M.com Part 1 (Semester 2)

E- COMMERCE

Most Important Question Bank for Current Exam 

Q.5. Highlight
the challenges faced by e-commerce.

ANS:

A) Challenges
for E-Commerce Firms

1) High rate of
return of goods:

E-commerce in India
has many first time buyers. This means that they have not yet made up their
mind about what to expect from e-commerce websites. As a result, buyers sometimes
fall prey to hard sell (Instant placing order for goods by watching
advertisement or offers). But by the time the product is actually delivered,
they regret and return the goods. Though consumer regret is a global problem,
but it is all the more prevalent in a country like India. Returns are expensive
for e-commerce companies, as reverse logistics (returning a product to the
manufacturer or distributor) create challenges. This becomes all the more
complex in cross border e-commerce.

2) Cash on
delivery is the preferred payment mode:

Low credit card access
and low trust in online transactions has led to cash on delivery being the
preferred payment choice in India. Unlike electronic payments, manual cash
collection is painstaking (be careful), risky, and expensive.

Though considered
good from buyer point of view but for e-commerce companies Cash on delivery
(COD) mode of payment is regarded as a drawback. COD delays the payment to
e-commerce company because buyer will pay when he or she will receive the
product. It will then go to the courier companies which after 2-3 weeks give
payment to the actual seller. In the meantime the e-commerce companies have to restock
inventory.

3) Payment
gateways have a high failure rate:

Indian payment gateways
have an unusually high failure rate by global standards. Ecommerce companies
using Indian payment gateways are losing out on business, as several customers
do not attempt making payment again after a transaction fails.

4) Problem of
Internet Access:

E-commerce shopping
requires Internet facility to work. Nowadays, availability of internet
connection is not a problem in metro cities. However, internet connectivity is
very poor in many villages. Hence, these villages can be targeted only if they
get better internet connectivity.

5) Technical
Problems:

E-commerce functions
through the Internet due to which technical problems such as slow speed of
Internet can occur. Sometimes, transactions are denied due to slow internet
connectivity. There may also be chances of double payment due to repetitive
clicks by users on the payment button.

6) Competition:

Due to a variety of
benefits offered by e-commerce industry such as global reach, high
profitability, zero initial costs, etc. many firms are encouraged to undertake
e-commerce business. This has led to increase in competition among the
e-commerce marketers. Competition is leading to decrease in profitability due
to reasons such as aggressive pricing strategies, heavy discounts and offers,
free delivery, high commissions to affiliates and vendors during sale period etc.
These firms are losing billions to attracting customers.

7) Poor logistic
& supply chains:

Underdeveloped logistics
is one of the main hurdles in the development of e-commerce in India. Multinational
carriers like DHL and Fed-Ex do operate in India but generally third party
services are hired for the delivery in smaller cities. Many a time last mile
deliveries are made by bicycle. Some of the large funded firms like Flipkart
have established their own logistics departments for the delivery of goods
ordered online. But huge investment in logistics is required to be done.

8) Other
Challenges

• The start-up costs
  of the e-commerce portal are very high. The setup of the hardware and the
  software, the training cost of employees, the constant maintenance and upkeep
  are all quite expensive.
• Although it may
  seem like a sure thing, the e-commerce industry has a high risk of failure.
  Many companies riding the dot-com wave of the 2000s have failed miserably. The
  high risk of failure remains even today.
• At times,
  e-commerce can feel impersonal. So it lacks the warmth of an interpersonal
  relationship which is important for many brands and products. This lack of a
  personal touch can be a disadvantage for many types of services and products
  like interior designing or the jewelry business.
• Sometimes address
  is not found or buyer does not like the product the it has to send back to the
  company for restocking.

 

B) Challenges
for Customers

1) Security
Issue:

E-commerce sites
record crucial and sensitive details of customers such as name, phone number,
address and bank details. Though many e-commerce firms try to make transactions
over their websites secure through SSL (https) that encrypts the transferred information,
still many cases of online password hacking has occurred. It has adversely
affected the trust and confidence of customers about ecommerce shopping.

2) Inability to
See and Feel Products before Purchase:

Indian customers
prefer to see, touch, smell or taste products before making purchase decisions.
However, e-commerce does not facilitate this arrangement due to which its
advantages are missing in this shopping option. Customers also have the
impression that the products shown in pictures on website can be different from
what they actually turn out to be after delivery. However, these days, many
firms are adding real images and videos of models using these products on their
websites, and also adding all possible information about products such as size,
quantity, colours etc. for the convenience of customers.

3) Uncertainty
about Quality:

One of the biggest
problems with buying things online is that customers may have no guarantee of a
product’s quality. Reviews provided by other customers are not always helpful. Return
policy of e-commerces firm is also not properly implemented, so customers face
problems in returning products and getting refund or replacement for it.

4) Delay in
Delivery:

E-commerce firms can
face the problem of shortage of manpower. This may result in delay in delivery
of product to customers. In many cases, customers do not get delivery of
products on promised date or time, which results in customer dissatisfaction.