In what ways does electronic commerce (E-commerce) influence business transactions?

Give
appropriate examples. (100)

Back in the past business was conducted through physical means but since the introduction of the
internet buying and selling or ecommerce can now occur worldwide without the need to go to
physical stores. Electronic commerce or e-commerce can be understood as the online buying and
selling of goods and services. This new way of doing business has impacted business transactions.
Business transactions can be understood as a financial transaction between two or more parties that
involves the exchange of goods, money, or services. The emerging of ecommerce has allowed
businesses to grow to new heights. It has reduced the cost of doing business hence increased profits.
In this essay l will show how electronic commerce influences business transactions using appropriate
examples.

The first impact of electronic commerce on business transaction is that it reduces business costs. E-
commerce eliminates the need for physical stores and replaces them with online shopping hence no
need for building or renting structures. “One of the ecommerce benefits is that it has a lower start-
up cost. Physical retail stores have to pay up to thousands of dollars to rent one of their store
locations”20 Advantages and Disadvantages of Ecommerce | Oberlo. The payment processes
performed online are cheaper than the traditional ones. If a company purchases goods online it is
cheaper compared to traveling to meet the seller for payments. Electronic commerce reduces the
need of more employees which cuts the wage bill. “You’ll need fewer employees in an online
business than in a retail location” 20 Advantages and Disadvantages of Ecommerce | Oberlo. It cuts
upfront costs such as store signs, store design, buying inventory, sales equipment, and more.
Physical stores need lots of employees to run each location and some even require security staff
depending on the store. Ecommerce has fewer requirements for inventory storage. For online
stores which use drop shipping services, they don’t need to store inventory for selling. They
purchase inventory according to orders coming in, hence reducing costs. “the cost of buying and
keeping products on your shelves is eliminated by drop shipping as you only need to order the exact
items required to fulfil orders, freeing your cash flow to use in other areas of your business” How to
Start My Own E-Cig Business (bizfluent.com). Generally, e-commerce is one of the best ways to
business costs.

Another advantage of electronic commerce is that it increases number of customers. Selling online
means that your products or services are viewed by many people both local and international
people. Basically, the world gets to know what you are selling. “The business can attract customers
across the globe, potentially increasing market share” The Influence of e-commerce on business
activity - The sales process and customer service - OCR - GCSE Business Revision - OCR - BBC Bitesize.
For example, companies like Amazon and Alibaba grew big by selling online. “In 2022, retail e-
commerce sales were estimated to exceed 5.7 trillion U.S. dollars worldwide, and this figure is
expected to reach new heights in the coming years.” E-commerce worldwide - statistics & facts |
Statista. Increase in customers means increase in profits. The more people see you’re your products
being sold online the high the probability of an increase in demand. E-commerce does just come
with benefits it carries some drawdowns. It increases competition making it difficult for retailers to
be noticed. “More competitors from across the globe, makes it harder for the business to get
noticed” The Influence of e-commerce on business activity - The sales process and customer service -
OCR - GCSE Business Revision - OCR - BBC Bitesize. If competition increases it becomes more difficult
to make profits hence traditional stores are even better. Basically, e-commerce is only more
profitable than traditional commerce if the online store manages to beat competition.

E-commerce is always open meaning sales can be made anytime unlike traditional stores which
closes at the end of the day. Customers can purchase desired products whenever they want just buy
clicking the buy button on online stores. “Sales can be made at any time of the day or night,
increasing the likelihood of making a sale” The Influence of e-commerce on business activity - The
sales process and customer service - OCR - GCSE Business Revision - OCR - BBC Bitesize.

Another advantage of ecommerce is that online stores are always open for business.
With Facebook ads, you can attract someone at 11 p.m. or 4 a.m. in any part of the world. In
contrast, most physical location stores are operational between 9 a.m. to 9 p.m., giving you
a competitive edge. By being available at all hours, you can attract people who would
normally pick up a product in stores if the outlet were open. 20 Advantages and
Disadvantages of Ecommerce | Oberlo

Due to their infinite availability, it provides a competitive edge over traditional stores hence sales
increase. E-commerce websites like Alibaba are always open for business hence more customers
visit such websites. “The annual active consumers on its online shopping properties in China reached
903 million by the first quarter of 2022, increasing from 882 million in the previous quarter” Alibaba:
cumulative active online buyers 2022 | Statista. In May 2022, Amazon.com had approximately 2.4
billion combined desktop and mobile visits, up from 2.3 billion visits in April. In 2021, an
estimated 2.14 billion people worldwide purchased goods online (Statista, 2017). At the same
time, global ecommerce sales were forecast at $4.891 trillion. We can clearly see that e-commerce is
king over traditional retail shopping. Another thing with ecommerce is that it is more convenient
than retail stores. When retail stores closed during the Covid-19 pandemic e-commerce became the
only option for buying and selling. It is reported that lots of sales were done through the internet.

Another influence of ecommerce on business transactions is that it can process a lot of transactions
at a faster rate than traditional retail stores. In traditional stores, customers often queue due to
large numbers. “In retail stores, long queues can deter people from shopping. With ecommerce,
there’s no waiting time. A customer can place orders on their own schedule with no delays, allowing
you to accept a high number of orders.” 20 Advantages and Disadvantages of Ecommerce | Oberlo.
Most of ecommerce activities are done through automation hence no need for human involvement.
“Ecommerce operates in different types of market segments and can be conducted over computers,
tablets, smartphones, and other smart devices.” E-commerce Defined: Types, History, and Examples
(investopedia.com). Electronic commerce is more convenient than retail stores.

In conclusion, ecommerce or electronic commerce has greatly influenced business transactions in

many ways. It reduces the cost of doing business when compared to the traditional methods. Due to
the introduction of ecommerce there is no longer need for setting up physical stores as people can
purchase products online. Just by clicking buttons transactions are made, making it a more
convenient way of doing business. This allows smooth flow of business as opposed to queuing in a
store. Ecommerce has increased profits for retailers. Setting up online stores has allowed business to
be known worldwide hence reach a lot of potential buyers. It should also be noted that ecommerce
has also increased the magnitude of business competition.
Bibliography

20 Advantages and Disadvantages of Ecommerce | Oberlo

20 Advantages and Disadvantages of Ecommerce | Oberlo

How to Start My Own E-Cig Business (bizfluent.com) .

The Influence of e-commerce on business activity - The sales process and customer service - OCR -
GCSE Business Revision - OCR - BBC Bitesize

E-commerce worldwide - statistics & facts | Statista.

The Influence of e-commerce on business activity - The sales process and customer service - OCR -
GCSE Business Revision - OCR - BBC Bitesize