Question

Write 100 words that provide Challenges/Risks of e-commerce

Answer 1

Challenges/Risks of e-commerce are as follows -

Inflation/ Price-adjustment Risk: The prices of many products might change while the stock is lying in the inventory. E.g. fast-moving technology products like mobile handsets keep on updating models/ features. In such cases the previous models have to be sold at lower prices.

Credit Risk: Many purchases of high-end products by customers are based on credit (like EMI). If these customers default or delay payment, the resulting NPA might be added to operational cost of the company, leading to losses.

Product Return: Most product returns (due to genuine reasons such as apparel size mismatch or misuse- such as wearing a party wear in an event and then returning or reasons such as “the product did not match the website descriptions”) cost heavily to e-commerce companies in terms of return-courier charges, banking charges (returning the money paid) and putting the fresh product into open-box/refurbished sale.

False Claims: There have been cases when customers have received products in good condition, damage it within return-window and claim that they had received damaged/ defective products. Increased misuse of this is a risk to e-commerce companies.

Mismatch in service delivery and expectations: Customer reviews influence the sale of several high-involvement purchase products. Hence a mismatch in service delivery and customer expectations could be a big risk to e-com companies. Negative product reviews/ social media propaganda affect the e-commerce companies quite badly.

Competition from Offline retailers: Offline retailers like Big Bazar in India, Best Buy in USA pose a big threat to e-commerce companies as they are both able to manage the pricing, discounting model and offer the advantage of being able to test the product before buying.