E-Commerce as a Factor for Reducing Transactions Costs (Essay Sample)

E-COMMERCE
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E-Commerce as a factor for reducing transactions costs
E-Commerce refers to the selling and purchasing of products and services by firms and customers through an electronic medium. It is broadly considered the selling and purchasing of products over the internet. It entails completion of transactions through electronic platform either through business to business or business to consumer and consumer to consumer. It has enabled companies to establish a market presence. Besides, it improves an existing market position by providing a cheaper and more efficient distribution chain for the products or services.
E-Commerce has various merits such as creating conveniences by ensuring businesses takes place twenty-four hours a day and seven days a week. Besides, it provides a chance for selection and preferences as many businesses use it as a platform to present a range of products to the consumers.
The major advantage of E-Commerce is reducing the cost of transacting business among the parties participating in the online business. It reduces the transaction cost through increasing the quantity of goods sold online. When offline firms calculate transactions costs, they have to incorporate in anonymous business expenditure together with the actual of transactions. When there are few transactions, cost per transaction is high. Besides, higher rates of transactions overpower the workers and the distributors. However, in an e-commerce business, the transactions cost is similar despite the number or frequency of transactions, whether there are many transactions or just one mere transaction.[Efendi, Jap, Michael Kinney, Katherine Taken Smith, and Murphy Smith. "Marketing Supply Chain Using B2B Buy-Side E-Commerce Systems: Does Adoption Impact Financial Performance?." Academy of Marketing Studies Journal (2012).]
Alternatively, electronic business almost eradicates the processing errors that result from poor calculations or recording keeping that are frequent with human processing. Thus, minimizes the time wastage in solving and correcting the mistakes by the workers, it provides the platform for transparent and accurate transactions that in the lon- run might save the money incurred to employ professionals like auditors to identify and correct the mistakes. Though the errors always don’t acquire fines and fees, they always consume substantial employee efforts time. Thus, e-commerce presents more time for the workers to focus on profit-generating operations in the business rather than spending much time solving the errors.
In an offline business, the cash received from every transaction always pay for various expenses such as repairs and maintenance of the building, displays, taxes, leases, credit card fees, and salaries of the workers. Besides, the same revenue covers the distribution and transportation cost of the products hence increasing the transaction cost. However, the revenue acquired from an e-commerce transaction pays for the distribution, the product, web hosting, shopping cart application, and some miscellaneous expenses. Therefore, the general cost of running a virtual store is much lower than the cost of operating a physical store.[Yao, Yuliang, and Kevin Xiaoguo Zhu. "Research Note-Do Electronic Linkages Reduce the Bullwhip Effect? An Empirical Analysis of the US Manufacturing Supply Chains." Information Systems Research 23, no. 3-part-2 (2012): 1042-1055]
In an offline store, the stocks are maintained through acquisition, transportation, unpacking, branding, displaying and storage of the additional inventory for future sale. While in the e-commerce business, an in...