Finally, e-commerce allows your business to track logistics, which is key to a successful e-commerce company. Having everything digitized makes it easier to automatically collect data and crunch numbers. While you can benefit from knowing what's selling best, you can also afford to take more risks on low-volume goods.
Read this article to learn about the meaning, advantages and disadvantages of E-Commerce.
Meaning of E-Commerce:
The fast and dramatic changes in information technology specially in last one decade has given new concept of marketing in which buyer and seller do not see each other face to face nor see the goods physically; the whole transaction is carried out with the help of ‘on line’ communication. The entire deal is carried out with the help of computer – telecommunication and net working with associated hardware.
In the e – commerce internet provides information about goods and services “It is” a way of conducting imaging and executing business transactions and services through electronic media and net working in computers and communication net work, websites, e-mail are resorted.
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Customers know about goods and services sitting at home. The manufacturers, distributors, suppliers and services providers let the consumers know about their products quality, price, size, color etc. through multi-colored catalogues on website. The consumers can ‘surface various web sites and compare their relative prices, quality characteristic, features etc.
These details can be obtained from suppliers around the globe. The websites are available beside for goods for direct selling, context selling, financial and other services such as hospitals, education, training, advertisements, property, entertainment, product demonstrations, bill payment, exchange and all other services which one can think of.
The types of selling through the use of internet and other electronic devices can be of following types:
1. Business to Business (B2B):
This implies selling by one business manufactures to other business manufactures, trade, wholesaler or retailer. In India as yet most of the e-commerce is B2B. The number of companies like TELCO, IBM, C1TI BANK, BHEL, ESSAR, TVS, MARUTI, BAJAJ, and many others are doing B2B. In 1998 out of total e-commerce of us$ 210 billion us$ 100 billion was accounted for B2B.
2. Business to Consumer (C2B):
When business sells to customers/consumers it is called B2C and is most important from our point of view. The products include items sold in departmental stores, chemist shops, grocery stores, books, stationery, clothes, vegetables, fruits and what not. As yet in India such sales are only of US$ 100 billion but are expected to go up to US$ 900 billion by 2005 i.e. the growth of 9000 percent. Many service sectors are adopting this mode.
3. Consumer to Consumer (C2C):
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Under this system when some consumer want to dispose off his old items, he can take the help of selling through internet. But this type of e-commerce is not very common at least in India and the business is negligible.
4. Business to Government (B2G):
Business house or on individual business has to file income tax and sales tax returns and various types of other returns. As yet this requires filing of return in respective office and apply for approval in concerned office. But now many countries allow this type of activity through e-mail/e-commerce. However, as yet this is not being done in India.
5. Government to Consumer (G2C):
In order to provide facilities to public and speed up information and records government in many cases provide record of information, through this system; sale of documents, passport forms, copies of returns etc are supplied through e-mail. The main features of e-commerce is that one does not physically feel an item nor sees it and places order on the basis of information supplied through website or in response to consumers inquiry, as yet e-commerce has last preference for daily consumption items.
It is largely limited to durable goods like computers, TV’s, automobiles, books, travel reservation. In case of service it is becoming popular for banking and share purchases. The growth of E-commerce is restricted as given in Table 20.1
Key players in e-commerce are consumers and sellers.
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E-mail net work:
E-commerce requires visit of website, selection of products, select a payment mode, realization of money (which is done before dispatch) and dispatch of goods.
The process may be depicted as under:
A. Visit of website:
Selection of a product
Selection of payment mode
1. Credit card
2. E-banking
3. VP/courier (who collects the payment at the time of delivery, but this is discouraged.
4. Placement of order through e-mail
5. Realization of money.
Dispatch to the customer can be on line or through courier.
In order that consumer may visit particular website, sellers have to advertise about their website so that consumer may visit the website. The consumer decides which websites have to be visited and after getting the information from various sites he makes a choice and decides which one should be purchased. He then places an order intimating the mode of payment which is generally through credit card or e-banking and advise the bank where he has credit card to debit the amount to his account.
After the seller realizes the amount for the goods order he dispatches the goods. In most of the cases whole process takes couple of minutes and goods reaches the consumer within half an hour to one hour if he is a local consumer, it is claimed so by sellers. In India in this business Rediff(dot)com is most popular and sells products worth Rs. 1340 million every month.
Advantage to Consumers:
The consumer has number of advantages and convenience and therefore the system is becoming popular.
1. Consumer has wider choice not from his town or country but also round the globe unless there are import restrictions.
2. Customized or personalized product and service. For instance if some lady wants a bra of exact size, her size can be measured through internet and stored and she will be supplied bra of her requirement.
3. In case of purchase, one is not required to go from store to store to see the products to collect their details, prices etc. Sitting at home he gets all the required information and that too very fast without spending much time.
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4. There is absolute flexibility of time, place and distance is no hurdle; one can open the site any time day or night to get details, there is no problem of shops/stores opening/closing hours. Website can be opened any time. In physical sales place and distance is also a problem which is no problem in e-commerce because one can see sites all over the world without moving out of the house.
5. Goods are available at cheaper price because there are lot of economies of space, rent, interest to the seller Further, he manages with much lesser number of outlets and cost of marketing is reduced. Part of these savings is passed on to consumer and therefore, he gets the products cheaper than from conventional shops/departmental stores, grocers etc.
6. It helps to globalize retail trading. One can buy things without geographical boundaries.
7. It eliminates with the system of distributors, authorized dealers and retailers, the manufacturer can deal with large territory with one store.
8. The inventory is reduced, and so the cost of carrying goods and distribution cost.
9. Exports to final consumers is possible through e-commerce, not only-just sales but procurement, accounts, logistics product development and other related services are also possible through e-commerce
10. The net enables suppliers to introduce and promote new markets and new products to meet the needs of individual buyers.
11. Long distance, travelling and delays, pollution all are avoided because one has not to travel to the shop.
12. Consumer is better informed about products, price etc and therefore can make better choice.
13. Suppliers, competitors and customers come under one roof through internet websites and massive exhibition of various items is possible.
Disadvantages:
1. The biggest disadvantage of e-commerce is that one is not able to see and feel the product.
2. Since consumers are not able to feel and touch the products and therefore business is on trust and as yet business is largely limited to travel, automobiles, PC’s, services, books and CD’s entertainment. As yet sales of apparel, food products is largely small percentage of total e-business. For instance in 1999 the maximum ownership of internet was 50 percent in USA, in other countries it varied between 1.8 percent to 45 percent (Table 20.2) But gradually this disadvantage is being reduced but still there is large percentage of population which does not own internet.
3. There is a big problem in on-line payment. It is with regard to time and legality of order to complete the transaction. As yet satisfactory system of payment has not been developed by banks and financial institutions in large number of countries.
4. The electronic signatures acceptance has been legalized by large number of countries but still many more have to take steps in this direction. Further, there are great chances of fraud in-spite of all the precautions.
5. The. e-commerce requires large investment to build a brand image on internet which is estimated around us$ 100 million or around Rs. 500 crores which can be invested only by big players. Thus small suppliers cannot get business through internet.
6. The market is restricted to high income and educated population who own and know the use of internet. Thus in poor, illiterate or less educated countries it has limited access.
7. Sometimes there could be flood of orders for any particular product which makes problem of timely supply to consumer. In 2000 there was YK2, problem and customers had to wait to get product of their choice.
8. Consumer has number of problems. He has to search internet/websites information on internet, make the purchase domain and the payment. There are difficulties in searching, surfing, browsing and wandering around the internet which costs both time and money.
9. Privacy of consumer is adversely affected specially in the matter of accounts; he is required to tell his credit card number to supplier or e-banker.
10. E-commerce is good for branded products like automobiles, electronic goods, computers, electrical goods, branded garments, branded food products, music, books etc. If middle class or lower middle class want to buy non branded products which are generally cheaper, they cannot be bought through e-commerce.
In other words e-commerce is for effluent society i.e. why population in USA use is 50%, in Europe 13 percentage, in poor countries only 1-2 percent and in some countries it is negligible. Thus e-commerce is for classes and not for masses.
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The internet might be the single most important facet of modern society. It plays a primary role in everything from political discourse and higher education to the way we conduct ourselves and our businesses. It's no wonder, then, that switching to an e-commerce model comes with significant advantages.
E-commerce eliminates the need for physical stores and allows businesses to expand their customer base. On top of eliminating the possibility of long lines, e-commerce sites offer a huge advantage to both shoppers and stores that aren't located in major urban areas. Even if you are located in a big city, e-commerce opens up new markets, allowing you to develop a new business model geared toward your expanding consumer base. Many businesses have found particular success in developing good e-commerce Search Engine Optimization, which drives more traffic to the site.
Your business can also save money on rent, utilities, maintenance, and other costs associated with physical stores. Your e-commerce store can essentially remain open 24/7 without hiring employees to watch over the store and protect items. Since you aren't confined to a set amount of shelf space, there is no limit to the number of items that can be sold online, and your store's stock can expand exponentially. Physical products will still have to be stored somewhere, but storage spaces are often cheaper than retail spaces, and you won't have to worry about factors like foot traffic and parking spaces.
Digital products can be sold online with little-to-no overhead cost. Thanks to e-commerce, consumers can purchase music, videos, or books instantaneously. Stores can now sell unlimited copies of these digital items, without having to worry about where they'll store the inventory.
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E-commerce also allows your business to scale up easier than physical retailers. When a brick-and-mortar store grows, it needs to consider how it will serve more customers in the same small space. More employees are needed to expedite check-outs, more of the floor gets dedicated to forming lines, shoppers feel more crowded as customer base and inventory grows. Of course, logistics always get tougher as a business grows, no matter how the business operates. With the right choice of a third-party logistics provider, however, e-commerce companies can manage this growth without worrying about the physical store aspects.
Keeping in contact with customers is often easier for e-commerce businesses. Since the e-commerce merchant captures contact information in the form of email, sending out both automated and customized emails is simple. Let customers know about a sale, promote a new product, or just check in with customers for a personal touch—all with minimal effort. Additionally, web tools like cookies allow for superior store customization and consumer behavior analysis.
The benefits consumers enjoy are shared by e-commerce companies when it comes to the supply chain. Consumers like online shopping because they don't have to deal with cash, worry about schedules, or wait in long lines. Those benefits also apply to entire supply chains interlinked with business-to-business e-commerce systems. Procurement becomes faster, transparent, and there's no need to handle currency notes or cash. The result is cheaper, easier transactions with fewer opportunities for accounting errors.
Benefits Of E Commerce Businesses
Finally, e-commerce allows your business to track logistics, which is key to a successful e-commerce company. Having everything digitized makes it easier to automatically collect data and crunch numbers. While you can benefit from knowing what's selling best, you can also afford to take more risks on low-volume goods. The conventional retail strategy focuses on stocking fast-moving goods, but the economics of e-commerce permits slow-moving and even obsolete products to be included in the catalog. Storage is less expensive, and displaying the product is as easy as adding another item page to your site.