Advantages and Disadvantages of Ecommerce

Not sure if an ecommerce store is right for your business? Read on to find out more.

ecommerce websites

Over the past few years, the rise in e-commerce businesses has been evident. More people are able to make purchases online and more people have started online businesses. If you’re part of the population still wondering whether this is a trend you should join, take a look at some of our advantages as well as disadvantages of investing in an e-commerce store for your business.

 

First things first – what is e-commerce?

Electronic commerce, widely known as e-commerce is the buying and selling of goods or services via the internet. Usually on a website, where a user is able to complete an order with a transfer of money or data.

There are various goods being sold via e-commerce. More and more, the capabilities of this rising trend has started replacing the need for brick-and-mortar retail. E-commerce works as a retail form that is easily accessible to SME, freelancers, individuals and large scale corporations. 

Some examples of products or services available include:

  • Sales of physical good and online digital products
  • Digital services
  • Online banking
  • Online marketplaces
  • Virtuals showings / online auctions

 

With all the possibilities, it is no surprise that so many businesses are reviewing their revenue models and engaging in e-commerce talks. If you need more convincing, think about this; according to statistica, in 2020 more than 2 billion people purchased goods and services online, this is a number that is increasing annually. E-tail sales surpassed 4.2 trillion U.S dollars worldwide – this is not something you want to miss out on right?

Now that we have a basic definition of e-commerce, let’s look at the different types to help you understand this new trend.

 

The 4  traditional types of e-commerce

Along with digital marketing trends, the way e-commerce is conducted is constantly evolving. Here are the 4main types of e-commerce business models.

types of ecommerce

1.Business to Consumer (B2C)

This is also known as one of the most popular e-commerce business models. This involves a transaction being made between the business and a consumer. For example, buying a leather bag directly from a website.

Example of B2C ecommerce Business:

  • Amazon is a well-known online e-commerce platform that allows transactions between businesses and customers. It is the world’s largest online marketplace as well as one of the world’s most valuable companies.

2.Consumer to Business (C2B)

This allows individuals to sell their goods and services to businesses. 

A common and rising example of this includes online platforms like Fiverr and Upwork. These are platforms that enable freelancers to set their prices for their services which gives them a competitive edge. It also gives business access to employing workers per project basis – which can help save costs in the long run.

Example of C2B ecommerce:

  • Upwork, is an American freelancing platform. The platform enables organisations and individuals to connect in order to conduct business. Upwork has over eighteen million registered freelancers and five million registered clients.

3.Business to Business (B2B)

B2B e-commerce allows online transactions between businesses. Organisations who would make use of this type of model are wholesalers, distributors and manufacturers. This type of e-commerce would be preferable if your target market prefers orders in bulk.

Example of B2B ecommerce:

  • Mailchimp, one of the world’s largest marketing automation platforms. Mailchimp provides mailing services to millions of large to small corporations.

 

4.Consumer to consumer (C2C)

C2C e-commerce takes place between customer and consumer. These platforms make profits by charging listing or transaction fees. Some examples of C2C platforms include Amazon, Etsy and eBay.

Now that you’re able to classify the type of e-commerce business model you will need, let’s take a look at the advantages of e-commerce, which has to be more than just boosting your sales.

  • Craigslist is an example of the C2C business model. This platform connects people that are selling products or services to people looking to buy.

C2C ecommerce

Advantages of e-commerce

 

1. Around the clock income

Having an e-commerce store allows you to sell your products or services at any time of the day, or night.  You’ll be able to capture the night owls surfing the web at 2 am and even the lunch break online shoppers. With a store that never closes, you have a competitive edge over shops that have operational hours.

Your business to be open and convenient to people who do not work normal hours or who might be too busy to visit a physical location. Having an online store, means you are available at any time.

 

2. Be available anywhere

Being online not only means your business is accessible anytime but also anywhere. This gives you the opportunity to find a target market in regions surrounding your location as well as internationally. 

When you open your business to a global market, you are able to build your brand much faster and this gives you the opportunity to  increase your profits much quicker than your local competitors.

 

3.Lower startup costs

One of the biggest benefits is the lower financial costs associated with an online business. When you run a physical store, rent alone can add thousands of dollars to your expenses. In addition, you also have to consider employing a team, designing the store, store signs and inventory. 

Having an e-commerce store significantly lowers your start-up costs. Depending on your type of business, you might only need to employ more people once you scale your business. Another advantage to building a remote team for an e-commerce store is that your talent pool is not restricted to a physical location but you’re able to hire internationally.

 

4.Provides more convenience for the customer

E-commerce can speed up the buying process for a customer. When someone thinks of buying an item that is only available at a certain physical store,  it means that the customer will have to make plans to get to the store. And very often the item might not even be in stock at a specific branch. When it’s available online, an e-Commerce store can save a customer time and effort.

 

5.Provide the customer with detailed information about the product

When you display your items in a physical store, you aren’t able to provide the customer with all the information that they might want to know. There simply is not enough space. 

When you’re selling products online, each product has a dedicated landing page, which gives you the ability to provide more information that will help them make their decision.

You’ll also be able to display reviews from people who have previously bought the product to help them in their decision-making phase.

 

6.Easily retarget your customers

When someone enters your physical store and leaves without a purchase, you have no influence in whether they decide to return to your store. When you’re running an online e-commerce store and someone visits your site without purchasing, you’re able to retarget them with various marketing efforts.

 For example, you can retarget them through display ads on websites that they visit or with ads on Facebook. You’re even able to send a personalised email offering them a discount on their purchase, as extra encouragement. All of this would never be possible in a physical store.

 

Disadvantages of e-commerce

The advantages of e-commerce might have been enough to convince you to convert but before you make a hasty decision, we would like to be informed about the other side of e-commerce too.

1.Websites crash

Sometimes technical glitches might result in a website crash. When your website crashes or has to undergo some type of update or maintenance, people will not be able to purchase anything. To avoid these kinds of unforeseen interruptions it is important to invest in a reliable web hosting company that can provide 24/7 support and avoid website downtime as much as possible.

 

2. E-commerce is very competitive

When you’re running a physical store, you only compete with customers within a certain radius of your store. Once you move into the online space, you’re suddenly competing with anyone in the country, no actually, anyone in the world, that is selling the same product. It is important that you are able to optimise your online e-commerce strategy to achieve the best results.  To compete, it is advisable to have a reputable digital marketing agency help you create a strategy for your online business. This would include building your brand awareness and sales by means of SEO, social media marketing, Google adwords etc.

Read our blog post for some further advice on how to create an e-commerce strategy.

 

3.Customers are buying products “blindly”

Even though they’re able to see the products online, they’re not able to engage with the product by feeling it, smelling it, tasting it or testing the sound. 

This is the reason why some customers might have difficulty buying products online. A way to make sure this is not deterring customers from buying your products is by providing as much information about the products as possible with high-quality images and of course, online reviews. Once people see other customers’ opinions about a product it will improve their trust level in your business.

 

4.Customers are not able to try before they buy

When making purchases online, customers are not able to try on items of clothing or perhaps cosmetic items. 

In the near future, this problem should be resolved with the innovation of augmented reality. This will mean customers can try on items virtually, for example, they can see what a shade of lipstick will look like on them. So this might only be a temporary disadvantage.

 

5. Shipping can be delayed

Even though a purchase can be made really quickly, a customer still has to wait for the product. This is one of the biggest inconveniences for shoppers as well as businesses. 

When running an online e-commerce business it is important to be transparent about when a customer can expect the products and communicate any expected delays as soon as possible.

 

6. People are cautious about providing personal information

In order to complete an online transaction, people have to provide some personal information, including their address and credit card information. Because of an increase in the frequency of hacker attacks,  people’s concerns are not unfounded, so this might influence their willingness to buy online. As a business, you have to make sure that your website is safe and secure to be able to reassure customers that their information is safe.       

 

Having introduced you to the most important advantages and disadvantages of e-commerce, we’re sure that you now have enough information to make an informed decision. If you’re considering taking your business online, contact Lilo to help you decide on the best way to move forward (and upward in sales).

 

                                  

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