ONLINE BUSINESS

Online Business



Online Business

Online Businesses and their Impact on Economy

Online business or e-commerce is a term to describe transactions conducted over the Internet, whether completed by individuals, organizations, or companies. It is a new way of conducting businesses. E-commerce is usually used to represent individual purchases made via the World Wide Web, though it is also applicable to business-to-business applications, such as selling inventory online or general procurement activities. Another type of online business se C2C or Consumer-to-consumer, where transaction is done between two consumers and the online business is just providing the platform to such transactions.

In recent years, online businesses have emerged as the fastest growing sector around the globe. Despite of the global recession, companies have persistently entered in online businesses and consumers have increased their habits to make their purchases over the internet. Online businesses have a small share in overall commerce of the world but its impressive growth indicates that, in the future, it will have a major impact on the global economy.

Online businesses can affect the economy through its impact on inflation and productivity. Through various costs can be eliminated pertaining to time and efforts in searching for the product and services that reduce the overall cost of the business, making it more feasible and cost efficient than conventional businesses. Apart from the consumer perspective, it also has played a vital role for the seller to reduce its costs. In offline stores, there are a number to factors to be determined. They mostly earn from economy of scales as their transaction cost minimize in that than if purchased one single product. On the other hand, in online business, the transaction cost remains the same whether you sell one product or a thousand. Online business has edge over conventional business in the level of its accuracy. It eliminates human factor from the tractions. It elimination does not only saves the time of solving invoices problems but it also eliminates human error. Most importantly, it helps the economy by reducing the costs on sales persons or other staff working in the bricks and mortar business. All other overheads like, storefront cost, telephone costs, electricity cost, cost of maintenance of building, etc are eliminated in the online businesses that help the economy to progress with reduced costs and efficient transactions (Zhuang, 2003).

Because of these lower costs of e commerce, online sales in US market and the rest of the world are increasing exponentially with more and more people turning online customers. According to US Census Bureau the Department of Commerce, in the total retail sales of US in the second quarter of 2011 were $1041.7 billion while on the e commerce side, it was $47.5 billion. It concludes that, in US, more than 4.5% of retail business is taken over by online businesses which were only 1.4% in 2002. This increased has shown that the market of online customers is expanding and people are converting towards online shopping (CNBC.com, 2008).

The financial crisis of 2008 has had both inflationary ...