E commerce is “electronic commerce”. It is anything that involves doing business electronically.
E commerce obviously includes commerce conducted over the internet, but it can include other forms of electronic commerce such as telephone banking, using a fax, or generating and managing accounting systems on a computer (without use of the internet).
E commerce also offers distinct advantages for both the buyer and the seller:
The seller has lower costs
The seller can change electronic details easier than details printed on paper (eg. if the cost of a service needs to be changed; you can do it easily and immediately on a web site: but cannot on a printed brochure)
The seller can reach the whole world as a market, through the internet
Immediate payment can be achieved at a distance electronically (with credit card or direct bank transfer, etc)
The buyer has greater bargaining power to purchase at a better price.
It becomes viable for smaller businesses to enter the market place; and that can result in some services or products becoming available, which might not normally be available through, for example, a traditional shop front.
The buyer can access a greater variety of suppliers easier
The buyer has the convenience of shopping from home 24/7
The buyer can shop around to get the best bargain in a fraction of the time than in the traditional way of shopping.
There is less stress involved in shopping online because there is no traffic to beat, no parking problems.
Online shopping offers a whole new world of shopping for people with disabilities, elderly and people with less mobility.
Establishing an ecommerce business requires a fraction of investment in comparison to a traditional brick and mortar business therefore enables many more individuals to establish their own business.
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Take a look at our E Commerce Course (click here)
Ways of Supplying Data
Electronic services and products such as ebooks, music, games, newspapers, video/TV subscriptions, and services ranging from education to health care; can all be supplied to customers in an electronic format.
1. Over the net:
Send as email attachment;
Keep on a web site and give an access code (eg. for a download or accessing online)
2. On a CD or DVD or Videotape.
Many goods and services still need to be supplied in a physical form. Nevertheless, e-commerce solutions can be part of the overall business model even where the thing being sold is something physical.
Ways of Supplying Hard Goods and/or Products
Physical distribution is the ‘behind the scenes’ activity concerned with efficiently transporting products from the business to the customer. While on-line transactions are convenient and fast (particularly in relation to virtual products), the immediate off-line delivery of physical goods can be costly and inefficient. Recent surveys of on-line shoppers by market research companies have found that one of the most important criteria is a timely delivery of goods. In a survey conducted by Binary
Barriers that stand in the way of inexpensive, convenient and timely delivery of packages are
- Parcel delivery
- Customs clearance (when dealing internationally)
The method of transportation a business uses will largely depend on the type of product and the degree of service the business wishes to provide. Transportation costs can be expensive and therefore you need to choose carefully. For smaller items such as books, CD’s, T-Shirts, etc, postal services may be the best option. Most countries’ postal services can guarantee next day delivery at a reasonable cost. Registered Post and Express Post are two options. Both options allow you to track items if they do not arrive.
When delivering internationally and in bulk, courier services may be the best. ‘Deals’ can be worked out and the courier service should be able to give you an idea on the status of the delivery.
There are many freight calculating site online, eBay offers a free freight calculator to embed in your website. Regardless, of how you want to manage your shipping costs, it is very important to always make it very clear just how much shipping costs will be to your customer.
Some dot.com companies have physical stores to sell their products. Order and pay for your goods electronically and collect the items on the way home from work. Groceries and vegetables can be purchased electronically. For example; at Woolworths orders can be placed online, and delivery can be arranged from the closest store in your locality.
When determining the most apt mode of supplying hard products, you need to consider a number of factors.
- Are they perishable or non perishable products?
- What sort of goods are they - shopping goods, specialty goods?
- Are they small or large items?
- How much do they weigh?
- Where are they going to – national or international?
- How are they packaged?
Consider the packaging, using cheap packaging may minimise the cost, but could result in a higher damage rate of goods.
Another major problem is the logistics in suiting deliveries to times which suit the customer but still allow efficient deliveries. These logistic issues especially apply to ‘specialty goods’, where there is less opportunity for multiple deliveries to adjacent locations.
The on going viability of e-commerce to fulfill customer orders for goods, while still making a profit, depends on whether:
- The goods can be transported cheaply in relation to their price and some delay is accepted)
- The goods are sufficiently expensive, that relatively high delivery charges can be added
- The goods can be sent from an affiliate near the customer eg, Interflora.
One area of change brought about by the e-commerce is the advent of drop shipping. This supply chain management technique is a new twist on the middleman. The online shop-front or retailer does not stock any goods, and when an order is received, it is passed directly onto the manufacturer or a wholesaler. They then ship the goods to the customer. A profit is made by the online shop-front on the difference between the wholesale and retail price while avoiding the work and commitment of warehousing and distribution. However consideration needs to be given to the extra cost involved to ensure that it will be profitable.
Many business online that drop ship, will go so some effort to hide this from their customers, others will openly declare it at checkout. Some wholesalers will send distribute items in blank packaging to help perpetuate the myth, other may include promotional material from the shop-front business such as the company’s logo and contact information. Trends in drop shipping include custom products where a manufacturer makes custom items and distributes them under the client logo. An example of this might be t-shirts. Drop shipping is also emerging as a huge trend on eBay, where a seller will list an item as brand new and ship it directly from the manufacturer/wholesaler to the highest bidder. This is legal as long as it is within eBay’s policies.
Evidently, there are some benefits to drop shipping. The first being consolidation of effort with orders going to one warehouse for distribution. This is often used by small business that then does not need to pay upfront for stock, allowing business setup for a fraction of the possible costs. Additionally shipping costs and inventory management costs are decreased which can be passed on to the customers.
The downside of drop shipping can be supply glitches where the wholesaler/manufacturer has run out of stock, making the drop shipping business look bad. Some businesses avoid this by integration of the wholesaler’s inventory with the shop-fronts website.
It is also worth noting here that the opportunity for scams is tremendous. Many scammers are selling drop ship wholesaler lists on the internet, while promoting drop shipping as a great ‘home based businesses’. There are also many scam website who in addition to the above will also sell ‘turnkey’ websites to sell the products.
Many e commerce businesses find that after a certain point they can no longer keep pace with packaging and delivery of their products. At this point it is becoming increasingly common to engage the services of an order fulfillment centre (OFC). Note the difference between drop shipping and order fulfillment centres is that when drop shipping you do not own the product, when you use an order fulfillment centre you own the product. An OFC provides a cost effective way of managing warehousing, packaging and delivery of your product. Typically OFC’s can pass on substantial shipping discounts to business due to the bulk nature of their business.
When you have decided that you need to move to an OFC, there are some important points to consider before engaging their services. Consider if they are upfront about all packaging costs, are they passing on a shipping discount, how reliable are they (error rate), what percentage of product is shipped on time, can they cope with spikes in demand, can you store all your product on their premises and what is their policy on reverse logistics (returns and refunds)?
Additionally it is worth considering additional services they might offer. Many OFC’s can also offer additional services such as call centre support, e commerce development such as shopping carts, database and websites, some can also offer payment processing services.
There are three common order entry methods: passing on the order to the OFC, entering orders singly onto the OFC’s web based system, passing all orders to the OFC on a spreadsheet. Which method you choose will be a balance of cost and efficiency. It may cost more to be able to email each order directly, but this may be offset by same day delivery.
Costs incurred with an OFC would usually involve storage costs which may be charged per pallet, there may also be a minimum monthly fee involved, account costs usually this is a monthly fee for keeping you on their books, per SKU (stock keeping unit) cost and finally a per shipment cost every time the OFC ships an order for your business.
The decision to engage an OFC will most likely depend upon the stage and size of your business. This option is probably not suitable for a home based start up due to the extra costs involved, but for the larger growing company this option may provide much needed support.
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