With ecommerce becoming a new trend for companies around the
world to manage their supply networks and delivery products to their target
customers, retail stores now face the possibility of being gradually replaced
in the process. Compared to normal retailing, ecommerce generally offers customers
more convenience and better prices. At the same time, companies are able to
reach more customers and produce and sell their products at lower costs.
However, for every one of these aforementioned advantage, there is at least one
disadvantage accompanying it, and companies should seriously consider both when
deciding whether or not ecommerce is a good strategy.
Geographical
Limitation vs. Product Selection Limitation
With the absence of a physical location, ecommerce allows
companies to sell goods to practically anywhere around the world and greatly
expands its reach to customers. In addition, it can help attract customers by
eliminating the need for them to travel to a store, thus making shopping easier
and more convenient. However, these advantages of online stores also place
limitations on what companies can sell online. For instance, the fact that
anyone can access an online store does not mean that a company can sell and
ship its products in a feasible way. Many products can be damaged during
shipping, and perishable items will spoil if delivery takes too long over too
much distance. Furthermore, the convenience of not having to leave one’s home
when ordering a product can also be offset by the time it takes for that product
to be delivered. Even with the fastest
delivery speed available, many products very often take longer to arrive via
ecommerce when compared to shopping at a physical store.
Product
Information Transparency vs. Increased Competition
Ecommerce gives customers easier access to a lot of
information for the products they are interesting in buying. Compared to
regular stores, where the amount of information one can obtain pertaining to a
product is often limited to the availability of sales representatives in these
stores, online stores can provide much wider range of product information in
the forms of customer reviews and price comparisons. Because of this, customers
become much more informed when making purchasing decisions. However, this
empowerment of knowledge can also result in much tougher competition in ecommerce
as compared regular retail. Product information transparency means that
companies must offer more competitive prices and higher quality than the competition
in order to be able to sell their products at profit and stay in business. Product
reviews by customers also means less control in product marketing for
companies; some negative reviews may seriously affect sales.
Less Need for
Labor vs. Lack of Human Touch
Online stores can stay open all the time, and accept and
process orders automatically with less need for human labor. This, when
combined with the fact that no physical store is needed, can save a company a
lot of operating expenses and increase margin. However, this cost-saving feature
of ecommerce can also become a weakness in some situations. For example, many
customers actually value the services that they get when shopping at a store
just as much as – if not more than – the price and quality of a product. To
these people, the act of adding products to the shopping cart and proceeding to
checkout in an online store lacks personal touch and is therefore less
appealing. Companies need to seriously consider their target customers when
deciding whether or not more automation is a good strategy.
Conclusion
As show above, each advantage of ecommerce is accompanied by
at least one disadvantage. Yet, some companies have managed to successfully leverage
the former and avoid the latter, while others have had less success. Can you
think of a few companies that overcame the disadvantages? How did they
accomplish it?
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