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 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 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 concerns.
Sometimes, I get enquiries from people thinking of quitting their regular 9-5 day jobs and going into business and online business.
They want to know what type of 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.
Table of Contents
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.
An E-business from the Merchant’s Perspective
Let’s start by considering the 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 online business 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 you have your website or social media channels up and running, your online business is open for online transactions 24/7 around the clock with no business hours restrictions. This 24/7 availability is a crucial advantage of having an e-business. There is no restriction to the regular 9to5 that 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 customers 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. There are no physical restrictions on a specific geographical region with a traditional business.
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
Whether it is your website, blog, or social network channels, you have access to make quick updates and order processing on things like promos, holiday specials, shipping costs, etc. Email marketing is another excellent channel for sending quick updates to your audience worldwide. This is where an email marketing campaign is another significant advantage of an eCommerce business. The benefits of email marketing to this business model cannot be overemphasised. 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 e-commerce site using various digital marketing strategies. In that case, you’ll be able to collect data on how long visitors or customers stay on your site, what pages they look at, and how they make purchases.
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. Therefore, an e-business makes it likely to capture relevant data about your customers when they visit your website, your e-commerce store, use your app, or engage with your brand on social media. Such data is necessary to have an appropriate 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 make their purchases online. Click To TweetNo 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 or hire a virtual assistant to handle customer service or other activities on your website on a 24-hour basis.
Saving Time and Cost
Operating an e-business saves time and cost since your customers can quickly reach you and make their purchases online, and you can dispatch 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
When a physical store experiences a customer spike, it becomes tough to manage due to insufficient staff. Scaling up or expanding a physical store needs additional floor space and resources, each with a cost. In comparison, growing an online store is extremely easy, one of the less apparent advantages of e-commerce for businesses.
All that is required is additional inventory, some digital tweaks, and probably additional storage space, which is significantly less expensive than storefront space. Additionally, being online removes the need to open a new store in a different location since you are already connected to a global marketplace.
Reviews & Ratings
Customers are encouraged to leave feedback on online stores to learn about customer satisfaction and any issues they have when using the products and services. These reviews on e-commerce stores allow potential buyers to learn more about the product and determine if it is appropriate for their needs. It also aids sellers in improving their services and products to increase sales and customer satisfaction.
We cannot find ratings or reviews of a product in a physical store, so we had to rely on our friends who had used the items to get helpful information. In contrast, a customer can read reviews in the comfort of his home and decide based on his preferences without asking his friends or family when shopping online.
Increased Profit Margin
Unlike traditional stores, the cost of setting up and operating an e-commerce store is meagre. You’ll also save money on marketing, labour, and overhead. Most e-commerce stores provide the dashboard with an added benefit for reports and invoices, helping the business manage their finance. When running an online store, inventory management costs are also reduced.
Online stores are available 24 hours a day, seven days a week, and can sell items faster and more efficiently. Increased revenues and lower prices have helped businesses grow their profit margins, proving an essential advantage of an e-commerce platform.
Targeted Marketing
When you sell online, you won’t have to pay to reach everybody, which is very costly. Your marketing budget would be based on reaching out to specific customers who are most likely interested in what you’re selling and purchasing your products. You can choose who sees your ads on online platforms based on keywords, demographic details, geographic location, and interests and hobbies. Compared to a traditional brick-and-mortar shop, this gives businesses a much better ROI (Return on Investment).
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 optimization. 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. So 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.
The poor handling of returns and chargebacks 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 out to the competition. It would help if you also innovated your supply chain to meet your customers’ expectations.
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.
These are some of the advantages and disadvantages of e-business from the perspective of merchants and consumers. Click To TweetAn 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 the small-business owners but also for the 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-business helps the consumer reduce time and cost 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 go online and do their shopping 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. An e-business allows your customers to remain unknown when you have the right processes. 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 TweetImmediate 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.
Disadvantages of E-business for the Consumer
Product Description
Regardless of how well you try to describe your product or service on your website or social networks using multimedia, it cannot compare with your consumers experiencing your product or service in-store physically. 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 rate, taxes and shipping might sometimes 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.
Infographic: 5 Tips for an Efficient E-business
Share this Image On Your Site.
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 or goes down.
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 it when you consider how much money you’ll save by avoiding paying sales taxes and shipping costs.
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Related Article(s)
- How You Can Stay Ahead of The Competition
- Ways for Your Business to Stay Ahead During the Coronavirus Pandemic
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