E-Commerce Benefits

Global marketplace E-commerce has allowed a global marketplace to develop, in which businesses trading online have access to consumers worldwide. Customers have the opportunity to purchase products from all over the world from the comfort of their own homes.

Traditional stores can only realistically target a local customer base which is limited to the location of the business premises. In order for a traditional business to attract customers from further a field, it needs to set up another store in that region.

24/7 trading Worldwide trading online means that there is no store needing to be staffed and trading can be carried out at any time, day or night, in all different time zones around the world. Websites can be automated, no staff are required to make sales. All orders and money transactions can be taken and acknowledged automatically.

Start up and running costs Setting up and maintaining a traditional store involves buying or renting a location, purchasing stock, hiring staff and paying utility costs such as electricity and water. These costs need to be paid upfront for a new business, before any profit therefore meaning start up costs are high.

An online store does not have such high initial costs. Potentially there may be no premises to purchase, fewer staff are needed as some e-commerce ventures are run by only one person. Albeit a growing e-commerce business may choose to move to larger premises and employ more staff, but not usually to the extent of a traditional business.

To compare two businesses in the same field of retail, the online bookseller Amazon may employ more staff but its turnover in significantly higher than that of Waterstones. Waterstones is paying a higher proportion of its revenue to its employees than Amazon, which results in Amazon enjoying considerably higher profitability.

AmazonWaterstones Purely online storeMore than 300 stores 12,000 full and part time staff 4,500 booksellers Net annual sales: £4.3 billion Net annual sales: £414 million Sources: and – all figures based on financial year

Competitive edge If there are two businesses, equal in all aspects except that one trades online and the other does not, the online business may be more successful, as it has the competitive edge by giving customers more flexibility to purchase.

Search facilities In a traditional large store, if you want to find a product, you might need to search the aisles or ask a shop assistant. No matter how large an e-commerce store is, if it provides a search facility (which most do) it should only take a matter of seconds to locate the item you want. This is huge benefit to costumers who are shopping online for convenience and speed.

Pricing opportunities. For ‘bricks’ and ‘clicks’ businesses, generally there is a price difference between the traditional stores and the online store. Online discounts are offered to shoppers to encourage this method of shopping. Fluid pricing can be easily implemented online to make sure products are sold.

Airline tickets: as more are sold and fewer are available, the tickets could become more expensive as the demand rises. More profit for the business. Holidays: as the time draws nearer, the price can be reduced to ensure that all places are sold. Not necessarily more profit, however they are only losing a proportion of the cost of each place rather than the full cost if the place were not sold.

Gathering customer information Information is the corner stone of all businesses and learning about the customer can be key to increasing profit. Loyalty cards allow businesses to track what customers buy. When shopping online, customers need to register as members to purchase products or services. Businesses can find out a lot about their customers and tailor their services to suit. Tesco's provide vouchers based on your previous shopping habits.