Impacts Of E-Commerce On Business
E-commerce has made a profound impact on society. People can now shop online in the privacy of their own homes without ever having to leave. This can force larger brick and mortar retailers to open an online division. In some cases, it can also force smaller businesses to shut their doors, or change to being completely online. It also changes the way people look at making purchases and spending money.
E-commerce has changed the face of retail, services, and other things that make our economy work. Undoubtedly, it will continue to influence how companies sell and market their products, as well as how people choose to make purchases for many years to come. The following are the impact of e-commerce on the global economy.
Impacts on Direct Marketing
Product promotion E-commerce enhances promotion of products and services through direct, information-rich, and interactive contact with customers. New sales channel E-commerce creates a new distribution channel for existing products. It facilitates direct reach of customers and the bi-directional nature of communication. Direct savings The cost of delivering information to customers over the Internet results in substantial savings to senders when compared with non electronic delivery. Major savings are also realized in delivering digitized products versus physical delivery. Reduced cycle time The delivery of digitized products and services can be reduced to seconds.
Also, the administrative work related to physical delivery, especially across international borders, can be reduced significantly, cutting the cycle time by more than 90 percent. Customer service Customer service can be greatly enhanced by enabling customers to find detailed information online. Also, intelligent agents can answer standard e-mail questions in seconds and human experts’ services can be expedited using help-desk software. Corporate image On the Web, newcomers can establish corporate images very quickly. Corporate image means trust, which is necessary for direct sales. Traditional companies such as Intel, Disney, Dell, and Cisco use their Web activities to affirm their corporate identity and brand image.
Other Marketing Impacts
Customization E-commerce provides for customization of products and services, in contrast to buying in a store or ordering from a television, which is usually limited to standard products. Dell Computers Inc. is a success story of customization. Today, we can configure not only computers but also cars, jewellery, gifts, and hundreds of other products and services. If properly done, one can achieve mass customization. It provides a competitive advantage as well as increases the overall demand for certain products and services.
Advertisement with direct marketing and customization comes as one-to-one or direct advertisement, which is much more effective than mass advertisement. This creates a fundamental change in the manner in which advertisement is conducted not only for online trades but also for products and services that are ordered in traditional ways.
Ordering System taking orders from customers can drastically be improved if it is done online. When taken electronically, orders can be quickly routed to the appropriate order-processing site. This saves time and reduces expenses. So sales people have more time to sell. Also, customers can compute the cost of their orders, saving time for all parties involved. The physical market is disappearing as is the need to deliver the goods; with the growing popularity of an electronic market, goods are delivered directly to buyers when purchasing is completed making markets much more efficient. For those products that are digitally based-software, music and information-the changes will be dramatic. Already, small but powerful software packages are delivered over the Internet. This fundamentally affects packaging and greatly reduces the need for historical distribution.
New selling models such as shareware, freeware are emerging to maximize the potential of the Internet. New forms of marketing will also emerge, such as Web-based advertising, linked advertising, direct e-mail, and an increased emphasis on relationship marketing. Customer’s convenience is greatly enhanced, availability of products and services is much greater, and cheaper products are offered. All these provide EC with a competitive advantage over the traditional direct sales methods. Some people predict the “fall of the shopping malls,” and many retail stores and brokers of services are labelled by some as “soon to be endangered species.”
Impacts on Organizations
Technology and organizational learning rapid progress in E-Commerce will force companies to adapt quickly to the new technology and offer them an opportunity to experiment with new products, services, and processes. New technologies require new organizational approaches. For instance, the structure of the organizational unit dealing with E-Commerce might have to be different from the conventional sales and marketing departments. To be more flexible and responsive to the market, new processes must be put in place.
This type of corporate change must be planned and managed. Changing nature of work and employment will be transformed in the Digital Age; it is already happening before our eyes. Driven by increased competition in the global marketplace, firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly less expensive.
The upheaval brought on by these changes is creating new opportunities and new risks and forcing us into new ways of thinking about jobs, careers, and salaries. The Digital Age workers will have to become very flexible. Few of them will have truly secure jobs in the traditional sense, and all of them will have to be willing and able to constantly learn, adapt, make decisions, and stand by them. New product capabilities E-commerce allows for new products to be created and existing products to be customized in innovative ways. Such changes may redefine organizations’ missions and the manner in which they operate.
E-Commerce also allows suppliers to gather personalized data on customers. Building customer profiles as well as collecting data on certain groups of customers, can be used as a source of information for improving products or designing new ones. Mass customization, as described earlier, enables manufacturers to create specific products for each customer, based on his or her exact needs. For example, Motorola gathers customer needs for a pager or a cellular phone, transmits them electronically to the manufacturing plant where they are manufactured, along with the customer’s specifications and then sends the product to the customer within a day.
Impacts on Manufacturing
E-Commerce is changing manufacturing systems from mass production to demand-driven and possibly customized, just-in-time manufacturing. Furthermore, the production systems are integrated with finance, marketing, and other functional systems, as well as with business partners and customers. Using Web-based ERP systems, orders that are taken from customers can be directed to designers and to the production floor, within seconds. Production cycle time is cut by 50 percent or more in many cases, especially when production is done in a different country from where the designers and engineers are located.
Companies like IBM, General Motors, are assembling products for which the components are manufactured in many locations. Sub-assemblers gather materials and parts from their vendors, and they may use one or more tiers of manufacturers. Communication, collaboration, and coordination become critical in such multitier systems. Using electronic bidding, assemblers get sub-assemblies 15 percent to 20 percent cheaper than before and 80 percent faster.
Impacts on Finance
E-commerce requires special finance and accounting systems. Traditional payment systems are ineffective or inefficient for electronic trade. The use of the new payment systems such as electronic cash is complicated because it involves legal issues and agreements on international standards.
Nevertheless, electronic cash is certain to come soon and it will change the manner in which payments are being made. In many ways, electronic cash, which can be backed by currency or other assets, represents the biggest revolution in currency since gold replaced cowry shells. Its diversity and pluralism is perfectly suited to the Internet. It could change consumers’ financial lives and shake the foundations of financial systems and even governments.