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Lesson 29
Advantages of E-business
Some advantages of an e-business are given as under:
Personalized service
Product, place, price and promotion are generally recognized as the 4 P's of marketing in relation to
traditional offline businesses. However, personalization is the 5th `P' added to the other 4 P's when we talk
about an e-business. In fact, the nature of internet technology is such that the information about the online
customers including their buying behavior can be recorded in the databases. This information can be
utilized by the e-commerce site to study the needs of a particular customer. Based upon that the site can do
customization and provide a personalized service to the customer.
High-quality customer service
Customers can provide their feedback or register their complaints quite conveniently in case of online
business as compared to offline business, and in light of that an e-business can improve its customer
No inventory cost
An e-business can have minimum overhead cost. You do not need to have any special physical place to start
your business or hire any staff to operate the business as required in offline business. One can start an e-
business as an intermediary or a middle man. In that case one does not require any warehouses for holding
the inventory. An e-business can receive orders and get them fulfilled by procuring the ordered goods form
open market without bearing the inventory cost.
Worldwide reach of your business
An online business has global reach. In a way people living anywhere in the world are potential customers
of an e-business. Moreover, the e-commerce site is open 24 hours a day, so shopping can be done from
there at any time.
Electronic catalogues
Electronic catalogues are used in case of an online shop. They have many advantages over paper catalogues.
Therefore, online shopping can be done more quickly and in a more convenient environment.
Bulk transactions
One can do bulk transactions during one visit to an e-shop, since there is no limitation of collecting,
packaging or carrying goods in contrast to shopping from a traditional offline shop.
Improved supply chain management
Typical members of a supply chain management are suppliers, manufacturers and end customers. If
suppliers of raw material have online presence, the manufacturers can place emergency orders to them,
which can be electronically/quickly processed on the supplier side. Thus, just in time delivery of raw
material is possible without requiring the manufacturer to arrange for the accommodation to hold the
inventory. Ultimately, the goods can be quickly delivered to the end customers due to the improved supply
chain management.
Disadvantages of E-business
Some disadvantages of an e-business are given as under:
Less security
The biggest obstacle in the growth of e-commerce is the issue of security. Internet is not a secured medium
of communication. There are tools or options available to hackers whereby they can not only monitor but
also control any data communicated over the internet. Particularly, people are not comfortable while
providing their financial information (credit card no. etc.) online due to the fact that this information can be
hacked and misused.
Less privacy
The nature of internet technology is such that private information of the online customers can be easily
collected and recorded on the server side. The buying pattern of a customer can be known to an e-shop
with the help of certain sophisticated tools. You know that cookies can be used to track customers online.
On one hand these technologies are useful for doing customization but on the other, they can be said to
have caused the breach of informational privacy rights of a person.
No physical proximity with items purchased
In certain cases the customers cannot decide about buying a thing before they can physically examine it. For
example, a customer would ideally want to touch and feel the texture of a piece of cloth before buying.
Similarly, a customer would actually want to smell a perfume before purchasing it. In the above or any
similar case, people cannot expect to physically examine/test the thing while buying it online. Rather, they
would prefer to buy such things from physical shops. An e-business has a limitation in this regard.
Online catalogues vs. Paper catalogues
Paper catalogs
Easy to create a catalog without high technology
Reader is able to look at the catalog without computer system
More portable than electronic catalog
Difficult to update changes in the product information
Only limited number of products can be displayed
Online or electronic catalogs
Easy to update product information
Able to integrate with the purchasing process
Good search and comparison capabilities
Able to provide timely, up-to-date product information
Can provide broad range of product information
Possibility of adding voice and motion pictures
Cost savings
Easy to customize
Difficult to develop catalogues
Large fixed cost if used for small no. of products
Need for customer skill to deal with computers and browsers
E-Business Models
Following are some popular online businesses that one currently finds on the web:
Storefront Model
It represents basic form of e-commerce where buyers and sellers interact directly. Merchants need to
organize online catalog of products, take orders through their websites, accept payments in a secure
environment and send items to the customers. They can also store and manage customer data in databases.
A storefront model uses the shopping cart technology which allows customers to accumulate items they
want to buy during shopping. This is quite popular in B2C transactions.
Auction Model
In this model there are auction sites to which the users can log-on and assume the role of a bidder or seller.
As a seller, one has to specify the minimum price to sell one's item (called reserve price), the description of
the item and the deadline to close the auction. At the end of the auction, the seller and the bidder are
notified by the auction site and the payment mechanism and delivery mode is worked out. Auction sites
charge commission on sales.
Online Banking
There is an online bank providing banking services to the customers through internet including services of
electronic funds transfer.
Online Trading and Lending
Online trading is buying and selling of stocks/shares of listed companies using internet. Many brokerage
houses have established an online presence. Online lending is providing loan through an internet
Online Recruiting
Employers can recruit and job searchers can search for jobs effectively through online recruiting web sites.
Online News Services
Many newspapers/magazines have online presence, providing 24-hour updates. Online publishing is
attractive because printing and distribution costs are not involved in it.
Online Travel Services
One can make travel arrangements online without going to travel agent. It is convenient and less costly.
There are online businesses which help customers find discount fares for airline tickets, hotel rooms and
rental cars or assist in case of lost luggage.
Online Entertainment
Internet technology can quickly provide information with high quality multimedia. Therefore, such e-
businesses have emerged which sell music albums, movie tickets, video films etc. The content can be easily
downloaded by the customer in this case.
Online Automotive Sites and Energy Online
Certain web sites allow users to search and purchase new and used cars and their spare parts. Also, there are
sites where buyers and sellers can buy, sell and distribute energy (oil, electricity etc.) on the web.
Selling Intellectual Property Online
Some e-businesses deal in the sale of intellectual property rights of companies such as patents, trade marks,
trade names etc.
Online Art Dealers
Artwork can be bought from the web at a discount, e.g pictures, paintings, posters etc.
E- Learning
Universities and various training institutes are offering high-quality distance education over the web. E-
books and other reading material can be easily downloaded to one's computer. is an
example of this type of business model.
Online Service Providers
These e-businesses help improve policies, procedures, customer service and general operations of other
businesses. They can provide consultancy/professional services, for example, web site development
services, online legal consultancy services etc.
Online Shopping Malls
Online shopping malls are those web sites which present customers with a wide selection of products
and services at a single place. Thus, Instead of making several separate purchases, customers can use the
mall's shopping cart technology to purchase items from many stores in a single transaction.
Portal Model
Portals are the web sites which provide chance to the visitors to find almost everything in one place.
Horizontal portals provide information about a very broad range of topics. Search engine is the
example of a horizontal portal. Vertical portals provide information pertaining to a single area of
interest. Community Portals such as those related to medical or legal profession are the examples of a
vertical portal. Online shopping is a popular addition to the some portals such as `yahoo.com'. Portals
allow users to browse independently owned storefronts unlike online shopping malls.
Brick-and-Mortar vs. Click-and-Mortar businesses
These two terms refer to the offline and the online businesses, respectively. Where a company is doing its
business both online and offline, there is often the problem of lack of proper integration between the two
different channels of business.