To What Extent Is the Growth of E-Commerce Likely to Benefit Some Stakeholders but Cost Others in the Marketplace

To what extent is the growth of e-commerce likely to benefit some stakeholders but cost others in the marketplace (40 Marks)

E-commerce is the buying and selling of goods and services using an electronic network, such as the Internet. This enables businesses to reach a larger target market and if done successfully should result in increased revenue and profit. However, the increasing popular channel to market benefits other stakeholders as well as the business.

Since around 2006 there has been a rise in services allowing consumers to access comparisons between businesses, enabling them to find the best price and option for them. Websites like Gocompare allow users to price check for a range of services including insurance, mortgage and gas and electricity suppliers. This service benefits customers as they can easily compare alternatives under on website rather than spending hours go through different websites. This provides the consumer with the added benefit of increased bargaining power as they can identify other companies offering similar deals or services, which allows them to drive down prices.

Market leaders who have lower operating costs can drive pricesdown, therefore become more attractive to customers and have a competitive advantage as they are rated better on these websites. This has been evident recently with Tesco, a monopoly with 28.1% markets share using their dominance to force suppliers to charge lower amounts. This reduces the unit cost, a discount that is past on to the customers as demand for cheaper goods increases. This has been necessary for them as there is such fierce competition between supermarkets especially with Aldi and Lidl offering low cost goods and rapidly gaining market share. This has been demonstrated with the constant TV adverts comparing a same shop at different supermarkets to show their price is less. As well as offering money off customers shop if it was cheaper elsewhere. This benefits the consumer as they pay less for goods that they would usually buy from the most local or easiest option.

In addition e-commerce allows consumers access to a wider range of goods and services as opposed to the ones on the shelves at their local store. This can be done at any time or place if people have Internet connection. This service has become increasing popular and is available across a wide range of platforms including computers, mobiles and apps.  This is beneficial for both the consumer and businesses as they can easily by products when under time constrains, it also enables businesses to grow their consumer base. Customers are one of the major stakeholders who gain from e-commerce as they pay lower prices for the same goods.

Part of the process of offering lower prices on e-commerce sales is using a businesses position and size to force suppliers to drive down price. This is clearly a major cost to suppliers as they have to cope with the increased demand and are being paid close to or below the unit cost. This detracts from the suppliers profit margins which makes it more difficult to survive. E-commerce has made it easier for customers to source alternative suppliers meaning it is harder to attract business based on them being a local supplier. Customers often have small orders meaning reduced demand, resulting in less bargaining power of suppliers.