The Issue and Challenges of E-business and E-commerce - Essay Example

? The issue and challenges of e-business and e-commerce to support small and medium size retail industry in Singapore This research paper is dedicated to the challenges of e-commerce in B2C in today’s marketing. E-commerce has become an essential part of distributing goods to an end customer. The paper provides advantages and disadvantages of using e-commerce in distributing goods. Introduction B2C has always been a very important element of the marketing policy. This type of trade that implies selling the product to the end customer existed several centuries ago as well as it exists nowadays. The example of B2C can be the selling of the shoes to an end customer. Though, buying those shoes from a retailer or buying leather for the shoes refers to B2B. When suppliers cooperate with a business, or wholesalers sell to retailers – these are all the examples of business-to-business activity. We are living in the era of high technologies as well as computerization. No wonder, that approximately 50% of the B2C world turnover can be ascribed to e-commerce. The term refers to any commercial operation that is carried out in the Web. It also pertains to “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact” (Allen, 2001). The procedure of trading on-line is not as easy as it may seem – it covers many rules, activities, laws and creativity. To put it another way e-commerce is a kind of science that is to be studied in order to be effective and bring results. Despite the growing popularity of the Internet sales and therefore of e-commerce, the latter has many pitfalls and bottlenecks that can lead to the reduction of the customers’ number. This essay aims to analyse the challenges of e-commerce in B2C. It is very important to investigate this problem since 80% of all operations on-line belong to the B2C ones. The rest 20% make up the wholesale, some financial services, and operations at a Stock Exchange. This topic was chosen because of its importance nowadays and because of its ‘under-research’. It means that not many scientists penetrated into this problem. The first cause for this is the relative youth of the Internet and e-commerce itself. The second reason is that trading on-line, as mentioned above is not considered to be a kind of science in a business world. It is considered to be the way to earn money, or the way to gain new customers. Studying this topic will empower anyone in future to apply this knowledge on practice and carry out the profitable e-commerce. It must be emphasized that e-commerce has become an essential part of B2C, though there are many challenges that are to be taken into account. Notion of B2C “Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes activities of businesses serving end consumers with products and/or services” (Baker 2010). Speaking about selling through the Internet it is to be mentioned that here B2C means selling goods that are bought by a customer for his own use. The brightest example of e-commerce B2C in the Internet is the site of Amazon. It is the electronic bookstore that was founded in 1995 and since that time became the world main book retailers. Others examples of B2C on-line can include traveling services, web-money, real-estates services and any information that can be used by a customer. Such sites as Facebook, Tweeter and others also represent the example of B2C. They do not sell anything but suggest communication on-line that is also consumed by a customer. E-commerce has not always been as effective as it is now. In 2000 when the company Nasdaq, that maintained the majority of on-line operations failed, the most of the e-commerce firms had to do away with their selling on-line. They had to shift to a more traditional way of carrying out B2C activity. That year some experts claimed that e-commerce would never restore its reputation since it endangered the private information about the clients. Despite the prediction the consumers just flooded the sites trading B2C, since it is very convenient for them to shop from home without leaving it. “They spent $172 billion shopping online in 2005, up from $38.8 billion in 2000” (Berkowitz 1997). In two years people are expected to spend $500 billion shopping on-line. Moreover, the number of households in the USA buying on-line is expected to grow from39% to 55%. It signifies that the Internet popularity is not diminishing in any way but vice a versa it is increasing day after day. With the development of B2C on-line a new term was coined - B2I – to denote transactions performed between a vendor and an individual. This type of selling is directed first of all on some personal features and needs of a customer. It involves deep understanding of a customer’s personality, looking for his conscious and unconscious desires in order to meet them. In B2C when every customer is valuable e-commerce gives numerous advantages to win a customer. “According to marketing terms "B2C businesses played a large role in the rapid development of the commercial Internet in the late 20th century” (Boone, 1996). The new interactive space was coined by giving an opportunity to customers to choose from on-line shops and catalogues. E-commerce gave a chance to businesses to promote their products to foreign markets without a necessity to penetrate it virtually. E-commerce gives a customer some benefits such as to choose in a suitable time, to choose without haste, to get acquainted with the testimonials of other customers and the main thing – to save time. Vendors also benefit from e-commerce because they don’t have to spend money on renting a premise for a store, they have no sales assistance only those who accept the orders and operate them. All in all e-commerce is quite beneficial for both parties. Challenges of e-commerce in B2C However, there are still some barriers that are to be overcome in order to make e-commerce in B2C even more efficient. The first problem is connected with the danger of being hacked. There are many computer genius in the whole world who can easily hack any site and then to insert a bug there. The consequences are the following: the site has to be relocated and therefore all the clientele is lost. Everything is to be started from the beginning. Another disadvantage is that a big percentage of orders are forgery. It happens because some teenagers want to joke, or because a customer occasionally gave incorrect data. Then a vendor spends for delivery in vain. And the last disadvantage is that individual approach is hardly possible within e-commerce. Any individual approach needs understanding, being flexible and to be able to react when the environment changes. All of these is impossible to carry out with a computer, only a live communication can bring the necessary results. As mentioned above e-commerce has negative sides, still customers are even endangered when shopping on-line. The first problem is that a customer is always asked to fill his/her private information. This information can be hacked or misused from the Internet space. The next problem is that a customer has only a visual image of a product but he cannot touch it, turn it and try it. This is usually true when speaking about clothes and footwear. Such items are better to buy with the face-to-face contact. And the next disadvantage is that sometimes a customer has to wait for several weeks to get his product. According to Chaffey, “E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals” (Chaffey, 2006 ). Terminology system There is a term of e-business that is occasionally understood as a synonym for e-commerce. Though, these terms differ greatly. E-commerce covers the activity of selling goods either to other businesses (B2B) or to an individual (B2C). While e-business represents the activity to widen the business. It includes all procedures that an organization either profit or not-for profit carry out via computer devices. According to Chaffey, e-business is: “The transformation of an organization’s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy” (Chaffey, 2006). E-business includes three main activities. 1. Production process – dealing with the suppliers, ordering raw materials, computerized monitoring of the production process, electronic transactions with suppliers etc; 2. Customer-focused process – dealing with customers through the customer Internet service, getting the orders, getting feedback from the customers etc; 3. Internal management process – deals with employee training, some electronic security systems, submitting reports and other types of information in electronic version. Another term that is to be introduced is the Internet economy. This notion covers both e-commerce and e-business. The Internet economy also covers such notions as “Business-to-customer, business-to-business, business-to-government, and government-to-business relations” (Chaffey, 2006). This term has been introduced only recently because of the overwhelming popularity of the Internet trade. Business-to-customer includes the areas of buying some tangible goods such as books, dishwashers and so on. Before making a purchase a customer is sure to gather information and testimonials about this or that definite item. The next activity involved in B2C is purchasing of the goods that are called the information ones. This may include software products, e-books, music and so on. After B2B, business-to-customer takes the second place in volume of e-commerce involved in its operations. “The more common B2C business models are the online retailing companies such as Amazon.com, Drugstore.com, Beyond.com, Barnes and Noble and ToysRus, other B2C examples involving information goods are E-Trade and Travelocity” (Bryma 2007 ). E-commerce in B2C is used not only to purchase tangible or information goods but also the get the private financial services. A customer can follow all his transactions through the Internet, to withdraw money and to transfer it from one account to another. As mentioned above e-commerce decreases transactional costs by providing a customer with the full information about the competitive product. A customer can search for the most reasonably priced goods. B2C also decreases the entry barriers both to the domestic market and the international one (Berkowitz et al). . The maintenance of the site is much cheaper than maintaining the real building with all the utilities, refurbishing and equipment. The only thing that makes e-commerce similar to the trade in real life is the existence of advertising in both types of trade. “E-advertising is characterized by being low-pressure and uniform, while the real-trade advertising can vary from the personal appeal of the vendor to handing out samples of a product” (Berkowitz et al). Besides being economically beneficial e-commerce also suggests the following advantages. First it serves as a balancing device. In other words small and large firms have equal chances to enter the global market through the Internet. The only thing they have to do is to advertise their site properly and then act accordingly: to attract new customers in order to expand their market, to offer innovations and reductions to their clients, to make the site appealing for everyone. Secondly, E-commerce makes “mass customization” possible it includes easy-to-use ordering systems that allow customers to choose and order products according to their personal and unique specifications (Baker 2000). It means that a customer does not have to wait in the queue in order to get a product. The procedure of ordering a product is very easy, though sometimes when it is a hot period such as Christmas, Mothers Day, Halloween a site can undergo pressure and hanging because of the great number of users. Thirdly, e-commerce introduced so called ‘network production’. This notion includes the production in which participate several producers that are situated in different parts of the world. Through the Internet they order materials, organize production and even hire people (Berkowitz et al). Case study The positive effect of e-commerce B2C can be exemplified by Walmart Company. In 1991, when Walmart developed what is known as the retail industry’s first web-based B2B exchange (Chaffey 2000). It was later named the “Retail link” by the businesses involved in this retailing. The majority of suppliers wanted to join the e-based system. In the system of Walmart participated such world-known companies as Pepsi Cola, Coca-cola, Hanes, Fisher Price Toys, Miley Cyrus Clothing etc. Many companies wanted to become partners of Walmart, because there was an incredible increase in their sales while working with Walmart. Walmart wanted from all its suppliers and partners to carry out all transactions in electronic way. The company NuBridges was the Internet provider that controlled all operations. Being in such kind of business allowed the participating companies to save on the mailing fees as well as travel fees. The above mentioned scheme described the B2B system of Walmart that proved to be efficient until 2000 when NuBridges failed and all participants got losses. However, Walmart worked out not only a B2B system but also a B2C one. It sells any product that you need from nails to cars.    Walmart’s e-buisness main goal is “to give customers a wide assortment of their favorite products, Every Day Low Prices, guaranteed satisfaction, friendly service, convenient hours (24 hours, 7 days a week) and a great online shopping experience” (Allen 2001) The factors that helped Walmart to become a leader in e-commerce are the following: easiness in ordering (even a child can do this), availability (as a rule customers get their orders that day they ordered it) and the round-the-clock operation (compared to the stores that work till 7 p.m.) According to the manager of Walmart the challenged that the company has to face is to keep pace with the development of information technologies that is to provide the updated versions of the sites. The next challenge is the threat to be hacked. There were several attempts recorded to hack the biggest system of e-retailing, though still Walmart managed to defend itself. Conclusion To make a conclusion it is necessary to mark that e-commerce has become an essential and efficient part of B2C. This type of business gives an opportunity to a customer to order the ready-made product on-line. It gives many advantages both to a business and to a customer. Businesses save money and reduce their expenses while a customer saves time. E-commerce has become very popular nowadays, though it is to be mentioned that businesses still have to face some challenges connected with it. First of all, trading on-line demands constant updating of information technology. It costs a lot and therefore a business will have to increase prices for its goods. Such situation contradicts the very policy of such businesses, because the motto of e-commerce is to sell goods at the best prices. With the prices increased it will no longer have advantages over the trade in real life. That is why businesses have to save expenses but not to increase prices. A customer can also face some challenges of e-commerce. The personal information about a customer can be misused with the damage to a customer. The next disadvantage is that a customer cannot touch the goods and therefore he can choose only on the basis of the picture. BIBLIOGRAPHY 1. Allen, E. and Fjermestad,J.(2001) E-commerce marketing strategies: a framework and case analysis, Logistics Information Management,14(1/2), 14-23. 2. Baker, W., Marn, M. and Zawada, C.(2000) Price smarter on the Net, Harvard Business Review, February, 2-7. 3. Baker, M . (2000). Marketing theory , a student text, Cengage Learning 4. Berkowitz, Eric N., Kerin, Roger A., and Willia m Rudelius (1997), Marketing. New York: McGraw-Hill Publishing Co. 5. Bennett,P (1995),The AMA dictionary of marketing terms, 2nd edn New York: McGraw, Hill 6. 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