Impacts of E-Commerce on Businesses

Increased accessibility to customers- e-commerce allows businesses to carry out their operations without the barriers of time and distance. In contrast to most traditional brick and mortar stores that do not operate 24 hours a day, e-commerce businesses operate throughout, and their goods or services are always available to their consumers. The use of the internet also allows e-commerce companies to reach out to potential consumers around the globe. They can reach customers from all corners of the world, provided they have access to the internet. Additionally, advertising over the internet is cheaper and reaches more people than any other form of advertising due to the internet’s global characteristic. In contrast, the traditional brick and mortar companies can only reach consumers within their localities. The internet also allows e-commerce businesses to reach their customers and suppliers directly, thereby eliminating the need for the use of intermediaries, and, hence, eliminates the costs associated with the use of intermediaries.

The possibility of small companies to compete with large companies- e-commerce eliminates or reduces most of the market entry barriers. As such, it makes it possible for small companies to enter into markets that are dominated by large companies. Additionally, advertising over the internet is cost-effective and levels the playing ground for all companies. Therefore, small companies can compete with the large companies in the market. Increased profitability- the adoption of e-commerce allows businesses to increase their profitability in various ways. For example, it helps companies reduce their costs of sales by eliminating the need for the use of sales people and, hence, eliminating the salaries and wages that would have been paid to such employees. It also eliminates the processing errors associated with the traditional means of selling. Additionally, e-commerce is faster and more convenient for both the sellers and the buyers. As such, it is a cheaper means of doing businesses and results in cost savings by sellers, thereby increasing their profits.

However, businesses are also faced with some challenges associated with conducting their operations over the Internet. For instance, just like in the case of individuals, e-commerce exposes companies to possibilities of fraud. The use of the internet leaves enterprises with no direct contacts with their clients and provides the clients with incentives to cheat about their real identities and ability to pay for goods and services.

High set up and maintenance costs- the initial costs incurred during the setup stage and the maintenance of e-commerce may discourage potential enterprises despite being lower than those involved in the case of traditional brick and mortar enterprises. Such costs may include research and development costs, staffing and training personnel, promotion, infrastructure development, initial web design fee, and website maintenance fee. Medium and small entrepreneurs may not have the financial strength necessary to pay for such costs, and may, therefore, be locked out of the online business platform.

  • Low sales figures immediately after set up- most businesses record declined sales revenue immediately after implementing their online platforms. The low sales figures may be attributed to the lack of experience in using the platform. For instance, most companies may not have sufficient IT personnel. Therefore, they may be dependent on web designers and internet service providers to design and update their websites from time to time, but the designers and providers may not be responsive to the needs of the company. Other companies are not able to design customer oriented websites and are, therefore, not able to attract customers to make purchases. Additionally, some websites are not readily assessable by potential customers via search engines and they decrease the abilities of their companies to establish contact with the customers looking for their goods and services through the internet.
  • Security and privacy- just like in the case of individual consumers, e-commerce, through its reliance on the internet, puts the security and privacy of businesses in jeopardy. Companies that are connected to public networks face the risk that unauthorized persons may access confidential data and use in for wrongful purposes. The internet also exposes businesses to litigations from their clients for interfering with their privacy such as through the use of their personal information for the unintended purposes.
  • The loss of a personal touch- as discussed in the case of individuals, e-commerce businesses automate most of their operations and have lean staffs, especially sales personnel. Therefore, e-commerce businesses do not have the chance to develop personal bonds with their customers as is the case with offline businesses where most customers return to make repeat purchases because of such relationships.
  • Technical issues- the internet is prone to technical issues such as bugs, viruses, and connectivity problems. E-commerce businesses may have to stop their operations when such issues occur. During such times, they lose a lot of sales revenue and may even lose their customers to their competitors.