What is the appeal of e-commerce?

• Also in 2004 – Shoppers will spend $144 billion online this year.

Given that these milestones only deal with the first ten years of e-commerce they highlight two notable facts. Firstly, e-commerce is a rapidly changing and advancing means of commerce and secondly, the economic impact of e-commerce is significant and cannot be ignored.

The rate of adoption of the internet as a vehicle for commerce has been significant, with Gnuschke (2000) reporting that Shop.org (the trade association for e-tailers) estimated that there were 30,000+ active e-tail web sites. Another indication of the size and progress made with regard to e-commerce was that Wei (2005) reported that there were over $5,000 e-commerce sales per Internet user worldwide at year-end 2003 – up from about $1,600 e-commerce sales per Internet user at year-year-end 1999. Confirmation of this growth is given by Doherty and Ellis-Chadwick (2010) who point out that online shopping is now estimated to be the fastest area of internet usage and its growth rates, over the past decade, have continued to rise and have far exceeded those achieved through traditional channels.

3.2.3 What is the appeal of e-commerce?

• Customers

E-commerce appeals to customers because, as pointed out by Maamar (2003), customers now have more opportunities to be informed about current trends in the market before making any decision. Another key benefit to customers is that they have access to a large number of potential suppliers, as highlighted before and are able to compare products and prices. This increased access to information is echoed by Doherty and Ellis-Chadwick (2010) who state that although no obvious trends have been observed towards “perfect competition”, there is growing evidence that power, in the electronic market-place has shifted towards the consumer.

Scott Morton (2006) highlights a number of ways in which consumers benefit from the use of the internet:

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• Websites that make traditional sales generate consumer surplus through availability, variety and convenience to the consumer;

• Price comparison sites allow consumers to quickly and easily gather price quotes from a variety of sellers, which results in the consumer paying a lower price;

• Information sites provide information that the consumer can use to pick an appropriate activity or execute a task more efficiently; often these sites save consumers time in mundane tasks such as buying tickets, checking the weather, or getting driving directions;

• Likewise, matching sites (such as eBay) improve transactions by hugely increasing the quality of the match compared to the local garage sale.

The shopping process in real life is definitely a social one where people can get advice and share their experiences with others. In an attempt to deal with some of the obstacles to e-commerce, several experimental technologies (for example, software agents, Web services) that aim at supporting users are now available. The purpose of these technologies is to attract more consumers and encourage them to participate in online business (Maamar, 2003). With the advent of Social Networking Sites the “social” element of the e-commerce process has in a large way been addressed, with the likes of Facebook, Twitter and Second Life.

Ching and Ellis (2006) bring to the fore the darker side of e-commerce, which could also be seen as appealing to potential customers, when they point out that in the emerging world of e-commerce, institutional safeguards are all but absent and the threat of opportunism runs high. With fresh information and quotes but a few emails away, potential traders can surf the Web for the best deals and abandon commitments with the ease anonymity and distance provide.

While it is clear the Internet increases price competition so that consumers pay less for products, it also improves daily life by increasing the variety, quality and availability of products and information. These gains are particularly useful to people with high transactions costs (busy, rural) and uninformed people (Scott Morton, 2006).

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• Suppliers

The Internet has provided businesses of all sizes with opportunities to expand their market base, improve operational efficiency, create new links with trading partners, and provide better customer service, amongst other benefits (Hassanein & Head, 2006).

Suppliers enter into e-commerce with the objective of increasing revenue by reaching markets that they previously would not easily have had access to. Findings by Doherty and Ellis-Chadwick (2010) indicate that a retailer’s overall financial and strategic performance could be positively affected by the addition of an internet channel. In a study conducted by De Klerk and Kroon (2005) the most important reasons for e-commerce and international trade included profit (86 percent), access to strategic markets (64 percent) and international association by means of relationships (61 percent).

The networking capacities that underlie e-commerce have the potential to enable these businesses to overcome their informational barriers by increasing the speed, richness and volume of information flows between a given enterprise and other market actors. The outcome of this should normally lead to better inter-firm information flows and increased market reach (Molla & Heeks, 2007).

By enabling direct marketing of goods to clients (including those in global markets), direct purchasing from suppliers and better sharing of information with partners, e-commerce could not only reduce costs but also significantly increase firm control over its place in the supply chain (Molla & Heeks, 2007).

Whilst the factors listed above may be attractive is seems that the decision to enter the e-commerce market is often as a result of pressures from the supplier’s environment, rather than from the benefits that are expected from participating in commerce. This fact is highlighted by Molla and Licker (2005) who say that e-commerce responds to the principles of network externalities in that the drivers of adoption are more often found in the social system of the organisation than in the attributes of the innovation. For instance, pressure from a business’s market forces

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(suppliers, clients and other partners) has been identified as one of the key drivers for the adoption and subsequent level of utilisation of e-commerce.