The way business is done was revolutionised by the Internet and caused emergence of the e-commerce. The main changes from the business perspective happened in the supply chain. Supply chain is important for any business, because it literally shows the way inputs go through to reach the customers. It is often very sophisticated and complex, but simple version could be shown in the following scheme:
As far as the logistics is concerned, we can look closely to that aspect of the supply chain. The traditional way – brick and mortar – is a physical store, where customers come to purchase goods, i.e. look at them and decide from the stock. Some goods can be carried straight away, where the supply chain ends. However, some can be later delivered to the customer’s desired place, and that is when supply chain ends as well. On the other hand, when online trade was not in use, people were able to purchase different goods using telephone.
The scheme on the left shows how the brick and mortar retail’s logistics works. We can see that supplies have to be delivered first, but there is no guarantee of sales. Therefore, a retailer has some direct costs incremented which then increase the prices to the final customers.
In addition to that, retailers increment many other costs including personnel, rent, design, transportation costs, etc.
On the other hand, customers are not used to buy some goods online and prefer to touch and buy them. The physical feeling or for example lack of time can overcome the best price instinct. Some customers also do not have access to internet or experience problems with delivery.
E-commerce changed business supply chain towards lessen costs. Businesses are more flexible in locations, ways of delivery, services and many other factors, which cause costs, which can be then transferred into final price. What different is the way customers interact with businesses. Scheme below shows the difference:
As we can...