Advantages and disadvantages of eCommerce | BBVA Switzerland
Are you interested in investing in the most relevant companies and ETFs dedicated to E-commerce?Open an account
With steady and increasing growth, e-commerce is at its peak. Therefore, here we will highlight the advantages and disadvantages of this type of transaction and how users’ consumption habits have changed to open the road for a new type of businesses
Electronic commerce, also known as ‘eCommerce’, continues to grow around the world. This business modality has increased its growth exponentially, as reported by the National Commission of Markets and Competition (CNMC) in the recently published statistics which you can access by clicking here.
For example, according to the most recent report from the CNMC, it is indicated that this type of trade exceeded 12,800 million euros in the third quarter of 2020 in Spain. In this case, this growth exceeds the data published for 2020 by 2.5%.
5 advantages of e-commerce
Using electronic channels for buying and selling is a trend that will continue growing during the next few years. That’s why we want to highlight the advantages of starting or investing in this type of business.
1. Low startup cost
As the first benefit of ‘eCommerce’, its low start-up cost has the first place. When this modality is compared to physical businesses, the start-up cost is considerably low and that is why it has become one of the most popular ways for new entrepreneurs who have a limited budget for their ‘startups’ or ventures.
It refers to the start-up cost, that initial investment that every entrepreneur must make to start their business. In the case of being an enterprise with a physical location, the costs of the establishment, services and employees are factors that considerably increase this investment.
2. Available 24 hours a day, 7 days a week
Electronic businesses have the benefit of being able to always be open and are not affected by confinements that may arise in the future. This availability gives them an advantage over physical stores.
3. International Scope
One of the great advantages of e-commerce is its reach. Having an enterprise or online store does not limit the clientele to only a physical space or a country, but it expands the possibility of reaching an international level, limited only by the entrepreneur.
Now, the market is the entire world and the limit is up to you. This is why some eCommerce companies are growing considerably and we believe that they will continue to grow in the future.
4. Maintenance costs
If a comparison is made between the maintenance costs of a physical store versus an online store or eCommerce, the second one is positioned as more profitable and this aspect is one of those that has influenced the growth of this type of service.
5. Updated information on customers
Having an e-commerce allows you to know about customers, their behaviors, consumption habits and many other data that cannot be accessed when you have a physical store. This is one of the consequences of ‘online’ businesses growing faster than physical businesses.
3 disadvantages of e-commerce
While eCommerce can be attributed numerous advantages, some of the disadvantages of this type of business should also be mentioned.
1. Privacy and security
This is one of the great concerns of users at the ‘online’ level. The reason why the user provides their data on the Internet and the uses that are given to this information can become confusing for them, so many people interact with some distrust.
In fact, it is estimated that 84% of users in Spain have this concern about the use of their personal data.
2. Quality of the products purchased
Although by making purchases online the user saves time, costs and all the benefits mentioned above, the quality of the products can only be observed when the user receives them.
In a physical store, the buyer has the freedom to see and analyze the quality of what he is buying before having made the payment for it.
3. Delays in shipments
Many factors can influence product shipments. Among them we can highlight climatic factors, availability of the same, among others. This disadvantage can affect the life of the user, who can visit a physical store and purchase the product they want without delay.
eCommerce is here to stay and its boom was boosted by the pandemic. Using Spain as an example, this country has become the third one in the world where this type of purchase has grown the most and it is expected that, during 2021, online transactions will register an increase of 24% compared to 2020.
What does a company need in order to be successful in this new digital environment?
The keys a company needs to be successful in the digital environment: raw material—data—and the other two are human factors—intelligence and innovation. Article written by Elena Alfaro, Head of Customer Solutions Analytics & Open Innovation, and Juan Murillo, Head of Analytics Dissemination and Data for Social Good at BBVA Data & Analytics.
Is technology a profitable investment?
The digital population growth is a condition that will define the world, not only in business, but in politics and investment. The changes in the generations and the access that each of these had to technology defines the financial scenario and the form that the growth dynamics will take on a global level.