How Will the Economy Affect E-Business?

From RIS News:

 “It is a sign of tough economic times. Retail store closings are up in 2008 by 25 percent year-over-year as the national economy continues to deteriorate. The International Council of Shopping Centers estimates there will be 5,770 store closings in 2008 compared to 4,603 in 2007. Surging gas prices, higher food costs and powerful inflationary forces are squeezing consumers and retailers alike.”

 And from the San Jose Mercury News:

Electronic commerce has grown about 22 percent in the past two years, said Hal Varian, [Google’s chief economist], who spoke at a forum on the state of the Internet economy at Google's new  Washington office. Ed Garrubbo, chairman of the Electronic Retailing Association, said online sales jumped 17 percent in the first quarter of this year. 

"The lesson here is that the economic slowdown is not an Internet slowdown," Varian said. "The Internet is looking pretty strong compared to other sectors."

I wonder if the slow down for brick-and-mortar retail is actually a boon for the e-commerce industry.

Research published in Claes Fornell’s recent book, The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference, he proves that a customer’s ability to spend is not necessarily a predictor of his willingness to spend. The best predictor, as crazy as it may sound, is whether or not that customer is satisfied. A satisfied customer will spend even if they don’t have the money.

Study after study shows that the online channel is the bright spot in any industry in terms of customer satisfaction. In the February release of the ACSI, we saw online retail (81.6 on the ACSI’s 100-point scale) trounce offline retail, which scored 74.2. Our study with Forbes about online financial services showed that customer satisfaction with online banking (82) outpaced satisfaction with banking overall (78).

So, in general, websites satisfy people more than other channels. Add that to increasing gas prices, and I think we have a few good reasons for people to move more and more of their business online. They can conduct business anytime, anywhere, and they don’t have to worry about inconsistency in service. And if the companies they interact with online are doing a good job satisfying customers, it might not even matter how much money they have!

My bet is that we will continue to see growth in the online channels of industries that are starting to feel the pinch of tough economic times, gas prices, and inflation.

Comments

[Fani]

Well. it won't affect on e-biz!
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[Johnhanry]

I think that there will be a lot of development in all soughs of industries and business. Economy will effect in a developmental side.

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[Jeff Paul Internet Business]

It will surely effect E-business becuase e-business is bassed on the comstomer's and when the economy is down it will surely gonna affect the e-business sell conversion.

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The growing demands of e marketing and e business shows increasing profit marginal returns of e com businesses , hence internet marketing is adopted by majority .

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Economic recession have an impact on various sectors , you wont find none other sector as safe as online business having no direct impact by economic conditions .

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It might not even matter how much money they have!

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Economy places direct impact on E businesses , the greater the financial resources , higher will be the web investment , but it has been proved secured comparatively.

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I think we have a few good reasons for people to move more and more of their business online.

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We know electronic businesses to be more secured and accurate with respect to secured returns , hence with economic breakdowns electronic means are preferred more .

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When the economy is doing poorly, and that affects all of us. The Stock Market goes down, and that lowers our savings and 401Ks. Housing prices also have plunged, and that makes people nervous, as tthey may owe more on their mortgage, than their house can sell for. When that happens, people cut back, often heavily on their spending. That means fewer products are sold, so the Manufactures lay off workers. It affects transportation, as they are delivering less goods. It affects Department stores, as they too aren't selling product, so they lay off workers, or don't hire new ones.

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With less than half a century’s development, e-business and the Information and Communication Technologies it relies on, have been growing rapidly. With an even shorter history than the technology itself, the study of its impact on the environment and sustainable development in general, is still in its infancy

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Abstract E-business offers buyers and sellers a new form of communication and provides an opportunity to create new marketplaces. In general it is suggested that the development of e-business results in higher firm productivity and efficiency as a result of lower search and transaction costs.

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The report goes into my theories for why the increases are happening, but its clear that both the industry and UK shoppers have made leaps and bounds this year, and I expect it will be a very merry Christmas for many on this list.

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