Advantages And Disadvantages Of E-commerce
Advantages Of E-commerce
Doing e-business is cost effective; it reduces logistical problems and puts a small business on a par with giants such as Amazon.com or General Motors. In a commercial bank, for example. a basic over-the-counter transaction costs £0.50 to process; over the Internet, the same transaction costs about £0.01. Every financial transaction eventually turns into an electronic process. The sooner it makes the conversion, the more cost-effective the transaction becomes.
Unlike the brick–and–mortar environment, in e–commerce there is no physical store space, insurance, or infrastructure investment. All you need is an idea, a unique product, and a well–designed web storefront to reach your customers, plus a partner to do fulfillment. This makes e–commerce a lot more economical.
E–commerce means higher margins. For example, the cost of processing an airline ticket is £5. According to one travel agency, processing the same ticket online costs £1. Along with higher margins, businesses can gain more control and flexibility and are able to save time when manual transactions are done eletronically.
Better Customer Service
E–commerce means better and quicker customer service. Online customer service makes customers happier. Instead of calling your company on the phone, the web merchant gives customers direct to their personal account online. This saves time and money. For companies that do business with other companies, adding customer service online is a competitive advantage. The overnight package delivery service, where tracking numbers allow customers to check the whereabouts of a package online, is one good example.
Quick Comparison Shopping
E–commerce helps consumers to comparison shop. Automated online shopping assistants called hopbots scour online stores and find deals on everything from apples ro printer ribbons.
Weaving the web throughout an organisation menas improved productivity. For example IBM incorporated the web into every corner of the firm – products, marketing, and practices. The company figured it would save $750 million by letting customers find answers to technical questions via its website. The total cost savings in 1999 alone was close to $1 billion.
E–mail is one example of how people collaborate to exchange information and work on solutions. It has transformed the way organisations interact with suppliers, vendors, business partners, and customers. More interactions means better results.
E–commerce helps create knowledge markets. Small groups inside big firms can be funded with seed money to develop new ideas. For example, DaimlerChrysler has created small teams to look for new trends and products. A Silicon Valley team is doing consumer research on electric cars and advising car designers.
Information Sharing, Convenience, And Control
Eletronic marketplaces improve information sharing between merchants and customers and promote quick, just–in–time deliveries. Convenience for the consumer is a major driver for changes in various industries. Customers and merchants save money; are online 24 hours a day, 7 days a week; experience no traffic jams, no crowds, and do not have to carry heavy shopping bags.
Disadvantages Of E–commerce
Security continues to be a problem for online businesses. Customers have to feel confident about the integrity of the payment process before they commit to the purchase.
System And Data Integrity
Data protection and the integrity of the system that handles the data are serious concerns. Computer viruses are rampant, with new viruses discovered every day. Viruses cause unnecessary delays, file backups, storage problems, and other similar difficulties. The danger of hackers accessing files and corrupting accounts adds more stress to an already complex operation.
A business develops an interactive interface with customers via a website. After a while, statistical analysis determines whether visitors to the site are one–time or recurring customers. If the company expects 2 million customers and 6 million show up, website performance is bound to experience degradation, slowdown, and eventually loss of customers. To stop this problem from happening, a website must be scalable, or upgradable on a regular basis.
E–commerce Is Not Free
So far, success stories in e–commerce have forced large business with deep pockets and good funding. According to a report, small retailers that go head–to–head with e–commerce giants are fighting losing battle. As in the brick–and–mortar environment, they simply cannot compete on price or product offering. Brand loyalty is related to this issue, which is supposed to be less important for online firms. Brands are expected to lower search costs, build trust, and communicate quality. A search engine can come up with the best music deals, for example, yet consumers continue to flock to trusted entities such as HMV.
Consumer Search Is Not Efficient or Cost–effective
On the surface, the electronic marketplace seems to be a perfect market, where worldwide sellers and buyers share and trade without intermediaries. However, a closer look indicates that new types of intermediaries are essential to e–commerce. They include electronic malls that guarantee legitimacy of transactions. All these intermediaries add to transaction costs.
Customer Relations Problems
Not many businesses realise that even e–business cannot survive over the long term without loyal customers.
Products People won't buy online
Imagine a website called furniture.com or living.com, where venture capitalists are investing millions in selling home furnishings online. In the case of a sofa, you would want to sit on it, feel the texture of the fabric etc. Beside the sofa test, online furniture sotres face costly returns which makes the product harder to sell online.
The availability of product details, catalogs, and other information about a business through its website makes it vulnerable to access by the competition. The idea of extracting business intelligence from the website is called web framing.
High Risk Of Internet Start–up
Many stories unfolded in 1999 about successful executives in established firms leaving for Internet start–ups, only to find out that their get–rich dream with a dot.com was just that – a dream.