E-commerce has come a long way since its inception. Gone are the days when you would have to queue up at a Selectric typewriter-cum-kiosk to place an order. Today, with the advent of the internet and e-commerce, you can make purchases from the privacy of your home or office.
E-commerce has become so much a part of our lives that it has practically become a part of our daily routine. From ordering food online to buying household essentials, e-commerce is now considered a necessity rather than a luxury.
With the growth of online shopping, vendors also grew with it. From fashion to books, you can now buy almost anything online. But as the saying goes, there is no such thing as a free lunch.
In this article, we will be talking about e-commerce, their pros and cons. Let’s take a look.
What is E-Commerce?
E-commerce is the use of computer networks, web-based systems, and digital communications technologies to make and manage purchases of products and services, such as those purchased online, by computer, telephone, mobile device, or other digital device.
E-commerce is the buying and selling of goods and services through electronic media. It is also the delivery of these goods and services, whether or not there is any physical contact between the parties. E-commerce does not include the use of electronic media for communication where neither transfer nor acquisition of goods or services is involved.
Types of E-Commerce
There are many types of e-commerce, including Internet, mobile, and hybrid. Internet e-commerce is the purchase and sale of goods or services using electronic methods such as computer networks, the World Wide Web, mobile apps, electronic messages, and other digital tools.
Mobile e-commerce is the use of mobile devices to buy and sell goods and services.
Hybrid e-commerce is a combination of mobile and Internet e-commerce that includes both online and mobile sales channels.
Pros of E-Commerce
There are many advantages to online shopping, such as:
- Lower Overhead Costs: E-commerce has reduced overheads compared to traditional shopping methods, meaning you can offer your products at a lower price point with less margin needed to survive.
- No Capital Investment Needed: Unlike bricks-and-mortar stores, you don’t need to invest a single cent to set up an online store. This means you can start selling online with almost no upfront costs.
- Flexible Hours: You can choose when you want to sell your products. This is great if you’re frequently on the move because you can set up an online store in a matter of minutes.
- Higher Average Sale Value (ASV): E-commerce platforms take care of most of the heavy lifting, like customer service, shipping, returns, and refunds. This means you can spend more time growing your business and less time managing operations.
- Potential for Massive Growth: E-commerce is expected to grow more than twice as fast as the overall global economy over the next five years. This means increased business for both existing and new e-commerce businesses.
- Global Reach: E-commerce companies can reach customers all around the world, even if they don’t have a presence in that country. This is a huge advantage over traditional stores that are typically confined to a single country.
- No Inventory Holding Costs: Unlike brick-and-mortar stores, you don’t have to keep any inventory in e-commerce platforms. This means you can keep your costs low and pass those savings onto your customers.
- Lower Overhead for Customers: Because you’re using an e-commerce platform, your customers don’t have to spend time managing their inventory, shipping, or orders. This means higher average ticket sizes and more revenue per customer.
- Easier to Manage: You don’t have to be an IT expert to run an e-commerce business. With the right software, you can easily create an online store with a customer account that tracks orders, customers, and their spending habits.
- Potential for Higher ROI: You can see higher returns on your investments due to the lower costs of e-commerce. Once you’ve factored in the lowered overheads, you can see even higher profits.
- Potential for Greater Customer Satisfaction: Customers are generally satisfied with their online purchases compared to in-store purchases. They don’t have to deal with slow delivery times, crowded stores, or rude staff members.
Cons of E-Commerce
Despite having so many advantages, e-commerce has its fair share of disadvantages, including:
- Higher Total Cost of Ownership (TCO): E-commerce platforms tend to be more expensive than traditional retail solutions. You’ll need to invest in a web developer to build your online store, as well as an e-commerce platform.
- Potential for Product Return: Unlike traditional stores that have returns policies in place to protect both the merchant and customer, e-commerce platforms don’t always have the best policies in place for handling product returns.
- Potential for Lower Customer Satisfaction: Some customers may experience dissatisfaction with their online purchases due to the lack of in-person service they are used to from brick-and-mortar stores.
- Potential for Missed Opportunities: Customers may not be able to physically visit your store, or your store may not be located in a location that’s convenient for them. This could mean they miss out on the opportunity to purchase from you because of this.