total sales of China's online retail market reached billion Yuan in 2008, increasing 137.2% compared with 2007 In 2009 Chinese B2C transactions reached RMB billion, and C2C transactions of the online retail market reached RMB billion, increasing % over the previous year.

46

47 2. China’s present situation of e-commerce development1) Chinese online shopping users surpasses 300 million. The scale of the Chinese online shopping users and the rate of using online shopping ( )

48 2) The total Chinese e-commerce transactions surpasses RMB 10 trillionThe total Chinese e-commerce transactions surpasses RMB 10 trillion in 2013, reaches RMB trillion Increased 26.8% compared to RMB 8.1 trillion in 2012 E-commerce has become an area of China with strong competitiveness in the international market.

49 The gross Chinese e-commerce transactions from 2004 to 2013

50 3) Chinese online retail turnover surpasses RMB 1.8 trillionChinese online retail turnover from 2008 to 2013.

51 4) Cross-border online retail turnover reaches USD 21.4 billionChina’s total imports and exports reached USD 41.6 billion in 2013, including the export value of USD billion, imports amounted to USD billion. It is estimates that the cross-border online retail turnover reached USD 21.4 billion in the total import and export

52 5)Electronic payment scale over RMB 1000 trillionIn 2013, there were billion electronic payment service in the world, totaling RMB trillion. (1)Among them, there were billion online payment service, totaling RMB trillion. (2)There were 435 million telephone payment service, totaling RMB 4.74 trillon. (3)And there were billion mobile payment services, totaling RMB 9.64 trillion. (4) In 2013,the payment department occurred billion of internet payment service, totaling RMB 9.22 trillion.

53 3. New Trends in China (1) Further Application Mobile e-commerce Big data Cloud computing Internet of Things

54 (2) Further Expansion Cross-border trade To another country Cross-border business To another industry

55 (3) New Models e.g OTO Versatility Personal experience

56 (4) Healthier & Faster accelerate the development of Chinese multi-layer capital market system impetus the inclusive development of the finance complement and improve the financial ecological environment (5)The Breakthrough Point to Transform Economic Development Pattern (6) Supportive Policies and System Revolutions Released by the Government

57 1.2 Concept and Classification of E-commerce1.2.1 Concept of E-commerce High frequency but no precise definition Several concepts (1)In the World Business Agenda for E-Commerce Conference (2)In the United Nations Commission on International Trade Law (UNCITRAL) (3)In the Organization for Economic Cooperation and Development (OECD) (4)In China’s 11th Five-Year Plan on Electronic Commerce (5)In this Book (6)Notable differences

58 (1)The World Business Agenda for E-Commerce Conference(1)Time and place November 6th-7th 1997,held in Paris (2)The concept put forward of e-commerce Realizing electronization of business transactions. (3)Difinations from two aspects From the coverage area Any form of business transaction in which the parties interact by electronic methods rather than by physical exchanges or by face-to-face communication. From a technical perspective A collection of multi-technology, including the exchange of data (such as electronic data interchange, ), access to data (such as shared databases, electronic bulletin board) and the automatic capture of data (such as bar codes).

59 (2)The United Nations Commission on International Trade Law (UNCITRAL)Dec 16th 1996, adopted the UNCITRAL Model Law for the great change in transactions Only emphasizes the specialty of E-commerce transaction means(uses data messages as the information carrier in commercial transactions) A wide interpretation of the term “commercial” A clear definition for a data message in the Article 2 Information generated, sent, received or stored by electronic, optical or similar means including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.

60 (3)The Organization for Economic Cooperation and Development (OECD)In 2000, endorsed two definitions of electronic transactions The narrow definition refers to those conducted over the Internet The broader definition refers to those conducted over any computer-mediated network In April 2001, OECD proposed operational guidelines for the interpretation of the two E-commerce definitions.

61 E-commerce transactionsOECD definitions Guidelines for the Interpretation of the Definitions (WPIIS proposal April 2001) BROAD definition An electronic transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on or off-line. Include: orders received or placed on any online application used in automated transactions such as Internet applications, EDI, Minitel or interactive telephone systems. NARROW definition An Internet transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over the Internet. The goods and services are ordered over the Internet, but the payment and the ultimate delivery of the good or service may be conducted on or off-line. Include: orders received or placed on any Internet application used in automated transactions such as Web pages, Extranets and other applications that run over the Internet, such as EDI over the Internet, Minitel over the Internet, or over any other Web enabled application regardless of how the Web is accessed (e.g. through a mobile or a TV set, etc.) Exclude: orders received or placed by telephone, facsimile, or conventional . OECD Definitions of E-commerce Transactions and Interpretation Guidelines

62 (4)China’s 11th Five-Year Pplan on Electronic CommerceA Broader Concept production, circulation and consumption activities based on the Internet, radio, television and telecommunications networks, not just the way of new transaction or circulation based on the Internet. E-commerce covers different kinds of economic activities within and among different economic agents, reflecting the fundamental characteristics of an information technology network-based application, namely, economic activities with high efficiency and high performance through a high degree of sharing of information resources and cooperation of social activity. pros and cons

63 (5)Definition of the AuthorA simple clear Concept E-commerce refers to transaction participants carrying out commercial activities by using Internet or other information networks. Network transaction service is defined as the service of providing technology, information, internet matching service and other services for the transaction parties making trades via the internet.

64 (5)Definition of the AuthorUnderstood from two aspects—modern information technology and commerce E-commerce is a Intersection of Two Subset of IT and Commerce Information technology Commerce E-commerce

65 (6)Differences Electronic Commerce and Commercial electronization Electronic Commerce and Electronic Business

66 1.2.2 Scope of E-commerce Market1. Physical Products and Information Products (1)Physical Products Core product Augmented product (2)Information Products Any particular intangible items which are formed by information technology through digital computation processing which can satisfy the demand or desire of consumers or users.

67 service products are divided into physical services and information servicesCommodity traded in Modern market Physical products Digital products Physical goods Physical service Goods Digital goods Digital Service Goods The Differentiation Of Product Or Service In Modern Commodity Trading

68 2. Physical Market and the Virtual MarketThe subject Internet users, billion by the end of 2013 The object Physical products and information products Many trading patterns

69 Close relationship between the physical market and the virtual marketDigital product Physical product Physical process Digital process Virtual process Virtual participant Virtual product Partial E-commerce areas Virtual Market Physical Physical participant Digital participant Physical Market and Virtual Market Diagram

70 3. The Scope of the E-commerce MarketBecause of the emergence of E-commerce, E-commerce is partly used in the transaction of information products and physical products. When we exclude the information products and physical products transacted by traditional means, we can clearly distinguish information products and physical products transacted by E-commerce means.

71 4. Cases & Causes Exits of Foreign Retail Giants Bertelsmann: June 13, 2008 Best Buy: February, 2011 Media Markt: March, 2013 Other stores: Barbie flagship, Me&City flagship, The First Department Store, Novel Building etc. Possible Causes Poor operation condition The increase of the luxury brands Alienation of the consumers Negligence of the Internet market

72 5. The Problems Embedded The market share changes of enterprises in the new marketing

73 6.Highly Paying Attention to the Virtual Market- An Important Point E-commerce's encroachment on the market E-commerce's fast development Reached a value of 33.4 trillion USD in 2013 And trillion RMB in China The inevitable trend of the world market

74 1.2.3 The Classification of E-commerce1.Classified According to Transaction Partners 2.Classified According to Business Activity Forms 3.Classified According to Network Types 4.Classified According to the Types of Service Industries

75 1.Classified According to Transaction Partners(1) Business-to-business (B2B) Defination Direct network transaction between enterprises (including transactions between a manufacturer and a wholesaler, or between a wholesaler and a retailer) Division [1] E-commerce between enterprises with stable business relationships or not. [2] Divided by E-commerce transaction platforms Integrated B2B models Vertical B2B models Self-built B2B models B2B models of associated industries

76 Integrated B2B model Gathers a large number of customers distributed in all industries Demand information can be highly matched Lacks a deep understanding and integration of the various industries Alibaba Logistics Clothing Steel Electronic Component Chamical Exhibition Integrated B2B Model (Alibaba)

77 Vertical B2B model Integrate and subdivide industry resourcesEnhances the accuracy of information of supply and demand lnsufficient coverage of supply-demand information Expert-deficiency NetSun China Chem Net Texindex.com Global Chemical Net China Medical Device toocle.com Vertical B2B model Model (NetSun)

78 B2B models self-built by industry leading enterprisesProvides the enterprise’s own products as the core of the supply chain, thus link the whole industrial production chain and supply service of information So proprietary and lack deep integration of industrial chains Leading Enterprise Supplier Buyer Industries Leading Enterprises Self-Built B2B Platform Model

79 Associated industries B2B modelCross-industry E-commerce platform Enhance the information width and accuracy Combines the integrated E-commerce model and the vertical E-commerce model Paper industry chain Printing industry chain Publishing industry chain Business integration point Integration of Paper Making, Printing and Publishing Industry Transaction Platform

80 (2) Business to consumer(B2C) Enterprises sell their goods directly to the consumers through online stores (3) Business to consumer(B2G) Covers all the affairs between businesses and government organizations. A government procurement list is published through the internet, and businesses submit a tender over the network. Government BTG Enterprise buyer BTB BTC Enterprise Consumer Relations Among B2B, B2C and B2G

81 (4) Customer to Customer(C2C)The constituent elements include E-commerce platform providers. Buyers and sellers release product information and engage in trading activities through an E-commerce trading platform the E-commerce platform providers play an important role

82 2.Classified According to Business Activity Forms(1)Direct E-commerce Online transactions of intangible goods and services Pure e-commerce, realize electronization in order, payment and distribution (2)Indirect E-commerce Ordering of tangible goods, still uses traditional channels to send goods or site delivery (3)O2O E-commerce—Online to Offline (4)Online group-buying Require the support of instant messaging and SNS

83 O2O Mode Schematic Diagram

84 Online group-buying

85 3.Classified According to Network Types(1)EDI (Electronic Date Interchange) commerce The definition of the NIST (National Institute of Standards and Technology), "EDI is the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments" (2)Internet commerce (3)Intranet (Intra-business Internet) commerce Using an enterprise’s internal network Have firewall programs, low cost (4)Mobile commerce Relying on wireless mobile network connectivity

86 Purchasing, stock, customer service Coordination of upstream and downstream firms Extranet Client Advertising, sales, customer service Finance and administration Business to business commerce Internet Modes of EDI, , etc. Intranet Research and development Manufacturing Business to consumer commerce Relationships Among Internet-business, EDI-business and Intranet business

87 4.Classified According to the Types of Service IndustriesDivided by the characteristics of different service industries Profit-making for mainly provide information services, and involve less physical transportation Adopt various forms of E-commerce, such as B2B, B2C, C2B, and C2C, which have characteristics of wide user scope, low operating costs, no time and space restriction, and direct exchange with users

88 1.3 Basic Program Pattern of E-commerce1.3.1 The E-commerce Trading Process 1.Preparation before transaction 2.Negotiation and signature of contract 3.Formalities for pre-transaction 4.Fulfillment and claims of the transaction contract

89 1.Preparation before transactionSellers Conduct overall market research Analysis, develop selling strategies and marketing methods Thoroughly understand the trade policies Advertise Find trading partners and business opportunities Preparing for the e-commerce transactions Buyers Conduct market research and market analysis Clear trade policies Determine the types, quantities, specifications, prices, purchase locations and trading methods

90 2.Negotiation and Signature of Contract(1)Negotiate the details of the transaction (2)Confirm the consultation results in oral or documented form (3)Make electronic contracts with detailed requirements rights and obligations of two sides in the transaction, goods type, quantity, price, place and time of goods delivery trading and transportation methods breach of contract and claims, etc. (4)Trading parties may use EDI or digital signature to sign contract.

91 3.Procedures for Pre-transactionVarious formalities must be handled by both parties from signing the agreement to fulfilling the contract Several parties may be involved, such as intermediaries, banks, financial institutions, credit card companies, Customs, commodity inspection system, insurance companies, tax system, transportation companies Exchange electronic bills and electronic documents

92 4.Fulfillment and Claims of Transaction ContractStarts after all the above procedures Seller: prepare and group the goods Buyer: receive the goods Banks and financial institutions:deal with contract, settle accounts, and produce corresponding bank documents Trace goods by E-commerce serve The injured party can claim compensation from the contract breaker.

93 1.3.2 Program Pattern of Network Direct SaleB2C and C2C are of this model Procedures (1) Consumers log onto the Internet to look up the homepage of the online shop or company (2) Consumers, through shopping dialog boxes, fill the order form (3) Consumer chooses the credit card or other means of payment. (4) The credit card company inform the bank and the bank inform the supplier that the fund has arrived. (5) The supplier makes the delivery and sends the receipt back to the bank. (6) The consumer’s bank informs the consumer’s credit card company, who is responsible for delivering a receipt to the consumer.

94 Supplier/manufacturerConsumer Supplier/manufacturer Credit card company Bank Order Information Transfer Delivery Inventory Receipt Payment Network Direct Sale Model

95 Supplier/manufacturerTo ensure the security, a certification authority is launched to verify the true identity of all network trading parties Consumer Supplier/manufacturer Credit card company Bank Order Information Transfer Delivery Inventory Receipt Payment Certificate Authorities Network Direct Sale Model with CA Involved

96 1.3.2 Program Pattern of Network Direct SaleCarried out under the SET protocol Advantages 1)Effectively reduce the trading process, transaction costs, and the final price of goods 2)Reduce the technical support costs of after-sale service 3)Lower the operating costs Deficiencies 1)Only judge the product’s model, property, style and quality from online advertising 2)High-tech crimes

97 1.3.3 Program Pattern B2B modelCertificate authority Commercial credit authentication Internal database information analysis of sales enterprise Logistics distribution Information platform of sales enterprise for issuing trading, cooperation, bids Electronic payment and settlement Information exchange platform of sales enterprise for signing electronic contract Enterprises of purchasing products

98 1.3.4 Program model of network commodity intermediary tradingB2B C2C models Carry out through a virtual market on the Internet Procedures (1)Buyers and sellers provide their supply and demand on the network commodity trading center. (2)Based on the information , buyers and sellers can choose their own trading partners. (3)A contract is signed between the buyer and the seller with the help of the network commodity trading center. (4)The buyer pays the seller through the bank designated by the network commodity trading center. (5)The designated bank notifies the network commodity trading center that the buyer’s payment has been received.

99 (6)The network commodity trading center asks the seller to send the goods to the delivery department of the center which is nearest to the buyer’s location. (7)The delivery department delivers the goods to the buyer. (8)The buyer checks the goods and informs the network commodity trading center that the goods have been received. (9) The network commodity trading center notifies the bank that the buyer has received the goods. (10) The bank transfers the buyer’s payment to the seller. (11)The seller gives the bank a receipt. (12)The bank transfers the receipt to the buyer.

100 Program Model of Network Commodity Intermediary TradingTransfer Settlement Delivery department Buyer Seller Certification authority Authentication Match Network commodity trading center Sign contract Information transfer Bank Match information Customer credit information Remittance Program Model of Network Commodity Intermediary Trading

101 1.3.4 Program model of network commodity intermediary tradingAdvantages 1) Wide range of information 2) Solve two difficult problems: Sellers getting buyers’ money without delivering the goods to the buyer and buyers getting sellers’ goods without payment to the seller 3) Adopt a centralized clearing mode, reduce risks for fund transfers Problems 1) Immaturity, relevant technical and legal issues must be resolved 2) Tax issues should be studied carefully 3) Transaction information need to be enriched 4) Keep pace with the rapid development of network technology

102 Application in Bulk Stock Electronic TradeThe Central Website of Shanghai Steel Exchange Center

103 1.4 Legal relationship Relationship of Participants in E-commerce1.4.1 Obligations and Rights of Buyers and Sellers in Network Transaction 1. The Obligations of Sellers Submit subject matter and documents according to the requirements of the contract Accept the obligation of guarantee for the right of subject matter,enjoy the legal rights of the subject matter sold to the buyer Accept the guarantee obligation for the quality of the subject matter

104 1.4.1 Obligations and Rights of Buyers and Sellers in Network Transaction2. The Obligations of Buyers Bear the obligation of payment according to the request of the network transaction, an electronic transaction contract should define clearly which payment method is available for the e-purchasing. Bear the obligation of accepting the subject matter according to the contracted time, place and method. Have the obligation of checking the subject matter.

105 1.4.1 Obligations and Rights of Buyers and Sellers in Network Transaction3. Remedy for the Non-fulfillment of Contractual Obligations of the Seller and the Buyer Once any default occurs, the buyer can choose the following remedies: (1) Requiring the seller to fulfill the contract by supplying alternatives, or repairing and remedying the subject matter; (2) Lessening the payment; (3) Claiming damages for delaying the delivery or not fulfilling the contract; (4) Canceling the contract and claiming damages.

106 1.4.1 Obligations and Rights of Buyers and Sellers in Network Transaction3. Remedy for the Non-fulfillment of Contractual Obligations of the Seller and the Buyer Once any default occurs, the seller can choose the following remedies: (1) Requiring the customer to pay for and take the goods, or fulfill other obligations; and reasonably extending an additional period to make the buyer fulfill the obligation (2) Asking the buyer to pay the contract price and the balance of the resale price (3) Canceling the contract

107 1.4.2 The Legal Status of the Network Trading CenterThe mediator of the transaction plays the roles of introducer, promoter and organizer in network commodity intermediary trading Conduct admittance system and administrative licensing system Operate businesses within the permission of national laws and regulations

108 1.4.3 Legal Relationship between Network Trading Clients and the Virtual BankThe relationship is still on the basis of the contract —————Electronic Funds Transfer (EFT) of the virtual bank The virtual bank acts as both transmitter and receiver 1) On the one hand, it receive the funds transferred 2) On the other hand, the transmitter bank and receiver bank are all members of an EFT system, and both of them bear the responsibility for the contract

109 1.4.4 Legal Status of Certificate Authority in E-commercePlays the part of supervising and managing throughout E-commerce transaction Requirements (1) The enterprise is qualified as an independent legal person. (2) There are no less than 30 professional and technical staff, operation managers, security managers, and customer service staff. (3) The registered capital is no less than 30 million Yuan (RMB). (4) There is a fixed business location and a physical environment meeting the requirements for CA services. (5) There are technologies and facilities that are in accordance with the relevant national security standards.

110 1.4.4 Legal Status of Certificate Authority in E-commerce(6) There is documentary proof of passwords agreed to by the China State Encryption Management Committee. (7) Other conditions stipulated by laws and administrative regulations are provided. Services (1) Making, issuing, and managing electronic signature certificates; (2) Confirming the authenticity of issued electronic signature certificates; (3)Offering list information inquiry services for electronic signature certificates; (4) Offering state information inquiry services for electronic signature certificates.

111 1.5 Impact and Role of E-commerce in the Modern Economy1.5.1 The Value Creation of E-commerce A huge effect on the whole economy and society E-commerce and net economy Scope of economy and society Huge effect E-commerce Organizational change Internet

112 1.5.1 The Value Creation of E-commerceBusiness is still the core of trade, while the “e” plays a role as a communication means for optimizing the core Source of value The agricultural age: Land The industrial age: Manufacturing The information age: Data, information and knowledge, and the advantages of E-commerce become more obvious Beneifts 1) The direct consequence of Internet development 2) The openness, globalization, low-cost, and high efficiency 3) Brings a new model for social value creation

113 1.5.2 The Impact of E-commerce on Social ProductivityHow it begins (1) The widespread use of modern information technology (2) Rading costs sharply decline, information instead of capital become the leading role in economic development (3) More efficient distribution of the existing social resources (4)Productivity is promoted

114 1.5.2 The Impact of E-commerce on Social ProductivityThe effects (1) Significantly reducing information costs and improving service efficiency of information Reduce the cost of information sources Breaks industry restrictions and the physicalness of products Expands the transaction scope Reduces information asymmetry (2) Significantly reducing the trade intermediate links, and lowering costs of sales and purchase (3) Helping to form an efficient circulation and exchange system

115 1.5.3 E-commerce as the Important Measure and Means to Change the Mode of Economic DevelopmentThree major changes of the Socio-economic development of mankind (1)Nomadic economy to agricultural ecomomy (2)Agricultural economy and industrial economy (3)Industrial economy to knowledge-based economy(The change of real economy to a virtual economy) The information industry maintained higher growth than most other industries In 2013, sales revenue of information industry reached 12.4 trillion RMB, a year-on-year growth of 12.7%, and accounting for 19.6% of Chinese GDP.

116 1.5.3 E-commerce as the Important Measure and Means to Change the Mode of Economic DevelopmentThe international financial crisis exposed to China the serious need of changing its economic development mode E-commerce not only promotes technology change, but also promotes institutional change, management change and development environment change. E-commerce stands for the future development trend of trade and becomes an emerging strategic industry in the 21st century The rapid development of E-commerce can promote primary, secondary and tertiary industries to collaboratively develop at a higher level, and it will exert great impact on the world’s economic development and competitiveness.

117 1.5.4 E-commerce as a Necessary Means to Promote Effective Distribution of Market Resources(1)The potential of distirbuting market resources, whether for the transformation of traditional industries or for the emergence of new ones (2)Rational flow of the elements and the elimination of restriction elements (3)Cross-region resources delivery (4)Uncertainty of product transactions and blindness of market development have been reduced Weakened and eliminated: Incomplete information and informational asymmetries Black case work and credit crises

118 1.5.5 E-commerce Impetus Chinese Enterprises Step to the WorldReasons (1) The general trend in 21st century (2) General secretary, Xi jin ping's address (3) Business activities are no longer restricted or affected by time differences (4) Now competition is global and all-around, which implies that an enterprise must correctly combine the “real” means which refers to product quality with the “virtual” means which refers to E-marketing techniques

119 1.5.5 E-commerce Impetus Chinese Enterprises Step to the WorldPractices (1) Releasing and refining of the policies (2) Pilot cities running cross-border e-business (3) The revolutional practises of the Inspection and Quarantine Bureau and the Customs Scales Up to March 3rd 2014: Total value: 22 million RMB Export manifest: 210 thousand Express service to places out of Chinese mainland in 2013 is billion RMB, in 2012, that number is billion, increased by 31.7% Orporation engaging in cross-border e-commerce platforms surpassed 5000, the number of enterprises related to these platforms have reached 200 thousand

120 Thank you