The Advantages, Disadvantages and Limitations of E-Commerce

Written by w.d. johnson
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The Advantages, Disadvantages and Limitations of E-Commerce
E-commerce makes transactions more convenient for consumers and businesses, but also subjects both parties to security risks. (Comstock Images/Comstock/Getty Images)

Forrester Research, a technology and market research company, reported in 2010 a five-year forecast which predicted that United States electronic commerce, e-commerce, sales would reach nearly £162 billion by 2014 -- up from about £100 billion in 2009. However, despite the immediate benefit of convenient shopping experiences for consumers and significant growth potential for businesses, the online marketplace also poses concerns for customers and companies.

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Advantages for Businesses

The marketing avenues that e-commerce offers make it easier for companies to gain visibility and accessibility to reach consumers on a national or global scale, if desired, regardless of physical location, time or distance. E-commerce also saves on overhead by sparing businesses extensive maintenance of physical locations. Inventory can be arranged and tracked easily, and processes like document preparation, catalogue distribution and record keeping become more automated saving owners in time and labour costs.

E-commerce tools also better inform businesses about customers' interests and preferences. Analysing web pages viewed immediately before and after a customer viewed a given business' website or product helps companies better shape the ideal shopping experience, as well as personalise individual alerts and recommendations.

Disadvantages for Businesses

As geographic limitations diminish, competition with other businesses increases. To remain relevant, competitive and effective, businesses must continually adapt to rapidly changing e-commerce technology, practices and trends. With e-commerce also comes the added necessity of protecting the online security of a business, as well as its customers.

Limitations For Businesses

Online businesses must ensure that their websites can accommodate all their content, inventory and customers. Underestimating bandwidth needs can lead to having a website temporarily suspended and unavailable for business. Additionally, businesses will continue to need brick and mortar stores to satisfy the remaining consumer desire for the traditional tangible and sociable shopping experiences that predated e-commerce.

Advantages for Consumers

E-commerce eliminates the need for consumers to waste gas, time and energy visiting stores for common purchases like electronics, attire, event tickets and even groceries -- all without worry about distance or closing time. Customers can also browse and compare several options more quickly and easily than in person. Deal and consumer tracking sites like RetailMeNot, PriceGrabber and PriceWatch make price comparisons, sales alerts, coupons and discount codes more readily available to maximise savings.

Disadvantages for Consumers

Entering credit card and other identifying information to complete online transactions increases vulnerability to computer hackers, identity theft and business' misuse of personal information. Because it is so easy for just about anyone to launch a website and pose as a business, trustworthiness can be difficult to discern, making consumers more susceptible to scams and fraud.

Additionally, wait time and shipping costs can off set the convenience of purchasing from home. Returns or exchanges can also be inconvenient when online companies have no local establishments for consumers to visit.

Limitations for Consumers

Since online shopping is less tangible, consumers are unable to scrutinise product quality or authenticity before finalising purchases. E-commerce also eliminates the social element of shopping with friends and family, or at least significantly alters it with online efforts to mimic that experience through social networking and shopping blogs.

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