E-commerce can be a great way for a small businesses to increase their sales and widen their reach. It's also convenient for consumers, who can buy at their convenience, without having to leave their homes or spend the day fighting queues at the shopping mall to pick up the best deals. However, e-commerce also has negative effects on both consumers and retailers that must be kept in mind before launching an online shop.
It is easy to collect a lot of personal information from a consumer using an e-commerce website, sometimes too easy. Since all online transactions are recorded, it's relatively easy to create an online profile of the buyer, and use that to send targeted advertisements. However, many will agree that this is an intrusion on a consumer's right to privacy, and it's something that is heavily regulated on many countries. This means small businesses aiming to establish an online presence using e-commerce need to be aware of the legislation that applies, as mistakes can be costly both in terms of fines and customer trust.
Another negative effect of e-commerce is its effect on consumers' security. Online transactions are inherently more insecure than those conducted in person because there's no way to guarantee that the person making the payment is the actual owner of the credit card used. At the same time, when the customer inputs the payment information they risk a third party intercepting it if the website doesn't comply with the adequate security measures, giving rise to credit card fraud and identity theft. Merchants need to be aware of the risks electronic transactions carry, and work towards securing the systems to the highest standards.
Merchants used to selling at their shop may often find selling online an extremely competitive marketplace. Their products are displayed alongside competitive offers, often from different countries or bigger retailers with access to better wholesale prices. This can affect the retailer negatively, as they cannot sell as much as they expected to actually make a profit, or the consumer's when online stores cut corners in order to become more competitive or products are purchased from illegitimate retailers because they had the best price.
Returns And Complaints
Selling online means usually a higher return rate on products than when the purchase was conducted in person. This is due partly to the fact that customers haven't seen the goods in person prior to purchase, but also to the fact that many online shoppers buy things on impulse, and by the time they receive them at their home they have changed their mind and make use of favourable return policies. While a big retailer would have no problem accommodating this, it can be highly disruptive for a small business with limited stock management.