eCommerce offers an easier, faster, and more efficient way for consumers to shop. Since the pandemic and lockdowns of the early 2020s it’s become a permanent part of the way society buys and sells.
So much so that an effective eCommerce strategy and platform is no longer a nice-to-have – it’s a compulsory part of doing business. And that goes for businesses selling B2C – as well as those trading B2B who want the benefits of an eCommerce experience for their wholesale customers.
But taking your business model online isn’t all plane sailing. While eCommerce business can have a tremendous upside, it comes with risks too.
So here are 19 pros of eCommerce – and 11 significant cons – that business leaders should know about.
18 advantages of eCommerce for a business
1. Ecommerce has greater reach
One of the greatest benefits of eCommerce is that it is not limited by physical boundaries. While doing business in multiple jurisdictions can be complicated – think tax, transport, language and culture issues – eCommerce opens up the possibility of commercial outreach anywhere in the globe. For businesses looking to expand, this creates huge opportunities. In fact global ecommerce sales are expected to pass $US5.5 trillion globally, this year.
2. Ability to offer more niche products
The ability to reach customers around the globe means businesses can create products designed specifically to the needs of certain groups. Worldwide reach means even niche products can become commercially viable.
3. Marketing opportunities are greater with eCommerce
Marketing in the digital space is a different proposition than marketing a bricks-and-mortar store. There are many ways to increase reach and brand awareness online, including maximising SEO and creating a social media strategy for the likes of Facebook, Instagram and LinkedIn. A digital strategy will target specific customer types, and surface advertising and content in the online space where they are present. Advertising on digital and in social media will generally be refined with A/B testing and phases such as raising awareness, retargeting, and focusing on conversations. Done well, digital marketing can be far more cost effective for businesses than traditional offline sales.
4. More innovative visual displays
Digital sales enable products to be considered ‘in situ’ – for example presented so a customer can consider what it might look or be like for them. Increasingly, products such as fashion goods or renovation products can be digitally overlaid onto a customer’s own face, body or home using augmented reality. This type of marketing goes some way to mitigating the inability of the customer to touch, feel and test the product before they buy it.
5. More ways to give consumers information about your products
eCommerce sites allow the seller to create a rich layer of extra information to help the customer figure out whether or not to make the purchase. The extra information can include online demos, user reviews, cross-sale pop-ups, and recommendations for bestsellers.
6. Open 24/7
eCommerce allows the customer to shop at their leisure, whatever time of night or day. Unlike a bricks-and-mortar outlet, sites are available to browse at any time for purchases, allowing you to trade outside of the usual 9-5.
7. Efficient order fulfilment
eCommerce sales can be processed efficiently, and at scale. Again, unlike a bricks-and-mortar outlet, there is no limit to orders being fulfilled – sales don’t rely on a shop’s on-the-floor staff to process them. Dropshipping, where a product is purchased from a third party and sent to the buyer, makes this particularly efficient.
8. Lower overheads
eCommerce stores have far lower overheads than physical stores. While there are costs in setting up a store – including creating a website, partnering with an eCommerce platform such as Shopify, and training staff – it can be very cost-effective once it is underway. eCommerce avoids costs such as the lease of a store, in-house staff, building maintenance, and the like.
9. Fewer barriers to entry
Competition among eCommerce platforms is high, which has pushed prices down – and seen the rise of services such as eCommerce fulfilment – all of which has made it easier to make a start in eCommerce selling.
10. Ability to automate key functions
The ability to automate and integrate online functions greatly reduces human error, and increase efficiency. Automation can be set up across key functions such as accounting, Customer Relationship Management and inventory management, saving both time and money.
11. Ability to collect customer insights
Transactions done online leave a digital footprint, allowing the business to collect data – with permission – about their customers and their habits, shopping trends and how sales could track in future. The ability to collect consumer insights through data or by opt-in surveys is incredibly valuable for any brand and business, not least because it allows for remarketing – targeting previous customers for additional sales.
12. Personalisation with eCommerce
As data is collected on certain customers or customer types, it allows the business to use the information for further sales opportunities. For example, products that appeal to certain types of customers can be surfaced to other customers with similar habits, needs or wants.
13. Automated communication with customers
The ability to communicate automatically is hugely beneficial for the business, and also for the efficiency and satisfaction of the customer experience. Automation allows customers to track their order, get alerts when an item is in stock, and receive information about any return or other request for the business.
14. Multiple payment options
eCommerce is able to offer a variety of payment options, from credit and debit cards, Buy Now Pay Later, PayPal, bank transfers and so on. This provides flexibility for customers who want to manage where and when they absorb costs.
15. Flexibility for employees
eCommerce businesses can hire staff from anywhere in the world. This creates flexibility for those who want to work different hours, be on a particular type of contract, or share working responsibilities. For the business, it also means they can tap into labour pools where certain skills are more available, or costs are lower.
16. Ability to scale cost-effectively
eCommerce allows businesses to scale by, for example, increasing their product base, adding a jurisdiction, or shipping to a new area. As such, scaling can be done incrementally without the need for large outlays such as purchasing or leasing a shop and hiring staff.
17. Demand for eCommerce is growing
The rise of eCommerce, supercharged by the pandemic, means consumers are now used to – and indeed expect – businesses to offer an eCommerce experience. Those who don’t will undoubtedly be missing on sales and leads, and will fall behind as eCommerce becomes the go-to way to shop.
18. eCommerce agility
Traditional sales channels can be restrictive to businesses, with high barriers to entry. Convincing retailers to stock your product can be hard, especially when you start out. The low costs of eCommerce channels, by contrast, let businesses experiment – growing brand recognition and a track record of sales the help them land more traditional wholesale deals.
11 Disadvantages of eCommerce for a businesses
1. Competition means potentially lower margins
The explosion of eCommerce outlets has created intense competition, given the ease at which customers can shop around. This can drive down prices and profit margins.
2. Consumers can’t touch and feel products
The convenience of shopping online can be undermined by the inability for customers to experience the products ‘in real life.’ This is particularly problematic for certain products where texture is important, such as textiles. This issue is being offset by many businesses which are introducing technology such as augmented reality that allows a consumer to experience the product ‘in their home’ or on their face or body.
3. Higher rates of returns
Another issue which arises due to customers not being able to see, feel or try on items is the higher rate of products being returned. This creates an administrative and logistical load for the business – known as ‘reverse logistics’ – which can be costly and time-consuming.
4. IT security burdens
As eCommerce has grown, so have the risks. Cyber security is a very real risk for many businesses, with the threats including infrastructure disruption, breach of privacy, financial loss, and – as this Forbes article points out – the risk of customers losing trust with tech and data.
5. Complexity of running multichannel sales
An eCommerce business should aim to run sales through multiple channels, such as the site’s own store, marketplaces, and outlets such as Amazon and Etsy. Doing this can create complexities, however, with each channel having different needs which then need to be integrated into the backend of the eCommerce business. If the business also runs a physical store, that can also create challenges for inventory tracking and restocking.
Ultimately a mature eCommerce or multichannel business will typically need to use an eCommerce inventory management software package such as Unleashed.
6. Staffing availability and costs
eCommerce sites need staff with skills in technology, be that simple website management or more complex webdev and IT skills. Given the explosion in eCommerce, these skills are in high demand and in some areas the costs of attracting and retaining staff can be high.
7. Potential for site issues
eCommerce is entirely reliant on its systems working – if the site crashes, no sales can be made. These risks can be mitigated by taking steps such as investing in IT support, cybersecurity systems and doing due diligence on any business you partner with. However, sometimes crashes are entirely unpredictable and it’s important to have a risk management strategy in place.
8. Shipping times
Shopping through an eCommerce site means relying on transport to get the purchase to the customer. But the COVID pandemic has upended global transport and delays are now commonplace. Around 60% of US consumers say they’ve experienced significant delays in getting their product. These issues can cause major damage to business’s brand and customer satisfaction. eCommerce operators should ensure they have efficient systems in place, particularly as customers demand faster services.
9. Customer interaction can be a burden when selling at scale
Compared to bricks-and-mortar stores, response times in a digital environment are often slower, in large part due to the high-volume, low-capital model that sellers employ. While chatbots can answer numerous queries, helping manage and filter customer queries, they still need a real human to back them up.
10. Potential for online fraud
Any digital commerce environment is at risk of credit card fraud. eCommerce losses to payment fraud were estimated at $US20billion in 2021, a huge leap from the year before. Cybersecurity systems are a vital addition to any eCommerce site.
11. Complexity of international fulfilment and accounting
An eCommerce site which sells into multiple jurisdictions needs to manage the complexities of each. Each jurisdiction will have its own fulfilment and accounting requirements, which can create challenges for the business. It is advisable that the requirements for any new jurisdiction are well understood before an eCommerce business does business there.