The Impact of Online Selling on Small Businesses - Essay Example

Impact of Online Selling on Small Business In this prospering global economy, E-commerce and E-business have become a more and more essential element of business strategy and a highly influential medium for economic development. Modernisation of relationship among organisations and between organisation and individual was made possible, especially during the recent years with the help of integrating information and communication technology (ICT) in business operations. Online selling is a part of E-business, which uses the broad functions and features of internet throughout the process of production and marketing. Utilisation of such practices boosts up production, promotes greater customer involvement, cuts down costs, and enhances effective customisation. Selling products on the Internet is just another method, in fact one of the most modern means through which an entrepreneur can utilize the facilities of the Internet in his business. Apart from using it as a selling tool, the wide range of capabilities of the Internet can be made use for customer support, marketing, recruitment, procurement, communication, and for many other functions. Indeed, today there is hardly any business activity in this modern world that does not pass across the Internet. In the opinion of Andam (2003), the most exciting function of the Internet these days is E-commerce and Online selling, where the provider uses the Internet as an intermediary to sell his products and services directly to the consumers in the global market. Online selling is expected to have a greater boom in global village as the responsive audience is growing by millions every year. It is the process whereby customers are facilitated with the technology to directly buy goods and services from a seller in real-time, over the internet without any intermediary service in between. While considering the benefits of online selling many seems to disagree that online shopping will affect the percentage of retail sales in the future, arguing that only a small percentage of online selling will only obscure the market potentials. However, as Andam (2003) points out, concentrating on this idea a little deeper reveals that even if the Internet sales constitutes only 5 percent of total retail within a few years, that still amounts billions and billions of dollars spent on online selling. As more and more organisations and customers are making the use of internet to collect information before they make the final decision and to purchase online, it is certain that all business firms must have a web presence. Leaving the online selling, if the firm is not existing on the Internet, it does not exist. Another advantage to the small business that uses online marketing is that they have the ability to sell a wide variety of products due to “infinite shelf space” (Afuah, 2009, p. 68). Afuah also comments that online stores can easily make higher proportion of their income out of the low-volume items rather than traditional stores, a trend called as the long tail effect. It makes possible for the firm to reach new markets and new customers. On the other hand, buyers can search for information to decide their final purchase and compare the products to see which offer sounds adequate to him/her. Small business organisations, especially in the developing countries have the advantage of diminishing the costs of search for information as well as costs of transaction. It broadens the effectiveness of transactions by reducing the time taken for processing, payments and other functions. As Gingrich (2003, p. 152) points out, a small business is highly benefited by information provided about customers and markets together with the valuable details of product design, financial resources, and process technology. The widespread use of internet and its functions have changed the way the customers as well as the firms acquire information and operate their business. In the same way, setting up an online store increases the face value of the company and builds a brand loyalty among the customers which instils them to set the products of the company within their preferences like that of the existing companies that have already implemented online selling. However, while a small business firm searches for newer markets and customers through online selling, it also faces with the issue of losing the older customers. The online selling also costs high for the organisation. Implementing a system of online selling creates equipment costs as well as labour costs to the company. The firm is in need of purchasing additional technologies as well as web hosting services to manage the selling process. The firm will need consultants who create and manage the website and its functions for the business. The company also requires additional financial managers to administrate and supervise the online financial transactions of the company. As the customers are paying online, it needs the company to take additional steps to make sure that the online transactions are secured and there are no chances for cyber crimes. There are also other indirect costs related to online selling such as the Cybertax, the tax payable to the government for the use of internet. However, despite all these costs and difficulties, the Internet and online selling will continue to remain the most thrilling technology of the twenty-first century. Moving on to online selling enhances manufacturers to sell their products directly into the hands of customers. This method forms a disintermediation which eliminates the functions of retailers. The Internet has a great role in the business. As all business operations are based on transactions which needs effective communication system to be carried out, the Internet enhances a competent method for communication with the customers widely opening the doors for new opportunities. The online selling makes the producer to market his products to every online person in the world. However, the fact that must be kept in mind while going online is that everyone else can also market products to those people. The main objective of the company moving to online selling is to increase the sales to the maximum and to reduce the costs to the minimum. When a small business organisation moves to online selling, it affects its financial management too. Unlike the traditional way of selling, online selling requires broader techniques for financial management. The most significant challenge associated with the financial management is to manage the two most important components of online selling namely, methods used for payments and security issues. According to Carroll and Broadhead (2001) implementation of online selling is a comprehensive process, which includes five stages such as planning, preparation, development, execution, and refinement; the planning process also includes estimating the financial costs of moving to online selling (p.2). The financial manager should evaluate the operation of the business using financial management tools like trend analysis, ratio analysis and break-even analysis to accurately predict the future business of the company when moving to online selling. According to Jones and Tilley (2003), for the purpose of online selling, a company needs higher degrees of organisational restructuring as the implementation of online selling influences outbound logistics and marketing, the two primary activities in an organisation’s value chain (p.179). The introduction of online selling also requires large-scale changes in the financial management system. Another element that affects the financial management when selling online is Cybertax, which requires the company to pay the government for utilizing online marketing. Already in Canada, some of the municipalities have already taken steps to impose online tax per gigabyte of information that is transferred (Learn2succed.com Inc, 2005). References Andam, Z, R. (May 2003). E-Commerce and e-business. E-Asean Task Force: UNDP- APDIP, 1-47. Retrieved from http://www.apdip.net/publications/iespprimers/eprimer-ecom.pdf Afuah, A. (2009). Strategic Innovation: New Game Strategies for Competitive Advantage. New York: Routledge. Carroll, J & Broadhead, R. (2001). Selling Online: How to Become a Successful E-Commerce Merchant. Canada: Dearborn Trade Publishing. Gingrich, G. (2003). Managing IT in Government, Business & Communities. USA: IRM Press. Jones, O & Tilley, F. (2003). Competitive Advantage in SMEs: Organising for Innovation and Change. USA: John Wiley and Sons. Learn2succeed.com Inc. (2005). Fundamentals of Effective Online Selling: Use the Power of the Internet to Increase Your Sales. Canada: Productive Publications. Read More