How e-commerce affects business
The Internet and the growth of e-commerce has had a revolutionary effect upon business whether it is dealing with other business: so called "business to business e-commerce" or whether it is business selling to consumers: "business to consumer" e-commerce. Here are some of those effects:
1. On-line selling allows products to be sold directly to consumers, bypassing traditional retailers. Web sites that sell computers directly from the manufacturer, such as Dell.com and automobile manufacturers like Honda of America are examples of business to consumer e-commerce that allow the customer to specify exactly the product they desire from the convenience of their own home.
2. Comparison-shopping, through e-commerce, has created price and product competition between businesses that benefits the consumer. It is very easy to make price and product comparisons online. Sites such as Compare.com will look up the best price and advertised for any product you choose.
3. Because consumers and business can deal directly with suppliers, intermediaries and brokers are potentially affected. This is the so-called "disintermediation" that many Internet commentators talk about. If you can book your airline tickets directly through expedia.com, what do you need a travel agent for? One way that intermediaries may rise to this challenge by providing a more personalized service to a smaller, higher value customer base.
4. Business to business trade is transformed, not only because many intermediaries are removed, but also because it is so much cheaper to issue invoices and purchase orders electronically than it is to do so by traditional paper means. In addition it becomes possible to manufacture "On demand", rather ahead of that demand. Traditional supply chains, which fulfill predicted demand for goods, become demand chains, where goods are manufactured to order as and when that order is received. This allows both manufacturers and suppliers to reduce their supply chains.
5. The costs associated with entry into global markets are very low in an e-commerce environment. Traditionally for somebody to set up an overseas operation often involves significant costs in setting up. Now with the Internet a website can be read anywhere in the world and anyone can be a global trader.
There are other challenges facing a company that wants to do business online. Marketing and logistics, along with security are the biggest challenges. In order to get your product out, E-businesses must market their product and web site. Many E-businesses have failed because of lack of knowledge about their site. Logistics encompasses many aspects of the E-commerce arena. Not only does a web site have to be easily navigatable, the customer must be assured that the product they are ordering will arrive on time and in the condition in which it is expected to be in. If the E-business fails to do so, the customer will not be back and they will tell their friends about their bad experience. This negative response from customers is the kiss of death to any E-business. The last issue is security, 2/3 of internet users are concerned about CyberCrime and worry about giving personal information, like credit card information, online to a company they may not know a lot about. In order to succeed, E-businesses must use the latest in encryption technology and develop good will with their customers in the area of personal information.
These issues are just a few of the many facing E-businesses in the arena of E-commerce. Next we will look at some successful and some not so successful E-businesses and reasons for their success or failure.