Advantages and Disadvantages of E-commerce - Alibaba - Essay Example

In the era of globalization, E-Commerce is a great revolution in human history. Technological changes have been widely used for business organizations. E-commerce as the means to do business over the internet has grown rapidly. E-commerce is not only way for placing orders online, but business companies perform their business operations such as manufacturing and products’ delivery on clients’ information over the E-commerce websites. This paper has been focused to see the adoption of E-commerce and advantages and disadvantages brought by the E-commerce. E-commerce in respects of (B2C) is analysed by using various demographic factors to see the clients’ behaviour towards the online buying of products. E-commerce brings several benefits to both clients and business organizations. Business organizations doing their business over the internet ensure the data security of customers. Customers can get their desired products very efficiently through convenient means with little efforts of just clicking the mouse and buttons. Customers can compare the similar products from various E-Commerce websites and place the orders they think that is reliable and low price. Competition in E-commerce industry has provided the clients’ options to choose the products from any website at anytime. Data security and privacy of clients’ information is a bigger issue for business over the internet. Credit cards’ transaction over the internet requires some hard rules for data security. Another issue for business over the internet is the physical inspection of products that is impossible. Although use of digital technology is fast in communication but clients wait for a long time for products’ delivery. Millions of users conduct their business over the internet and face the challenges of slow speed of internet that creates problems for clients as well as business organizations. Trust developing with clients is a difficult task for business organizations virtually. Buying intentions of customers through online systems is affected by several factors such as age, gender, income and education. Higher income and higher qualified people do more purchasing over the internet as compared to low income and low qualified people. Young educated people show their more interest towards the online buying of products. Female gender also prefers to buy more online as compared to male gender. Alibaba has become a popular web portal for online buyers in China as it offers quality products to consumers at low prices as compared to eBay. E-Commerce Service (B2C) Background of paper Beyond the real world, the Internet has created the new world called as sixth continent or virtual network. In business, e-commerce has made prosperous circulation system. E-commerce has enabled to achieve the fast, reliable and better economical results as compared to traditional business. E-commerce permeates the every profile including media, logistics, finance, enterprises, governments and traditional agriculture. Aim behind this paper is to see the changes brought by adoption of E-commerce for enterprises. What advantages and disadvantages have been produced from E-commerce to business? What are factors involved in buying attention of customers from E-commerce as well as traditional buying? Introduction to E-commerce E-commerce is commonly used term in the era of Internet age. E-commerce simply means the putting up the website for service and product information along with the email contacts from where customers can place order for buying the products. E-commerce is a system to conduct the business activities via the usage of internet and related technologies. This internet usage refers to computer network to conduct the business. In also includes the selling and buying online, transferring the electronic funds, business communication and associated activities with the selling and buying of services and goods online (Qin et al., 2014). Business to Consumers (B2C) as a category of e-commerce deals with the direct business between the business companies and consumers. It means that a transactional and trading connection is established between organizations’ website and users of the website. Consumers can buy books, computer products, games CDs, DVDs and other services at any time that suits to consumers. Just like any other business, e-commerce has its unique business environment. Nevertheless, transactions in e-commerce are different from any other business activity. The environment involving e-commerce involves persons having access to the internet. Therefore, any person using a computer or a smartphone can reach any business activity taking place on the internet. Consequently, the large number of people accessing the internet makes it easier for e-business online to reach many people. E-commerce may use social media such as Face book and Twitter to reach people (Caner, 2006). Therefore, the environment consists of many people. There are many businesses, which take place in different business online activities. Each e-commerce online activity conducts it process differently. However, they are certain business online organization conducting their activities in similar ways since they produce similar products and services. For instance, Amazon and e-bay perform similar businesses. Therefore, they use a similar process to transact their business activity. In relevance to Arnold (2011), many people may find it hard to understand how people participating in e-commerce earn income since they do not engage in direct conversation with consumers. Ultimately, people participating in e-commerce business activities have services or products, which other consumers do not have. For instance, a student with access to the web has access to online books and journal that are not accessible in print. The student, therefore, purchase the books to sold responsible for uploading the books. Therefore, the internet plays a crucial role in embracing e-commerce. Benefits of E-commerce to business 1. E-commerce online is beneficial to both the consumer and the organization managers. Since, e-commerce uses internet as a means of transaction, consumers do not have to visit the organization. Moreover, the consumers can communicate with the organization managers or service providers directly using the website (Napier, 2006). Communication and activity between the consumers and the organization are confidential. Therefore, other people cannot identify the activities that take place in the website. Confidentiality in e-commerce ensures security for the consumers and organization managers. Therefore, e-commerce promotes security. The consumer also cannot transfer money direct from their phone or bank account to the organization account without visiting the account. The service makes the consumers money secure. E-commerce is also beneficial to the managers or the website creators. The managers can work from their homes (Zaidi, 2011). There do not necessarily need to walk or drive to the organization. E-commerce has also helped in reducing unemployment rates in America. For instance, e-commerce has created employment opportunities for people studying web design (Canzer, 2006). 2. E-commerce provides an opportunity to satisfy the customers’ requirements more efficiently and effectively when compared to traditional shopping. Customers also get their required products from minimal efforts, time investment, and minimal chances of inconvenience. In addition, consumers can buy goods by clicking a mouse button without going anywhere from his house (Patil and Bhakkad, 2014). 3. The consumer can access the online system and gets complete information about products, saves time and cost. Shoppers can liken the prices of products and select the best company offering quality products at a low cost (Joseph, 2012). The Cultural environment of consumers has been changed with E-Commerce. Consumers have overcome their cultural and native environment. Advanced systems have reduced the mistrust of consumers regardless of their cultures, such as E-bay among others (Ong, 2013). 4. Consumers can also expand their choice of products in order to buy products at any time from anywhere. Consumers can customize products to meet their personal benefits. Transparency in the E-Commerce has resulted in an intensive competition that has lowered the products’ prices for consumers (Azadi, 2011). E-Commerce has allowed the consumers to make transactions anywhere for 365 days a year. Consumers influence that how products are made and how companies deliver the services to consumers (Morley and Parker, 2015). 5. Old business links have been changed from vertical relationships to the extended or integrated relationships. In vertical relationships, a company has control over its suppliers and distributors while in integrated relationships all departments are linked and no central control over it. In order to keep the integrated or extended relationship, e-commerce plays a vital role where business to consumer’s relationship is maintained (Manzoor, 2010). Many e-commerce websites provide a forum for viewers to post their feedbacks about products they purchase from online systems. Consumers’ confidence is increased by looking the positive comments from customers (BBC, 2014). Disadvantages of e-commerce to business 1. Security and privacy are bigger concerns of consumers about E-Commerce use for online shopping. Consumers want the secure transactions and privacy of information provided. They worry about fraudulent acts of hackers. However, reputable websites have installed the safeguards to protect their consumers from all concerns Encryption and decryption system for authentication of users, and close working with cyber crime handling companies. They have installed premium antivirus and firewalls (Parsons and Oja, 2011). 2. Consumers feel difficulty in inspecting the sum of items like food items, jewellery and antique. The Most disadvantage of E-Commerce is the rapid expansion of the underlying technologies. Internet has become the effective conduit for auditory and visual information: reading books, hearing sounds and seeing pictures. However, it cannot allow to full scope and expectation of our senses. Rapid changes in technology have certain issues for companies with E-Commerce facility. However, these concerns disappear when new technology provides the advanced usage services. Buying a new technology to compete in the market is often expensive. Sometimes, companies cannot calculate the accurate costs and return from investment in new technology. Therefore, rapid change in technology makes difficult for investors to determine the costs (Maumbe and Okello, 2013). When shopping is done physically by going at shop and selecting the right product, but buying through e-commerce is only made on trust (Parsons and Oja, 2011). Customers’ satisfaction before buying a high cost or perishable product is necessary; it requires the inspection before placing an order to relevant products. Many E-Commerce websites have legal and cultural issues for conducting their business. Most of the consumers fear about using their credit cards and sending the numbers over the internet. Other consumers show their resistance to changes and feel uncomfortable when they look merchandise on the computers’ screens (Joseph, 2012). 3. Unlike physical shopping from mortar and brick store where customers can talk to service providers, E-Commerce does not provide such as platform to customers. Much of services provided by e-commerce involve the digital technology where consumers have to wait for a long time for receiving the reply (Morley and Parker, 2015). Although purchasing from the online company is a convenient mean but product cost is not clear provided on the website. Sometimes, E-Commerce companies include the high cost of shipping and re-stocking charges, which are paid by consumers (Jiang, 2012). 4. There are millions of online users all over the world. The Internet is the busiest highway for business. The Internet is monitored and designed to avoid the failures, but internet failure happenings are most common these days in China, attackers, as well as technological issues, have created concerns for website owners and administrators. Denial of service is caused by a large number of people access the website at the same time (Sharma, 2009). 5. In spite of the myriad benefits and advantages, e-commerce has many barriers and disadvantages. Business online can only be effective when a person has access to internet. Unfortunately, a person cannot participate in e-commerce activity when they do not have access to internet. In some countries, access to internet is expensive. Therefore, many people cannot fail to access since they cannot afford amount required to participate in business activities. Such cases lead to slow growth in e-commerce (Kalakota, & Robinson, 2000). In addition, consumers can only participate in e-commerce activity if they have knowledge of how to operate a smartphone or a computer. Unfortunately, they are many people in some countries unaware of the skills required to participate in e-business (Arnold, 2011). The computer and smartphone literate people lead to a decrease in e-commerce. 6. E-business developers also face many barriers. For instance, it is hard to create a website, which will convince the consumers that the particular service or product produced by the organization is legitimate (Elsenpeter, & Velte, 2001). Moreover, few people can create a well-designed website. Moreover, reaching many consumers is also difficult since there are many websites on the internet. The website, therefore, depends on advertisements, which are normally expensive. It is also hard to earn trust from consumers. Such factors lead to slow growth. Internet access is also another barrier facing e-commerce managers and developers. Much online businesses have their servers, which provide internet, therefore, they do not have problems accessing internet. However, the organization that lacks serves has difficulties when accessing internet (Driver, 2010). Accessing internet from external servers is also expensive. Some people decide to quit since they cannot afford the required money to access internet. E-commerce also faces problems from hackers. Hackers are professional people who can illegally access the website and tamper with information stored on the website (Stanford-Smith, & Kidd, 2000). Therefore, the organization requires having a protected website created by experienced and competent website designers who are expensive to hire. Factors affecting purchase intention There are many factors affecting online purchase intention that commonly include the gender, age, quality of goods and services, etc. The online shopping and services are beneficial to clients and also risky to some extent. The risk involve in online payment regarding credit card security might make negative impacts on the performance of e-business. The making of changes on different demands of business is easy to apply on e-business as applied in the physical business, for example the change in the price of products. The promotional activities for products are easier to make for e-business and expensive for the advertisement of the products kept in the physical stores. The approach of customers is more in online stores due to the shortage of time, and more use of internet. It definitely saves time for selecting an appropriate product from the online store. The quality of goods is difficult to judge through online shopping, the material and stuff visible on the website might vary from the actual product customer received physically. The quality is on risk for client if purchased from new business. Mostly quality is maintained properly for e-business because it promotes the business growth, if once client gets annoyed from any specific business product it will make negative impact on the business. The online users belong to different user groups and age. The age is major factor in the online shopping. Young people below than 20 years and older citizens above than 65 years show less interest in the online shopping and even browsing. The people above 20 and below 65 are seen more involved in browsing and online shopping through different websites of e-business (Pappas, 2011). Gender’s impacts on online buying behaviour of Consumers Gender impacts on customers’ preference of products for online buying. Females preferred the purchase of products, which they experienced in past like beauty products, apparels, home accessories and food products. Male show their preference to buy the electronic products, software and hardware. Both, male and female genders have differences in information searching, evaluation options and product preference. Female have more concerns of online buying and prefer to buy the products for which they have knowledge and experience. On the other hands, male ignore the information to buy the products positively. Females get influence from consumers’ reviews more than the male because female show more sociability and accept the others’ advices (Ling and Yazdanifard, 2014). Balakrishnan and Bhagat (2010) assessed the relationship between gender and their preference for online buying. Results indicated that online shopping was the most popular way of purchase among male and female of Kalyan city of India. It also showed that 90% male and 80% female preferred to buy online products through the e-commerce. Figure 1: Gender wise behaviour of online shopping (Source: Balakrishnan and Bhagat, 2010) It has been found that female online buying behaviour than male is greater as shown in figure 1. These findings were later confirmed in a research work of Richa (2012) where results showed that females were more frequent in the online buying as compared to males. It was further indicated that female use e-commerce to place 3 to 4 times orders in a month while male made 1 to 2 times online shopping over the internet. Females were more impulsive online buyers than opposite gender and more attracted towards the promotional schemes or offers at online departmental stores. Working women concept has increased the trend of online buying because they believe in their status quo. A significant link existed between the online intention and age of consumers. Life cycle and age are the potential impacts for the consumers’ behaviour towards the online shopping through e-commerce. With the passage of time, consumers change their attitude towards the online buying. Life cycle of a family is divided into stages like young, married couples, singles and unmarried couples. Life cycle stages help the marketers to develop the appropriate products for every stage of family life cycle. Personality is another important demographic factor that influences the buying behaviour of consumers for buying products through e-commerce. Personality does not mean what someone wears rather it is about behaviour’s totality in varying situations. Different characters of personality include as aggressiveness, dominance and self-confidence etc. These characters are used for determining the consumers’ attitude for particular services and products (Yoganandan and Pugazh, 2015). Age, Income and Education Impacts Consumers’ age influence their attitude towards the online shopping through e-commerce. Most of recent studies reveal that younger generation is more interested in online shopping. Reason behind this increased interest towards the online buying is that younger have more knowledge in computer technology as compared to the older generation. Older people are less computer users than younger people. Some of the researchers still argue that age does not impact on the online buying behaviour of people. Higher income and education are other demographic variables that impact the online buying behaviour of consumers. Families or individuals having more income have a strong and a positive trend towards the more online buying of products. Consumers between ages 20 and 29 years were scored as less online buyer as compared to those who were aged between 30 and 39. Consumers with ages between 30 and 39 have higher tendency to buy online products. Hashim and Said (2009) rejected this concept of age’s impacts on the online buying behaviour of consumers. Consumers’ perception towards the online buying varies from place to place in different circumstances. Online buying attitude is changed regardless of age groups, but relates with other demographic characters like salaries or income of people. This argument is supported by the research of Varma and Agarwal (2014) as they found that consumers aged between 21-29 years were more active online shoppers and followed by consumers with ages between 31-39 years. Number of kids in a family has influence over their spending on the online buying. As number of kids is more the spending on the online buying is also increased. Figure 2: Age (Source: Sultan and Nasir Uddin, 2012) There are five important five ages’ groups shown in the above figure 2. This data was taken from Gotland University students. This figure clearly shows that online buying trend among university students is highest for the participants between ages 21 and 25 years. ALIBABA Changes the life of People in China Alibaba changes people's life in China and it is well known as the biggest store that works online and provides the support to the world of e-commerce. It introduces that e-commerce is not only the buying and selling of products and services but it also the methods and procedures of business activities through online world. All the business activities of business concerns are developed and promoted through electronically. The activities of e-process of business activities improve the life style of business world and provide the ease to business owners, employees and finally the end users and clients. The competitors of Alibaba are Amazon and eBay (Wee, 2015). Increasing Trend of Internet Users in China Number of Internet users has rapidly increased in China as it ranked after United States. Majority of users were websites’ users. Due to categorical expansion of online channels, consumers are comfortable to use the internet for shopping. In China, transaction of online shopping reached to 1.85 trillion Yuan in 2013. There was an increase of 42% as compared to year 2012. Gradual establishment has improved gradually the online shopping and matured the market (Shang and Wang, 2015). Emerging technology spread the culture and people’s needs have become diversified. Other factor for increasing the internet users is that educational level in China has gradually increased. Therefore, users check the prices of commodities and their changing trends over the internet. E-commerce in China Alibaba is the largest e-commerce company of the world. Trillion of sales in China are handled through the web portals of Alibaba. Alibaba is local e-commerce company of China. Alibaba is successful as it enters into new markets and has capability to change China. Alibaba is growing very fast and expected to become a biggest company for overseas Chinese to purchase online. Next success of Alibaba is its payment system (escrow), when buyers are happy with the products. Customers’ data is another hallmark of company’s success because 60% parcels delivered in China are handled through Alibaba (The Economist, 2013). EBay is slow in its services and updates; so looses customers in China. EBay charges more than Alibaba in China. Although, eBay made efforts to cut prices in order to stay in the market in late 2005, but it was too late. In a joint venture with Tom Online, eBay could not benefit from this joint venture. Taobao a web portal of Alibaba stayed a strong competitor of eBay in China’s market. Alibaba offers discounts to increase the sales and retain their customers. Figure 3: Alibaba rose more than other main online players (Source: Yazdanifard and Li, 2015) In above figure 3, performance of Alibaba in terms of earning has been shown. This figure shows that Alibaba remained as largest U.S. Inter IPO with the earnings of $21800. Figure 4: Active buyers (Source: Alibaba Group, 2015) In presence of increasing number of active users of Alibaba as shown in figure 4 show a gradual increase of customers have been observed. However, Alibaba has capacity of promotions and offering to their customers. These discounts are provided to those buyers who purchase products in a bulk or during the festivals. Alibaba offers the promotion of buy one get one free and provides value added services to customers. Shipping prices of products are kept low. All these offerings and promotions have made it more advantageous than eBay in Chinese online market. Conclusions: Background of the e-commerce is set as the purpose of the paper. Brief description of E-Commerce in different perspectives has been given. Advantages and disadvantages of E-Commerce in the context of business to customers are also focused. As E-Commerce is developing, it is affecting the all aspects of human life. It has enabled clients to retrieve the information about daily usage products such as food items, computers, clothes and crockery products. Fast and convenient communication is done through E-Commerce. E-commerce has brought industrial revolution in production and delivery operations. E-commerce has given some of the important advantages, because important business activities are performed through the E-Commerce. Products’ availability at right time at a right place is ensured through the E-commerce. Vertical relationship has been changed into extended or integrated relationships. Instead of several advantages, E-commerce has disadvantages for buyers as physical inspection of products is not possible through the E-Commerce. Female gender remains more interested in the online buying of products. Age groups have varying impacts on the online buying; as people with high income and knowledge preferred the online buying. 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