2.1.1 E-commerce

E-commerce and the changing use of ICT

1. Changing use of ICT: faster broadband, smartphones and secure online payment have made it normal for a customer to buy from a business without ever entering its premises.
   1. A shopper can compare televisions, read reviews and order one from Currys for next-day delivery without leaving the sofa.
2. Where the business activity happens changes. Sales move from a till on a shop floor to a website, so the firm spends its money on a warehouse, packing and delivery rather than on prime retail space.

Using e-commerce to reach a wider market

1. A national and international market: a website is not limited by how far a customer will travel, so a firm based in one town can sell to buyers across the UK and overseas.
2. Open all hours: an online shop takes orders at 2am and on bank holidays, so it picks up sales a closed high street would lose, without paying anyone to stand behind a counter.
3. Lower fixed costs than a shop: rent on a town centre unit, shop fittings and counter staff are costs the online seller avoids, which leaves more of each £1 of sales available as profit.
4. Small firms gain buyers they could never serve. Selling through an established platform gives a one-person business a nationwide audience on its first day of trading.

What a business needs to sell online

1. A website or app that works: pages must load quickly, show accurate stock and take payment in a few taps, because a confusing checkout loses the order to a rival one click away.
2. Delivery and logistics: someone has to pick, pack and post every order, so the firm pays for warehouse space, packaging and a courier such as Royal Mail or Evri.
   1. Free delivery is never free to the business: the cost is either built into the price or taken out of profit.
3. Secure payment: customers hand over card and address details, so the firm needs an encrypted payment system, and a data breach costs it money and customer trust at the same time.
4. A returns process: buyers cannot handle goods before they arrive, so an online seller must accept returns, and each one costs postage, checking and repackaging.

The pressures e-commerce creates

1. Price comparison: comparison sites line up every seller's price side by side, so a firm charging £3 more than the cheapest can lose the sale even when its service is better.
2. High return rates: clothing shoppers often order two or three sizes intending to send some back, so the seller pays postage twice and may not resell the item at full price.
3. Delivery expectations set by the biggest sellers: Amazon has trained customers to expect next-day arrival, so a smaller seller either pays for faster couriers or loses impatient buyers.
4. Less personal contact: staff cannot notice a hesitant customer and suggest an alternative, so it is harder to build the loyalty a good shop assistant creates.
5. Dependence on technology: a site crash during a sale stops all trading at once, whereas a broken till affects one branch for an afternoon.

Adding e-commerce to a high street business

1. Click and collect: the customer orders online and picks the item up in store, so the firm avoids courier charges and gains a visitor who may buy something else while there.
2. Existing branches become useful again. Currys uses its stores as collection and returns points, which turns the cost of holding property into an advantage over an online-only rival.
3. Trading both ways spreads the risk. When shoppers stay at home the website takes the orders, and when town centres are busy the shops still trade, so a fall in one channel need not sink the business.

2.1.2 Digital communication

Digital communication and the stakeholders it reaches

1. Customers: they now hear about prices, new lines and offers through a website, an app notification or a social media feed rather than through a posted catalogue or a newspaper advert.
2. Employees: email, group messaging such as Microsoft Teams or WhatsApp, and shared online rotas let one message reach every shift at the same time instead of being pinned to a staffroom noticeboard.
3. Suppliers: orders travel between linked computer systems, so a falling stock level can trigger a reorder without anyone making a phone call.
4. Shareholders and the local community: results, announcements and job vacancies go straight onto the company website, so the same information reaches investors, neighbours and journalists at once.

The channels a business uses

1. Choosing the channel matters. Each channel suits a different message, so a firm confirming a delivery time uses email or a text, while a firm launching a product uses social media.
2. Most firms use several at once. Tesco runs a website, an email newsletter, a Clubcard app and staffed social media accounts, because different customers pay attention to different places.

What changes for customers

1. Communication became two-way. A poster could only broadcast, whereas a social media post can be liked, shared, questioned and answered, so the customer talks back.
2. Feedback arrives immediately and free of charge. Reviews and comments tell the firm within hours that a new recipe is disliked, information that once needed a paid market research survey.
3. Messages can be targeted. Online advertising tools let a business show an advert only to chosen ages, interests or areas, so less money is spent on people who will never buy.
   1. A gym can pay to reach adults living within five miles, which wastes far less than posting leaflets to every house in the town.
4. Complaints are now handled in public. A complaint that once arrived as a private letter is posted where everyone can read it, so the reply itself becomes part of the firm's reputation.

What changes for employees and suppliers

1. Work can happen away from the workplace. Shared files and video calls allow remote and hybrid working, which lets a firm recruit from anywhere in the UK and cut the office space it rents.
2. Meetings cost less. A video call between two sites replaces train fares, hotel bills and a day of lost working time, so decisions are taken sooner.
3. Ordering from suppliers is automatic. Sales data passes straight to the supplier, so replacement stock is requested as it sells rather than after someone counts the shelves.
4. Employees are contactable outside working hours. Messages arriving in the evening blur the line between work and home, which can raise stress and lower motivation if the firm does not set rules.

Drawbacks the business has to manage

1. It takes staff time and skill. Someone has to write posts, answer messages and keep prices on the website correct, so a small firm either trains an employee or pays an agency.
2. It needs constant monitoring. Accounts have to be watched at weekends and evenings, because a problem left unanswered overnight has already spread by morning, and an account nobody replies to does more harm than having no account at all.
3. Security and privacy carry a cost. Customer addresses and card details must be protected by law, so the firm pays for secure systems and for training staff who handle the data.
4. Some stakeholders are left out. Customers with poor internet access or little confidence online still expect a telephone number, so digital channels rarely replace the old ones completely.