E-Commerce in Basic Terms Business to Consumer Essay

  • Length: 8 pages
  • Sources: 5
  • Subject: Business
  • Type: Essay
  • Paper: #14180603

Excerpt from Essay :

E-Commerce

In basic terms, business to consumer (B2C) e-commerce can be said to be a transaction-based relationship that exists between a given business' website and the consumer. This transactional relationship is sparked when the end user logs onto a certain business' website with an aim of procuring a good or service. In this case, on selection of the product he or she is interested in, the consumer is prompted to pay for the good or service procured using a wide range of payment methods including but not in any way limited to PayPal, check or credit card. The transactional relationship in this case is concluded once the customer receives the good or service purchased using this platform. In this text, I analyze Amazon, a popular business to consumer (B2C) e-commerce entity. In so doing, I will describe the organization and highlight how it benefits from electronic commerce. Further, I will explore Amazon's website with an aim of recommending solutions on how the entity can be improved.

Amazon: A Description of the Organization

Amazon.com, Inc. is one of the largest electronic commerce companies around the globe. With Seattle, Washington serving as its headquarters, the organization which started off as a bookstore offering for sale books to its global clientele has today diversified to offer a wide range of products and services including but not in any way limited to computer software, electronic goods, mobile devices, DVDs, toys, furniture and even food. Basically, the organization serves its clientele using its retail Web sites which are tailored to offer convenience and speed to shoppers. Founded in 1994, the global organization operates in the catalog and mail order houses industry with its sector more specifically being the services sector. The catalog and mail order houses industry is characterized by non-store retailers. Organizations operating in this industry mainly deliver products purchased by clients through the mail. It can be noted that one of the most significant benefits that players in this industry reap is the elimination of sales workforce and rent expenses. In this industry, the main competitors of Amazon include EBAY, Wal-Mart and Barnes & Noble.

According to Ireland, Hitt and Hoskisson (2011), a mission statement helps any given business to highlight its intent. When it comes to the mission of Amazon, the same is given as:

"To build a place where people can come and discover anything they might want to buy online." (Ireland, Hitt and Hoskisson, 2011)

As highlighted in its Investor Relations page, the firm states its vision as:

"We seek to be Earth's most customer-centric company for three primary customer sets: consumer customers, seller customers and developer customers." (Amazon, 2011)

Advantages of Electronic Commerce: An Emphasis on Amazon

It can be noted that the advent of the internet has opened up many opportunities for businesses. E-commerce is an example of such an opportunity. According to Fazlollahi (2002), e-commerce can be taken to be "the use of technology mediated exchanges by business for the purpose of selling goods and services over the internet." In the recent past, the growth of e-commerce has been rather fast with more businesses becoming motivated by a wide range of reasons to embrace the platform. This also happens to be the case for Amazon. By embracing e-commerce, and most specifically business to consumer (B2C) e-commerce, Amazon has been able to access a quite a number of benefits which I highlight below.

To begin with, the online retailer has by adopting e-commerce effectively conquered geographic limitations. Generally, for those retailers with physical stores, their sales are often limited to the geographical areas they can service. However, those retailers who have e-commerce websites like Amazon have the globe as their playground. It is hence reasonable to say that Amazon can make sales anywhere around the globe without the limitations of geography. For instance, a customer in a far away African country can order for an electronic product and have it delivered at his or her doorstep in a couple of business days. Hence Amazon does not have to open a store in each and every country so as to be able to service the needs of each and every customer. This has a positive impact on the bottom line of the company.

Next, e-commerce multiplies the number of clients a given business has access to. Indeed, according to Reynolds (2004), many e-commerce websites receive orders (international) on their very first day of operation. It can be noted that whereas relationships and branding serve as the key drivers of physical retail, online retail has search engines as yet another driver in addition to the two drivers stated earlier on. For instance, a client seeking more information on a given product or a customer seeking ways of solving a given issue could land on a link that which guides him or her to an online retailer like Amazon. Hence effectively, Amazon benefits by having an additional channel which comes in handy in the enhancement of sales. Thus in comparison to a traditional physical retail store, Amazon effectively has access to a larger customer base.

Third, we have the advantage of reduced costs. According to May (2000), any business that embraces e-commerce reaps in terms of cost efficiencies. Indeed, this has been touted as one of the main benefits that accrue to those businesses that embrace e-commerce. Thus for a business that wants to adopt a competitive strategy by offering its products for sale at a price that is below that of the competition, the relevance of e-commerce cannot be overstated. Indeed, Amazon is today able to sell its products at a discount thanks to e-commerce. In this regard, the online retailer effectively reduces its costs on two main fronts. First, we have cost reductions on the marketing and advertising front and then cost reductions in terms of personnel. When it comes to advertising and marketing, it should be noted that some of the most cost effective platforms are in organic search engine traffic maximization, the utilization of social media and lastly, the use of pay-per-click as yet another option. In regard to personnel, Amazon is able to maintain a relatively lean workforce in comparison to other physical retailers. This has been made possible thanks to the fewer individuals required to operate the e-commerce setup as a result of the automation of a wide range of operational processes including but not in any way limited to the management of inventory, payments handling, billing etc. Further, as Meier and Stormer (2009) note, storage costs are relatively lower for online retailers.

Fourth, through the online retail platform, Amazon is able to avail to customers as much information as possible regarding a given product. Generally, there is an inherent limitation as to how much information a given physical retailer can display in a physical store. Further, in the case of a physical retailer, it becomes rather difficult to effectively equip shop attendants with sufficient information so as to answer all the queries clients may hurl at them. Amazon does not encounter such limitations. In fact, a look at the website of Amazon shows how easy it is for a customer to get a lot of information about a given products by just making a few clicks. It should be noted that in the case of Amazon, such information is availed by the vendors of the 'listed' products. Hence effectively, Amazon does not incur any cost for the same.

Next, Amazon is able to offer for sale niche products which could sell in small volumes in a conventional physical store. According to Witcher and Chau (2010), the market for niche products is now more attractive for online retailers (like Amazon) as the use of websites allows them to have a global reach. In basic terms, a niche product can be defined as that product which appeals to a specific market. A good example of a niche product which can be found on sale in Amazon's Website is a wedding dress. For a physical store, the turnover of wedding dresses may not be significantly high due to the relatively fewer weddings taking place in a given geographic area. Hence in such a scenario, such a niche product is best sold by shops specializing in that particular market. However, Amazon has a global exposure and hence even for such a niche product as a wedding dress, the turnover may still be significantly high.

Lastly, a business utilizing e-commerce can be able to establish for itself a sustainable competitive advantage. For instance, with cost reductions that are brought about by the utilization of such a platform, a business can significantly lower the costs of its goods and services in such a way that it is able to offer the same for sale to clients at a discount. This effectively acts as an entry barrier and further protects the business from the existing competition. Hence in the case of Amazon, the online retailer has an option or resorting to price wars should the same be deemed necessary to protect…

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