Impact of online retailing on small business financial management

¶ … online selling small businesses. • Identify benefits costs online retailing i) small businesses online retailing ii) small business online retailing. • Explain online retailing affect financial management existing small business chooses move online retailing.

Online Selling

The following pages focus on identifying and discussing the impact that online selling has on small businesses. The paper intends to address issues like benefits and costs associated with online retailing. In order to provide information that can be used in understanding the factors that influence this process, the paper presents the situation of small businesses that use online retailing, but also of those that do not use this type of retailing. This comparison is intended to help readers better understand the data collected by the research process.

The research method used in this case is represented by secondary data collection. The reason behind selecting this technique relies on the advantages of secondary research. Secondary sources of information are easier to access by researchers, and have very little costs, sometimes they are free of charge, mostly in the case of Internet sources. Such information sources are more available than primary sources of information. However, the disadvantage of these information sources is that they are not as complex as other sources of information.

The importance of the researched topic relies on the necessity of understanding the process of online retailing and its effects. The numerous technological developments introduced by specialists in certain fields have modified the business strategy of many companies (Grosso et al., 2005). The number of online businesses has significantly increased with market conditions allowing this situation. The numerous advantages of online businesses have determined certain companies to address this type of activity.

Small businesses that use online retailing

The development of e-commerce has determined significant effects for both retailers and their customers. Although in certain business fields it is important to encourage direct contact with customers in traditional stores, most sellers address online selling also. This situation can be attributed to the intensified online shopping that more and more customers seem to prefer. Their interest towards online shopping is determined by the reduced time required by this activity and by the advantages it provides.

The most important advantage provided by online retailing is represented by the increased sales reported by companies. This is because online retailing allows these companies to have their store open continuously. It is important that companies also develop online shopping systems in addition to traditional stores, even if customers are not that interested in shopping online. This is because the website allows them to see what the price range is, what products and services the company offers, and other characteristics of these products. In other words, online retailing also provides important information to customers. In certain cases, customers prefer not to address companies that do not allow for online shopping because they cannot receive information about these products from the Internet when searching for different types of products (Forbes, 2011).

In addition to this, online retailing has the great advantage of allowing companies to display their products and services across the world with very little costs. Therefore, companies can easily expand their activity on international level with the help of the Internet. This is also useful in the relationship with suppliers. Having a well developed website allows companies to address a larger number of suppliers and to improve their relationships with these business partners.

However, there are several disadvantages that must be taken into consideration. The most important disadvantage is represented by security threats. Most individuals that prefer traditional shopping in comparison with online shopping are discouraged by the security issues associated with this activity. But technological developments and the fact that companies have increased their investments in security has determined an increased number of customers to use online shopping (Bannister, 2002).

In addition to this, it is more difficult for online retailers to develop relationships with their customers based on trust. This is also because direct contact and interaction between buyers and sellers is reduced, which leads to reduced trust from customers in these companies. These online retailers find it difficult to improve customer loyalty.

The fact that online retailers expand their activity on international level also determines certain issues that can affect their business. This strategy significantly influences these companies' supply chain management. This is because by addressing international markets, these companies have difficulties in developing an efficient delivery system.

Conclusions

The global business environment is increasing its competitiveness level, determining companies to develop strategies based on innovation in order to create competitive advantage. In their efforts of increasing their efficiency and reducing their costs, numerous companies address online selling. It is important that companies understand the advantages and disadvantages of this strategy in order to improve their success.

Online retailing allows companies to significantly reduce the costs associated with their business. This also helps them expand their business on international level. However, companies that use this method must increase their investments in technological developments that can be used in order to address security issues. The increased competition in most business field determines companies to invest in developing websites that attract customers. In addition to allowing for online purchases, these websites also provide important information that customers require. This strategy helps companies increase their number of customers and improve their efficiency and productivity.

Reference list:

1. Grosso, C. et al. (2005). Retailing: What's Working Online. McKinsey Quarterly. Retrieved October 14, 2011 from http://www.mckinseyquarterly.com/Retailing_Whats_working_online_1631.

2. Online Retailing's Next Frontier (2011). Forbes. Retrieved October 15, 2011 from http://www.forbes.com/2010/06/16/future-of-online-retailing-facebook-entrepreneurs-technology-wharton.html.

3. Bannister, P. (2002). Ten Best Practices of Online Retailing. E-Commerce Guide. Retrieved October 15, 2011 from http://www.ecommerce-guide.com/news/trends/article.php/979861.