The Internet provides an online medium for businesses and customers to communicate and facilitates the overall economic activity.
Businesses in the virtual marketplace enabled by the Internet are referred to as online businesses.
There are a number associated advantages and disadvantages of conducting business online.
The following advantages are the hallmarks of conducting business in an online environment: Ability to conduct business on a 24x7x365 basis - The world market never sleeps.
With a global reach, online businesses are conducted on a non-stop basis in a 24x7x365 environment.
Global reach - Online businesses conduct their operations around the world in different time zones simultaneously.
This kind of reach is never available to the businesses in a physical marketplace.
Businesses get an exposure to the world markets using the online medium.
High speed and Relative Ease - The Internet provides a lightening fast and easy to use medium to undertake business transactions.
This is partly due to the communication capabilities extended by the online medium.
It significantly reduces the turnaround and lead times for the complex business activities.
Reduced costs - Conducting business in an online environment is very economical compared to corresponding investments in the physical infrastructure in case of a conventional business.
The associated investments in setting up an online business are negligible.
Despite all the benefits of conducting online business, there are certain issues that must be taken into consideration before moving from the physical to a virtual marketplace.
Some common constraints in conducting online business include: Security concerns - One of the major impediments in the growth of online businesses is the security concerns of the sellers as well as the buyers in an online environment.
These include concerns regarding the security of personal information, transaction as well as the medium (credit card) details.
Uncertainty regarding supplier, delivery and the physical product - Online businesses suffer from an uncertainty surrounding the physical product, the actual supplier and the delivery of the product.
Unlike an offline business environment, the customer is not exposed to these aspects and these remain hidden from the customer in the background.
Unsuitable for certain product categories - Some product categories are inherently unsuitable to transact in the online business environment.
For example perishable goods are unsuitable to be transacted in an online environment because the actual delivery might take long time.
These products are best sourced from the local markets.
In contrast, durable goods are the most suitable to be transacted in an online business.
Limited and selected sensory information - The Internet is most suitable to transmit visual and auditory information including the pictures, sounds and related text.
However, it does not allow any scope for other senses such as touch, taste or smell.
In an online store, one can select flowers but not smell them; one can see a gadget, but not touch or feel it.
One can see the chocolates but not taste them to see if they taste as good as they look.
This makes the online medium unsuitable to be used for selling products that need to be touched, felt or tasted before purchase.