What is eCommerce? Benefits and Risks

Simply defined, eCommerce is trade conducted over the Internet. When considering the technological developments and breakthroughs that are continuously taking place, traders can no longer afford to ignore the Internet. You could be losing out to more digital-savvy traders! In this section, you can find out more about eCommerce, including the various types of websites, benefits and risks of selling over the Internet.

eCommerce entails various services, electronic processes and transactions and can be in the form of:

  • goods and services sold via a website but delivered in non-electronic form [Example: a Maltese website sells a book to a UK consumer. The book is then shipped from Malta to the UK];
  • ‘traditional’ goods delivered electronically, [Example: a trader sells books in digital form, such as ebooks, which can be downloaded by consumers];
  • Electronic delivery of services [Example: a Maltese lawyer provides services via the internet to a consumer in Italy];
  • goods and services traded online between companies [Example: Maltese company buys its supplies from another Maltese or foreign company’s website. This is commonly referred to asB2BeCommerce].

However, it must be noted that the payment for goods/services, may at times, be settled either physically, upon delivery or by other traditional methods which do not necessarily involve online payment transactions.

Types of Websites

Websites may be used for an infinite range of purposes. They may be designed for entertainment, for providing information, for facilitating communication or for commercial purposes. Different types of commercial websites exist and you need to be knowledgeable of the various models available in order to select the one that best suits your present and future business requirements.

 

Following are some of the most commonly-found types of commercial websites:

Information Delivery Sites, Online Brochure/Catalog Sites or Branding Sites

These sites generate sales by promoting your business and allowing potential consumers to familiarise themselves with your products at their convenience. Whilst portraying a professional presence on the Internet, these sites provide information about the product or service, as well as information on how to proceed with a purchase. They are also used to present and promote a brand online. Such sites are usually less expensive to design and maintain than an eCommerce site and suit all types of businesses.

eCommerce Sites

These normally include the features found in Information Delivery Sites and much more. Besides browsing your products and services, consumers can also place and pay for orders on your website. Such websites also allow you to provide facilities for consumers to contact you for after-sales service., You also have the facility to add and update product details. Some websites also include features such as automated stock control[1].

eMarketplace Sites

These platforms bring a number of buyers and sellers together to facilitate transactions (Examples: eBay, Amazon, Alibaba, etc.). By joining an eMarketplace, you will reap the benefit of joining a community where eCommerce is already thriving. However, you need to be aware of the conditions [which are set in place by the eMarketplace operator] to which you agree to abide by.

 

Benefits of eCommerce

Investing in an eCommerce system could potentially result in a number of advantages:

  • No need for a brick and mortar storefront, resulting in less fixed and overhead costs for both existing and new businesses;
  • Customer orders can be automated, reducing costs related to order-processing;
  • Breaks down the barriers of time and distance;
  • A 24 x 7 showcase for products and services – providing customers with the opportunity to browse and shop at their convenience, anywhere and anytime;
  • Small businesses can compete with large companies on a more level playing field;
  • Reductions in marketing and advertising costs;
  • Online catalogues are easily amended and edited, anytime and at minimal expense, eliminating printing costs;
  • Customers are provided with real-time, up-to-date information about products and services and related offers, more than what is possible through brochures;
  • A personalised customer service can be offered at reduced cost. Customers’ interests and preferences can be tracked, allowing tailor-made products and services that meet customers’ needs. [Example: you can recommend items to your customers based on the knowledge of previous purchases];
  • You can promote your products and services directly to particular segments of the market. You can target potential customers by means of email, or via a link through another website such as affiliate marketing[2].

Risks in eCommerce

All business ventures can be affected by varying degrees of risks. You need to be aware of such threats especially if you aim to establish a thriving eCommerce business. By carefully assessing and addressing the implications that risks pose on business, you are in a better position to overcome any potential dangers. If your website is not accessible for any particular reason, potential customers will quickly and easily shift to your competitors.

The following, are some common risks to eCommerce systems:

  • Physical damage, such as a fire, flood that could damage the eCommerce server location;
  • Data threats, such as viruses that destroy or harm software and information;
  • Technical failures, such as hardware and software malfunctions, power failure;
  • Card payment fraud;
  • Internal or external malicious attacks;
  • Infrastructure failure, such as server crashes.

These risks and threats not only result in a loss of sales, but can also dent a brand’s reputation. You should discuss these and other potential threats with the eCommerce developers so that they are proactively catered for.

Further information about online security and how to mitigate online risks can be viewed in the ‘Planning your IT Requirements’ section.


[1] This allows for stock to be automatically updated as soon as consumers buy products, whilst also indicating whether an item is available in stock or not.

[2] Affiliate Marketing is a revenue sharing venture between a website owner and an online trader whereby the former will place advertisements on his website to either help sell the trader’s products or to send potential customers to the trader’s website, all in exchange for a share of the profits – http://www.wisegeek.com/what-is-affiliate-marketing.htm.