14 Differences between e-commerce and traditional commerce
Electronic commerce is very much like traditional commerce. It also involves and exchange of goods. But the exchange of goods is conducted online. Technologies such as email, electronic data interchange and electronic fund transfer are used to track transactions and receive payments. Some of the differences between electronic commerce and traditional commerce are explained briefly below.
Difference between E-Commerce and Traditional Commerce
1. Cost effective
E-commerce is very cost effective when compared to traditional commerce. In traditional commerce, cost has to be incurred for the role of middlemen to sell the company’s product. The cost incurred on middlemen is eliminated in e-commerce as there is a direct link between the business and the customer. The total overhead cost required to run e-business is comparatively less, compared to traditional business.
For example, in running an e-business, only a head office is required. Whereas in traditional method, a head office with several branches are required to cater to the needs of customers situated in different places. The cost incurred on labour, maintenance, office rent can be substituted by hosting a website in e-business method.
2. Time saving
It takes a lot of time to complete a transaction in traditional commerce. E-commerce saves a lot of valuable time for both the consumers and business. A product can be ordered and the transaction can be completed in few minutes through internet.
E-commerce provides convenience to both the customers and the business. Customers can browse through a whole directories of catalogues, compare prices between products and choose a desired product any time and anywhere in the world without any necessity to move away from their home or work place.
E-commerce provides better connectivity for its prospective and potential customers as the organization’s website can be accessed virtually from anywhere, any time through internet. It is not necessary to move away from their work place or home to locate and purchase a desired product.
4. Geographical accessibility
In traditional commerce, it may be easy to expand the size of the market from regional to national level. Business organizations have to incur a lot of expenses on investment to enter international market. In e-commerce it is easy to expand the size of the market from regional to international level.
By hosting a website, by placing advertisements on the internet and satisfying certain legal norms, a business can penetrate into global market. It is quite easy to attract customers from global markets at a marginal cost.
5. Introduction of new products
In traditional commerce, it takes a lot of time and money to introduce a new product and analyze the response of the customers. Initially, cost has to be incurred to carry out pilot surveys to understand the taste of the customers.
In e-commerce, it is easy to introduce a product on the website and get the immediate feedback of the customers. Based on the response, the products can be redefined and modified for a successful launch.
E-commerce helps to increase the sales of the organization. It helps the organization to enjoy greater profits by increasing sales, cutting cost and streamlining operating processes.
The cost incurred on the middlemen, overhead, inventory and limited sales pulls down the profit of the organization in traditional commerce.
7. Physical inspection
E-commerce does not allow physical inspection of goods. In purchasing goods in e-commerce, customers have to rely on electronic images whereas in traditional commerce, it is possible to physically inspect the goods before the purchase.
8. Time accessibility
Business is open only for a limited time in traditional commerce. Round the clock (24 x 7) service is available in e-commerce.
9. Product suitability
E-commerce is not suitable for perishable goods and high valuable items such as jewellery and antiques. It is mostly suitable for purchasing tickets, books, music and software. Traditional commerce is suitable for perishables and touch and feel items. Purchasing software, music in traditional commerce may appear expensive,
10. Human resource
To operate in electronic environment, an organization requires technically qualified staff with an aptitude to update themselves in the ever changing world. E-business has difficulty in recruiting and retaining talented people.
Traditional commerce does not have such problems associated with human resource in non electronic environment.
11. Customer interaction
In traditional commerce, the interaction between the business and the consumer is a “face-to-face”.
In electronic commerce, the interaction between the business and the consumer is “screen-to-face”. Since there is no personal touch in e-business, companies need to have intimate relationship with customers to win over their loyalty.
There is an automated processing of business transactions in electronic commerce. It helps to minimize the clerical errors.
There is manual processing of business transactions in traditional commerce. There are chances of clerical errors to occur as human intervention takes place.
13. Business relationship
The business relationship in traditional commerce is vertical or linear, whereas in electronic commerce the business relationship is characterized by end-to-end.
Lot of cyber frauds take place in electronic commerce transactions. People generally fear to give credit card information. Lack of physical presence in markets and unclear legal issues give loopholes for frauds to take place in e-business transactions.
Fraud in traditional commerce is comparatively less as there is personal interaction between the buyer and the seller.