The last decade has seen the rise of many new technological developments, one of the most prominent of these developments has been the internet. The Internet has already managed to weave itself into our daily lives where we use it for the simple communication of e-mail or to retrieving large volumes of information. More recently the Internet has been incorporated into businesses which have ranged from ‘online’ grocers to travel agents and real estate agents. This electronic commerce has many advantages to the consumer such as increased price transparency, ease of use, and its capability to offer information to consumers about products. Electronic commerce also has many disadvantages such as the constant security threat to consumers from the theft of their credit card numbers and personal details by hackers and the inability of consumers to feel and examine the products. These advantages and disadvantages will probably result in several major changes in the way business is conducted in the future.
Electronic commerce offers many advantages to both consumers and firms. It is very convenient for consumers as there are no shop hours and orders can be placed any time of the day. Electronic commerce also allows companies to have much larger markets, once you are on the Internet you are everywhere. A customer in Japan can buy exactly what a customer in the UK buys from the same electronic store. The capability to purchase products at ease from all over the world would eventually result in the weakening of international boundaries and increased trade between countries. For example when the machinery for one of General Electric’s light-bulb factories broke down, GE would invite bids from four domestic suppliers. With the help of the Internet General Electric extended its bidding abroad, and awarded the contract to a Hungarian firm saving 20%. The Internet will also increase price transparency dramatically and bring about price harmonization. With the capability to find and list thousands of firms selling the same or similar products in a matter of seconds it would be nearly impossible for firms to sell their products at higher prices. Furthermore, electronic commerce also dramatically reduces the overhead costs for firms. Location is no longer an issue for firms so long as there is a telephone line available, the amount of staff required to maintain the online stores are considerably less, and the online stores keep their stock entirely in a warehouse, none of it is on expensive shelf space.
The inability of electronic online stores to display their products physically to consumers is also a disadvantage. Research has shown that ‘hard goods’ traditionally sold through consumer catalogues and retail stores often sell poorly online where they cannot be held and examined. This would leave the Internet best suited only to services such as finance, travel and cars. Another disadvantage of electronic commerce is the language barrier. Although most people who use the Internet speak English fluently there is still a sizable quantity of people who speak other languages. Furthermore, most people throughout the world don’t own computers. Electronic commerce can also be also carries a very strong reputation as being unsafe in many ways. When you shop online your personal details and credit card number are stored on computers. A hacker could gain access to these details and use them. Although several credit card companies claim this has not happened yet, the fear of it happening has put many people off shopping online. The real threat comes from fraudulent sites claiming to be selling legitimate products and services that only want your credit details.
The Internet will probably result in several major changes in the way business is conducted in the next decade. The flexibility the Internet offers would also affect its users dramatically. Online business might be conducted from home or at non-standard business hours. The capability of online stores to sell their products to consumers throughout the world will decrease trade barriers and result in increased trade. The increased price transparency offered by the Internets capability to check the prices of thousands of items simultaneously would allow consumers to have a much larger knowledge base before making a decision. This would also increase competition between various online firms dramatically causing large price drops.