Impact of E-Commerce on Business

05/07/2021 0 By indiafreenotes

Ecommerce businesses are fast gaining grounds and changing the way of doing business. Electronic commerce refers to the buying and selling of products or services over electronic systems such as the Internet and other computer network The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction’s life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices and telephones as well.

The internet has changed many aspects of our lives, including the way we communicate with each other, how we keep our finances. It has made a profound impact on society. Now we shop online from our houses. This forces retailers to open online division. It can also force smaller businesses to shut their doors, or change to being completely online. It also has changed people way of spending money. Undoubtedly, it will continue to influence how companies sell and market their products, as well as how people choose to make purchases for many years to come. The following are the impact of e-commerce on the global economy

The main aspect of ecommerce involves doing business on the web and includes:

  • Business to business (B2B) trading which involves a business such as a company trading with another business on the world wide web.
  • Business to consumer (B2C) trading which involves a business such as a company directly dealing with consumers over the world wide web.

Ecommerce has affected businesses positively and negatively. On the one side, ecommerce makes it easier for businesses to reach a much wider audience at less expense than would be required if the traditional retail method was to be applied. With ecommerce, there is no requirement to acquire expensive shops in high streets. You can produce or store your goods at a remote upcountry location and still advertise and sell them worldwide. While the cost of developing a good website may be substantial, it is much cheaper than letting expensive high street storefronts. Additionally, once you have your website operational, you will reach a wide client base. The next thing is to ensure that you have access to appropriate means of transporting goods to customers who make orders.

On the other hand, established enterprises, most of which are vertically integrated are finding it harder than before to retain their market share. More flexible competitors are entering the market traditionally dominated by these established companies, making competition fiercer than ever. To remain relevant, old school companies are having to adjust to the new technologies and incur capital expenditure in developing new capabilities. Blockbuster, a leading video rental and franchise in the world had enjoyed many years of success. However, Netflix, an ecommerce based firm entered the market and took away a considerable market share from Blockbuster which was forced to readopt its business model to offer ecommerce services. Another good example of how ecommerce is changing the business landscape is which grabbed a substantial market share from traditional booksellers forcing them to start selling online as well.

Traditional companies that have spent significant amounts of money in the past in developing physical infrastructure are suddenly finding themselves being outsmarted by startups with much less physical infrastructure, usually based on ecommerce model. These ecommerce-based startups ship goods from oversea suppliers who produce high-quality goods at less expense. This gives them an advantage over vertically integrated companies that have traditionally sought to do everything from production to supply. It should be noted that such integrated companies may not be the best in everything; a company may be good in one aspect and another in a different aspect. The traditional companies are therefore being forced to focus only on what they can do best and outsource the rest if they have to compete favourably.

Ecommerce has contradicted the classic economic theory of decreasing returns to scale which holds that a business cannot grow its profits infinitely. E-commerce based enterprises have been shown to sustain fast growth while increasing returns as well. The reason is that these startups have minimal infrastructure and inventory and rely heavily on information and communication. In fact, in information-based product industries, distribution and sale via ecommerce may bring the cost per unit to almost zero. A perfect example here would be the online software vendors who allow customers to buy products and added licenses online.

The impact of ecommerce on businesses is immense and cannot be exhaustively elucidated in a short article like this. The impact is expected to increase as internet penetration in emerging markets increases.

Impact on direct marketing

Product promotion: E-commerce enhances promotion of products and services through direct, attractive and interactive contact with customers.

New sales channel: E-commerce creates a new distribution channel for existing products. It facilitates direct reach of customers and the bi-directional nature of communication.

Direct savings: The cost of delivering information to customers over the Internet results in substantial savings to senders when compared with non-electronic delivery. Major savings are also realized in delivering digitized products versus physical delivery.

Reduced cycle time: The delivery of digitized products and services can be reduced to seconds. Also, the administrative work related to physical delivery, especially across international borders, can be reduced significantly, cutting the cycle time by more than 90 percent.

Customer service: Customer service can be greatly enhanced by enabling customers to find detailed information online. Also, intelligent agents can answer standard e-mail questions in seconds and human experts’ services can be expedited using help-desk software.

Corporate image: On the Web, newcomers can establish corporate images very quickly. Corporate image means trust, which is necessary for direct sales. Traditional companies such as Intel, Disney, Dell, and Cisco use their Web activities to affirm their corporate identity and brand image.

New product capabilities: E-commerce allows for new products to be created and existing products to be customized in innovative ways. Such changes may redefine organizations’ missions and the manner in which they operate. E-Commerce also allows suppliers to gather personalized data on customers.

Changing Nature of Work: The nature of work and employment will be transformed in the Digital Age; it is already happening before our eyes. Driven by increased competition in the global marketplace, firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly less expensive.