E commerce as an important leverage to reduce overhead costs and increase profitability

The 21st century has created a 21st century method of business, which involves the use of technology to make transactions of goods and services with the aim of maximizing profits. This is known as E commerce. E commerce otherwise known as electronic or internet commerce is the buying and selling of goods and services as well as the transaction of money and other necessary data needed for transactions via the internet. In simple terms, it is an online marketing, sales and transactions.

E commerce has been in existence since the 90s and has evolved over time to make business transaction easier, more productive and profitable for retailers, wholesalers, salespersons, freelancers, small scale markets and large corporations.

Since commercial transaction occurs between businesses and consumers, E commerce is practiced in different models which includes:

· Business to Business (B2B):

This is a transaction between businesses. E.g. Software selling between businesses.

· Business to Consumer (B2C):

This is the transaction between a business and an individual consumer. E.g. An individual buys a pair of Sunglasses from an online store.

· Consumer to Consumer (C2C):

This is the transaction between consumers. E.g. An individual sells an old furniture on eBay to another consumer.

· Consumer to Business (C2B):

This is the transaction between a consumer and a business organization. E.g. A freelance web developer develops the website of an organization through a freelancing site.

There are different forms of E commerce based on the scale of business, type and means of transaction carried out by the consumer and the business. These forms are:

· Retail: A small scale transaction between a business and a consumer without any intermediary.

· Wholesale: A large scale transaction between a business and a consumer, through the services of a retailer.

· Services: This is a transaction involving the exchange of a skill or set of skills for money. In this case the service provider is paid for the time spent.

· Dropshipping: This transaction involves the purchase of a product online, which is shipped by a third party to the consumer.

· Subscription: This is a recurring transaction due to the purchase of a product or service regularly. It is automatic and can only stop when the subscriber chooses to cancel.

· Physical products: These are tangible goods that require physical shipping to the consumers as well as making inventories.

· Digital products: These are downloadable digital goods, templates, courses, or media that are purchased for consumption by consumers.

· Crowdfunding: This is the advance collection of money from consumers on a product. This is done in order to raise the startup capital necessary to create a market for it.

How E commerce reduces overhead costs and increase profitability?

The emergence of E commerce has been seen as a blessing in the business world as it is being leveraged on to reduce the overhead costs of businesses and to increase profitability. Many business organizations, small, medium and large scales are benefiting from the the use of E commerce to boost their sales, maximize their profits and reduce their expenses. The following are the areas E commerce can influence to reduce overhead costs and increase profitability:

Marketing costs

Studies have shown that the cost of marketing online is lesser compared to traditional physical marketing. E commerce has a wider target audience, can reach out to as many consumers and businesses as possible in the shortest possible time. This means cost of marketing like advertisement, physical campaigns, pre-sales, are reduced. Social media and other internet platforms are used to promote business, reducing costs and increasing profits. Storage of products is handled by the E commerce platforms, provision of services and authenticity of services is also handled by the platforms at a very affordable rate.

Available workforce

This is another area that has been influenced by E commerce, when properly utilized. For the traditional business method, more cost is generated in hiring, training and payment of the workforce. Whereas, in E commerce, lesser workforce is needed and costs are reduced. For a third party transaction, the E commerce platform makes use of their workforce and resources, which is paid for at a less rate. This helps to maximize profits for businesses.

Target audience

This is a major concern for business organizations or corporations. E commerce through the use of technology and the internet gives a wider access to the target audience of a particular market. Globally, any market can be invaded in the shortest possible time and more profits can be made. Resources needed to reach such scale of audience is also less compared to the traditional physical method, which is time, effort and resources consuming.

E commerce is the trending means of transaction that helps businesses to reduce costs and increase profitability.