Advantages and Disadvantages of Ecommerce

Look Beyond the Hype: Analyze the Advantages and Disadvantages of Ecommerce

I have already written articles about the advantages of ecommerce and its disadvantages. But those were focused on the primary pros and cons of ecommerce. There is a need for a more exhaustive list.

Given below is a large list of advantages and disadvantages of ecommerce. This list will help you look beyond the hype and develop your own perspective of the true value of ecommerce: to businesses and to consumers. Interestingly there are many advantages for consumers that might actually be a disadvantage for ecommerce businesses.

Pro: No Standing in Queues or Being Placed on Hold Forever

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For customers, this is one of the most popular conveniences of ecommerce.

Con: Lack of Personal Touch

I miss the personal touch and relationship that develops with a retail store. In comparison, ecommerce is far more sterile.

Pro and Con: Easier to Compare Prices

There are several shopping search engines and comparison shopping websites that help consumers locate the best prices. While buyers love this, sellers find it too restrictive as many of them get filtered out of the consumer's consideration set.

Pro: Access to Stores Located Remotely

Especially for people who are not situated in major urban centers, this can be a big advantage. Likewise,​ ecommerce opens new markets for ecommerce businesses.

Con: Inability to Experience the Product Before Purchase

There are many products that consumers want to touch, feel, hear, taste and smell before they buy. Ecommerce takes away that luxury.

Pro: No Need for a Physical Store

Since there is no need for a physical store, ecommerce businesses save on one of the biggest cost overheads that retailers have to bear.

Con: Need for an Internet Access Device

Ecommerce can only be transacted with the help of an Internet access device such as a computer or a smartphone.

Con: Need for an Internet Connection

Not just does one need an access device, one also needs Internet connectivity to participate in ecommerce.

Pro and Con: Common Availability of Coupons and Deals

Though there is nothing about ecommerce that makes it intrinsically oriented to discounts, the way online business has evolved has led to lowered prices online. This is an advantage for the buyer, but a disadvantage for the seller.

Pro: Lots of Choices

Since there are no shelf size or store size limitations, ecommerce businesses are able to list many different items.

Pro: Stores Are Open All the Time

Eliminating the limitation of store-timings is a big convenience for consumers.

Con: Credit Card Fraud

Consumers and businesses alike suffer from credit card fraud. Some doomsayers go so far as to predict that fraud will lead to the demise of online business.

Con: Security Issues

Consumers run the risk of identity fraud and other hazards as their personal details are captured by ecommerce businesses. Businesses run the risk of phishing attacks and other forms of security fraud.

Pro: Ability to Buy and Sell to Other Consumers

Auction sites and listing sites allow individuals to buy and sell from each other. This opens a whole new paradigm of ecommerce. The most famous enabler of consumer to consumer (C2C) ecommerce is

Pro: Instantaneous Purchase of Digital Goods

No longer does one need to go and buy a CD of one's favorite music. Within a few minutes, one can download digital products, such as music, and start using them immediately.

Pro: Ability to Have Vendors Bid for Your Business

Online business has opened new vistas for consumers. It is now possible to list your requirements online, and have suppliers bid for your business.

Con: Delay in Receiving Goods

If shopping is about instant gratification, then consumers are left empty-handed for some time after making a purchase on an ecommerce website.

Con: Inability to Identify Scams

Consumers are often taken in by fly-by-night ecommerce websites that look good but are up to no good. Scam artists often accept orders and then disappear.

Pro: Not About "Location Location Location"

Conventional wisdom lays a lot of emphasis on the location of the physical store. But ecommerce has liberated businesses from the shackles of location.

Pro: Ability to Scale Up Rapidly

Ecommerce businesses are able to scale up easier than physical retailers, as they are not bound by physical limitations. Of course, logistics get tougher as one grows. However, with the choice of the right third party logistics provider, one can scale up one's logistics too.

Pro: Unlimited Shelf Space

Being liberated from a physical store also entails being liberated from the limitations of shelf space. This allows ecommerce businesses to "stock" a wide range of products.

Con: Extraordinarily High Reliance on the Website

For an ecommerce business, its website is everything. Even a few minute of downtime can lead to a substantial loss of money, not to mention customer dissatisfaction.

Con: Multiplicity of Regulations and Taxation

Regulators are still not clear about the tax implications of ecommerce transactions. This is especially true when the seller and buyer are located in different territories. This can lead to multiplicity of taxation as well as higher expense on accounting and compliance.

Con: Chargebacks

Credit card issuers are quite liberal in permitting chargebacks upon customer request. This puts the ecommerce businesses in a bad position if the goods have already been delivered.

Pro: Ease of Communication

Since the ecommerce merchant captures contact information in the form of email, sending out automated and customized emails is quite easy.

Pro: Superior Customization

Using cookies and other methods of monitoring a consumer's behavior, an ecommerce website can customize many aspects of what the consumer sees.

Pro: No Need to Handle Currency Notes

In physical stores, many customers pay with currency notes. For a large multi-store retailer, this creates the need for careful cash management. For the tax authority, it creates a problem in being able to accurately evaluate a retailer's earnings. Electronic payments leave a stronger trail, and this helps the retailer as well as the tax authority.

Pro: Efficient Procurement

Because the entire supply chain can be interlinked with business to business ecommerce systems, procurement becomes faster, transparent, and cheaper.

Pro and Con: Delivery of Each Individual Item

The consumer experiences the convenience of having goods home-delivered. But the logistics involved with delivering each individual item adds substantial strain to the ecommerce business operation.

Con: Expense and Expertise Needed for Ecommerce Infrastructure

Substantial information infrastructure is required to run an effective ecommerce website. And when you factor in denial-of-service attacks, the scale of infrastructure needs to be still greater.

Pro: Superior Inventory Management

If ecommerce businesses can tune into the order processing systems of their suppliers, they can maintain lower inventories and still not face stock-out situations.

Pro: Reduced Employee Costs

Since ecommerce processes are automated to a large extent, fewer employees are required for lower-end jobs. Human resources can be used more effectively for higher-level functions.

Pro: Gain Search Engine Traffic

Close to 100% of Internet users also use search engines. With the right ecommerce SEO, search engines can act as a great source of qualified free traffic.

Pro: Ability to Sell Low Volume Goods Too

Conventional retail focuses on stocking fast-moving goods. Pricey shelf-space dictates that items that do not move fast should be candidates for removal from the product portfolio. The economics of ecommerce permits selling slow-moving, and even obsolete, products to be included in the catalog.

Pro: Ability to Track Logistics

Since effective logistics is the key to a successful ecommerce business, the ability to trigger and monitor logistics online is a valuable tool for the ecommerce business.

Con: Need for Expanded Reverse Logistics

In the case of physical retail, customers are usually willing to travel to the retail outlet to return/replace goods if required. But receiving goods back is a bigger nightmare for an ecommerce business. This has led to the growth of the reverse logistics function.