Following the popularization of the internet, the retail and wholesale landscape has seen significant changes. One of those changes is the rapid rise of the E-commerce industry. eCommerce giants like Amazon and Alibaba are valued at billions of dollars, indicating that E-commerce is the future of trade. Consumers, too, are shifting more and more towards buying online because of how convenient and time-saving it is. But before we move any further, it is important to understand precisely what E-commerce is.
“E-commerce, electronic commerce, or internet commerce refers to the buying and selling of goods and services using the internet, with the transfer of money and data to make this trade possible.”
It is expected that by 2023, E-commerce will make up 22% of global retail sales. The consistent rise of E-commerce naturally makes us think it must have significant advantages over traditional buying and selling, which it does. However, there are also critical disadvantages of E-commerce, which will be the topic of our discussion today; some of them are really concerning. Here are the 13 disadvantages of E-commerce you should know about.
Top 13 Disadvantages of e-Commerce
Privacy and Security Issues
One of the most significant disadvantages of using E-commerce is the compromised privacy and security of your data. Consumers have to provide their personal data such as an address, name, phone number, credit card details, etc. The most common cybersecurity threats to your credentials are data theft, phishing, malware attacks, hacking, and misuse. To make matters worse, the E-commerce industry is the most vulnerable industry as it experiences 32.4% of cyber-attacks in various forms.
Therefore, a poorly managed and insecure E-commerce website puts every consumer at great risk, which is probably the biggest disadvantage of E-commerce.
Connectivity and Website Issues
E-commerce is an internet-based industry that relies entirely on a well-performing internet connection. Any event that cuts off this connection to the consumers can result in huge losses. Moreover, issues like site crashes, slow load times, poorly designed user interface, and lack of mobile phone optimization contribute greatly to the loss of engagement and conversions.
Here’s a statistic that explains this point better: A delay of as little as 100 milliseconds in page response time can reduce conversions by 7%. An E-commerce business must have impeccable connectivity and a well-performing website round the clock. Maintaining this level of performance can be quite a challenge, which is why it can quickly become a disadvantage of running an E-commerce business.
Consumers’ Inability to Try or Test the Product
Another disadvantage of E-commerce from a consumer’s perspective is the inability to try a product before making a purchase. In brick-and-mortar stores, consumers can pick up the product they’re interested in, feel it in their hands, test it out, ascertain its build quality, and analyze its appearance before deciding to buy it. This tangibility builds trust, and consumers can simply choose not to buy a product if it doesn’t meet their expectations.
However, in E-commerce, consumers are limited to pictures, videos, and product reviews before making a purchase. Even though many stores have money-back guarantees or “return or exchange” policies, it is still a hassle to order something and not find it exactly as it was shown on the website. The consumer then has to spend extra time getting in touch with support and returning or exchanging the product. This can be discouraging for many potential consumers.
Fear of the Unknown
Unless it is a world-famous E-commerce brand, people are usually hesitant when they make a purchase online.
Firstly, it is not possible for consumers to try the product until they pay for it. Secondly, E-commerce transactions are faceless and paperless. Many E-commerce businesses don’t have a physical existence, and customers are afraid of getting ripped off their hard-earned money when buying online. The stories of data theft, card fraud, and scams scare consumers, and they think many times before purchasing a product online, especially if it is something expensive.
Specialized and Costly Workforce
Many entrepreneurs wrongly believe that starting an online business doesn’t require as much workforce or professional resources as a brick-and-mortar business. Even though you can hire freelance talent to conduct business activities, you still need talented professionals to take care of things like:
- Website development,
- Software development,
- Product research,
- Digital marketing,
- Customer service
Although an E-commerce store saves up on rent and utilities, it sometimes costs more for additional skills required. Furthermore, skills like software development and digital marketing are some of the highest paid in the industry, and you must have the appropriate budget to allocate for these professionals if you want to have a successful E-commerce business.
When you run an E-commerce business, you open yourself up to an international market.
For a seller, there’s a slight disadvantage in that. You might be aware of the tax laws of your own country, but it is super difficult to learn the tax laws of every country in the world. From an international consumer’s perspective, spending extra time calculating taxes levied in their country is an added inconvenience. This can discourage some consumers from buying online.
Just like tax issues, every country has different local laws regarding internet privacy, copyright protection, trademark security, business incorporation, sellers’ rights, and consumers’ rights. Additionally, there are international laws that govern trade through the internet too.
As an entrepreneur, you must be able to know the local and international business laws to avoid legal hiccups. Failure to learn and abide by such laws might result in severe losses in legal liabilities, penalties, and fines. It is a great risk and hence classified as a disadvantage of E-commerce.
An E-commerce business requires a robust shipping network and infrastructure that ensures that the products are delivered on time. A business can experience significant losses if it fails in this particular department. According to a survey, late or failed deliveries pose a substantial threat to more than 65% of E-commerce businesses.
Moreover, certain products must be delivered on time at all costs, such as:
- Time-critical medicines or medical equipment
- Birthday gifts
- Gift deliveries on special days like Christmas, Valentine’s, etc.
If an E-commerce business fails to deliver in time in such situations, it will most likely lose the customer for good. Even though it is possible to put reliable delivery systems in place, businesses still make mistakes, making this issue a critical disadvantage of E-commerce.
Credit Card Fraud
Fraudsters use sophisticated scams to obtain credit card information from cardholders and use that information to make purchases in their name. This card fraud is quite common in the E-commerce industry, where most transactions are made through credit or debit cards. Since 2020, E-commerce merchants in the US have reported a 140% increase in such fraud attacks.
Similarly, in the event of a cyber-attack on an E-commerce website, the card data of consumers stored on the website has a risk of being stolen. Hackers can then use that data to make purchases online without spending a penny of their own.
In both cases, the E-commerce business plays a central part, and consumers and sellers end up getting hurt.
High Technical Costs
The technical infrastructure required to run an E-commerce business is vast and sophisticated. It overarches every aspect of the business, such as:
- Supply chain management,
- Customer relationship management,
- Marketing and sales,
- Warehouse management,
- Shipping and returns.
This requires a plethora of software and tools to keep everything running efficiently. Most of these tools are Software as a Service (SaaS) which can be very expensive for e-Commerce merchants.
It is a hefty investment, and a business that skips on using these software just to save some money ends up losing its place in the market. This is why the enormous technological cost of an E-commerce business can be a disadvantage if you don’t have a big budget.
Total Reliance on the Website
The website of an E-commerce business is its storefront. This means that any problem with the website will affect the business negatively. This dependency on the E-commerce website can sometimes become a disadvantage if the website is facing issues like slow loading speeds, poor optimization, poorly designed user interface, lack of security, etc.
Consumers are very critical of these issues on E-commerce websites, and with so many options around, they don’t think twice about switching to another seller if the website is not up to the mark.
Lack of Personalization
An E-commerce store fails to provide customers the same level of personalization as a brick-and-mortar store. When you walk into a traditional store, there’s a salesperson who welcomes you, takes time to understand what you need, and helps you find it. They stay with you throughout your time in the store, answer your questions, give recommendations, and provide you with a personalized shopping experience.
This kind of experience is not prevalent in an E-commerce store. Even though there are chatbots or customer care representatives you can chat to, it is still not the same level of personalization. Some consumers might be discouraged because of this, making a lack of personalization a disadvantage of E-commerce.
The E-commerce industry has taken over the market rapidly, giving rise to cutthroat competition. Even though the competition is a good thing, E-commerce businesses are finding it harder and harder to attract consumers because of it.
To beat the competition, they constantly offer lower prices and discounts to attract customers. Even though it might seem like a good thing, cutting costs drastically to appeal to consumers directly affects product quality or lowers profits. Therefore, E-commerce merchants are finding it harder to balance the price and quality while also trying to run a profitable business.
90% of E-commerce ventures fail within the first 120 days of launch. This means that the success rate of E-commerce businesses is 10%. It is often a combination of the disadvantages mentioned above that leads an E-commerce business to failure.
However, with proper knowledge, ample budget, and an experienced workforce, these things can be kept to a minimum, improving the chances of success of an online business.
Are there any other disadvantages of E-commerce you can think of? Let us know in the comments!