Discuss How E-commerce Has Transformed SMEs and the Way They Do Business
Introduction
Laudon and Traver (2013) highlight that for several years, the global economy entered a period of globalization, and this entry brings with it a lot of characteristic changes in the life of mankind. Currently, it is approved by the understanding that the Internet is another business environment that has its own specifics, and very multifaceted, but is subject to general business laws. On the Internet, it is possible to look for partners or customers, create solutions to support business, automate operations with partners and dealers, and create and develop retail online stores.
According to Chaffey (2011), e-commerce, the fastest growing form of e-business today, relates to the development of the Internet as a new business environment. E-commerce is the business of sale of goods, works and services carried out by using modern information and communication technologies, namely public networks (Internet), corporate networks and electronic document interchange (EDI). E-commerce is a tie entirely on the Internet, ranging from dating the customer with the product and ending with his/her purchase and payment.
Thus, Schneider (2014) states that the attractiveness of electronic commerce concerns the following factors:
Everywhere Internet is the norm of business life, and global cyberspace is a completely new and undeveloped commerce environment, allowing implementing the offer of services, both directly and in the form of virtual models, unimaginable in other circumstances;
Transaction costs are reduced due to “cooperation” of the consumer with the manufacturer online without intermediaries even of transnational structure; the expansion of range of business transactions’ subjects is performed;
There is a possibility of formation in a real-time of all the available product configurations at the request of the consumer, i.e. meet his/her exclusive individual needs;
The terms of cooperation for all businesses are the same, so the new, small and aggressive company can often compete with large, well-known;
Media of electronic market is favorable advertising space, allowing for the interactive marketing network among the audience of paying people of working age.
Comparison of E-commerce and Traditional Business
As stated by Wilson and Gilligan (2005), various ratios of traditional and electronic businesses involve different requirements for people and systems, resources and clients. In the absence of adequate tools to measure the results of adaptation of people, systems, resources and clients to the prevailing state of the business, strategic goals cannot be achieved. Webster (2014) considers that the situation requires a different approach, when the e-business becomes a separate kind of business, regardless of the existing traditional. For example, when a manufacturer, who sold the goods through the traditional chain participants (distributors or dealers), suddenly decides to offer them to customers directly through the network. Leaving aside the negative reaction on the part of the traditional participants in the chain, it is obvious that the organization will be unable to serve customers in new ways while maintaining the normal allocation process. It is necessary to predict, create systems that would allow e-business strategy to operate efficiently, and to combine them with traditional operations. If these systems are not combined, both ways of doing things (traditional and electronic) may be adversely affected.
Chaffey (2011) defines that the general features of e-commerce and traditional commerce are familiarization of the buyer with the goods’ advantages; demonstration of goods’ appearance; description of the main advantages; consultations on the rational use; the buyer’s choice of goods; payment of the selected product; acquisition and registration by the seller of goods, provision of goods to the buyer; delivery of selected goods; modification of goods to use them, if necessary (assembly, commissioning); and after-sales service (if it is provided for by the purchase).
Differences between Traditional Business and E-commerce
The differences in sales of electronic stores from sales in the traditional store include ten crucial positions. These differences can be classified as follows.
1. By way of attracting buyers. According to Chu (2011), ways to attract customers into the store are very important. In trade, as traditionally understood, this process can be characterized by four stages: to attract customers through advertising (the main factor is the store’s location); the impact on the buyer by a good window dressing and the entrance to the store (this phase plays an important role); the attraction of customers, who have entered the shop, by interior decoration of trading hall and its convenient organization; the buyer’s choice of needed goods (the buyer’s decision to make the following buy at the store or not will depend on how fast and easy he/she will choose a product using the seller in the sales area). At the electronic store, all of the above steps to attract the buyer are arranged differently. Storefront and entrance to the shop are combined. All advertising information is placed in the window of an electronic shop. This is a brief and understandable form, from which it is clear what, where and how the customer can buy.
2. By means of psychological impact on buyers. Laudon, K. C. and Traver (2013) specify that sellers are unable to have a psychological impact on customers in the electronic trading system. It excludes the possibility, for example, such an impact on the buyer as a demonstration of charm and respectability, attractive and pleasant tone of voice.
3. By means of presenting information about the product. MacGregor and Vrazalic (2007) present that during normal trading process the familiarity with the product is going on personally. The electronic product introduction occurs through a careful study of customer information and description of the relevant characteristics of the goods.
4. By means of shopping. Schneider (2014) highlights that in normal trading of goods the purchase of the product by the customer occurs personally. In the electronic store, when purchasing the goods, the buyer registers and orders via the Internet.
5. By the level of costs for the organization of trade. According to Chu (2011), organization of trade and services through the e-shop makes the presence of buildings of shops, warehouses and offices, as well as all kinds of commercial equipment, optional. This reduces the cost of marketing, advertising and maintenance of retailer and products can be sold cheaper.
6. By ease of shopping. Schneider (2014) informs that to visit dozen of electronic stores is much easier than to go round the same number of traditional shops on the car or to call them to find the right product.
7. By the degree of availability. According to Chu (2011), any electronic stores are available to the customer virtually anywhere in the world. He/she is not limited in the choice of necessary goods and services during travel and business trips. These shops are open around the clock; they have clusters of many buyers, both in ordinary stores. The buyer has the opportunity to make purchases at any time convenient to him/her.
8. By the quality of service. As stated by Chaffey (2011), in a typical store during the purchase and for more information about the product, it is necessary to address the seller for getting an advice. In this case, the choice of product will depend on the vendor and on the level of his/her competence, as well as the time that the seller may pay to the buyer. Electronic store can offer a wide range of information support for all goods; the buyer does not need to wait for advice. However, poorly organized electronic store will work just as not effective as a traditional retail store.
9. By time to enter the market. As specified by MacGregor and Vrazalic (2007), to create an electronic shop requires less time than the organization of the traditional store. The company-manufacturer itself can establish and control the prices of its products.
10. By the range of goods. Schneider (2014) considers that in a traditional store, the selection of products is limited, so the buyer often has to search long for the right product in several stores. If there is no desired product in one electronic store, the buyer can find it right in the other one or directly from the manufacturer.
Advantages of E-commerce over Traditional Business
De Kluyver (2010) informs that consumers and commercial firms using e-commerce are informed about available anywhere goods and services, prices and conditions of sale, allowing them to make the necessary acquisitions on the most favorable terms. E-commerce provides marketing services to suppliers in real-time and enables them to transact without opening offices or hiring foreign agents. Fast and guaranteed delivery allows wholesale and retail trade reduce the range of the required reserves. And this, in turn, helps companies, and especially small and medium, to reduce their costs.
As specified by Laudon and Traver (2013) and Schneider (2014), the advantages of e-commerce compared to traditional business are:
Reduction of costs by vendors, namely due to economies on renting office space and optimizing the size of storage space, saving on staff salaries (at comparable sales, e-commerce staff is twice or three times less than of a traditional store), etc. Consequently, the establishment of a smaller than in traditional trade prices.
Features of full-scale presentation of goods, advertising, sales promotion, etc. for the seller in the Internet are much higher and the costs for similar events are substantially lower.
For the buyer it is about lower prices, elimination of the possible costs of search (or just find relief) and, most significantly, especially for large cities – huge time savings.
Both, the seller and the buyer, are provided with specialized, structured and targeted information on product availability, pricing nomenclature, potential suppliers and alternative options transactions.
Disadvantages of E-commerce
MacGregor and Vrazalic (2007) state that e-commerce has great advantages over traditional forms of commerce. However, at the same time it has a number of shortcomings that hinder its development. First of all, buyers are concerned about the safety of operations conducted on the Internet. Filling out online forms, customers leave their personal information in a database store, including credit card details, addresses and phone numbers. Fraudsters can take this information and use it for their own purposes.
Chaffey (2011) informs that another big problem is the inability to try on, test and feel the goods presented for sale. Many people do not buy clothes and shoes at online stores for this reason. Most online stores offer the customer a detailed description of the product and the opportunity to return or exchange the item if the client does not like it, but the return is a waste of time, so many people prefer to buy in retail stores.
MacGregor and Vrazalic (2007) believe that e-commerce cannot achieve success without the elaboration of delivery system. Despite the advantage of speed, many online shoppers complain of delays of goods. Perishable products and goods necessary to the client in the near future are goods that the customer is not willing to buy in the Internet-shop precisely because of possible delays.
As mentioned by Schneider (2014), the absence of a legal framework of e-commerce is another major problem. After all, the lack of the necessary legal framework for e-commerce holds the major manufacturers and government agencies on large-scale investments in this area, which has a huge potential of savings, profitability increase and provision of conditions for conducting modern business. Besides this factor greatly reduces the security of electronic payments, which is the predominant reason for the low interest of users to shop online.
Chu (2011) defines another drawback of e-commerce is a low entry barrier – that is, any entrepreneur can create an online store. This, in turn, leads to a deterioration of the quality of service and increase in fraud and deception of buyers. Finally, some people find shopping a part of public life. E-commerce almost completely eliminates the possibility of living communion.
Thus, Laudon and Traver (2013) highlight that at the moment disadvantages of e-commerce are very noteworthy, but despite this, the online business is developing at full speed. The solution of problems depends not only on how fast the audience will grow, but also on how quickly it will be possible to solve the problems concerning the execution of payments in real time. Similarly, the success of e-commerce depends largely on the implementation of innovative practices and projects based on the use of e-commerce tools, which are now seen not only as an independent direction, but also as a powerful resource that can make a revolution in the information economy. MacGregor and Vrazalic (2007) believe that availability of telecommunications infrastructure and Internet access, the availability of sites and online stores by companies, can also contribute to solving the problems of e-commerce. Selling quality products and their timely delivery by online shops should become a guarantor of the formation of a positive attitude towards the new form of retailing – electronic sales.
Conclusions
Overall, e-market is characterized by a perfect competition than the traditional physical market. A large number of buyers and sellers work in the electronic market; there are no barriers to entry for new participants; and all participants have free access to information. However, the economic reality of the present time is far from optimistic forecasts of the past. Despite the fact that the Internet really reduces transaction and indirect costs, participation in e-commerce requires significant investments, allowing attracting customers in an environment far from the absence of competitive tension (Warf and Stutz, 2007).
Indeed, Waschik, Fisher and Prentice (2010) stress that the Internet eliminates the need to build shops, hire a large staff of service personnel, equip with a large warehouse (order execution can be carried out directly on a “just in time” from the supplier to the consumer). All this suggests that the big players in the market will lose their comparative advantages over small. In fact, to gain a foothold on the market was more difficult than to overcome the relatively low barrier of entry in it. Reality shows that it is necessary to have enough resources and skills to create an effective presence in the market and ensure the execution of orders. To do this, work experience in the field of well-established connections with suppliers and expertise in this area are still necessary.
Also, it is worth mentioning that remote form of sale, including over the Internet, is suitable for products, which quality is well-known for customers. It is this postulate was the basis for the formation of the first catalog of virtual stores. Gradually their standard kits were complement by the range, which can be found in a real store (Chaffey, 2011).
In anyway, e-commerce over the Internet is fast, a little expensive, comfortable and does not limit the choice of goods. It allows pushing the boundaries and the number of commercial transactions performed without any human presence. It becomes part of the overall business, allowing business to do “alone”.
References
Chaffey, D. (2011). E-Business and E-Commerce Management, 5th ed. New Jersey: Financial Times/ Prentice Hall.
Chu, L. J. T. (2011). Building the Competitive Advantage in E-Commerce Capabilities: Building and Sustaining the Sources of Competitive Advantage in E-Commerce Capabilities. Saarbrücken: LAP LAMBERT Academic Publishing.
De Kluyver, C. (2010). Fundamentals of Global Strategy: A Business Model Approach (Strategic Management Collection), Business Expert Press.
Laudon, K. C. and Traver, C. (2013). E-Commerce Essentials. Upper Saddle River: Prentice Hall.
MacGregor, R. and Vrazalic, L. (2007). E-commerce in Regional Small to Medium Enterprises. Hershey: IGI Publishing.
Schneider, G. (2014). Electronic Commerce, 11th ed. Boston: Course Technology.
Warf, F. P. and Stutz, B. (2007). The World Economy: Resources, Location, Trade and Development (5th ed. ed.). Upper Saddle River: Pearson.
Waschik, R., Fisher, T. and Prentice, D. (2010). Managerial Economics, Second Edition: A Strategic Approach. London: Routledge.
Webster, Th. J. (2014). Managerial Economics: Tools for Analyzing Business Strategy. Lanham: Lexington Books.
Wilson, R. M. S. and Gilligan, C. (2005). Strategic Marketing Management: Planning, Implementation and Control 3rded, Butterworth-Heinemann.
