Social Implications of E-Commerce

BTEC National Diploma

e-Commerce

Social Implications of e-Commerce

e-Commerce was not always available, in fact it is a very recent development. As with all major changes e-commerce has implications for businesses and consumers. Some of these are positive implications, some are less favourable.

Changing the way a customer operates

E-Commerce allows a business to be more focused on their customer and this can create better customer relationships and for the business, more profits. An online business can easily give its customers more service, and more personalised service, for example Amazon.Com provides recommendations based on a customer’s previous shopping patterns. This can make shopping more enjoyable for the customer.

Are there any downsides to recommendations? ______

______

When shopping online the customer does not get to “handle” the goods, therefore to save having to deal with many returns the company must provide very detailed information on each product. Some companies are excellent at doing this.

Task One

List Five Online Companies who you feel provide good product descriptions.

1.  ______

2.  ______

3.  ______

4.  ______

5.  ______

List Five Online Companies who you feel advertise their products badly and why.

1.  ______

2.  ______

3.  ______

4.  ______

5.  ______

Finally e-commerce allows people to shop in a very different way. The online shop is available 24 hours a day, 7 days a week, 365 days a year. Customers can quickly switch from one store to another and can search for the cheapest product at the click of a button. The best online stores will use marketing techniques to encourage customers to shop at their store and not look elsewhere.

Task Two

Find the following items in three online stores. List the name of the store and price and indicate which store you would use and why.

Item / Friends DVD Box Set 1-10 / Calvin Klein Eternity Perfume / Nintendo DS Lite / Leeds United Football Shirt
Store One
Price One
Store Two
Price Two
Store Three
Price Three
Buy From
Why?

Impact on business and society as a whole

e-Commerce can open up a global marketplace, meaning that you can now buy goods from anywhere in the world. This means even a small local shop can have a massive global customer base. It has also allowed new digital markets to be created selling items such as MP3s, MPEG movies, software and information.

Task Three

What effects has e-Commerce had on the music industry? Is this good or bad in your opinion? ______

______

For a business they are no longer limited to local suppliers. Businesses can buy their products, or parts, from global suppliers and they can source these at the click of a button. This form a global trading has many impacts:-

·  There is more accessible information about what is available – you can compare dozens of prices in seconds e.g. moneySupermarket.Com

·  This can lead to large organisations, who can offer better services and discounts, swallowing up small stores e.g. there once was a Music and Book Shop in Downpatrick – it is no longer in business

·  In the B2B sector firms can source and control their ordering across the globe

·  Using EDI – electronic data interchange – orders can be sent automatically and instantly over an extranet – a private network on the Internet that exists between organisations

·  E-Commerce means that even tiny organisations can be global companies

·  This leads to more competition in the marketplace and usually to lower prices

The UK government has also taken advantage of e-commerce:-

·  People can book their theory and practical driving tests online

·  The Post Office sells postage services online

·  This allows busy people to access services in a quicker and easier manner

There are also negative effects of e-commerce:-

·  Many small local companies are closing

·  Many jobs in trade and government are being lost as the roles are begin replaced with automated processes

Economic and Social Impact due to the Speed of Change

e-Commerce has been used for only a decade and the speed and change in this time has been profound. By 1999 it was a “boom” sector and Internet search engines were more highly valued than large businesses. On the 14 April 2000 the boom came to an end when US stock markets crashed and suffered the largest losses in history – Microsoft alone lost $1.8 billion in one day. The same thing happened in the UK and many e-Commerce organisations disappeared overnight. This made people less confident in the idea of e-Commerce but since then it has grown again. Retail analysts IMRG state that between April 200 and December 2006 e-Commerce in the UK has grown by 3500% and worldwide sales are over £250 billion.

The driving force behind the success of e-Commerce is information. Information is readily available about:-

·  Customers

·  Suppliers

·  Products

·  Services

Search engines and price comparison sites bring information together in one location and this can be accessed in seconds. Prices of items that are readily available and easy to distribute have been lowered as a result. Customers do not always make purchasing decisions based on cost however and e-commerce can still suffer from a lack of trust. Many people, especially older people, have some very justifiable concerns about using e-commerce. These include the facts that:-

·  Anyone can create a site on the Web – they need not be a legitimate business and may sell stolen or imperfect goods

·  These individuals or businesses can easily remain anonymous

·  Without an established brand consumers find it difficult to trust on-line businesses, especially when they have to enter personal information and credit card numbers

Task Four

List FIVE issues that would cause you concern when ordering from a little known web site:-

1.  ______

2.  ______

3.  ______

4.  ______

5.  ______

Some businesses can now operate in a completely different way. These include businesses that provide free web searches, social networking and direction finding. Google is an example of a new type of business and it not only competes with other search engines, it also competes with the media industry, radio and television. In the UK, Google is only second to ITV in advertising revenue.

How is Google able to provide free services and still be a multi-billion pound organisation? ______

______

e-Commerce offers a fast response to economic and social changes. Businesses that trade via e-commerce can react to changes more quickly than a traditional business. For example imagine two businesses who decide to lower their prices on a particular product.

For the traditional business this is time-consuming. They need to put new price labels on every item in every store. It is also expensive in terms of advertising. They must print new posters or perhaps change newspaper adverts or mailing leaflets.

For the e-commerce business it is much less complicated. The changes to the prices happen automatically. The business can simply change the price in a database and the product is instantly available to customers at the reduced rate. It is also very cheap. The company just needs to send out an e-mail to all its registered customers.

Language Issues

e-Commerce allows businesses to trade on a global scale, even if the businesses is a local craft shop based in Downpatrick. Again this raises issues for the business and the consumer:-

·  For a business to achieve a global impact requires local language Web sites - customers prefer to buy from sites in their native language

·  60% of web content today is in English; but more than 50% of the current users do not read English

·  If a business decides to use different languages for different areas they may still need multiple translations for different dialects for example, Spanish - Mexico and Spain

·  Translating entire Web sites is expensive – about £120 per hour for human translators. Automated software translation (machine translation) is cheaper but it is also less accurate

Cultural Issues

Cultural issues are those that relate to the social characteristics and behaviours of a particular society or region. Many cultural issues affect successful e-commerce:-

·  The choice of icons on Web pages becomes problematic on international Web sites:

o  In the US a shopping cart is useful, in the UK a shopping basket is more appropriate, Australians call shopping carts, shopping trolleys

o  In many places other than Brazil the thumbs up gesture means okay, in Brazil it is an obscene gesture

Brick and Click

Many successful e-businesses are existing business who have created a strong web presence to compliment their existing organisation. Tesco is a prime example of this idea of “brick and click”. Their Internet side is a billion pound industry with sales of £1226 million in 2006 and profits of over £83 million. Tesco has over 850,000 regular customers who place over 250,000 orders per week.

Brick and Click organisations are very successful because:-

·  They already have customer trust. The customers will have used their “brick” store and know there is a “real” business that they can communicate with

·  It is less risky for an established business to set up a web presence than for a new business to start from scratch on the web. Established businesses will already have:-

o  a track record of success before they branch out

o  existing suppliers from whom they can source products

o  existing customers

o  existing processes and assets to build on

·  Adding an Internet presence gives an organisation a chance to benefit from new economies of scale – this means that can increase their productivity without increasing their overheads (costs)

Providing an online presence does not always guarantee success as opening a web store can take customers away from existing “brick” stores.

Task Five

Argos is a well established business who have built an online presence while maintaining their traditional stores. In groups, log on to the Argos website and consider the following questions:-

1.  Why do you think Argos decided to move into e-Commerce?______

______

2.  How would the move to e-Commerce fit in with the organisation’s aims?______

______

3.  Has the e-Commerce site achieved its aims? ______

______

4.  What effects do you think the e-site has had on existing customers?______

______

5.  What do you think the benefits of the e-site have been for Argos?______

______

6.  What do you think the main problems have been?______

______

7.  What could they do to improve their e-site in the future?______

______

6

Angela Gilmore