Republic of the Philippines

Mountain Province State Polytechnic College

Tadian, Mountain Province

Chapter 1.
Learning Objectives:

At the end of this lesson, you shall be able to:

 differentiate the two ecommerce platforms; and

 identify the advantages and disadvantages of ecommerce.

INTRODUCTION

Commerce is a division of production, i.e. the making of goods or provision of necessary or

desired services. When we engage in commerce, we engage in actions that bring products and
services to consumers. Ecommerce – short for electronic commerce – refers to the actions taken
for provision of goods and services via online channels. In common usage, it refers to
transactions taking place online. Both are distinct from digital and online marketing. Marketing
aids sales, through promotions and advertising. It advises the consumer of the existence of a
given good or service. Ecommerce is concerned with the acts of sales and provision: i.e. bringing
goods to the consumer in return for payment. The center point of any commerce is making a
sale.

Recently, electronic commerce has become very popular around the world with many
advanced technologies presented in its process. E-commerce was established in the 1960s as
business organizations implemented the usage of Electronic Date Interchange (EDI) as a tool to
exchange data with other business organizations. In 1979, sharing documents through
electronic networks for businesses was established universally. The usage of electronic networks
for business continued to witness an increase in the 1980s until it boomed in the 1990s when
online market platforms eBay and Amazon surged. Purchasing limitless amounts of items online
from e trailers has become available to all consumers (Khurana, 2019).

Today electronic commerce is thought of as phenomenal as its powerful concept and

processes have profoundly changed the present life. For many, business electronic commerce
has become a priority (Nanehkaran, 2013; Abdulaali et al., 2019). Electronic commerce has
opened doors to business organizations. It provided them with opportunities to further improve
and advance prevailing market position by delivering an inexpensive, more operational
distribution sequence for their products and/or services (Abbas et al., 2021). The usage of
electronic commerce has also provided business organizations the capability of connecting with
corresponding business organizations in order to reduce production and delivery times following
the Toyota managing system, also known as “Just in time production” and “just in time
delivery”.

In this chapter, we will get into the advantage and disadvantages of ecommerce as well as
its limitations.

PRE-ACTIVITY
Read and understand the following statement and identify if it is a pro or a con. If pro, draw a /
mark if con, draw an X mark.
_________ 1. Convenient _________ 6. Fraud and fake orders
_________ 2. No in-store customer engagement _________ 7. Long delivery period
_________ 3. Security breach potentials _________ 8. Lack of personal touch
_________ 4. Save time _________ 9. Lower cost
_________ 5. Affordable advertising _________ 10. Competition

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Ecommerce Platforms
1. Direct platform. It is when the business operates out of its own site, using ecommerce
software to conduct transactions. Some ecommerce software covers all aspects of sales;
some covers transactions only. Small businesses can set up a shopfront with content
management systems such as WordPress and integrated plugins or other software. Some
small businesses contract developers to set up store fronts.

2. Indirect platform. It is when the seller engages with consumers via a third-party such as
Amazon, eBay or Etsy. In this case, the third party runs the site and transactions. Funds
may be transferred to the third-party, then to the seller, or directly to the seller. Indirect
platforms usually charge a fee. Sellers focused on drop shipping and resales, with no
branding or merchandising requirement, often benefit from indirect platforms. Indirect
platforms are also a good way to enter the market with little risk and lower overheads.

Direct Ecommerce Platform Indirect Ecommerce Platform

More time to start up Easy to start- great for small entry level
Set up fees, URL purchase and costs, ongoing Usually charges a fee for service, sometimes
website hosting fees, website maintenance commission
and upgrade costs
Technical issues handled by the seller Technical issues handled by third-party service
provider
Control over product sales, types May have extensive terms and conditions, limits
on products and sales
Promote own products only More competitors- Competition may be promoted
alongside
Drop shipping and other forms available Useful for drop shipping
No intrinsic benefit with independent platform May have higher search ranking due to platform
use

Reliant on own marketing and promotion Access to an existing pool of consumers

Better for more products- you have more Third party indirect platform promote their sites
control of and are usually high ranking
Website must compete with other websites Third party indirect platform promote their sites
(and and are usually high ranking
competitors) for ranking and exposure

Risk of security breaches, etc must be covered Third party indirect platform have more IT staff
by the seller and programmers ensuring web security and
reducing the likelihood of security breaches

Full design control, easier branding No design control, difficult branding

The Advantages of E-commerce

Recently, there has been a noticeable rise in the percentage of online shopping. With more
customers, this percentage has been increasing as time goes by. Customers, organizations, as
well as the society are getting great benefits from E-Commerce. To illustrate, in the past years
when traditional marketing systems used to prevail, customers wasted lots of time and energy
commuting to the physical shops to do their conventional shopping. With the advent of e-
marketing, customers can give up on the usual exhausting trip to the supermarket to purchase
the desired goods. With the web-enabled computers, laptops or mobile devices, shopping is
much easier. This unconventional shopping allows customers to do shopping everywhere while
sitting comfortably in their house (Aonerank, 2019).
The rise of interest in online shopping has a bunch of reasons. The most common one is the fact
that

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The main classifications for the benefits of e-commerce
• Advantage to the customer
• Advantage to the organization
• Advantage to the society

1. Benefits of E- commerce to the Customers.

a. Buying 24/7 all year long. E-commerce stores are available at all times. Customers can
shop at all hours of any day during the year. In this case, customers, especially those who
do not usually have time on their hands to do conventional shopping, can do any
purchase anytime through visiting the website. Such websites facilitate shopping due to
their convenient design. For example, products are classified into categories which help
customers have fast orders. Moreover, this kind of shopping is perfect for people who work
long hours and are unable to find time to go to retail shops. A good example of such
websites are AmazonFresh, Target, and Lazada.

b. Convenience. Being a very convenient way to do shopping, E-commerce has become the
easiest and most popular way for shopping. Products can be ordered anywhere on the
planet with just a simple tap on the mobile device connected to the Internet. With such an
easy way, consumers effortlessly pick merchandise from various sources with no physical
constraint.

c. Time Saving. Time is money! With the benefit of being fast, E-commerce has facilitated
the buying/selling procedures. A key advantage of cyber shops is saving time. In other
words, while shopping online, customers would not need more than 15 minutes to
perform their purchase. Add to that, providers are so careful as to deliver the products to
customers’ doorsteps within a week.

d. Comparison in prices. With E-commerce platforms, consumers are provided with more
opportunities to see different price points and features and thus pick less expensive and
superior options. Comparing choices in a conventional or physical marketing system can
be very difficult, since visiting all the stores and asking for prices can be exhausting to the
customers. The issue of asking about prices can be a little embarrassing for some
customers, and some others do not even dare to ask about the price of a certain item.
However, with online shopping, everything is tool to hand and clear in front of users.

e. Adequate information. E-Commerce provides a history of customers’ purchases

available whenever needed with a huge amount of data. A customer does not only see the
relevant detailed information within seconds, but is also able to review his/her previous
purchases. Therefore, it permits clients to search for merchandise info, compare the costs
and benefits and eventually evaluate its value before performing the purchase. This is very
difficult to be seen in a conventional shop since such a vast amount of data is difficult
and sometimes impossible, to be displayed to customers.

f. Many options and range (options & options). E commerce has broad array of
merchandises and amenities, consumers can get to see a varied choice of products and
services to choose the best of them, unlike traditional marketing system, one can see only
a limited stock.

g. Accessible. In a normal conventional store, customers might get lost while wandering
from aisle to other browsing for merchandise. However, with e-commerce services, clients
can search the merchandise categories, or they take advantage of the webpage’s search
tool and can, in no time, find the desired product.

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 2. Benefits for the companies
a. No Geographical Limitations. Conventional shops impose limitations on providers
which are always costly and inaccessible. For example, if customers need to get a certain
item from Beirut and they live in Baguio, they will have to drive and waste more money in
order to get what they need. Similarly, if merchants want to display their products in
another city, they will have to open new branches and pay extra money and exert extra
efforts. With the electronic commerce these kinds of limitations have no place to be found.
By utilizing e-commerce, businesses can magnify their marketplace to countrywide and
world-wide marketplaces with least money investing. In other words, an company can
effortlessly find additional clienteles, top dealers, and appropriate corporate associates
throughout the world.

b. Money Saving. E- Commerce business have significantly lower operational costs and
better quality of services, in comparison to the actual stores. There is no staff to employ
and recompense, no rent and has a reduced fixed operating expenditure.

c. Increasing efficiency of companies. E-commerce benefits from the “pull” type supply
administration. In this type of management, a business procedure begins at the moment a
demand originates from a client and utilizes a ‘just in time manufacturing’ method. This
makes the company conduct business transactions faster and at lower operational costs,
increasing company efficiency.

d. Laser targeting market. Targeting the right people is a key factor in promoting e-
commerce services. Online providers collect a great number of consumers’ data to ensure
they are targeting the right audience to their products. For instance, if they are promoting
a male-oriented product, they are capable of targeting one sex and getting more
engagements, and as results gaining more purchases. Same is the case with promoting
other customized services for different age groups.

e. Easy to initiate and administer a company. Location is an issue which an e-commerce

business owner never worries about in running a business. All is required are electronic
devices such as laptops or mobile phones and Internet connection. Therefore, e-commerce
simplifies the business processes with more speed and efficiency.

f. Higher Ad returns. It helps organizations gain higher return on advertisements, if

managed properly.

3. Advantages for the Society

a. Customers do not need to move from one place to another to do their shopping.
This process results in less transportation on streets and reduced air pollution. It reduces
the price point range of items due to less fixed expenditures, so consumers with lower
incomes are also able to buy items. It has allowed remote zones in the countryside to
contact items and amenities that were not accessible previously.

b. It aids governments in delivering communal services. For example, medical charges,

schooling fees, and communal service industries can be obtainable to citizens with less
cost and more developed method.

The Disadvantages of E-commerce

Like any other business where there are always ups and downs, E-commerce has benefits
and drawbacks. Running this kind of business has its own challenges. However, being aware of
such challenges will help people in charge of this business avoid common consequences. The e-
commerce downsides can be classified into two main categories: technical and nontechnical.

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 1. Non-Technical Disadvantage
a. Inability to test items first-hand before buying. It is one of the most common problems
faced while shopping online. With this kind of shopping, customers are unable to try the
item before getting it. In another sense, e-commerce takes away a crucial part of the
purchase process which is testing the product. Videos promoting the products might have
been made in a very professional and convincing way, but still many customers are
hesitant to buy any item they have not tested or seen before. This is so due to the fact
that many customers do not see a real guarantee of product quality.

b. Lack of the personal touch. E-commerce is missing one of the factors that many
customers consider to be essential, which is the personal touch. In other words, some
consumers need to feel the intimate experience from physically going to the store and and
interrelating with sales assistants. So, with online shopping there is no place for new
relationships to be born (Searchcio, 2019; Al-Abbrow et al., 2019; Alnoor, 2020).

c. Delay in delivery. Waiting is one of the online shopping features, which turns into a
problem if customers are not patient enough. To shop online means to wait up to one
week, or sometimes more, to have your order in your hands. The gratification anyone gets
while doing actual shopping is always delayed while shopping online where customers do
not hold the physical item in their hands for a while after the procurement (Bhasin, 2019).

d. Cost and product feature comparison. Through cyber shopping, buyers can liken
several items and catch the cheapest cost. While shoppers love being able to compare
prices, providers find it too restrictive as numerous prices are eliminated from suggested
or recommended items based on the price range the customer sets.

e. Damage during Transportation and Delivery. The product bought online can be
damaged or spoiled during delivery.

f. Restricted Consumer Services. In the case that a consumer has any enquiries about a
certain item in a physical shop, the assistant, the cashier or even the store manager all
are ready for help. In contrast, the customer service on ecommerce websites can be
restricted: the site may only offer services at a specific work schedule, and sometimes a
call to the consumer services division may place the consumer on call hold for a long time.

2. Technical Disadvantages
a. Security issue. Cyber security is a worldwide issue which needs to be resolved.
Eventually, the lack of reliable security systems creates a risky experience for customers
shopping online. In recent years, the world has witnessed a number of reputable
organizations and international businesses falling targets of scammers which steal
consumer data from their databank. This could result in lawful and monetary allegations.
Likewise, it also deforms the confidence which took years to be built between the
customers and their providers.

b. Need for Internet Connection. Connectivity to the web or online access is required for
the partaking of customers in online shopping. They also require devices that connect to
the Net.

c. Credit card Fraud. One of the real and growing problems in the world of online
businesses is credit card fraud. It can consequence in the forfeiture of profits, fines, and
bad repute. Both customer and the business are easy preys to credit card deception.
Some pessimists even to claim that scams will eventually result in the vanishing of e-
commerce (Chahar et al., 2013).

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 d. Software development. Software is constantly being developed and modified. This poses
limitations on online companies. For example, it requires companies to constantly update
software as well as hardware required to support the development of software.

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