E-commerce as a factor of reducing transaction costs

[Name of Student]
[Institutional Affiliation]
[Date of Submission]
The emergence of electronic commerce led to many changes in the ways businesses
market their products and effect sales. While it brought improved approaches for businesses
to reach out to potential consumers, it also made it easier for consumers to find needed
products in the most diversified way ever. These were achieved through improved efficiency,
enhanced speed and the elimination of irrelevant business processes. Today, both traders and
consumers find E-Commerce the most favourable option of performing business transactions
because efficiency and reduced costs of operations lead to increased benefits for all the
parties involved.
E-Commerce reduces transaction costs by eliminating irrelevant business
processes, cutting down consumers’ expenses, and integrating numerous services that were
previously performed separately.
Before the rise of the innovations that brought E-Commerce into existence, business
processes were comparatively traditional with many entrepreneurs depending on non-digital
approaches. Reconnoitring business prospects and market research compelled traders to
travel to their target markets. For goods and services to reach consumers, many brokers and
distributors had to play different roles in ensuring the success of transactions. With the
emergence of E-Commerce, physical reconnaissance has become an element of the past.
Many distributors have been eliminated from distribution chains because producers can easily
meet consumers directly. The elimination of these irrelevant processes reduces the costs of
goods and services.
These benefits are ultimately transferred to traders and consumers.
The share of benefits accrued to consumers in relation to transactions draws from a
wide spectrum of elements. A typical scenario of traditional brick-and-mortar shops would
have a consumer spending money on travelling to undertake window-shopping. In the
process, they would have to spend a lot of time in between their activities. Markedly, most
.Warkentin, Merrill. Business to Business Electronic Commerce: Challenges and Solutions (Hershey:
IRM Press, 2013), 31.
.Mohapatra, Sanjay. E-commerce Strategy: Text and Cases (New York: Springer Publishing Limited,
2012), 236.
consumers would not even visit all the shops offering the products they need because of time
and financial factors. By the time a consumer completes a transaction, they have spent large
amounts on supplementary processes to the extent these may even exceed the actual price of
the product. In the contrasting case of E-Commerce, all the shops are available at an office
desktop or cell phone. The first sets of costs eliminated by E-Commerce are those related to
travel and time. Because consumers have access to the best qualities at the best prices through
comparative reviews, they also end up saving large sums of money.
Lastly, E-Commerce has reduced costs of transactions by integrating numerous
processes and services that were previously performed separately. It is not much that all
brick-and-mortar shops must close down their activities. This is because shops that have
integrated both classical and digital approaches find the two merging very conveniently. To
this extent, such shops avail online platforms for consumers to view and select products.
Thereafter, packaging and deliveries get accomplished from brick and mortar shops. Besides
reducing costs for consumers, this approach reduces traffic in brick and mortar shops. It also
enables an increased number of transactions at affordable costs.
In conclusion, E-Commerce presents a great extent of integration of services and
business processes. While consumers save time and money, businesses access an increased
number of consumers without spending more on advertisement and distribution of products.
Consumers have access to increased varieties of products at comparatively low prices. They
also experience increased efficiency and convenience because all activities get effected using
electronic devices. On the other hand, entrepreneurs also benefit from the elimination of
unnecessary business processes.
.Ratnasingam, Pauline. Inter-organizational Trust for Business to Business E-Commerce (Hershey:
IRM Press, 2013), 121.
.Frieden, Robert. Managing Internet-Driven Change in International Telecommunications (Norwood:
Artech House, 2014), 17.
Frieden, Robert. Managing Internet-Driven Change in International Telecommunications.
Norwood: Artech House, 2014.
Mohapatra, Sanjay. E-commerce Strategy: Text and Cases. New York: Springer Publishing,
Ratnasingam, Pauline. Inter-organizational Trust for Business to Business E-Commerce.
Hershey: IRM Press, 2013.
Warkentin, Merrill. Business to Business Electronic Commerce: Challenges and Solutions.
Hershey: IRM Press, 2013.

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