Advantages and Disadvantages of Ecommerce in Supply Chain

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?

 

Sources:

1.      http://ecommerce.about.com/od/eCommerce-Basics/tp/Advantages-Of-Ecommerce.htm

2.      http://ecommerce.about.com/od/eCommerce-Basics/a/Disadvantages-Of-Ecommerce.htm