0264 · 3.3.5Ecommerce

How ecommerce works

0:00A customer orders a winter jacket from the sofa after nearby shops have closed. The seller receives the order, but someone must still pack the parcel and arrange delivery. Moving a purchase online changes how customers reach businesses, while physical tasks often remain. Understanding that connection helps us explain the benefits and difficulties of ecommerce for both sides. Ecommerce is buying and selling goods and services using the internet. A customer can place an order through a website or an application on a mobile phone.

0:26The business then provides the product through delivery, collection or electronic access. By the end of this video, you will understand why these arrangements create opportunities and costs. Goods are physical products, while services are activities carried out for customers. A jacket needs to reach the buyer physically, but access to an online banking service happens through a screen. This difference affects the importance of delivery, convenience and inspecting products.

0:51Ecommerce can also operate alongside a shop, so customers may have a choice of purchasing methods. Online shopping includes ordering clothes, books or groceries through the internet. Mobile phone and internet banking allow customers to access financial services, such as transferring money between accounts. Online ticketing lets a buyer book admission to a cinema or reserve a journey. These examples show that ecommerce covers services as well as physical products.

1:16Advertising can help a customer discover a product, while ecommerce allows the purchase to take place online. For a physical order, the usual sequence is choosing an item, confirming the purchase and arranging payment. The seller then prepares it for delivery or collection. An electronic ticket can reach the customer directly through the internet, so no parcel is needed.

Business advantages of ecommerce

1:34For businesses, the main advantages are a wider market, orders at any time, potentially lower operating costs and useful customer data. Willow Crafts is a small business that sells handmade jewellery. Its shop attracts customers who can travel to that location. A website allows buyers farther away to order, so the business can reach a larger market. That market can extend worldwide when payment arrangements and delivery services support overseas orders.

1:59The opportunity comes from reducing the importance of distance between the buyer and the seller. An online store can also accept purchases all day, every day. Customers can order after shop closing time, so the business has more opportunities to make sales. A business operating entirely online may avoid the rent associated with customer-facing shop premises. It can also need fewer employees serving buyers at a counter, so wage costs may fall.

2:23Storage, packing and customer support can still require space and employees. The saving depends on which activities move online and which remain necessary. Customer data includes information about purchases and preferences. An online system can record which products buyers choose, so the business can identify popular items. That information helps it offer products that better match demand. Protecting these records requires spending on security, so collecting information creates responsibilities as well as benefits.

Business challenges and customer benefits

2:50The main disadvantages for businesses involve delivery and returns, website and security costs, price competition, and customers being unable to try products. Packaging and transport add costs to physical orders. If buyers send unsuitable items back, the seller may also pay for return transport and inspection. Charging customers for delivery can discourage purchases by increasing their total payment. A website requires development, maintenance and reliable operation. Security measures protect customer information and payment details, so the business must fund them.

3:22Technical failures can interrupt ordering and cause lost sales. A security problem can also damage customer trust, which makes future purchases less likely. Price competition becomes intense when buyers can compare several sellers quickly. A customer may switch to a cheaper supplier after checking similar products online. This creates pressure on businesses to reduce prices, which lowers the amount received from each sale. Sellers therefore need to consider their delivery service, reliability and product quality alongside price.

3:50Customers also depend on descriptions and images when choosing physical goods. With a jacket, they can check the stated size but must wait to see how it fits. Some buyers hesitate because they are uncertain about the fit. For the business, that uncertainty can mean fewer purchases or more returns after delivery. Customers gain convenience, wider choice, easy price comparison and the ability to shop at any time. Ordering from home can save a journey and the time spent travelling.

4:16Access to sellers outside the local area increases the range of available products. Someone seeking an unusual jacket size may therefore find suitable options online. Price comparison helps the buyer choose between similar offers without travelling between shops. Checking delivery charges alongside the product price reveals the total payment required. Shopping at any time gives customers flexibility around school, work or other commitments. They can place orders when convenient, even though delivery and customer support may follow separate schedules.

Customer drawbacks and exam technique

4:45For customers, disadvantages include delivery charges, waiting, limited inspection, security risks, the need for internet access and potentially difficult returns. A delivery charge increases what the buyer pays for a physical order. Waiting creates another problem when the product is needed immediately. A purchase from a nearby shop may be more suitable for an urgent need. Inspecting a product in person allows the customer to judge its condition, colour or fit before purchase.

5:10Online buyers depend on the accuracy of the information displayed. Fraud occurs when someone deceives another person for financial gain. A dishonest seller may take payment without supplying the order, so the customer can lose money. Data theft involves obtaining someone’s information without permission. Stolen personal or payment details expose customers to further financial harm. A reliable internet connection and a suitable device are also necessary for online access. Customers who lack these resources have fewer opportunities to use ecommerce.

5:40Returns can take more effort when the customer must package an item and arrange transport. The buyer may face return charges and wait for a refund. A nearby shop may allow the issue to be handled directly at its counter. The convenience of placing an online order therefore needs to be considered alongside the process after delivery. Cedar Steps is a small footwear seller that takes online orders with home delivery.

6:01An exam-style question asks you to explain one advantage and one disadvantage of ecommerce for its customers. Begin by identifying whose experience the question concerns. Then use the product and purchasing method to connect each point to a clear effect. Customers can order shoes from home, so they save the time needed to travel to a shop. However, they depend on size information because they can try the footwear only after delivery.

6:23An unsuitable fit may require a return, so the buyer faces extra effort and a wait for replacement shoes. Each explanation links an ecommerce feature to a consequence for the customer. In Paper One Short Answer and Data Response and Paper Two Case Study, use the information given to support your reasoning. Explain means set out purposes or reasons, say why and how, supported with relevant evidence. Keep the business viewpoint separate from the customer’s.

6:47For example, packaging costs affect the seller, while a delivery charge affects the buyer who pays it. Ecommerce is buying and selling goods and services using the internet. Businesses gain a wider market, orders at any time, lower costs and customer data. Their difficulties include delivery and returns, website and security costs, and intense price competition. For buyers, ecommerce brings convenience, wider choice and easy price comparison, while delivery, inspection, fraud and internet access can create problems.

7:17Judge each effect through the product, the purchasing arrangements and the party affected.