E-Commerce S.W.O.T. Analysis

E-Commerce Strengths, Weaknesses, Opportunities and Threats

Are you considering starting a new e-commerce business? Yes? Do a SWOT analysis of the industry and your niche within the world of electronic commerce. Below is a general e-commerce SWOT analysis that highlights some on the particulars of selling items online.

Strengths
Ability to compete with other companies global and locally
Implementing an e-commerce business solution allows companies to expand their customer base to a global level without considerable time or expense.

Specialization and niche selling

The larger customer base created by online sales allows e-tailers to specialize in certain niche products that could not support a more traditional business model. 

Low overhead cost and low barrier to entry
Startup costs for an e-commerce retail operation are a fraction of the costs of starting a traditional brick and mortar company. 

Direct consumer communication

This form of commerce allows the business to maintain a higher level of consumer communication.  The communication happens when the order is placed, when the order has shipped and then at a point in the future, should the customer opt-in to receiving regular email communication.

 Weaknesses

High Customer Expectations
Small businesses can appear to be large companies on the Internet.  Customers have no way of gauge the business’ actual level of man power and resources.  This leads to customers that demand the same level of service from business with 1-2 employees as they would from industry giants like amazon.com. 

Search Engine Unpredictability
Web retailers live and die by organic search engine placement.  The higher the store is placed on the search engine result pages (SERPs) translates to more traffic and sales.  Search engines regularly change their ranking systems and this can cause major fluctuation in placement and create an unpredictable environment.  

Opportunities

Global Exposure
Adding an e-commerce component to a business allows the company to sell their products to a global market. 

High Availability: a 24/7 business
Selling on the Internet allows the company to take orders around the clock on every day of the week.  Orders can then be filled and processed during set business hours.

Strong business-to-business networking
Websites allow for business-to-business exchange links to increase traffic and search engine placement for each businesses’ sites.  This opens lines of communication on a business-to-business level and aids in the cooperation between companies.

Industry Growth
Retail sales on the Internet in America have seen double digit growth each of the past 8 years.  Growth is expected to continue at high rates and having a business online allows the merchant to be in a position to benefit from this expansion.

Threats

Competition
The low barriers and the comparatively low overhead costs allow a for a relative easy entry into the market.  This increases the level competition and can cause a reduction in prices and profit margins.  Threats are produced not only by other retailers within the same industry but also by the manufactures that supply the products that the retailer sells.  It is not uncommon for online retailers to directly compete with the manufacturer of the lines they carry. 

Innovation
Future innovation could have an adverse effect on e-commerce businesses. 

Fraud
Some consumers are leery of doing business online out of concerns of fraud and misuse of their financial data.  This alienates an entire segment of the population from conducting business via the Internet.

Privacy Concerns
Some consumers prefer not to give any personal information out over the Internet because of fears that the information will be misused, lead to spam email or identity fraud.

Future Legislation
Internet sales only have tax applied to the purchase if the buyer and seller reside in the same state. Considering the growth and amount of tax revenue lost to e-commerce, the federal government and individual states could write legislation to impose tax on all online sales. This would remove one incentive to conducting business online.