For companies that produce goods or services, electronic commerce, through the creation of e-commerce websites, represents an opportunity to develop a new sales channel. This has already happened in the past thanks to the combination of opportunities offered by technology and organizational solutions based on the availability of the sales force and money.
This new electronic channel has two exclusive features in respect to the previous channel:
a) It is global, and can reach potential customers who are anywhere in the world.
b) It has relatively low development costs and it is therefore also accessible to smaller businesses.
E-commerce is global
Electronic commerce means that the company should start to think in terms of global trade policies. The prices on web sites and promotional offers are visible on the web to customers in each country.
If this kind of globalization becomes too frightening, it is possible to fall back on Web sites dedicated to specific markets, in local languages, but a skilled customer would notice any differences in the offers on the different websites online.
E-commerce Web sites are an opportunity for SMEs
It must be underlined that this new adverting channel has lower costs than existing ones, and especially it is able to cope with growing volumes of contacts without the need to increase advertising spaces or staff.
The low cost investment required to develop this channel is a great opportunity for the small to medium sized companies to compete with bigger ones. To enter in the business market you don’t need to have vendors, branches or shops, except what is strictly necessary to maintain physical contact with customers. The development of electronic commerce will eliminate protective barriers represented in the past by geographical distance.
E-commerce enhances the business intelligence
If the products are either digital or easily transportable (ie, parcels, or packages), it will be almost irrelevant to buy them from your country or a distant country dealer. In fact these products can be sent easily real-time via the network, in the case of digital products, or within a few hours via shipping companies in the case of physical products.
The dismantling of these barriers will emphasize the importance of business intelligence and creativity in promoting their own products and services. Since we can easily buy English books in discounted international websites, why should we waste time to sort through a library locally, where they cost more and not be available until much later.
E-commerce Web sites cancel the distance between firms and markets
Many companies, through the E-commerce web sites, may establish a direct channel with their end-customers. It bypasses the traditional distribution chain and tries to grab a portion of the product’s value that was previously left to intermediaries downstream.
Direct contact with end customers can significantly reduce the costs of product’s marketing. Some of the savings are retained by the company, with obvious profit advantages, and other savings can be transferred to the market in terms of selling price reduction.
Even with suppliers, electronic commerce may be conducted to bypass intermediaries and go directly to producers (in this case we speak of e-procurement website). Even in this case the benefits are obvious:
- The company would have more choice.
- They would probably pay less for components or raw materials.
- It would be possible to reduce the lead time of replenishment by automating the relationship with the supplier.
- The reduction of lead time would result in a reduction of safety stocks.
- The stock reduction could prevent the requirement to increase storage space and physical infrastructure.
E-commerce increases the quality of communication and service
One of the clearest advantages of an electronic channel, represented by e-commerce websites, is the ability for the company to get in touch with their end-customers without an intermediary.
This means the ability to recognize and treat each customer individually in a personalized way (mass customization). Many bank websites ask to their customers to specify their needs or interests; for example, a customer might be interested in financing services, others in asset management services and so on. The result is a customer “profile”, which produces a corresponding profile for the commercial offer: consequently the website reconfigures itself on the basis of the interests declared by the customer and shows only offers that are presumed to be compatible with his needs.
Direct contact with the market also allows companies to provide better technical information about the product or service. This relieves sellers from having to answer to customer’s questions and permits the product’s features and functionalities to be properly presented to customers, something which was not always assured when product illustration is done through intermediaries, due to wholesalers and shop assistants.
Through e-commerce, websites marketing messages are presented correctly, the strengths of the products are clearly highlighted to customers and different features compared to competing products can be adequately emphasized.
An important advantage of direct contact with the customer is that the company can receive real-time feedback from the market.
By studying online purchases made by customers, the website pages most frequently accessed by users or e-mail messages sent by customers, the company will immediately realize how the market has seen a new product. They can react with a new advertise campaign. The collection of this information can be used to quickly correct any errors in marketing. Instead of using the old information channels, companies should expect to have more opportunities to catch weak but worrying signals.
E-commerce reduces flows and response times
Through e-commerce Websites trading operations can also be performed more quickly and effectively.
A price change, if approved, can be seen by all at once, avoiding sales clerks or sellers mistakes. A commercial campaign, published on a website, becomes immediately operational for the entire market, without spending time to align the sales forces to the new directives.
In the case of digital products, the electronic channel ensures the immediate delivery of goods without the need to produce a physical copy of the product sent to the customer. Even in the case of physical products sellers can achieve considerable benefits if you take orders using the web. Requests on the internet arrive in real time to sales management, which alleviates the need for one or more central warehouses, saving in the storage of goods in periphery warehouses.
An extreme effect of electronic commerce can be represented by the reorganization of the commercial sector, with the disappearance of some figures like commercial intermediaries and the restructuring of the supply chain upstream from the manufacturer.
A computer company that receives orders from customers only by an e-commerce website could easily get replenishment orders of computer components to its suppliers and taking delivery of what is only required to meet its commitments to customers. This would generate a very efficient supply chain by reducing inventory and work-in-process.
E-commerce means flexibility
A digital commercial network allows for greater flexibility with respect to a physical network. A crowded shop can not attract other customers, who will keep away from it.
The web sites, if properly dimensioned, can handle spikes of visitors without visible degradation of response times (websites such as Microsoft or Yahoo handle several million hits a day).
The e-shops can also stay open 24 hours a day, seven days a week, answering questions from all over the world without worry or timetables or holidays. Flexibility is also in terms of ability to respond to marketplace. Using information gathered in real time through its websites, the company can modify its proposals, promoting products that have difficulties, making more attractive deals if users indicate weakness in respect to competition. Compared to a conventional commercial network in which the company proposes more products than the market’s demand, for e-commerce it is the opposite. The market “pulls” and the company follows, trying to stimulate demand, but only from the inclinations observed in the market.
The e-commerce also brings new business opportunities
The ability to sell directly online to a wide audience of customers can potentially generate new areas of business. It is, for example, the case of financial information in the evolution of financial markets (stock exchanges, foreign exchange, etc.). There are several Internet providers who joined this business that sell quotes, financial news in real time, or offer opportunities to work online through the stock exchange. In general it’s possible to develop many information selling services, which customers are disposed to pay. Currently you can subscribe to a market research firm in order to receive studies and research reports from their Web sites. One area where new services are developing rapidly is tourism. In this area, there are numerous Information Providers that allow you to get information about tourist destinations and make reservations at hotels. For example, the subsector for skiing holidays is developing a very strong competition on the Internet between French regions, Swiss cantons and Italian valleys, with very interesting opportunities from tourist point of view.
Finally, e-commerce can give rise to entirely new sales processes compared with the old ones. For example, many airlines have adopted e-commerce solutions for their tickets. On the new websites of flight companies, the customers book flights and obtain tickets directly, so the process can be completed by many different people, travellers, but it is no different from the traditional one in which travel agents make bookings. But some flight companies have thought about an innovation. When the flight date is near and there are still empty seats, the company will “auction” the seats on the Internet at very attractive prices without a reservation, thus, selling them to the first customer who is willing to buy them. Through its websites the company maintains, in addition to the traditional “virtual store”, a parallel “store” for sales or specials. This economic activity has contributed greatly to raising the number of the travelling public thus improving the economic performance of flight companies.