"What are the negatives or 'cons' of e-commerce?" - Meiron Cornish
E-commerce has a lot going for it. From the customer's standpoint convenience,
broad selection, fewer sales taxes, and the ability to do easy price-comparisons
are prominent. From the merchant's point-of-view, e-commerce opens up a vast
national and, in some instances, international marketplace. The ability to drop-ship
items from the manufacturer or distributor minimizes the capital investment
that physical shopowners must put into inventory, and smaller e-tailers can
often operate out of a home office, saving the high cost of leased commercial
space.
But there are negatives for both the shopper and the merchant that must be
overcome if e-commerce is to succeed. From the shopper's standpoint,
fears about credit card fraud, spamming, and identity theft make some hesitant
to buy online. Shipping costs sometimes cause the final price to be as much
or more than they would have paid for the item locally (if it were available).
Browsing bookshelves, sizing up the product, and feeling and trying on apparel
aren't possible in online stores (though e-tailers are finding virtual approaches
to meet some of these shopper needs). Immediacy is lacking; customers may have
to wait days or weeks to receive tangible goods purchased online. And customer
service can be difficult since phone lines are often backed up for hours --
if you can find a phone number -- and concerns expressed via e-mail are too
often ignored or processed extremely slowly. Product returns may require several
time-consuming steps (but can't be much worse than the department store after
Christmas!)
Merchants, too, struggle with the downside of e-commerce. Credit card
fraud is present in an average of 1% to 3% of transactions, and merchants always
bear the loss of so-called "authorized" credit card purchases, in addition to
incurring chargeback penalties. Since you can't ask for an ID or signature,
it is more difficult to verify the purchaser's identity (though credit card
passwords and card verification codes [CVV2, CVC2, and CID] are helping). Merchants
find it difficult to provide effective customer service since communication
with drop-shippers about problem orders can be difficult or delayed. In addition
to merchant credit card fees and discount rates, merchants sometimes have to
pay a percentage of the sale to the e-commerce software or marketplace hosts
(such as eBay, Amazon, or Yahoo! Store). Effective advertising is often expensive
(though this is also true of local stores). Looming on the horizon is the administrative
horror of having to collect and remit sales taxes for dozens of state governments.
E-commerce brings significant challenges that merchants must overcome for their
customers and themselves if they would earn a meaningful profit from online
sales. Am I down on e-commerce? Not at all -- only realistic. Every business
marketplace has built-in problems to overcome. But e-commerce offers huge promise
for savvy small business people who dream of reaching the world. Count me in!
