E-commerce can be a great way for small businesses to increase their sales and expand their reach. It is also convenient for consumers, who can buy at their convenience, without having to leave their homes or spend the day queuing at the mall to get the best deals. However, e-commerce also has negative effects on both consumers and retailers which must be taken into consideration before launching an online store.
It is easy to collect a lot of personal information from a consumer with an e-commerce site, and sometimes it is very easy. Since all online transactions are recorded, it is relatively easy to create an online buyer profile, and use it to send targeted advertisements. However, many would agree that this is an infringement of the consumer’s right to privacy, which is highly regulated in many countries. This means that small businesses aiming to establish an online presence using e-commerce must be aware of applicable legislation, as mistakes can be costly in terms of fines and customer trust.
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Another negative effect of e-commerce is its effect on the security of consumers. Online transactions are inherently more insecure than those made in person because there is no way to guarantee that the person making the payment is the actual owner of the credit card being used. At the same time, when a customer enters payment information, it risks being intercepted by a third party if the website does not comply with appropriate security measures, resulting in credit card fraud and identity theft. Merchants must be aware of the risks that electronic transactions carry, and work to secure systems to the highest standards.
Merchants who used to sell in their stores often find selling online in a very competitive market. Their products are displayed alongside competitive offerings, often from different countries or larger retailers with access to better wholesale prices. This can affect the retailer negatively, as they cannot sell as much as they expected to actually make a profit, or the consumer when online stores cut corners in order to become more competitive or products are bought from illegal retailers because they have the best price .
Returns and complaints
Selling online usually means a higher rate of return on products than when purchased in person. This is partly due to the fact that customers have not seen the merchandise in person before buying, but also to the fact that many online shoppers buy things with impulse, and by the time they receive it at their home, they have changed their minds and are taking advantage of favorable return policies. While a large retailer will have no problem accommodating this, it can be very annoying for a small business with limited inventory management.