E-commerce can be greatly beneficial to both customers and merchants because it:
- Helps customers save time through allowing shopping and acquiring services online
- Provides detailed and useful information about products
- Permits customers to do comparison shopping that will allow them to choose the best product with the best price
- Allows businesses to attract more customers through:
- Offering lower consumer prices through coupons, deals and bargain offerings
- Open for 24/7, e-commerce allows customers to purchase goods anytime and from anywhere they are.
- Websites, having clear directions, make online shopping experience easy and convenient
- Gives abundant information about the price elasticity which shows how the quantity demanded for a good or service changes when the price changes. For instance, with the help of auctions, companies can learn the willingness of customers to pay a particular price for their product.
- Provides market efficiency through disintermediation (refer to Figure 1). This allows manufacturers to directly sell products to customers thus creating increased revenues and lower consumer prices
(figure 1)
Issues:
Despite all of the benefits mentioned above, customers and companies have to carefully consider some of the issues and costs associated with e-commerce:
Despite all of the benefits mentioned above, customers and companies have to carefully consider some of the issues and costs associated with e-commerce:
- Security is one of the major concerns and there have been many issues with the abused information and “stolen” money.
- Dissatisfaction with the purchased goods after delivery as some of the products may not be exactly the same as they are represented online.
- Disintermediation that allows the manufactures to set up a lower price will simultaneously cause price conflicts with the retailers who usually set up higher price for the products.
- Show rooming occurs when some customers go to the physical store to examine a product; however, they end up buying online. There has been debate that this impacts the profitability of the retailer.
One of the biggest issues with e-commerce that needs to be addressed is taxation. It is very difficult to tax goods or services when customers live in a different country than the company offering online shopping.