E-commerce has proved to be a suitable alternative for people who want to shop and transact from the confines of their home. However, there are certain challenges concerning the security issues associated with a customer’s confidential information that need to be taken care of. 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.
History of E-Commerce
The history of e-commerce dates back to 1970, when for the first time, Electronic Data Interchange (EDI) and Electronic Fund Transfer (EFT) were introduced. Since then, a rapid growth of e-commerce has pervaded almost every aspect of business such as:
- Supply chain management
- Transaction processing
- Internet marketing
- Inventory management
Advantages of E-Commerce to Business Firms
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 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 non-existent 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.
International Marketplace
What was once a single physical marketplace inside a geographical area has evolved into a borderless market that includes both national and international markets. Businesses may now reach individuals all over the world by becoming e-commerce enabled. All e-commerce companies have effectively become virtual multinational corporations.
Operational Cost Savings
Mass customization has reduced the cost of creating, processing, distributing, storing, and retrieving paper-based information. E-commerce has changed the way people shop for goods and services. Pull-type processing enables products and services to be tailored to the needs of the consumer.
When Ford first started making cars, customers could have any colour they wanted as long as it was black. Facilitating ‘pull’-type supply chain management – which is premised on gathering the customer order and then supplying through JIT (just-in-time) manufacturing – allows for lower inventories and overhead. This is especially useful for organisations in the high-tech sector, because stockpiles of components can fast become obsolete in a few months.
Companies such as mobile phones and laptops, for example, collect consumer orders for a product, transfer them electronically to the manufacturing plant, where they are made to the customer’s requirements (such as colour and features), and then delivered to the customer within a few days.
Lower Telecommunications Cost
The Internet is much less expensive than value-added networks (VANs), which rely on leasing telephone lines for the organization’s and its authorised partners’ exclusive use. Sending a fax or e-mail over the Internet is also less expensive than dialling.
Digitization of Products and Processes
Specifically in the situation of software and music/video items that may be downloaded or e-mailed in digital or electronic format directly to customers via the Internet.
No More 24-Hour-Time Constraints
Companies can be approached at any moment by customers or suppliers.
Benefits of E-Commerce to Society
Enables More Flexible Working Practices
Which of these improve the quality of life for a wide range of individuals by allowing them to work from home? Not only is this more convenient and produces happier and less stressful working environments, but it also has the potential to cut pollution by reducing the number of individuals who must commute to work on a daily basis.
Connects People
People in underdeveloped countries and rural places can now enjoy and access products, services, information, and other people that they would not otherwise have access to.
Facilitates Delivery of Public Services
For example, health services are available via the Internet, as is filing taxes via the Inland Revenue website.
Benefits of E-Commerce to Customers
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.
Online commerce also offers buyers a wider range of products and services to choose from, as opposed to conventional shopping, without the hassles of lugging around heavy shopping bags and getting stuck in messy traffic jams, which turns out to be more convenient and time-saving.
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.
24/7 Access
Customers can shop or do other transactions from practically any location 24 hours a day, all year. Checking balances, making payments, and collecting travel and other information are just a few examples. In one case, a pop star installed web cameras in every room of his home so that he could check on the status of his home while on tour simply connecting onto the Internet.
More Choices
Customers have access to not just a wide range of items to choose from and personalise, but also to a global network of suppliers.
Price Comparisons
Customers can ‘shop’ all over the world and compare prices either directly by visiting different sites or by visiting a single site that aggregates and compares pricing from multiple vendors.
Improved Delivery Processes
This can range from the on-line tracking of the progress of products being delivered by mail or courier to the immediate delivery of digitised or electronic commodities such as software or audio-visual files via downloading via the Internet.
Other Business Benefits
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
- Increasing productivity and customer care service
Electronic commerce reduces the burden of infrastructure to conduct businesses like physical store setups and thereby raises the amount of funds available for profitable investment. It also enables efficient customer care service by collecting and managing information related to customer behaviour, which in turn helps develop and adopt an efficient marketing and promotional strategy.
An Environment of Competition
As different retailers compete for customers, big discounts or value-added services might be obtained. It also enables several consumers to combine their requests into a single order that can be presented to wholesalers or manufacturers for more competitive pricing.
Benefits of E-Commerce (Summary)
- Access new markets and extend service offerings to customers
- Broaden current geographical parameters to operate globally
- Reduce the cost of marketing and promotion
- Improve customer service
- Strengthen relationships with customers and suppliers
- Streamline business processes and administrative functions
Disadvantages of E-Commerce
Electronic commerce is also characterized by some technological and inherent limitations which have 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 and objects that need to be felt and touched before actually making the purchase.
The time period required for delivering physical products can also be quite significant in case of e-commerce. A lot of phone calls and e-mails may be required till one gets the desired products. However, returning the product and getting a refund can be even more troublesome and time-consuming than purchasing, in case anyone is not satisfied with a particular product.
Scope of E-Commerce
- Marketing, sales, and sales promotion
- Pre-sales, subcontracts, supply
- Financing and insurance
- Commercial transactions: ordering, delivery, payment
- Product service and maintenance
Limitations of E-Commerce
During the last several years of the 20th century, there was a lot of buzz about the Internet and e-commerce. Much of it portrayed the Internet and e-commerce as the solution for all evils, which begs the question: do e-commerce and the Internet have any limitations?
As per Newton’s 3rd Law of Motion: “For every action, there is an equal and opposite response.” E-commerce, too, has constraints.
Technical Limitations
- Lack of system security, reliability, standards, and some communication protocols
- Insufficient telecommunication bandwidth
- Rapidly changing software development tools
- Difficulty integrating Internet and e-commerce software with legacy systems
- Need for special web servers and network infrastructure
- Compatibility issues between e-commerce software and hardware/OS
- These issues are improving, and planning can help mitigate them
Non-Technical Limitations
- Cost and Justification: High costs of in-house development and potential delays from lack of experience. Outsourcing brings its own complexities.
- Security and Privacy: Despite improvements, customer concerns persist—especially in B2C models.
- Lack of Trust and User Resistance: Faceless sellers, paperless transactions, and electronic money often discourage customers.
- Other Factors:No physical “touch and feel” Legal issues unresolved Government regulations lacking maturity Limited support services Not enough sellers and buyers in niche markets Fear of degrading human relationships Internet still costly/inaccessible for some
Conclusion:
E-commerce, as a discipline, is still evolving rapidly. With proper strategic planning, improved technology, and trust-building measures, the benefits of e-commerce have the potential to far outweigh the limitations and adapt to modern demands.
