The Effects of E-Commerce
Online buying and selling goods and services as well as procurement and distribution of goods are termed as e-commerce. It also includes remitting of funds or data through electronic networks, mainly the Internet. The retail industry has grown tremendously due to the application of e-commerce to the business. E-commerce helps in making the transactions faster and, thus more reliable and efficient. In addition, it has resulted in the exit of some firms that have been unable to implement the use of e-business. Through e-commerce, businesses have created convenience to suppliers, sellers, and buyers, conquering the geographical barrier, reducing cost of doing business, and gaining better access to markets.
First, E-commerce affects the equilibrium prices of goods and services as it brings the reduction of search costs to the consumers. Consequently, industries take advantage of this and increase the prices of their products. These does not affect their sales since customers will always buy more goods as they can acquire whatever they want at their comfort, anytime. Higher price elasticity can bring different reactions to different firms depending on their competitors.
Secondly, e-commerce brings information asymmetry in the sense that there is direct contact between the seller and the buyer; hence, a customer tends to have strong brand recognitions and a high level of trust. Consumers tend to have information about the online sellers through the online rating done to the seller that gives them a strong or a weak score. Industries will always try their best to have a good score so that they can win a substantial market share and boost trust to their customer.
Thirdly, it is evident that the application of e-commerce has brought a decrease in the search costs by a significant margin. A good example for this is the travel agencies where the individual do not have to walk to the company’s offices to book a flight but rather have it booked online. It has brought convenience to the consumers who use the product and as a result, there have been many repercussions to the businesses that cannot create convenient online services as well as to the customers exiting the business, as many consumers in the USA prefer to book their flight online. The total amount of time and cost needed in search of goods and services from different producers was significantly lowered by taking the application of e-commerce. However, there is still cost involved in the quest but this cannot be compared with the cost incurred through the search of goods and services online. The cost reduction has an effect on the total revenue, profit margins, marginal cost, and the firm’s composition. It is evident that the industries that implement the use of e-commerce made more income, hence more profits generated from the increased sales that were created by the convenience made from selling the products online. These firms are more competitive as compared to the industries that do not make the use of e-business.
Moreover, e-commerce has a positive impact on the geographical and demographical aspects. Research shows that people move from one location to another with the online speed in search of goods and services. They will navigate from one store to another with internet speed just to buy what makes them feel comfortable. Therefore, it is clear that distance is a non-issue when it comes to e-commerce. People from smaller cities and smaller countries can have the privilege to use the goods and services enjoyed in the developed countries and towns by making a purchase online. For instance, residents from the developing countries enjoy the services in the developed countries, which has been made possible by e-commerce. However, it has reduced the use of local products, as consumers prefer to go online and search for products they want, thus reducing the income per capital generated by the local industries. In addition, competition within the local market has reduced as more people buy their goods through e-business.
Furthermore, e-commerce has largely contributed to the entry and exit of some firms worldwide. Some evidence has been presented to support the survival and exit of the enterprises on a competitive market. The efficiency of the industries determines their survival on the market. It is clear that the size of the firm is not an important factor to become competitive but rather its efficiency to its clients and customers. E-commerce, in this case, has led to the growth of small firms that have used it well. However, some large enterprises, which chose to maintain the status quo, have exited the market, and some have ended up closing the entire business. The companies that make the use of e-commerce are also seen to make high sale per unit cost.
E-commerce has caused a dynamic change in the supply chain. For instance, most people tend to buy products online; this has largely reduced the business of warehousing locally, and international firms doing business online have been forced to improve their transport and delivery systems. After the customers place an order, these companies have no options rather than to ensure that the goods reach their customers conveniently and in real time. Therefore, the firms surviving on the market are those enterprises that have proper transport mechanisms.
Additionally, e-business has a positive impact on the mode of payments. As people continue to do business online, they come up with relevant innovations in the way of making payments for those goods and services. The use of telegraphic transfers through subsidiary banks has increased and it has been made more secure. Additionally, the use of debit, credit, and prepaid cards has been made payments secure and user-friendly. Online banking has been implemented by most banks, making fund transfer electronically even more efficient.
E-business will enable firms to monitor their competitor strategies, and they will be able to counter attack the rivals and dominate the market. For instance, when a competitor company realizes that the opponent makes a massive online advertisement, it creates awareness to its customers that they have better products, and therefore they should not be convinced to move to the competitors.
In conclusion, e-commerce has benefitted most of the businesses across the globe and has created the efficiency to customers as they can buy goods and services for their comfort. Additionally, consumers have been enabled to move across the word in search of products with an internet speed and to different stores and buy things they favor most. Businesses have grown due to the making use of e-business, as it reduces search cost to the consumer, leading to the firms making more sales. However, the companies that have chosen to maintain the status quo have been seen exiting the market or even having to shut down the business operation. Funds transfer from one individual to another has been made more secure, more efficient, and faster. Economies of different countries have grown as people continue to do business electronically. Information sharing has been improved, and this has made the word a global village in the sense that anyone can get whatever they want from any country at their comfort.