Question

How do you identify the benefits and estimate costs of electronic commerce initiative

Answer 1

Regarding the eCommerce initiatives, the benefits are estimated as the profit earned over and above the cost of the products sold to the customers. The costs to be estimated are costs incurred in managing the platform, cost of logistics to deliver the goods, cost related to technology acquired and cost of building presence in different platforms. Besides, cost of advertising, salaries and wages paid are also to be estimated by the eCommerce enterprise.

Here, the cash inflows coming to the company is considered as benefit and cash outflows are estimated as cost. Acquisition of technology, is considered as fixed cost other than building a platform such as website. But, payment of  wages to the employees for operations are considered as variable cost. So, first all type of costs are identified, then they are allocated in a particular category of costs for proper calculation of fixed cost, variable cost as well as overhead costs.