It is great to be back with a blogpost after taking a hiatus from blogging for a bit. Be that as it may, we are going to kick off with a short series on taking your business online and to have your products purchased online. As you will know very well, online trading is referred to as Electronic Commerce or simply “e-commerce”.

Wikipedia defines e-commerce as follows:

Electronic commerce, commonly written as e-commerce, is the trading in products or services using computer networks, such as the internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, internet marketing, online transaction processing, electronic data interchange, inventory management systems and automated data collection systems. Modern electronic commerce typically uses the world wide web for at least one of the transaction’s life cycle, although it may also use other technologies such as e-mail.”

To some the enormity of such an undertaking may be intimidating whilst others may have their misgivings about security risks possibly attached to e-commerce. In this series we are going to have a look at these concerns, consider the positives and negatives (yes there are) of e-commerce, consider different e-commerce platforms and all the factors that you may need to consider before trading online.

Let’s kick off this series by considering the possible positives and negatives of e-commerce.

From the perspective of a web designer/developer, I instinctively feel the need to discuss the advantages and disadvantages from an online-store-owner’s perspective. It will however be a good thing for us to consider the advantages and disadvantages from both the seller and buyer’s perspective. This way you can use the buyer’s perspective as well in order to align your approach and decisions.

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Facts to consider: Advantage Disadvantage
No Standing in Queues or Being Placed on Hold Forever Obvious advantage to buyer as he/she can sit and purchase goods/ services at their own leisure.

Obviously good for seller as more buyers can purchase goods/ services at the same time.

None that I am aware of
Lack of Personal Touch   Obviously a disadvantage for the buyer as no relationship is established and the environment is very sterile.
Easy to Compare Prices There are several shopping search engines and comparison shopping websites that help buyers locate the best prices. Sellers often find themselves filtered out of the consumer’s consideration.
Easy access to remotely located store Good for buyers not situated in major urban areas.

Seller can reach much more buyers.

 
Not able to experience the product before purchase.   Buyers cannot touch, feel, smell or use their senses other than seeing an image of the product.
No need for a costly physical store. Less overheads for seller.

Less overheads for sellers can result in lower prices and savings for buyers.

 
Need for device to access internet.   E-commerce is only possible via a computer or a handheld device and via the internet.
Need for an Internet Connection   Not only do possible customers need an access device, they also need internet connectivity in order to participate in e-commerce.
Availability of Coupons and Deals A lot of available coupons lead to competition and subsequent lower prices which relates to savings for buyers. Although nothing in respect of e-commerce makes it intrinsically oriented to discounts, the evolution of online business has led to lowered prices online and a lower profit margin to sellers.
Lots of Choices No store-size limitations result in a wider variation of products to be sold.

No store-size limitations result in a wider variation of products to be purchased.

 
Online Stores Are Open All the Time Eliminating the open and closing times of stores holds a big advantage to sellers and can lead to more sales.

Eliminating the open and closing times of stores holds a big advantage to consumers.

 
Credit Card Fraud   Businesses suffer as a result of credit card fraud.

Consumers can also suffer as a result of credit card fraud.

Security Issues   Consumers run the risk of identity fraud as their personal details are captured by e-commerce businesses.

Businesses run the risk of “phishing” attacks and other forms of security fraud.

Ability to Buy and Sell to Other Consumers Auction and listing sites allow individuals to buy and sell from each other which in turn opened up a new paradigm of e-commerce such as eBay.com.  
Instantaneous Receipt of Purchased Digital Goods Within seconds of buying a song, movie or even software the buyer can download it without having to go and collect it.  
Delay in Receiving Goods   As opposed to the previous consideration, a purchaser can feel “empty handed” after an online purchase and may have to wait some time for delivery
Delivery Costs   The addition of delivery costs may increase the price to the extent that purchasing something directly from a “real shop” may be more attractive.
Having Sellers Bidding for a Buyer’s business. It is possible for a purchaser to place their requirements online and have suppliers bid for their business. Obviously good for the consumer. It is possible for a purchaser to place their requirements online and have suppliers bid for their business. Obviously bad for the seller.
Inability to identify Scams   Scam artists often set up overnight e-commerce websites which buyers may not recognise as a scam. After accepting payment on an “order” they simply disappear. Bad for buyers!
Location of Store   Whilst the location of a physical shop is of the utmost importance and the rent increases with the desirability of a location there is absolutely no discrimination with respect to the “location” of an online store.
Scaling Up Ability An e-commerce business can be scaled up much quicker, easier and much less costly when compared to a physical business.  
Unlimited Shelf Space An e-commerce business is not confined to the limited store space of a physical store which allows a seller to “stock” a much wider range of products.  
Extraordinarily High Reliance on the Website   As can be expected, its website is everything to an e-commerce business. A few minutes of “down-time” can lead to less selling and frustration to purchasers.
Credit Card Chargebacks   Due to credit card issuers being quite liberal in permitting chargebacks upon a customer’s request the e-commerce business may be placed in a difficult position if the goods have been delivered.
Ease of Communication. The e-commerce merchant captures the buyers contact details during the sale which in turn makes it quite easy to communicate with and even send out automated and customised emails to the buyer.  
Absolute Customisation. By using cookies and various other methods of monitoring a consumer’s behaviour, an e-commerce website can customise many aspects of what the consumer sees.  
No Handling of Currency Notes. Due to no money physically changing hands between the buyer and the seller a lot of risks attached to dealing with cash is eliminated.  
Effective Procurement. The entire supply chain can be interlinked with business to business e-commerce systems, procurement becomes faster, transparent and cost effective.  
Delivering of Individual Items.   Although buyers experience the convenience of having goods delivered to them, the logistics involved with delivering each individual item can create a substantial strain on the e-commerce business operation.
Superior Inventory Management. An e-commerce business can interact with the order processing systems of their suppliers which can maintain lower inventories without having to face out-of-stock problems.  
Reducing Employee Costs. Most of the e-commerce processes are automated which in turn requires fewer employees and less overhead costs.  
Gain Search Engine Traffic. Almost 100% of internet users make use of search engines. With the e-commerce business’ SEO Strategy properly in place, search engines can act as a great source of qualified and free traffic.  
Ability to Track Logistics. Since effective logistics is the key to a successful e-commerce business, the ability to trigger and monitor logistics online is a valuable tool for the e-commerce business.  
Need for Expanded Reverse Logistics.   In the case of physical retail, customers are usually willing to travel to the retail outlet to return/replace goods if required. But receiving goods back is a bigger nightmare for an e-commerce business. For this reason, a proper reverse logistics procedure need to be put in place.

As can be seen above there are quite a large number of advantages and disadvantages related to an e-commerce venture. Most of the positives and negatives listed above speak for themselves. Should you however have any question or input, you are welcome to contact us or leave a comment below. The above list is also by no means exhaustive. I have however listed the most important pros and cons for you to consider.

In our next blog post we will discuss the things you need to consider before diving into an e-commerce venture.

Take care

This blog was written by Eitel Bock

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