Internet-based systems enable companies to simplify their information management process by removing complexity, which makes the organization more responsive and as a result, organization generates more profit through revenue and saving. The process of doing business over the Internet or any other electronic medium is known as e-commerce. Amazon has been able to embrace this opportunity by offering its customers a wide range of products, including music, toys, electronics, software, books, and clothes.
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Selling products online has its own advantages and disadvantages. To begin with, there are several advantages that can be attributed to e-commerce model used by Amazon. First, the company is able to reach its customers directly because the Internet spans the world. This is also known as disintermediation, in which intermediaries such as suppliers, distributors, and retailers are reduced hence easy management of supply chain. Second, through the implementation of e-commerce, the company minimizes its transaction costs. Chadramita (2009) asserts that the costs incurred in trading goods or services, customer care, processing, and inventory can be reduced. For example, advertising a company’s products through Amazon enables it to reach many customers, therefore enhancing product awareness.
Third, the Internet enables Amazon to reduce the use of cash; handling a lot of cash is considered insecure due to the susceptibility of theft and fraud. The company uses electronic money transfer which is implemented through the internet. Customers are only required to submit their payment details, such as credit card numbers to proceed with purchasing. Fourth, e-commerce systems have the capability of operating daily at any time. This is a major boost of Amazon’s marketing strategy. The company’s physical markets do not need to be open daily for the consumers and suppliers to engage in electronic business. Thus, the Internet enabled the company to increase its market share with about 128% in 2007 (Marcial, 2007).
However, the Internet has several disadvantages. One of the drawbacks of e-commerce is that many people are still not conversant with the use of Internet. Others don’t trust the Internet when it comes to performing business transactions. There are also issues related to submission of private information, which can be manipulated by internet-based organizations. It is always difficult to reach out to such people. Sometimes companies use customers’ email addresses to send advertisement messages without considering the impact it would have on customers.
Another disadvantage is that Amazon cannot expand its product line to market perishable items such as food products. This limits the company’s market opportunity since people prefer to buy food through traditional ways. Highly priced products such as jewelry are difficult to handle using an e-commerce framework. People fear paying for expensive or luxurious products using electronic method due to security concerns.
Despite the ease of access, using the Internet to process the delivery of products such as books is still a problem. A customer might wait for more than a week before a physical product is delivered. This is because a lot of e-mails and phone conversations must be made before delivering the products. Furthermore, returning a product to the company is sometimes difficult in case a customer is not satisfied (Chandramita, 2009). This cuts down customer loyalty, hence preference is sometimes given to traditional ways of shopping.
Amazon provides download services for e-books in order to compete with the traditional physical stores. Electronic book device and e-books downloads were introduced by the company in 2007 with the aim of increasing customer base and market share (Stone, 2007). However, not all publishers supply their books in electronic form. Others argue that electronic books can be copied and misused without the consent of the author or the editor. This has been a major drawback in selling e-books.
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But if books can be downloaded from Amazon’s website, the company is deemed to increase its revenue and customer base. As mentioned earlier, purchasing books online takes long as compared to walking in a local book store to buy or read a book. Electronic books are gaining popularity in today’s changing world; people are moving from paper-based operations to electronics operations. In addition, e-books are easy to process as compared to physical books which require a lot of raw materials, such as ink and paper, to produce. Therefore, Amazon can reduce the cost associated with producing and supplying the books to customers.
Looking at how Amazon performs its business, we can compare it to a pure e-commerce organization because many of its business operations are performed online. Traditional stores can be able to gain from implementing an e-commerce side to enhance their retail stores in many ways. This form of business model is known as click and mortar. The first benefit in setting up an e-commerce business model is that an organization can reach many customers and sell products beyond its geographical boundaries. This is because of the speed of the Internet. Electronic communications facilitate quick delivery of data between the company and customers. Since electronic messages are instantaneous, a customer may not wait for long in order to get the order details by post. An organization can also gain by selling non perishable products, such as clothes, music, and books online.
Perishable products and expensive products such as jewelry can still be marketed through an e-commerce website and offered to customers through offline methods. Having products catalogue in an e-commerce system helps customers to get information about products offered by the company even if some products can be acquired through offline methods.
The internet runs for 24*7*365, making commercial information available to the audience around the globe at their convenient time. Most conventional communication media such as newspapers and radios cover regional commercial news and therefore, the information is confined to specific areas. Through the internet, a company can be able to create its product and services awareness by creating an interactive e-commerce system.
A company can link its e-commerce system with social sites such as Twitter and Facebook with the aim of expanding its market through product awareness. Social sites serve as good locations for driving conversations with potential customers, analyze their preferences, and consequently design products that meet customers’ expectations. “Managers can use e-mail and other Internet communication capabilities to oversee larger number of employees, to manage many tasks and subtasks in projects, and to coordinate the work of multiple teams in different parts of the world” (Laudon & Laudon, 2006, p.15).
Chandramita, B. (2009). “Advantages and Disadvantages of Electronic Commerce.” Buzzle.com. Web.
Laudon, K. C., & Laudon, J. P. (2006). Management information Systems: Managing the Digital Firm. (9th Ed).Upper Saddle River, NJ: Pearson Prentice Hall.
Marcial, Gene (2007) “The Unplumbed Depths of Amazon.” Business Week. New York. p. 112.
Stone, B. (2007). “Amazon Says Profit Jumped In Quarter.” New York Times (Late Edition (East Coast)). New York, N.Y.: p. C.3