ISSUES AND

CONSTRAINTS
ECOMMERCE
The Cost Factor
 To set up an e-commerce infrastructure, you need
cash.
 Beyond a sophisticated interactive website, you need
networks, servers, terminals, software, staffing, and
training.
 Transaction costs are another issue.
 New type of intermediaries like electronic malls that
guarantee product quality, mediators for bargaining,
and certification authorities to ensure the legitimacy
of transactions add to transaction costs.
Security
 With spamming, spying, file corruption, and
malicious misuse, no company can afford to do
business online without protection via firewalls,
specialized antivirus products, and the like.
 For millions of potential cyber-customers, the fear
of credit card theft and identity theft continues to be
concern.
 The goal of an online merchant is to assure
customers secure lines and secure sites that will
protect their privacy, whatever the transaction.
System and data integrity
 Data protection and the integrity of the system that
handles the data are serious concerns. Computer
viruses are rampant, with new viruses discovered
every day. Viruses causes unnecessary delays, file
backups, storage problems, and the like.
 The danger of hackers accessing files and
corrupting accounts adds more stress to an already
complex operation.
System scalability
 A business develops an interactive interface with
customers via a website.
 If the company expects two million customers and
six million shows up , web site performance is
bound to experience degradation, slowdown, and
eventually loss of customers. To keep this problem
from happening, a website must be scalable or
upgradable on a regular basis.
e-commerce is not free
 For a long time, success stories in e-commerce have
favored large businesses with deep pockets and smart
funding. Small retailers that go head – to head with e-
commerce giants could be in for a surprise. As in the
brick-and-mortar environment, they simply cannot
compete on price or product offering.
 Brand loyalty is related to this issue. Brands are expected
to lower search costs, build trusts, and communicate
quality. Users remain suspicious of search engines for
locating product information; instead they rely on
recognized dot-com brands for purchases.
Fulfillment and customer relations problems

 Tales of shipping delays, merchandise mix-ups, and web

sites crashing under pressure continue to be problems in e-
tailing.
 Customer confidence in e-commerce’s ability to deliver
during heavy shopping seasons continues to be a concern.
 Every happy customers say the experience could be
improved.
 CRM is taking on high priority as more and more e-
merchants have found that without prompt delivery of
products and quick responses to customer complaints, they
are not going to make and headway in the e-industry.
 The interpersonal part of e-commerce between e-merchants and
customers continues to be setback. Many web sites lack a phone
contact to discuss order problems with humans. This is also the
case with help desks that are designed to help customers wade
through technical problems. The lines are either busy or simply
do not answer. This is directly related to fulfillment problems,
when customers have a difficult time receiving or returning
items purchased over a merchant’s web site.
 The best approach is to have customers who purchase items via
the company’s web site go to the nearest company’s brick-and
mortar store and settle the complaint in person. This is what has
been recently called click n brick business.
Products people resist buying
online
 Think of the web sites furniture.com or living.com,
whose venture capitalists invested millions in selling
home furnishings online. Furniture.com’s site enabled
browsers to design floor plans using existing furniture
on the web site. But in the case of sofa, you’d want to
sit on it, feel the texture of the fabric, and so on.
Besides the “sofa road test” factor, online furniture
stores faced costly returns and deliveries that could not
be expedited via fedex or ups. Living.com folded in
august 2000 and furniture.com followed a few months
later.
 From this lesson we learned to focus on specific
business model that process standardized items
with strong brand identity and require no inspection
or comparative analysis.
 Examples are airline tickets, books, office supplies,
and brand – name hardware.
 Buying these items on the internet becomes a
matter of price and convenience.
 We also learned that when personal selling skills are
required, such as in selling real estate, traditional
commerce continues to be a better way to sell.
 A combination of electronic and traditional commerce
strategies is ideal in situations when the business
process involves a commodity that requires personal
inspection. Eg., people looking for a standardized
items like a sony 52” TV first visit a retailer like best
buy. Then they shop on the internet for the same item,
hoping to buy it for significant savings.
 In today’s growing e-commerce business, the trend is to
look more for value then price. The key question is what
value to get by purchasing an item via the Internet
compared to buying from a local dealer. More and more
local dealers are beginning to match internet prices to
stay alive. They explain to the consumer the value
they’re getting such as processing rebates, local services
or in-house repairs, 30-day guaranteed returns, and so
on, at the same price as the internet. Of course, the
customer saves on shipping charges, but pays the sales
tax.
Cultural, language and trust issues
 In addition to these generic problems and drawbacks, there are global
issues as well.
 When e-commerce and the internet went global, there were an obvious
pressure to adapt e-marketing, e-products, and interfaces to cultural
expectations and constraints.
 Culture is the set of norms and innate values of a community, a society, or
a region.
 For example, in the middle East, where the norms is to buy a house with
cash rather than a cashier’s check or via a loan, it is difficult to trust
electronic transactions via credit cards.
 Similarly, when it comes to purchasing flowers, in eastern European
countries, the bouquet should contain an odd number of flowers. The north
American concept of a dozen roses simply doesn’t fly because the number
is even.
 A firm launching a business in a new country must be
aware of the culture as well as the language of that culture.
 Trust is another issue that needs to be addressed. When the
Internet is perceived to be an unreliable environment with
a great number of anonymous users, customers are
cautious in communicating via the internet.
 Since the internet and the web are essentially an
information space that reflects not just human knowledge
but also human relationships, it will soon become obvious
that trust relationships among people, organizations, and
computers are too complex to ignore.
Corporate vulnerability
 The availability of product details, catalogs and
other information about a business through its web
site makes it vulnerable to access by the
competition.
 The idea of extracting business intelligence from
the competition’s web pages is called web farming.
Lack of blueprint for handling e-commerce

 There is a continuing shortage of e-literate people

in the workplace. Most of the surveys conducted
conclude that few key managers have e-commerce
skills, internet experience or foresight.
 They also have a tough time attracting people
wanting to take advantage of online opportunities.
 Traditional organizational structures and cultures
were also found to inhibit progress in e-commerce.
High risk of internet start-up
 Many stories unfolded in 1999 and 2000 about
successful executives in established firms leaving
for internet start ups, only to find out that their “get
rich” dream with dot com was just that a dream.
 With the recession over, many retailers are
rethinking re-entry.