The development of e-commerce and modern technology such as laptops, tablets and smart phones has increased numbers of on-line shops as well as online shopper. It is predicted by Verdicts Research that online shopping will gradually overtake bricks & motar retail and account for over 15% share of total retail by 2017. That means on-line shopping plays an important role in the context of contemporary business with many of its advantages in comparison with traditional business. To evaluate this role, two points are investigated in the essay, including competition and benefits from e-commerce. In detail, online retail not only leads to a huge increase of competition, which is generally considered to be beneficial for both consumers and businesses but also greatly benefits e-commerce at the expense of traditional business models.
One of the key roles of online shopping is helping improving competition, which seems to remain controversial about its benefits for many years. As stated in the White Paper, vigorous competition between firms is the lifeblood of strong an effective markets. Competition helps consumers get a good deal and encourages firms to innovate by reducing slack, putting downward pressure on cost and providing incentives for the efficient organisation of production (paragraph 1.1). With the existence of online shopping, competition tends to be improved and extended thanks to availability of information and unlimited marketspace. Hotelling (1929) identified that there is no geographical product differentiation the Internet, which decreases total product differentation under competitions. As mentioned above, online retail marketplace into marketspace (Laudon, 2013), thus, there will be no discriminations in both products and prices in different countries or territories. For example, everyone who purchases an Ipod from eBay or Amazon website has to pay only a specific price regardless their countries. However, some authors see price discrimination has still remained. It is explained by the shipping cost, which exactly determined by distance from the home warehouse of online shop to the named place of delivery (Hotelling, 1929). Also, Diamond (1972) and Stahl (1989) found out competition from online retails significantly lowers margin cost for business and search cost for consumers. Search cost as explaination of Laudon (2013) is time and efforts relating to finding and choosing the most suitable product. Stahl (1989) mused that when competition raised from many online retails, customers would benefit low search cost than without competions, since retailers take advantage of many programs such as SEO, Google Adword to introduce their samples and products.
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