Electronic Commerce (E-Commerce) has become one of the most influential drivers of the world economy. The increase in traffic for online retailers and companies in all industry continue to grow exponentially. In the last decade, industries like Application Development to Fashion continue to increase their online presence. The effect of this E-Commerce wave has been felt in different countries as their economies grow exponentially. One of the most influential factors that continue to encourage this growth is the global need to become technologically literate. As the world turns towards this new direction, many factors test the legitimacy and importance of E-Commerce as the most convenient form of trade and weigh its benefits alongside the disadvantages of employing this method of communication (Wang, 2015).
A study in 2014 revealed that the E-Commerce scene in China realized 12.3 trillion Chinese Yuan. This figure was approximately a 21.3% increase from the previous year, 2013. The economic significance of this increase cannot be ignored. Another benefit that comes from this growth is the need for diversity and timelessness of the products and services that are provided, a result that pushes the industry to grow every year (Wang, 2015).
Primary functions of the E-Commerce as a method of trade:
There are three main functions that the E-Commerce has as a way of trade.
■ Operational functions. Businesses can achieve information exchange, logistical analysis, online payments and sales activity from a central location to a greater market compared to traditional trade (Wang, 2015).
■ Support function: The E-Commerce has been able to exhibit financial analysis, market research, and informed business planning. These are intermediary functions from which companies can get an increased organizational performance.
■ Link between subsidiaries and related services; E-Commerce can relate service and subsidiary industry. All these improve the efficiency with which companies are run, and this can be reflected in the general economy of a country (Wang, 2015).
The agriculture as a success experience of E-Commerce
One industry that has shown an increased efficiency with the incorporation of E-Commerce is the agriculture. In the United States, Canada, Japan and China, the information systems that have been set up, in a manner that allows such industry to promote an internet based presence. The result of this incorporation has seen a possible shift in how business is perceived and practiced. The logistical analysis is another crucial area that continues to realize a lot of improvement and awareness compared to traditional forms of logistical analysis (Cai, Lang, Zheng, & Zhang, 2015).
One of the most influential factors that continue to promote the adoption of E-Commerce not only in the agricultural purview but also in all industry is the cost benefit that accompanies the model.
Benefits of the E-Commerce
■ E-Commerce reduces significantly if not entirely the costs that are associated with the physical analysis of market structure and trends, and even physical structures are factors that continue to realize little impact regarding investment (Cai, Lang, Zheng, & Zhang, 2015).
■ The fact that companies can set up a virtual store on the Internet reduces the need to have physical stores.
■ There are supporting companies that can facilitate delivery services, research information, all of which are on the internet. It is therefore significantly cheaper for businesses to be run given the costs that are cut by the use of the Internet as the single resource, for financial analysis, market research, and business planning among other business functions (Cai, Lang, Zheng, & Zhang, 2015).
■ With an increased traffic on the internet, the use of different universal currencies has also grown. Services, like PayPal, allow business people on the internet to have the PayPal dollar and transact with virtual currencies over the same network.
The significance of the cost benefit of E-Commerce as a method of trade has been realized by the growth of different companies and industries on the internet. It is easier than ever, to start up a business compared to more traditional methods. Persons of all ages and in all industries have been able to manufacture different products and services, learn the market trends and realize significant traffic on their social media handles and web pages. The previous has been an instrumental factor in pushing the industry. For instance, the applications industry has grown from nearly nothing to a 77 billion dollars industry in less than ten years.
Challenges of the E-Commerce
One of the most controversial yet increasingly used currencies on the internet is the Bit Coin. It is a digital currency that allows persons to make purchases of service and goods on the internet. One of the unique features of digital currency is that the universal nature of its value is recognized by almost any business on the internet. As far as currencies go, the use of digital money, for example, the Bit Coin, illegal trade has also significantly benefited from the use of the currency.
The internet is not a guarantee. Certain factors continue to undermine the trust of its use as a means of trade. The previous has been an issue when it comes to promoting E-Commerce in different countries. Online shopping trends in some continents, for example, Africa, are still in their infancy. Given this, there are certain methods that government and companies can use to improve the online shopping habits of consumers. One of the methods that can significantly improve these systems is the improvement of the Information Systems both regarding Infrastructure and literacy. Developing countries are yet to realize fully the potential that lies on the internet. It is through improving computer literacy that these systems can begin to see significant value in Developing Countries.
Improving the infrastructure of the information systems and E-Commerce systems will also have a significant impact on the use of E-Commerce in a different industry (Liu, 2013). The previous is a function whose responsibility lies a great deal with the governments of the world. It is important that the difference in the way governments work to improve the systems that are in place, for example, the connectivity to the internet, the price of getting access to the internet among others is analyzed and improved. Through these initiatives, the value of E- Commerce can take shape. In addition to this, improve systems and infrastructure can be a significant factor in improving the public attitude as far as E-Commerce is concerned (Liu, 2013).
The E-Commerce in the macroeconomy
Still, the most practical form of determining the growth of a countries economy is a significant benefit. The Gross Domestic Product (GDP) is perhaps the most accurate indicator of the growth of a country's economy. The factors that determine the growth of a country's GDP are consumption, investment, government purchase and the net export of all goods and services. Taking the example of the App Industry, the GDP of the United States of America has seen considerable input to their GDP from this industry. Google Inc. alone has at least one billion international registered users. Google alone has exhibited all factors of growth of the GDP. The previous is a practical example of how the App Industry through all products and service contributes to the GDP of the United States (Liu, 2013).
The empirical analysis carried out by Liu seeks to determine the effect on the economy attributed to the e-commerce. The selection of data includes several indicators of GDP. The GDP is the dependent variable. The number of internet users, the scale of online advertising, the number of websites, domain name, the number of online shoppers and international bandwidth from the independent variable. The results from the empirical study prove that GDP and other factors are related positively. These factors include the increases in domain names, bandwidth, increased Internet adoption and the scale of online advertising. These factors have a played a role in the promotion of a positive economic growth.
Another empirical analysis undertaken by Brookes and Wahhaj seeks to measure the change in GDP that it attributed to e-commerce. It is estimated that the B2B e-commerce contributes to about 0.25% per year in the industrialized countries. The research was in line with the theory that IT contributes to increased productivity in the industrialized nations. One of the most significant analyses concludes that the 80% of the Total Factor Productivity of growth that was experienced between, 1996 and 2001 were attributed to IT – producing center. E-Commerce, therefore, plays a significant role in the United States of America (Brookes & Wahhaj, 2001).
Although data on the actual impact on growth that E-Commerce on the economy is scarce, Brookes and Wahhaj made an approximation of the impact of Business to Business E-Commerce at 0.25% points annually on the larger economy of the Country. When this figure is translated into actual data, it translates to approximately $8- 11 billion to the GDP of the Country. However, the accuracy of this data is still unknown financial analysis is based on the underlying data, most of which is still unknown given the unstandardized manner in which online transactions are taken. The ability to assess the productivity of e-business undermines the assessment of productivity (Brookes & Wahhaj, 2001).
References
Brookes, M. & Wahhaj, Z. (2001). The economic effects of business to business Inter-net activity. National Institute Economic Review, 175, 95-108.
Cai, Y., Lang, Y., Zheng, S., & Zhang, Y. (2015). Research on the Influence of E-commerce Platform to Agricultural Logistics: An Empirical Analysis based on Agricultural Product Marketing. IJSIA, 9(10), 287-296. http://dx.doi.org/10.14257/ijsia.2015.9.10.26
Liu, S. (2013). An Empirical Study on E-commerce’s effects on Economic Growth (1st ed., pp. 81-84). Xiamen: Atlantis Press.
Wang, L. (2015). Research on the Impact of E-commerce on Logistics Economy: An Empirical Analysis based on Zhengzhou Airport Logistics. IJSIA, 9(10), 275-286. http://dx.doi.org/10.14257/ijsia.2015.9.10.25
