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The Social and Economic Importance of E-Commerce


Electronic commerce, the use of the internet for purposes of buying and selling services and goods (Bidgoli 18), has been gaining importance, in recent years. Many organizations have now embraced e-commerce to enhance the rate at which their products and services access the market. This is in addition to the drastic reduction in their operating cost, compared with the use of other conventional modes of selling. E-commerce activities have had an impact on various sectors of the economy, notably, finance, retail trade, communications, and business services (Decker 85), amongst others. From a social perspective, e-commerce has held the buyers and sellers to maintain social relationships, and his has been beneficial to the two parties involved. The intention of this report therefore is to help shed light on how electronic commerce has influenced us, both economically and socially.

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Economic importance of e-commerce

Although sales attributed to electronic commerce are modest in comparison with the total economic activities, nonetheless electronic commerce is gaining prominence. For example, according to the Office for National Statistics (2009), there was an increase of 17.1 per cent of internet sales in the United Kingdom, in January 2009, relative to the same period in 2008. This is an indication that the use of electronic commerce can greatly boost the economy of a country. According to statistics released by the U.S Department of Commerce (2), internet sales only formed 1 % of the entire retail sales realized in the United States in 2002. Although internet sales had been on the decline in the United States for a period of three eyras, between 2006 and 2008, nonetheless there was a 1.8 % rise in 2009, despite the impact of the global financial crisis (Office for National Statistics 3). The effect that e-commerce has on the market and by extension, the economy, is two-fold. First, e-commerce is crucial in increasing market transparency (Zhuang 12). Accordingly, e-commerce helps open up markets for goods and services. For this reason, manufacturers enjoy a bigger market for the products they make, and this may in fact help them to increase on their production capacity. In the process, the manufacturing and distribution industries of products benefits from the creation of more jobs.

E-commerce enables consumers to search for goods and services that are within their desired price region. Moreover, consumers have the choice of not only buying goods and services at a low price, but also from foreign sellers as well (Lubbe and Van Heerden 184). In addition, sellers to have a chance to reach an increasing number of buyers. This results in the creation of more transparent markets for goods and services. Based on these arguments e-commerce can be a useful tool for intensifying competition. When competition becomes intense, the profit margins of the companies involved in e-commerce ends up reducing. On the other hand, when the market becomes broader thanks to e-commerce, this is a chance for the organizations involved to take advantage of economies of scale. The result is that consumers end up paying for their desired goods at a lower price than would; have been the case in the absence of e-commerce. In addition, the fact that e-commerce is characterized by high transparency levels results in reduced search as well as transaction costs. This is in terms of both money and time. E-commerce also helps to balance the supply and demand of goods and services in the market because of the increased choice and information (Chaudhury & Kuilboer 64). For this reason, product manufacturers for example, are in apportion to make adjustments to their production processes with more precision to cater for the existing demand in the market.

Since e-commerce has ensured that information exchange between for example, a firm and its customers or suppliers is efficient and fast, organizations are therefore in a position to reduce costs related to production, procurement and sales. Owing to an improved supply chain management facilitated by e-commerce, efficiency of the business process is thus attainable (Nabi & Luthria 135). Moreover, new goods and services have also emerged thanks to e-commerce. However, there are also negative effects to the economy that are associated with e-commerce. For instance, good reputation and economies of scale though a good thing for some firms, might in fact provide several e-tailers (for instance, Amazon). In addition, competing firms may use increased transparency as a technique to compare prices offered by rival companies, thereby enabling them to establish pricing strategies.

E-commerce can also assist competitors to differentiate their products due to intensified competition. As a result, consumers would find it hard to use the internet for purposes of comparing prices. From a microeconomic point of view, e-commerce may more impact on search goods, compared with other forms of goods (Graham 771). For instance, a majority of the experience goods are less suited for electronic transactions since the desire for consumers is to first see, try, or tough them, before they make a decision of whether or not they will make a purchase. Such goods would include houses and cars. However, e-commerce acts as a powerful informative tool for a prospective buyer, because they are enlightened on where to access these products, should the need arise.

Social importance of e-commerce

Systems of e-commerce influence societal social roles because of their associated social impact in their users. There is a need to appreciate the fact that e-commerce systems constitute the human social and communication system. Since they are part of our social system, e-commerce systems enable us to manipulate, send and receive information from one part of the globe to the other (Kellerman 461). Since the information transmitted is what results in business activities between two parties, it is hard to treat e-commerce systems as a tool of trading that is secluded from the norms of a business transaction. There is a need to appreciate the fact that e-commerce benefits results from the application of this system as opposed to the technical components associated with it. Buying and selling of goods and services is more of a social activity, because the individuals involved have to interact. In addition, the opinions and thoughts of other consumers over a given product or service strongly influences our decision to purchase a certain good or service. Based on this, marketers have opted to use social sites as a way of creating awareness on the existence of their products and services. When potential consumers login to such sites as Facebook or Twitter, they can then discover very new products and services, and this may be a cue for them to try out these products and service. Social sites may be used by markets of goods and services to target their niche market, based on a fact that most of the social sites brings together individual with similar tastes and preferences. Moreover, the use of social sites can be quite an inexpensive way for a manufacture of a certain products to acquire new customers, as opposed to the use of the more expensive conventional sites of advertisement. These may not have the same impact that a social site may have, in targeting a given niche market.


There are social as well as economic benefits that characterize e-commerce. From an economic perspective, e-commerce enhances market transparency by opening up the market. This results in a bigger market fro goods and services. There is also the issue of an increased ease of searching for goods and services within the desirable price region of customers. Furthermore, e-commerce leads to competition intensification and the buyers and sellers benefits from economies of scale. In addition, e-commerce saves time and money, in terms of searching for products and services. It also enhances the balancing of supply and demand of goods and services. On the other hand, buying and selling of goods and services is a social activity, due to the interactions involved in the transactions. Moreover, the opinions and others influence our buying decision, which is why the use of such social sites as Facebook and Tweeter has greatly improved commerce. Business owners and the government alike need to embrace the social and economic benefits of e-commerce to improve market penetration across borders, and to benefit from the economies of scale.

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Bidgoli, H. Electronic commerce: principles and practice. Academic Press, London, 2002

Chaudhury, A. & Kuilboer, J. P. e-Business and e-Commerce infrastructure. McGraw-Hill, New York, 2002

Decker, R. The importance of E-commerce in China and Russia: an empirical comparison. Springer, London, 2001

Department of Commerce. (2002). “A Nation Online: How Americans Are Expanding Their Use of the Internet.” E-commerce Multi-sector Report.

Graham, M. Warped geographies of development: the internet and theories of economic development. Geography Compass, Vol. 2, Issue 3, pp. 771

Kellerman, A. Worlds of E-commerce: economic, geographical and social dimensions. Political Geography, Vol. 22, Issue 4, pp. 457-458

Lubbe, S. & Van Heerden, M. V. The economic and social impacts of e-commerce. Idea Group Inc, 2003

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Nabi, I. & Luthria, M. Building competitive firms: incentives and capabilities. The World Bnak, Washington D. C., 2002.

Office for National Statistics. Internet retail sales (2009). Web.

Rajadhyaksha, H. Leveraging Social Networking Sites to boost Ecommerce online traffic.Web.

Zhuang, Y. An instrument for measuring the business benefits of E-Commerce. 2003

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