Advantages and disadvantages of doing business online

By: | Tags:

e-commerce

The Internet has brought about revolutionary changes in everything we do. Most of the things that we need in life are or can be done online. One of the areas where we see the Internet is playing a magnificent role is business. There was never a better or easier time in history than today as long as running a business is concerned. However, an entrepreneur running his/her business online may face some challenges as well. This article will highlight some of the advantages and the disadvantages of running a business online.

Advantages of doing business online

There are a number of advantages of running a business online from the perspectives of both entrepreneurs and customers.

Convenience

Online shops are open 24 hours a day and 7 days a week. This makes shopping immensely convenient for customers. Online businesses do not have any opening or closing times. Therefore, customers can do their shopping anytime and can often choose a convenient time for product delivery as well.

Cost reduction

An online business requires a smaller space than an offline business. Perhaps no space is required at all if the business is run entirely online. Many service companies run their operations online only. Likewise, as there is no face to face communication involved, online businesses do not require a high number of employees. These help a company reduce its operating costs significantly.

Greater reach

Online businesses can reach out to far greater people than offline businesses. Anyone living in any part of the world can be a potential customer. However, it should be noted not all online businesses can or will deliver their products worldwide due to logistical issues.

Easy data collection

Understanding consumer buying behaviour is extremely important for any business. Online businesses are in a better position to collect data concerning consumer behaviour as all the transactions and communications are computerised. Consequently, businesses can offer different promotional offers in order to influence consumer behaviour.

Affordable

Products sold online are usually cheaper than the ones sold online. This is a good incentive for customers to buy stuff online.  Perhaps, it is one of the main reasons why online shopping is in gradual increase worldwide. This increase is particularly evident in the developed economies.

Disadvantages of doing business online

There are a number of disadvantages of running a business online from the perspectives of both entrepreneurs and customers.

Security and privacy issues

The world of Internet has suffered a number of data breaches over the years. This has made may customers very concerned about the security of their personal information.

Fierce competition

Competition is fierce online. Big businesses spend millions of dollars on advertising and promotion and can actually sell their products cheap due to economies of scale. This puts an enormous pressure on small businesses trying to get their grips online.

Not everyone’s cup of tea!

The Internet is not everyone’s cup of tea. Many people prefer offline to online. The Internet is heavily used by customers in developed countries. It may perhaps take years for both developing and poor countries to develop their infrastructure and culture for online business.

We hope this article on the ‘Advantages and disadvantages of doing business online’ has been useful. You may also like reading ‘How to make money online’ and ‘How to start a home-based business’. If you liked this article, feel free share it by clicking on the icons below.

The article publication date: 01 October 2016

Further reading/references

Waite, R. (2015) Online Business Startup: The entrepreneur’s guide to launching a fast, lean and profitable online venture, Rethink Press Limited

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.