Advantages and Disadvantages of Electronic Commerce (e-commerce)

Electronic commerce or e-commerce, has completely revolutionized the traditional concept of doing business by enabling a presence in the global market. Here are some of the important advantages and disadvantages of electronic commerce.

Electronic commerce or in short e-commerce, refers to business activities like selling and purchasing of products and services carried out over electronic systems like the Internet and computer networks. The history of e-commerce dates back to 1970, when for the first time, electronic data interchange (EDI) and electronic fund transfer were introduced. Since then, a rapid growth of e-commerce has pervaded almost every other aspects of business such as supply chain management, transaction processing, Internet marketing and inventory management. Advantages and Disadvantages of Electronic Commerce Like any conventional business, electronic commerce is also characterized by some advantages and inherent drawbacks. Let's have a look at some of these important advantages and disadvantages of electronic commerce. Advantages of Electronic Commerce The greatest and the most important advantage of e-commerce, is that it

enables a business concern or individual to reach the global market. It caters to the demands of both the national and the international market, as your business activities are no longer restricted by geographical boundaries. With the help of electronic commerce, even small enterprises can access the global market for selling and purchasing products and services. Even time restrictions are nonexistent while conducting businesses, as e-commerce empowers one to execute business transactions 24 hours a day and even on holidays and weekends. This in turn significantly increases sales and profit. Electronic commerce gives the customers the opportunity to look for cheaper and quality products. With the help of e-commerce, consumers can easily research on a specific product and sometimes even find out the original manufacturer to purchase a product at a much cheaper price than that charged by the wholesaler. Shopping online is usually more convenient and time saving than conventional shopping. Besides these, people also come across reviews posted by other customers, about the products purchased from a particular e-commerce site, which can help make purchasing decisions. For business concerns, e-commerce significantly cuts down the cost associated with marketing, customer care, processing, information storage and inventory management. It reduces the time period involved with business process re-engineering, customization of products to meet the demand of particular customers, increasing productivity and customer care services. Electronic commerce reduces the burden of infrastructure to conduct businesses and thereby raises the amount of funds available for profitable investment. It also enables efficient customer care services. On the other hand, It collects and manages information related to customer behavior, which in turn helps develop and adopt an efficient marketing and promotional strategy. Disadvantages of Electronic Commerce Electronic commerce is also characterized by some technological and inherent limitations which has restricted the number of people using this revolutionary system. One important disadvantage of e-commerce is that the Internet has still not touched the lives of a great number of people, either due to the lack of knowledge or trust. A large number of people do not use the Internet for any kind of financial transaction. Some people simply refuse to trust the authenticity of completely impersonal business transactions, as in the case of e-commerce. Many people have reservations regarding the requirement to disclose personal and private

information for security concerns. Many times, the legitimacy and authenticity of different e-commerce sites have also been questioned. Another limitation of e-commerce is that it is not suitable for perishable commodities like food items. People prefer to shop in the conventional way than to use e-commerce for purchasing food products. So e-commerce is not suitable for such business sectors. The time period required for delivering physical products can also be quite significant in case of ecommerce. A lot of phone calls and e-mails may be required till you get your desired products. However, returning the product and getting a refund can be even more troublesome and time consuming than purchasing, in case if you are not satisfied with a particular product. Thus, on evaluating the various pros and cons of electronic commerce, we can say that the advantages of e-commerce have the potential to outweigh the disadvantages. A proper strategy to address the technical issues and to build up customers trust in the system, can change the present scenario and help e-commerce adapt to the changing needs of the world.

In simple words, E-Commerce is doing the work of commerce electronically.Now, it is not that we have ECommerce between certain groups only; rather we have E-Commerce that can be between many groups.Therefore, we do not have only one type of the E-Commerce, but we have many types of the ECommerce.Our E-Commerce can be between business and business, or between business and consumers, or can be between business and employees, and can be many more.

B2B - Business to Business

B2B is the selling between companies, wholesale rather than retail. But it means more than that. Efficient use of capital demands small inventories, which entails anticipating demand, and so maintaining detailed information flows between all parties involved in today's complex manufacturing processes. B2B involves widening the circle of suppliers (for safety and competition), and of centralizing control (for records and discounts). B2B ecommerce is an important part of any online business. Leaving aside the simple transfer of funds covered here many businesses need some combination of:

creditworthiness assessment. guarantee of quality and delivery of goods (escrow services). safeguards against fraud. fast collection of funds, with ability to vary the collection period. reporting: approval of sale, invoicing, delivery, payment. procedures to handle disputes. Information of all types corporate, technical, identity-building has to be interchanged across the scattered divisions of large companies, and new ideas fostered, assessed and disseminated. Speed is vital, as are improved communication, collaboration, and customer understanding. All these requirements can be handled by IT, and software has been developed to meet the challenge customer relationship management, enterprise resource planning, online auction, supply chain management, etc. Little of it is off-the-shelf, but is devised as systems to be extended and built round individual company requirements.

Hence many problems with surveys. B2B has reportedly done better than B2C steadier growth, higher profits but is it software sales or savings in companies with B2B-enhanced management that have been measured? Even within the B2B market, there are marked differences between types of software and their successes. Records of some are distinctly spotty, and sales of the more advanced systems have been badly hit by the dotcom bust and US recession. Improved management is not simply a matter of installing new software: extensive company reorganization and retraining are required to obtain even a modest payoff. These points need to be borne in mind when following up the information briefly noted below. B2B Ecommerce History An Anderson survey found that America accounted for 67% of worldwide B2B revenues in 2000, and Europe 14%. Towards the end of 2000, a gloomy period for ecommerce in America, executives remained confident about the digital marketplace. Some 45% of suppliers reported an average 31% increase in sales over the previous 6 months, and 66% of customers responding said they had increased purchases over the period. A June 2001 IDG survey came to a similar conclusion, noting that B2B trade in Brazil should near $2 billion in 2003. . Even in the B2C ecommerce slump of August 2001, the larger US retailers were planning to invest in B2B to improve customer service and supply chain management. 2003-4 B2B Prospects Forrester predicted in 2001 that the US would be exporting $1.4 trillion worth of goods through online marketplaces by 2004, and associated easy payment systems were proving their worth in 2001. According to American CRM, customer relationship management expenditures are expected to grow from $5.4 billion in 2002 to $11.0 - $16.9 billion in 2004. Demand is growing for B2B products in midsize US companies, reported Gartner in January 2002. Fifty percent of European firms expect B2B investment to create a 5% productivity growth. IDC forecast a 49% annual growth in Japanese B2B to $504 billion in 2005, but prospects in Asia and the Pacific Rim need careful research. Nonetheless, there are differences between B2B submarkets. Supply chain management is increasingly competitive, and software houses will need to address customer requirements better if they are to survive. Nor has B2B implementation been plain sailing. B2B industry should prosper, but individual suppliers may not.

B2C - Business to Consumer

B2C (Business to Consumer): Refers to a business communicating with or selling to an individual rather than a company. B2C e-commerce jumped from $11.2 billion in 1998 to $31.2 billion in 1999, Doing business online no longer requires a huge investment by retailers, thanks to developments in template-based online stores which are based on packaged applications that are delivered over the internet. As nearly all online stores will require the same functions: catalogues, order baskets, payment processing, content management and member management, it makes sense for those components to be created once and shared by all stores, with each store effectively renting its own copy of the applications. The one area where it's important for online stores to differentiate is their look and feel, and naturally retailers feel very strongly about their business branding. So the ability to create a unique skin for each site is an important part of a template-based e-store offering. Using the latest internet application technology, individual sites can be created within minutes of the retailer selecting a template and supplying graphics such as logos. Typically, retailers will pay only a modest monthly rental charge and retailers require no specialist hardware or software, other than internet access. Anyone who wants to sell products and services over the internet, or who wants customers to be able to research their purchases on the internet, should consider an online store. These days, a web site should be a standard part of the promotional and advertising mix for every business, along with other tools such as Yellow Pages, newspaper advertising and signage. Advantages of B2C e-commerce B2C e-commerce has the following advantages:

Shopping can be faster and more convenient. Offerings and prices can change instantaneously. Call centers can be integrated with the website. Broadband telecommunications will enhance the buying experience.

Challenges faced by B2C e-commerce The two main challenges faced by B2C e-commerce are building traffic and sustaining customer loyalty. Due to the winner-take-all nature of the B2C structure, many smaller firms find it difficult to enter a market and remain competitive. In addition, online shoppers are very price-sensitive and are easily lured away, so acquiring and keeping new customers is difficult. A study of top B2C companies by McKinsey[citation needed] found that:

Top performers had over three times as many unique visitors per month than the median. In addition, the top performer had 2,500 times more visitors than the worst performer. Top performers had an 18% conversion rate of new visitors, twice that of the median. Top performers had a revenue per transaction of 2.5 times the median. Top performers had an average gross margin three times the median. There was no significant difference in the number of transactions per customer and the visitor acquisition cost.