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You are here: Home / Digital Marketing / The Advantages and Disadvantages of an E-Business (Updated)

The Advantages and Disadvantages of an E-Business (Updated)

Ademola Abimbola · 12 minutes well-spent · Updated: January 26, 2023

What are the advantages and disadvantages of having an e-business?

E-business is a type of business that operates through the Internet or other electronic means. The term was coined in the 1990s and has become widely adopted. E-business is a business type often considered synonymous with a virtual company.

E-businesses offer several benefits over their brick-and-mortar counterparts. They allow companies to reach customers worldwide at a low operating cost and without geographical boundaries. In addition, they provide flexibility and efficiency in terms of time management and communication. On the flip side, however, e-businesses also present challenges such as high costs, technological limitations, and security issues.

Sometimes, I get enquiries from people thinking of quitting their regular 9-to-5-day jobs and going into business and online business. They want to know what business they can invest in to make money.

Some are even specific and want to know what type of online or e-business they can do to make money. These questions often lead me to tell them the advantages and disadvantages of e-business. So I have spelt it out for you all here.

With the pandemic crisis upon us, now is the time to put all your efforts into either starting or growing your business’s online presence.

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Table of Contents

  • What is E-Business?
  • An E-business from the Merchant’s Perspective
  • Advantages of E-business for the Merchant
  • Disadvantages of E-business for the Merchant
  • An E-business from the Consumer’s Perspective
  • Advantages of E-business for the Consumer
  • Disadvantages of E-business for the Consumer
  • Infographic: 5 Tips for an Efficient E-business
  • 5 Tips for Successful E-Commerce Sites and Efficient E-business
  • Final Thoughts

What is E-Business?

In 1996, IBM’s marketing and internet team coined the term E-business. It stands for electronic business or online business. It is a business where the transaction occurs online, and the buyer and seller need not meet in person. Electronic business is a part of E-commerce, i.e., electronic commerce/online commerce.

An E-business from the Merchant’s PerspectiveAn E-business from the Merchant’s Perspective

Let’s start by considering the major advantages and disadvantages of online business or e-business for you, the merchant, i.e., the business owner having an e-commerce website and conducting e-commerce transactions, whether for business-to-business (B2B) or business-to-consumer (B2C) ventures.

Advantages of E-business for the Merchant

The benefits of doing business online or e-business for the merchant are often a simple decision, primarily when most people work from home because computers, internet access and online banking have become part and parcel of our daily lives.

Here are the top 10 advantages of e-business:

24/7 Availability

Your website is an invaluable e-business tool. There is no e-business model or e-business owner that does not have a website. Having your website opens the door to more business advantages.

Once your website or social media channels are up and running, your online business is open for online transactions 24/7 with no business hours restrictions. This 24/7 availability is the most significant advantage of having an e-business. There is no restriction to the regular 9-to-5 you see in a traditional business.

A traditional business or brick-and-mortar retail shop means paying staff to come to work to sway customers to buy goods and services. But with your online store, it’s easier for your online shoppers to do their online shopping at your online store at their convenience, regardless of the day or time. This helps to improve the customer experience with your brand. All they need to transact business with you is internet access, an internet-connected phone or computer, and their debit or credit card.

Though your physical products will still have to be stored in physical stores, storage spaces for businesses are often cheaper than retail spaces. You won’t have to worry about factors like potential customers’ foot traffic and parking spaces.

Global Reach

You can reach a worldwide audience for your product or service through the internet. Unlike traditional businesses, there are no physical restrictions on a specific geographical region with an online business. You track visitors using tools like Google Analytics, etc.

However, according to these stats for a dropshipping store, startup costs are estimated at $418 in 2019 and e-commerce stores only pay $3192 a year on Shopify at most for virtual rent’.

Quick Updates

You can quickly update promos, holiday specials, shipping costs, and more on your website, blog, and social network channels. Email marketing is another excellent channel for quickly updating your audience worldwide. An email marketing campaign is another significant advantage of an eCommerce business. This business model can benefit significantly from email marketing. If you have a physical retail store, you can also use it to drive foot traffic to your doorstep.

Customer Profiling

Suppose you have an eCommerce platform using various digital marketing strategies. Using this technique, you can track visitor or customer behaviour on your site, such as how long they stay on your page, what pages they look at, and how much they spend.

The more data you have on your customer base, the better you can tailor your product or service to meet their requirements. This type of data is priceless to your online marketing efforts. A website, e-commerce store, app, or social media account associated with an e-business allows you to capture relevant customer data. Such data is necessary for an appropriate social media marketing and business plan.

You can use your information to improve your customer’s journey and shopping experience. The better a visitor’s experience on your online store, the greater your chances of turning that visitor into a customer.

According to this article, whether you’re sending visitors to your eCommerce website through organic search, PPC ads or a good old postcard, there is a way to track your traffic and customers’ entire user journey to get insights about keywords, user experience, business marketing message, pricing strategy, marketing strategy and more. You can hire SEO experts if you need help with this.

Customer profiling is complex for traditional businesses unless you want visitors to label you a creep or worse.

Customer profiling is the foundation for excellent marketing strategy and customer service. And having a sound customer service system in place is critical to the survival of your physical business or e-business.

Operating an e-business saves time and cost since your customers can quickly reach you and purchase online. Click To Tweet

No Location Disadvantage

With a physical store, the physical location of your business is essential. Having a store in a high street shopping mall will be more lucrative than a place where it is difficult for your customers to reach you. It can also affect your supply chain. However, this is not the case if you operate an e-business.

You can create a bot/app or hire a virtual assistant as a customer service representative to handle other activities on your website on a 24-hour basis.

Saving Time and Cost

Operating an e-business saves time and cost since your international customers can quickly reach you and purchase online. You can dispatch the items to their desired location. All this with the click of a button!

Merchants can scale up or down their operations and take advantage of the unlimited virtual storage space to respond to market trends and consumer demands.

Scalability

Lack of staff contributes to difficulty managing a physical store during customer spikes. When a physical store expands, more resources and floor space are required, which is an additional cost. A less apparent advantage of internet commerce is the ease of growing an online store.

Additional inventory, digital tweaks, and probably more storage space are all needed. Since you are already connected to an international marketplace, it is unnecessary to open another store.

Reviews & Ratings

Online stores encourage customers to leave feedback on their product and service experiences to learn about customer satisfaction. A product review on an e-commerce website can help potential buyers better understand the item and determine whether it suits their needs. Customers and sellers alike benefit from its ability to improve services and products.

There are no ratings or reviews of a product in a physical store. Thus, we rely on friends who have used the items to get helpful information. On the other hand, online shopping enables a customer to read product reviews in the comfort of his home before making a decision based on his preferences without consulting his friends or family.

Increased Profit Margin

In contrast to traditional stores, e-commerce stores are relatively inexpensive to set up and operate. You’ll also save money on marketing, labour, and overhead. Internet business owners can easily manage their finances using dashboards and reports from most online stores. When running an online store, inventory management costs are also reduced.

In addition to being available 24/7, online stores can sell items more quickly and efficiently because they are available 24/7. An e-commerce website allows businesses to increase their profits through increased revenue and lower prices.

Targeted Marketing

When you sell online, you won’t have to pay to reach everybody, which is very costly. You will base your internet marketing budget on reaching out to customers interested in your offering and purchasing your products. Online advertising platforms allow you to target your ads based on keywords, demographics, location, interests, and hobbies. It gives you better ROI in comparison with brick-and-mortar businesses.

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Disadvantages of E-business for the Merchant

Certain e-commerce disadvantages are present for the merchant operating an e-commerce business. Since most companies are going digital, we may as well consider these to be disadvantages of entrepreneurship. They include:

Quicker Market Share Loss Because of the Competition

With an e-business, corporate vulnerability is dangerous as you risk speedier market share loss because of competition from home and abroad. So, you have to always be on your toes (so to speak) and think of innovative ways to keep your customers’ patronage. This is the only way to avoid a substantial loss to your business.

High Startup Costs, Especially with Marketing

With an e-business, the merchant is competing against other merchants worldwide. This global competition increases your startup and digital marketing costs for search engine optimisation. You will need to be creative, where you cannot outspend your competitors. Look for other avenues to out-think your competitors to gain your target audience’s attention. Pay-per-click advertising is an effective way to ensure that you only pay for adverts viewed by actual humans.

Handling Returns

There is a limit to how you can describe a product on screen. Thus, when the product eventually reaches the consumer and is not what they expected, they will return it. Is your business ready to accommodate these returned products? Is your company capable of absorbing all the requests for money back? You need to meditate on these things when adopting an e-business, mainly if you will deal with physical products.

Poor handling of returns, chargebacks, and other financial details can have long-term legal and financial implications for your business.

Innovation Pressure

An e-business model exposes you to a global competitive field, and there is a tendency for your brand’s voice to be drowned out in a sea of several thousand competitors. This situation leads to constant pressure to innovate. Be innovative to get and keep your customers; otherwise, you lose them to your competitors. It would help if you also innovated your supply chain to meet your customers’ expectations. Even as an online retailer, you still need to look for ways to give your customers a personal touch in the online marketplace, similar to what they get from a physical retailer.

Customers Can Remain Anonymous

Depending on the e-commerce platform or CRM platform you use with an e-business, there is a tendency for your customers to stay anonymous since you are not relating to them face-to-face, and sometimes, their business interaction with you might be a one-off affair.

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These are some of the advantages and disadvantages of e-business from the perspective of merchants and consumers. Click To Tweet

An E-business from the Consumer’s Perspective
An E-business from the Consumer’s Perspective

In the paragraphs above, we have considered the advantages and disadvantages of e-business from the merchant’s perspective.

Now let’s turn our attention briefly to consider the advantages and disadvantages of e-business from the consumer’s perspective, i.e. your existing and potential customers.

Advantages of E-business for the Consumer

There are innumerable advantages of e-business, not only for small-business owners but also for consumers. Some of these include the following:

Saving Time and Cost

Here again, just as it is with the merchant, from the consumer’s perspective, an e-commerce transaction helps the consumer reduce time and commercial transaction costs since they do not have to go physically to your brick-and-mortar store to do their shopping. They use their mobile device or computer to shop online from your website or app. It is that simple.

Convenience

With an e-business, your customers can transact business with you from the comfort of their homes or offices. This convenience, in most cases, is what attracts many consumers to this e-business. The more convenience your brand offers your customers, the more they are likely to do business with you and be advocates for your brand.

Not Dependent on Opening Hours

With an e-business, your consumers are not relying on the opening hours of your business since they can transact business with you around the clock via your website, app, or social network channels.

Easy to Transact Business Internationally

Whether your customers are in Australia, China, Antarctica, New York, Singapore or London, they can do business with you online. This reduces transaction costs since they need not go to your physical office to transact business with you.

Anonymity

Nowadays, we live in an interconnected world, and your data is precious to advertisers. Therefore, many consumers are concerned about their privacy and identity theft. An e-business allows your customers to remain unknown when you have the proper business process. Your customers, therefore, feel that they are transacting business with your brand on fair competition regardless of socioeconomic status.

It would help if you implemented additional software to analyse website traffic and user behaviour and improve your online shop quality.

It would help if you implemented additional software to analyse website traffic and user behaviour and improve your online shop quality. Click To Tweet

Immediate Price Comparison

Your customers can compare your prices with your competitors to ensure they get a fair deal or the lowest price. You will also see many low-cost items online, more than you will see in-store.

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Disadvantages of E-business for the Consumer

Product Description

Regardless of how well you describe your product or service on your website or social networks using multimedia, it cannot compare with your consumers physically experiencing your product or service in-store. Your consumers cannot assess your product quantity and compare it to others. Your consumers cannot access the physical product until it reaches their doorstep. It is only then that they can decide whether it meets their expectations.

Cost and Shipping

Factors such as exchange rates, taxes, and shipping might make your product unaffordable for consumers in another geographical location.

Poor Internet Connection

Despite the advancement in global internet connectivity, some countries and territories still have poor internet connections. This makes it difficult for customers in such lands to access organisations from various business sectors and e-commerce portals online.

After considering these issues, if you still wish to go ahead with your e-business, here is an infographic with 5 Tips for an Efficient E-Business to help you out.

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Infographic: 5 Tips for an Efficient E-business
Five Tips for an Efficient E-business

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5 Tips for Successful E-Commerce Sites and Efficient E-business

Communication

Maintain regular communication and customer dialogue (via customer feedback and contact forms) for inquiries and complaints.

Software

You must implement robust Customer Relationship Management (CRM) software with an online chat and ticketing system’s capabilities. This CRM will help to ensure e-commerce communication.

Web Controlling Solutions

It would help if you implemented additional software to analyse website traffic and user behaviour and improve your online shop quality.

Regular Testing

You must engage internal employees and others to test your entire e-business solution and processes to ensure proper security measures in your online store.

Patience

It would be best if you devoted much time to build your e-business. The time required to grow your brand online can range from several months to years! E-commerce is not a silver bullet to success.

Final Thoughts

In summary, we can say that the advantages of e-business are that they can save time, money, and resources. They can also provide better customer service than traditional businesses. E-business can also help reduce costs, increase profits, and improve efficiency.

We can also say that the disadvantages of an e-commerce business include the fact that it may not have the same level of security as a brick-and-mortar store. There is also the possibility of losing customers if the website crashes.

These are some advantages and disadvantages of e-business from the perspective of merchants and consumers.

In conclusion, starting an e-commerce site isn’t always easy. But it’s worth considering how much money you’ll save by avoiding paying sales taxes and shipping costs on a wide range of products due to online selling.

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Do you know what else? I would love to hear from you! Let me know your main takeaway from the article.

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  • Ways for Your Business to Stay Ahead During the Coronavirus Pandemic

 

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About Ademola Abimbola

Ademola Abimbola is the founder of Mauco Enterprises. He is a digital marketer with two decades of experience. He provides site audits, phone consultations, digital marketing and social media marketing help. Follow him on LinkedIn and Twitter.

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