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written by | October 11, 2021

Online Business: Advantages and Disadvantages

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Table of Content


E-commerce is among the fastest-growing and profitable areas of modern business. While there is no sign that it is slowing, this e-commerce market has experienced substantial growth over the last few years. 

In addition, sales online are predicted to increase to around ₹561 lakh crores by 2025. As with all businesses, selling online has certain advantages and disadvantages, discussed below. It is essential to examine both sides to determine whether this is the ideal business option for you and check the advantages and disadvantages of online business.

Did You Know?

As per GlobalData, a highly reputed data and analytics company, The Indian e-commerce market will hit around ₹5.67 lakh crores in 2022 with a CAGR of 21.5%. We're already in 2022, and their forecast proves to be true! Now, as there are benefits of online business, Indians have speedily changed their way of shopping. As more and more Indians are educating themselves in this department, we can expect booming e-commerce growth in the future.

Next, we will discuss the pros and cons of doing online business.

The Advantages and Disadvantages of Online Business

Also Read: Key Advantages and Disadvantages of GST for Businesses

Advantages of Online Business

1) Customer Data

The most important aspect of any business procedure is collecting customer information. Online companies allow customers to collect data about their customers and their behaviour. It's all done with little effort. Therefore, it's the best online business benefit anyone can get. 

Using this information, the company can make the necessary changes to improve customer experience. For instance, if it is an online shop, it is possible to determine what kind of product people are the most drawn to, which country the largest sales come from and which is the most popular payment method.

2) Customisation

The degree of satisfaction provided by an online company is higher than that of a traditional office-based business. In reality, an unrivalled business model can offer the same in terms of online business.

When it comes to online businesses, there are various options for customisation available to customers. The client must select one option and place the purchase. This is a simple process, and it is possible to improve the customer's experience. In this way, it’s one of the advantages of online business.

3) Lower Marketing Costs

The growth of the internet has led to an explosion in the number of websites for social networking. These platforms, which are created to bring people together, can be effective, cost-effective marketing channels used by small and large companies. The Internet means that you can advertise your products and services in front of your desired customers without the assistance of a professional marketing company to help you but at a higher price.

4) Accessibility

Online businesses are also exempt from geographical limitations. Customers can make orders from any region of the globe. However, it is contingent on having access to the internet. This is among the main reasons companies choose internet-based business strategies to attract international clients.

5) Automatic Systems and Resource Sharing

The internet has given you many ways to simplify your life as a business owner. You can handle your bookkeeping, customer service and bookkeeping support online and get custom solutions that will automate the way customers buy your goods and services. In other words, it will simplify processes and save valuable time from doing repetitive tasks.

Additionally, it allows you to share information and data quickly and efficiently. Sharing information has been made simple and effective when sharing documents, best practices in business applications, emails, webinars, or anything else.

6) Long-term Cost

Online businesses are significantly less expensive in operating costs than traditional businesses. An online business requires the smallest office space, or there is no need for office space. Thus, companies can reduce the cost of leasing/renting/buying physical space.

Furthermore, if there are no physical premises for the business, then the cost of hiring employees will be reduced.

7) Customer Contact

Through an online company, you can communicate with customers worldwide. Any person from any specific region is more likely to be a potential customer for your business. Even the smallest businesses have the possibility of reaching international customers. This could lead to the highest sales that offline businesses cannot quickly achieve.

These were all the benefits of online business. Next, we will discuss the cons of online business.

Also Read: What Are The Disadvantages And Advantages Of Exporting In India?

Disadvantages of Online Business

1) Customer Support

Contrary to traditional enterprise, an online business is completely devoid of face-to-face interaction. This is a major issue for customers as most of them prefer to communicate directly.

Although some businesses online provide the option of contact via chat, email or call to get customer support, it's not enough to provide the level of customer support provided through face-to-face communication.

2) Potentially Lower Profit Margins and Possibly Lower Profits

The internet has widened the competition for all kinds of companies. Although it allows consumers to find your services and products, it can also make it easier for customers to gain access to your competition's services and products.

To stay at the top of their minds, businesses have cut prices dramatically and have also diminished profits. If you operate your business online, be prepared to be unable to sell if your customers get the same item in the marketplace for less.

3) Customer Satisfaction

Naturally, when it comes to online businesses like e-commerce websites, customers do not get the opportunity to interact with the items physically. When the product is handed over to the buyer, they are not guaranteed to be pleased with the product. If the client does not receive the expected goods, they may return the item.

4) Reduction of Physical Interactions

Many of the most innovative concepts are born out of people's interactions. Although the internet has successfully superficially connected people, it's not enough to match the human interaction of speaking in person with customers and colleagues.

5) Competition

Being an online business owner is not easy because of the fierce competition in the internet world. The big corporations always come up with more effective advertising promotions, marketing and even more affordable products that could steal your business. If the right business strategy is not followed, the company could face significant losses. Competition is always considered among the business disadvantages.

6) Negative Reviews

Buyers may use social media to share their frustrations and opinions about businesses. The public is more inclined to complain than be a positive reviewer of a business, which could damage the image of a business. Many examples can be seen in complaints that have become viral and have caused businesses to alter their strategies or even change their products, resulting in revenue and reputation loss.

The internet is a potent tool, not just for companies but also for consumers. Be careful and use it in line with your company's requirements and model to ensure that the benefits are maximised and the disadvantages are reduced.

7) Cost to Start

While online businesses can benefit from cost savings over time, the implementation is not the same. The business must be prepared to deal with the huge initial cost as the website needs to be created and maintained by an experienced professional.

Furthermore, additional costs related to web hosting, SEO, etc., add to the total costs. However, a proper solution to lack of investment can be a government loan scheme that perfectly suits your business.

Conclusion

E-commerce has huge potential in terms of a profitable commercial option. First, an online store won't require the same number of employees as brick-and-mortar stores. Additionally, e-commerce platforms simplify the process of starting your own online company.

If you're thinking of selling online, you must consider all the benefits of e-commerce and its drawbacks. Armed with this knowledge, you'll be better able to make informed choices and efficiently implement your business strategy.

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: What are online business advantages and disadvantages?

Ans:

When starting an online business, it's important to check both sides of the coin: 

Disadvantages of online business

  • Startup cost
  • Security
  • Competition
  •  Trust factor
  •  Customer satisfaction
  • Technical problems
  • Customer support

Advantages of online business

  • Global access, 24 hours x 7 days a week.
  • Increased professionalism
  •  Cost savings
  •  Improved client service through higher flexibility
  • Less paper waste
  •  Faster delivery of products

Q: What are the advantages of online services from the consumer's perspective?

Ans:

Being a consumer, you enjoy many benefits of online services such as an abundance of choices, great customer service (not always), saving money and time, getting enough information, etc.

Q: What are the disadvantages of running a small-scale online business?

Ans:

One of the biggest disadvantages of running a small-scale online business is heavy competition. You truly need to work very hard to pave your way through. If you're a new or small business, the trust factor may also hinder the way.

Q: What is the biggest disadvantage of online selling?

Ans:

Out of the most considerable online business disadvantages, less communication with the customers and heavy competition are the biggest.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.