Costs Associated With E-Commerce

Executive summary

According to statistics, it is explicit that E-commerce has increased significantly over the recent past. The fast, extensive use of the media coupled with the high purchasing power of individuals can be attributed to its expansion. It is anticipated to further expand with an approximate 1% by 2024. Therefore, small and medium scale retailers have gone for E-commerce to enable a significant reach of target groups across the borders.

New models and suitable approaches for easy reach of the customers have emerged. Also, the pandemic further increased the use of E-commerce. Although its use enables reaching a large number of customers, it comes with extra costs. Firstly, the initial establishment and development and its eventual use entail incurrence of costs. There is the cost of building and hosting a website at the initial stage, apart from several costs which arise once the operation begins.

Moreover, retailers may decide to undertake their operations by employing a third party on behalf of the business. In such an instance, costs are incurred as a result. E-commerce necessitates consistent internet access, which must be paid for it. Also, there are variable costs that businesses might incur since it necessitates the application of software to trace the pathway of goods. With E-commerce, payments are made online, and each payment comes with a transactional fee whenever a customer pays for the goods. However, challenges are bound to arise in any business organization and call for planning acting effectively.

The major challenge in an organization is the capability to counterpart expectations from the customer. Also, stiff completion exists where veterans have taken their expertise to the next level. Finally, the costs of cloud services are part of the challenges that have influenced their operations. Therefore, crucial for retailers to get good organizations to counter potential uncertainties.

Introduction and Background

The emergence of E-commerce is attributed to increased digital connectivity, infrastructure, and significant growth in the electronics sector, footwear, and apparel. Statistics has also shown that the increase results from high purchasing power, the recent extensive use of social media, and the rise of smartphones. Based on statistics, it is anticipated that the growth (store-based) will increase by approximately 1% by 2024 (Dos Santos et al., 2017).

However, E-commerce is expected to rise by 19% over the same period. Irrespective of the impacts of the recent pandemic, online penetration is foreseen to double the growth in the future compared to the recent growth. The E-commerce trend continues upward and is an excellent opportunity for logistic players to extend their operations and utilize it for potential cross-border E-commerce. E-commerce is a significant booster of a country’s economy by attracting investors and establishing a sustainable ecosystem for many corporations. In E-commerce, personalization is essential, and it refers to the relation of business and its customers on a personal level (Pourhejazy, 2020).

The transitions to online payments and the revolution of technological capabilities into much safer and quicker experiences are major aspects that have significantly impacted E-commerce (Einav et al., 2017). The digital transformations have re-engineered retailing over the recent past. Therefore, it has led to the development of new models in business and suitable approaches to reach and engage with customers easily. In addition, the pandemic accelerated E-commerce as it became the only default option when restrictions were upheld. According to Euromonitor International, E-commerce will account for half of the worldwide retail sector’s absolute value growth between 2020 and 2025 (Dos Santos et al., 2017). As more items are sold online, this corresponds to a $1.4 trillion increase in absolute value.

Thus, to put that expected E-commerce boom into perspective, it is about the same size as the entire value of goods sold across all retail channels five years ago. In keeping with its ongoing commitment to disseminating useful information regarding the effect of E-commerce on the retail logistics industry, statistics indicated double penetration of E-commerce globally. Retailers with well-established E-commerce and digital platforms outperformed brick-and-mortar stores, which were under pressure during the lockdowns. Essentially, cart reminders are significant in the operation of E-commerce (Wang & Lee, 2017). It involves the automatic generation of emails and sending them to potential customers who have left the site and has similar products in their carts.

Costs Related to E-Commerce

The establishment of e-commerce comprises the availability of the product, the workstation or computer, and the internet connection. On the surface, E-commerce seems to be relatively cheaper. However, the development and eventual use necessitate a few extra costs. For instance, a medium-scale operational business dealing with the sale of clothing and footwear is anticipated to incur extra costs once it establishes E-commerce. It includes fixed costs and variable costs, as discussed below. Most often, the E-commerce related costs are varied and hidden, and therefore each business should be prepared concerning the same. In case of failure to plan, it significantly results in logistical hitches and a more likelihood of business failure. The line between success and failure is razor-thin for all small businesses, and E-commerce is no exception. Therefore, several costs need to be considered by a business venturing into e-commerce.

Firstly, it is crucial to keep in mind the cost of building and to host a website. Creating an e-commerce site entails much more than simply setting up a Word press blog. E-commerce enterprises are anticipated to have complex web pages, but even a simple site would necessitate a domain name, an E-commerce payment option, SSL certification, and hosting (Escursell et al., 2021). Therefore, a well-designed site with custom-built widgets can cost much more.

Hence, the actual value of the cost of building a website is not fixed, but a well-established site costs more. If a business wants to get the help of a third party, if it means selling the products online, it necessitates payment of platform fees. A business may forgo and sell its products through third-party platforms, which means it will incur some cost to be listed. Depending on the company, the fees are varied, ranging from monthly flat rates to specific monthly subscription fees. For instance, it ranges from tens to hundreds of dollars monthly.

Businesses undertaking e-commerce do not exempt it from payment of permits and licenses fees. Also, the cost is varied and is dependent on the nature of products and the business’ state. If a business prepares and sells foodstuffs, it necessitates payment for Doing Business As (DBA), professional trade licenses for insurance and financial planning firms. Besides, e-commerce requires constant, reliable internet access, and a business may incur higher costs on utility account as a result.

Inventory management costs for e-commerce are also known as inventory shrinkage when goods sent to a customer are lost or damaged (Wang & Lee, 2017). There is software for inventory management that tracks products from origination to the customer to do away with that. Therefore, an extra cost is incurred. E-commerce payment options entirely include credit cards or online wallets. Thus, some sought transactional fee applies whenever a customer pays with their cards to a business account.

Challenges Faced by Business Venturing E-Commerce

As stated earlier, e-commerce is anticipated to grow further by 17% by 2025. Over the past decade, its growth due to digital commerce has led to many challenges with its size increasing (Pourhejazy, 2020). It is therefore appropriate for businesses to identify those challenges and act efficiently and ensure integration is achieved. To ensure integration is achieved, businesses need to work to ensure that a solution is reached. It will be helpful for businesses to solve store management and Omnichannel problems. Instead of relying on assumed data, it is crucial to organize data in innovative ways appropriately. It is also good for businesses to acknowledge the effect daily and its impacts in the long run.

Retailers globally are striving to advance their reputation and the product image by giving a better experience. However, it is tougher to counterpart customer anticipation in a period where know-how is crucial, and digital veterans take their experience and expertise to the next level. Besides, agility is another vital aspect of E-commerce. It involves the ability of a business to establish and deploy digital content and act to changes efficiently. This aspect ensures the fulfilment of the digital world, and it is significant for agile renovation in e-commerce and the identification of essentials for success. A good number of businesses find it hard to adjust quickly to the needs of the customers. It is majorly because they cannot integrate upcoming technologies properly with their systems, making it difficult to penetrate the market.

Consistency is a crucial element when establishing an omnichannel approach. On many occasions, customers undertake a search for the products before arriving at a decision. Thus, the company’s task is to provide constant and seamless buying encounters in all available products for sale. However, it is challenging to make an analysis of customer interaction in all touchpoints for customer experience. It is these challenges that result in the hidden cost associated with E-commerce. The challenges can only be solved by additional costs to arrive at a good strategy. For instance, undertaking research necessitates another budget to gather for all that is required. Furthermore, the cloud services costs also challenge E-commerce businesses. According to a study, the cost is anticipated to increase and significantly impact E-commerce for small and medium businesses.

Recommendations and Conclusion

Firstly, businesses should consider making E-commerce function collectively instead of working as a separate segment. It is essential to identify ways to know the weight of data correlated to the customer and its store. It will be a strategy that seeks to visualize data; clearly, target consumers more appropriately, enable a cross-digital impact and help to provide improved monetized methods. Statistically, approximately 85 per cent of customers are willing to gather for extra cots to achieve customer experience. However, 88 per cent of them are more likely to start their ventures due to poor customer experience.

Therefore, to meet the customers’ experience, the organization needs to research customer experience and focus more on utilizing the findings for a good customer experience. In connection, a good customer experience increases the bulk of sales in a business. More sales mean more profits, which can then be used to gather hidden expenses that arise from e-commerce. It will ensure the sustainability of the business once such issues are resolved.

Moreover, agility in e-commerce results in a good purchase experience in a business. To be agile, businesses need to incorporate appropriate changes in all platforms and create personalized undertakings that appeal to their customers. It is important to use fresh content that is carefully designed for all channels with guided expertise. E-commerce also requires an established relationship of 1:1 with their customers.

Conclusion: there is a need to focus on efficient capabilities for easy reach and visibility among the customers. Additionally, consistency is a crucial aspect of e-commerce; thus, firms should consider strengthening digital platforms to achieve consistency. For instance, search options, distinct shopping pages, and ferrying details ensure good quality and fulfilment of distribution. If a business considers all challenges associated with e-commerce, then it means that it will work impeccably and maximize profits. Good profits result in proper management of costs that arise due to its operations.

In conclusion, establishing relationships with customers takes time and effort. It is a good strategy to integrate consumers in different approaches beyond the mere transaction to feel valued. Even when developing a good website that seeks to provide a good customer experience, it is good to engage with the customers by focusing on custom-made communication. It is also important for businesses to look at e-commerce associated costs and the long-term benefits that will arise if promising approaches are considered. It is worth it to spend more on the initial establishment of e-commerce than an eventual business failure.

Finally, it is suitable for businesses to be conversant concerning cyber-attacks against small organizations. Approximately 60 per cent of all e-commerce businesses have experienced attacks on incidents such as malware infections and even hackers. It is more likely as a result of the fact that they are more vulnerable to attack and given that they can be easily exploited and attacked. The result of getting hacked is devastating and therefore calls for investing heavily in reasonable security measures. For instance, encryption and firewall, consistent security measures and upcoming approaches to curb the same. It is crucial as well to be conversant about uncertainties, given the volatility of the world.


Dos Santos, V. F., Sabino, L. R., Morais, G. M., & Gonçalves, C. A. (2017). E-commerce: A short history follow-up on possible trends. International Journal of Business Administration, 8(7), 130-138. Web.

Einav, L., Klenow, P. J., Klopack, B., Levin, J. D., Levin, L., & Best, W. (2017). Assessing the gains from e-commerce. Unpublished manuscript. Web.

Escursell, S., Llorach-Massana, P., & Roncero, M. B. (2021). Sustainability in e-commerce packaging: A review. Journal of Cleaner Production, 280, 124314. Web.

Pourhejazy, P. (2020). Destruction decisions for managing excess inventory in e-commerce logistics. Sustainability, 12(20), 8365. Web.

Wang, Y., & Lee, S. H. (2017). The effect of cross-border e-commerce on China’s international trade: An empirical study based on transaction cost analysis. Sustainability, 9(11), 20-28. Web.

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