Blog
January 23, 2023 • by Victoria

What are eCommerce Advantages and Disadvantages?

E-commerce development
image

It is hard to deny that the development of digital technologies and the Internet has greatly simplified our existence. Now, to purchase any desired product or service, we do not need to go around shopping from store to store; instead, just using a computer or mobile device will do the trick. Online selling has firmly entered into our lives; in this article, we’ll discuss the advantages and disadvantages of the eCommerce industry.

 

Today, eCommerce is an integral part of the modern economy. eCommerce stores do not require their owners to search for retail space, hire employees or buy cash registers, and buyers visiting such a store can get their desired product or service with just a few clicks on their devices.

 

Below, we’ll cover eCommerce advantages and disadvantages in detail — because only after considering both sides of the coin can one objectively judge.

 

 

What is eCommerce?

 

eCommerce is not just about online stores. It is an entire industry structured for the sale of goods and services over the Internet. This includes all financial and commercial transactions carried out using computer networks and the business processes associated with such transactions. eCommerce unites all platforms and services where payment is made online. First and foremost, online stores accept electronic payments. An online store is an object of electronic commerce and is a virtual analog of a physical store.

 

It is logical that the cost of maintaining an eCommerce store is very different from the cost of maintaining a physical store, since it often involves the absence of sales space and sellers in the traditional sense.

 

eCommerce involves both the sale of products directly from a warehouse as well as through drop-shipping; a method in which the buyer places an order with an online store, and the latter transfers the order to the manufacturer or wholesaler, who in turn processes the order and sends it to the buyer.

 

Let’s take a closer look at what exactly the concept of eCommerce includes today:

 

  • electronic purchases;
  • mobile commerce;
  • online transaction processing;
  • electronic data interchange (EDI);
  • inventory management systems and automated data collection systems;
  • electronic funds transfer (EFT);
  • electronic trade (e-trade);
  • electronic money (e-cash);
  • electronic marketing (e-marketing);
  • electronic banking (e-banking);
  • electronic insurance services (e-insurance).

 

Statista predicts the growth of the eCommerce market in 2023 to be $4.5 trillion.

 

Next, consider the types of eCommerce. eCommerce can be classified according to descriptors such as “What are they selling?” and “Who are they selling to?

 

“What are they selling?”

  • Physical goods (clothes, furniture, appliances, paper books, etc.)
  • Digital goods (music, e-books, service subscriptions, etc.)
  • Services (cleaning, ride-hailing, etc.)

 

“Who are they selling to?”

  • b2c (business to consumer) – online retail sales when goods or services are directly sold to consumers;
  • b2b (business to business) – a company sells something to other companies. This can be both the sale of goods and services intended for corporate needs as well as wholesale purchases for the subsequent sale of goods at retail prices;
  • c2b (consumer to business) – individuals providing goods and services for companies;
  • c2c (consumer to consumer) – individuals providing goods and services for each other directly;
  • g2b (government to business) – government agencies providing goods and services for business;
  • b2g (business to government) – provision of goods and services in the framework of public procurement;
  • c2g (consumer to government) – payment by the consumer of state services.

 

The development of marketplaces in the digital space and their increasing accessibility allows for reducing production and trading costs and saving time, which explains the massive growth of the eCommerce industry. Let’s now take a closer look at both the advantages of eCommerce as well as its potential disadvantages.

eCommerce Advantages

 

  • Availability anywhere in the world

 

Regional independence allows the owners of eCommerce businesses to reach a massive audience of online shoppers. Of course, depending on the size of the business, the ability to deliver goods may be limited — for example, only within one country. But if we are talking about major players (Amazon comes to mind), then delivery is available to customers literally anywhere in the world.

 

 

  • Availability 24/7

 

In an online store, the client does not need to stand in line, wait for the seller and rush to make a purchase before the store closes. Online shopping allows a buyer to simply go to the site, add the necessary goods to the basket and purchase anytime.

 

 

  • Reduced store maintenance costs

 

Opening a physical store always involves numerous expenses such as renting or buying the premises, purchasing cash registers and card reading equipment, hiring many employees (salesmen, security guards, storeroom or warehouse personnel, etc.), and designing the store itself. In addition, unforeseen expenses, such as urgent repairs, for example, cannot be ruled out. And in any case, your target audience will be limited to the region where your store is located (at best, in the city, and in an area with heavy foot traffic).

 

It is worth noting that there are online businesses operating in the brick-and-mortar format as well. These are stores that have at least one physical outlet. Of course, this entails an increase in costs, though it can also have a positive effect on the buyer’s confidence in what you’re selling — but more on that later.

 

 

  • Work monitoring

 

Web analytics is a valuable tool for an eCommerce business owner who really wants to know the behaviors and needs of their target audience, as well as optimize their store by using this knowledge.

 

Web analytics tools allow you to find out what online shoppers are interested in, what products are most popular, at what stages buyers abandon purchases, and what sources drive them toward your eCommerce website.

 

 

  • Risk reduction

 

Well-established electronic payment systems minimize the risks associated with receiving, storing, transferring and accounting for cash. You will also be able to work with ultra-small lots, reducing the risk of illiquid products piling up and/or purchases of goods of inadequate quality.

 

 

  • Sale of intangible goods

 

Having an online store, you will be able to sell non-material goods: online courses, music, games, movies, etc. It’s a huge advantage because this sector of ​​income is almost unrealizable in a real store.

 

In an online store, you can place any number of goods — instead of numerous employees and several managers to answer customer questions and help with ordering. Additional costs may be required to maintain storage space, but even this can be avoided with drop-shipping.

 

 

eCommerce Disadvantages

 

  • Dependence on server operation

 

The operation of your online store strictly depends on the correct operation of the server on which it is hosted. A successful hacker attack, slow loading of the site or its complete inaccessibility as a result of a serious load on the server will lead to a significant drop in sales — or their complete absence during the period of incorrect operation of your store.

 

If this is due to negligence in any way — such as the online business owner being unacceptably careless about the issues of server operation — this could result in more than just temporarily jeopardizing security. Ignoring these aspects can lead to the theft of customer data and a complete loss of the store’s reputation.

 

 

  • High competition

 

We have highlighted the significant advantages of eCommerce, and doing so leans into one obvious disadvantage: since Internet commerce has so many positives, everyone will go there, which will lead to considerable competition. And this potential downside brings us to the next point…

 

 

  • High promotion costs and the need to understand digital marketing

 

Among the competitors, the leaders will be those who have not skimped on budgeting for promotion. Large online sales involve large investments in marketing, building a sales funnel, attracting targeted traffic and retargeting. If you do not want your site to be located on the fifth or tenth page of search engine results, you will have to pay marketers, SEO optimization and contextual advertising specialists, designers, photographers, copywriters, etc.

 

 

  • Problems with delivery

 

A huge problem, especially with buyers who are still ready to go to a physical store, is delayed or even failed delivery. Yes, some are ready to wait months for their orders due to low prices, but the risk of not receiving the goods at all makes customers shy away from using online stores. This is one of the most common reasons why shoppers refuse to shop online.

 

 

  • Inability to see the product before purchase

 

Some stores have already reached the point of implementing augmented reality technologies on their websites, where a product can be viewed from any angle. And eCommerce retailers generally promise to accept a returned purchased product within a certain time period if it does not fit. But let’s be honest: AR technologies are extremely rare in online stores, and not every customer is ready to “play the lottery.”

 

 

  • Customer confidence

 

The customers that trust physical stores are not always willing to do the same with an online store. The very fact of having a store “IRL” often gives customers a certain guarantee of quality service. That is why some online businesses prefer the format of a brick-and-mortar store, despite the higher costs.

 

Online stores don’t have that luxury. An eCommerce store will have a long way to go from inception to becoming a trusted and recommended place. This path will require you, as an online store owner, to constantly work toward generating positive user reviews and build the reputation of your online business.

 

 

Conclusion

 

Despite the presence of potential drawbacks and difficulties we highlighted above, it can be said that the eCommerce industry will undoubtedly continue developing, and aspects such as the Covid-19 pandemic and the development of digital technologies will only accelerate this process.

 

If you have decided to initiate or expand your online business, IntexSoft specialists are always ready to help you develop and launch your site — and this includes designing for powerful eCommerce platforms like Magento or Shopify, if needed. Contact us for a free consultation!

Written by

image

Victoria

Marketing Manager

FAVORITES OF THE MONTH

Don't miss our updates