A STUDY OF THE RECENT BOOM OF E-COMMERCE WEBSITES

AND IT’S IMPACT ON SMALL SCALE RETAILERS IN VILE PARLE

REGION

A project submitted to

University of Mumbai for partial completion of the degree of

Master of Commerce

Under the Faculty of Commerce

By

Student Name: Yash Pradeep Rane

Class: M.COM Roll No: 55

Under the guidance of

Dr. Kanchan Fulmali

M.L. DAHANUKAR COLLEGE OF COMMERCE

DIXIT ROAD, VILE PARLE EAST,

MUMBAI - 400 057.

MARCH 2021-2022
 DECLARATION BY LEARNER

I, the undersigned Mr. Yash .P. Rane hereby, declare that the work embodied in this project
work titled “A STUDY OF THE RECENT BOOM OF E-COMMERCE

WEBSITES AND IT’S IMPACT ON SMALL SCALE RETAILERS IN

VILE PARLE REGION”, forms my own contribution to the research work carried out
under the guidance of Dr Kanchan Fulmali is a result of my own research work and has
not been previously submitted to any other University for any other Degree/Diploma to this
or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Yash Pradeep Rane

Name and Signature of learner

M.L. Dahanukar
College of Commerce,

Dixit Road, Vile Parl(E).

Mumbai 400 057.

 ACKNOWLDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me a chance to do this
project

I would like to thank my Principal Dr. D.M. Doke for providing the necessary facilities
required for completion of this project

I take this opportunity to thank our Coordinator Dr Kanchan Fulmali, for her moral support
and guidance.

I would also like to express sincere gratitude towards my project guide whose guidance and
care my project successful.

I would like to thank my College Library, for having provided various reference books and
magazine related to my project.

Lastly, I would like to thank each and every person who directly and indirectly helped me in
the completion of the project especially my Parents and Peers who supported me throughout
my project.
 CHAPTER 1. INTRODCUTION

INTROUCTION TO TITLE 1.1

For the last two and half decades, the information technology and internet changed the world
entirely into new dimension. It helped all the organizations, businesses and individuals to do
their work in more efficient and profitable way. Due to availability of good network (3g/4g)
data packs, smartphones implied more number of internet users. The numbers of internet
users were increasing high day by day. E-commerce stands for “electronic commerce and
refers trading in goods and services through electronic medium i.e. internet or phone”. It
conducts business with latest and advanced information technology such as electronic data-
interchange (EDI). All the primary and support activities i.e. Inbound logistics, operations,
outbound logistics, marketing & sales, service, firm infrastructure, human resource,
technology, procurement of the firms were redesigned in the path of e-commerce to do more
business with high quality products and services and to expand their business to global in
more convenient and simple way through the help of electronic mails, phones and internet

E-commerce can be categorized into following segments:

(1. Consumer to Consumer C2C): consumer to consumer or customer to customer, is a

business model facilitates the transaction of products or services between customers.

2. Business to Consumer (B2C): business to consumer is business or transactions conducted

directly between a company and consumers who are the end users of its products and
services.

3. Business to Business (B2B): business to business is a type of transaction that exists

between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler
and a retailer.

E-commerce market growing fast at good amount for every year. Lot of new products and
services are added to the current portfolio. New offers, new schemes, new cash benefits etc.
are implemented for every quarter of the fiscal year. This made huge business and expansion
of the market to urban and rural areas. The turnover of the businesses those who use e-
commerce increased to tremendous amount and profits are good when compared to previous
year statistics.
e-commerce growth has led to an increase in marketable transactions a multiple times as
compared to the pre-commerce period in the India. The gap of communication between
client/ customer and firm has reduced so much due to the availability of advanced
communication technologies and products. The digital commerce market in the country is
expected to cross $50 billion in value by the end of 2018 from the current level of $38.5
billion, on the back of a growing internet population and increased online shoppers, says a
recent study. The increasing mobile and internet penetration, m-commerce sales, advanced
shipping and payment options, exciting discounts, and the push into new international
markets by e-businesses are the major drivers of this unprecedented growth, it said. Banks
and other players in the e-commerce ecosystem are providing a secured online platform to
pay effortlessly via payment gateways. However, it pointed out that the Indian e-commerce
sector is heavily dependent on the cash on delivery (cod) mode of payment as it is the most
preferred choice for Indian consumers due to lack of trust in online transactions, limited
adoption of credit and debit cards, and security concerns, among others. “More than 50% of
online transactions are done on cash on delivery method and it is available across 600 cities
and towns of India,” the joint study pointed out. On the increase in preference of mobile
transactions, the study said one out of three customers currently makes transactions
through mobiles in tier-1 and tier-2 cities. In 2017, 82% of shopping queries were made
through mobile devices, compared to 76% in 2016, added the study, indicating the
increasing mobile transactions. The survey highlights that 28 per cent of regular shoppers
are in 18–25 age group, 42% in 26–35, 28% in 36–45 and 2% in the age group of 45–60.
While 65% of online shoppers are male, 35% are female. The products that were highest
sold in 2017 included mobile phones, apparel, food items and jewellery, among others, it
said. As per the study, there would be more than a seven to ten fold increase in revenue
generated through e-commerce as compared to last year with all branded apparel,
accessories, jewellery, gifts and footwear available at cheaper rates and delivered at the
doorstep. Definitions of Micro, Small & Medium Enterprises In accordance with the
provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the
Micro, Small and Medium Enterprises (MSME) are classified in two classes

1. Manufacturing Enterprises: He enterprises engaged in the manufacture or production of

goods pertaining to any industry specified in the first schedule to the industries (Development
and regulation) Act, 1951) or employing plant and machinery in the process of value addition
to the final product having a distinct name or character or use. The Manufacturing Enterprise
are defined in terms of investment in Plant & Machinery.

2. Service Enterprises: The enterprises engaged in providing or rendering of services and

are defined in terms of investment in equipment.
THE PRODUCT GROUP MATRIX
There are about twenty-one major industry groups in the small scale sector. They are Food
Products, Chemical & Chemical Products, Basic Metal Industries, Metal Products, Electrical
Machinery & Parts, Rubber & Plastic Products, Machinery & Parts Except Electrical goods,
Hosiery & Garments-Wood Products, Non-metallic Mineral Products, Paper Products &
Printing, Transport Equipment & Parts, Leather & Leather Products, Miscellaneous
Manufacturing Industries, Other Services & Products, Beverages, Tobacco & Tobacco
Products, Repair Services, Cotton Textiles, Wool, Silk, Synthetic Fiber Textiles, Jute, Hemp,
Mesta Textiles and Other Services. A survey of indices of industrial production (IIP)
maintained for these major industry groups reveals what the sunrise industries are and on
what segments the sun has set. SSI units produce an amazing variety and type of products.
Over 7500 products are known to be manufactured in this sector. Even in a particular
product, there would exit a wide range of qualities or specifications catering to different
market segments, particularly in consumer/ household products. Small Scale sector has
emerged as a major supplier of mass consumption items like leather and leather goods, plastic
and rubber goods, ready-made garments, hosiery goods, sheet metal goods, stationery items-
soap and detergents, domestic utensils, toothpaste and toothpowder, safety matches,
preserved foods and vegetables, wooden and steel furniture, paints and varnishes etc

Among the sophisticated items mention may also be made of Television sets, calculators,
microwave components, plastic film capacitors, carbon film registers, electro medical
equipment, electronic teaching aids, digital measuring equipment, air-conditioning
equipment, optical lenses, drugs and pharmaceuticals, electric motors, pesticide formulators,
photographic sensitized paper, razor blades, Collapsible tubes, etc.

MSMEs AND E-COMMERCE MSME SECTOR IN INDIA

As per the latest data available from the Ministry of Micro, Small and Medium Enterprises
(MSME), the number of MSMEs in India consist of 51 million units which provide
employment to around 117 million people. MSMEs manufacture more than 6,000 products,
account for 45% of the total manufacturing output and contribute 40% of total exports from
the country. Studies show that MSMEs that use Ecommerce platforms are around five times
more likely to export than those in the traditional economy.
E-COMMERCE INDUSTRY IN INDIA
The E-commerce business in India has seen exponential growth over the last decade. This
growth is due to many contributory factors, including rapid adoption of technology by Indian
consumers, large increases in the number of internet users, new enabling technologies,
innovative business models and alternative payment options offered by E-commerce
companies. Moreover, the high growth in Ecommerce continues unabated, with the sector
expecting to witness a steep increase in revenues in the coming years

The Internet and the World Wide Web (WWW) are revolutionizing the way organizations are
functioning around the world. The Web is used by organizations in a myriad of ways, some
of which include collaborating, communicating information, obtaining information, providing
information, and sharing information. One application of the Web that is grabbing headlines
in virtually every media is Internet commerce or Electronic Commerce (e-commerce). E-
commerce--the marketing, promotion, buying and selling of goods and services over the
Internet is experiencing unprecedented growth (Williams, 1999). In the past 2 or 3 years, e-
commerce growth has been astonishing and is expected to continue at a similar rate over the
next four years.

Small business use of the Internet (e-commerce and other applications) has increased from 10
percent in 1996 to about 75 percent today; this use is expected to increase to 85 percent by
2002 (Song, 2000). However, currently, only 28 percent of small companies sell goods and
services online (Maxwell, 2000). If one looks at businesses with fewer than 10 employees,
one sees a slightly different picture. In 1999, about 15 percent of these 7.5 million small
businesses in the U.S. conducted e-commerce (Business Week e.biz, 1999). This number is
expected to increase to 20 percent by the year 2001. Although these statistics provide
evidence that smaller organizations are now conducting e-commerce activities, large
companies still account for the majority of e-commerce activity in the U.S. These statistics
also fail to tell us whether or not selling online is a better method for small business.
Over the past few years, a decrease in the prices for software and hosting services has
reduced the barriers to entry in the online environment. Even the smallest of businesses can
now have a presence on the web and conduct commerce. Selling online, however, is not
without its perils. Blindly diving headfirst into the Internet without a complete understanding
of technical, managerial, and competitive challenges may result in stressed operations or
bankruptcy.A question, then, arises: should small businesses and potential entrepreneurs
embrace the Internet? The answer to this question lies in how well a business understands e-
commerce opportunities in its environment and implements strategies to take advantage of
these opportunities. This paper will examine the opportunities that are available for small
businesses and entrepreneurs on the Internet, identify the challenges they are likely to
encounter, and suggest strategies they can develop and implement to take advantage of e-
commerce opportunities.
1.2 CONCEPT OF E-COMMERCE BUSINESSES

As noted above, ecommerce is the process of buying and selling tangible products and
services online. It involves more than one party along with the exchange of data
or currency to process a transaction. It is part of the greater industry that is known as
electronic business (ebusiness), which involves all of the processes required to run a
company online.

Ecommerce has helped businesses (especially those with a narrow reach like small
businesses) gain access to and establish a wider market presence by providing cheaper and
more efficient distribution channels for their products or services. Target (TGT)
supplemented its brick-and-mortar presence with an online store that allows customers to
purchase everything from clothes and coffeemakers to toothpaste and action figures right
from their homes.

Ecommerce operates in all four of the following major market segments. These are:

 Business to business (B2B), which is the direct sale of goods and services between
businesses
 Business to consumer (B2C), which involves sales between businesses and their
customers
 Consumer to consumer, which allows individuals to sell to one another, usually
through a third-party site like eBay
 Consumer to business, which lets individuals sell to businesses, such as an artist
selling or licensing their artwork for use by a corporation

Providing goods and services isn't as easy as it may seem. It requires a lot of research about
the products and services you wish to sell, the market, audience, competition, as well as
expected business costs.

Once that's determined, you need to come up with a name and set up a legal structure, such
as a corporation. Next, set up an ecommerce site with a payment gateway. For instance, a
small business owner who runs a dress shop can set up a website promoting their clothing
and other related products online and allow customers to make payments with a credit card
or through a payment processing service, such as PayPal.

Ecommerce has changed the way people shop and consume products and services. More and
more people are turning to their computers and smart devices to order goods, which can
easily be delivered to their homes. As such, it has disrupted the retail landscape. Amazon
and Alibaba have gained considerable popularity, forcing traditional retailers to make
changes to the way they do business.

But that's not all. Not to be outdone, individual sellers have increasingly engaged in e-
commerce transactions via their own personal websites. And digital marketplaces such as
eBay or Etsy serve as exchanges where multitudes of buyers and sellers come together to
conduct business.
1.3 HISTORY OF E-COMMERCE

Most of us have shopped online for something at some point, which means we've taken part
in ecommerce. So it goes without saying that ecommerce is everywhere. But very few
people may know that ecommerce has a history that goes back before the internet began.

Ecommerce actually goes back to the 1960s when companies used an electronic system
called the Electronic Data Interchange to facilitate the transfer of documents. But it wasn't
until 1994 that the very first transaction. took place. This involved the sale of a CD between
friends through an online retail website called NetMarket. 3 3

The industry has gone through so many changes since then, resulting in a great deal of
evolution. Traditional brick-and-mortar retailers were forced to embrace new technology in
order to stay afloat as companies like Alibaba, Amazon, eBay, and Etsy became household
names. These companies created a virtual marketplace for goods and services that
consumers can easily access.

New technology continues to make it easier for people to do their online shopping. People
can connect with businesses through smartphones and other devices and by downloading
apps to make purchases. The introduction of free shipping, which reduces costs for
consumers, has also helped increase the popularity of the ecommerce industry .

1960 – 1982: Invention and the Early Days 

The development of the Electronic Data Interchange (EDI) in the 1960s paved the way for
electronic commerce. EDI replaced traditional mailing and faxing of documents by allowing
a digital transfer of data from one computer to another. 

Trading partners could transfer orders, invoices, and other business transactions using a data
format that met the ANSI ASC X12, the predominant set of standards in North America for
inter-industry electronic exchange. Once an order is sent, it is then examined by a VAN
(Value-Added Network) and directed to the recipient’s order processing system. EDI allowed
the transfer of data seamlessly without any human intervention. 

Michael Aldrich’s invention, the idea for which was sparked by a conversation with his wife
about their weekly supermarket shopping expedition, involved hooking a television to their
supermarket to have them deliver the groceries. Aldrich coined his invention “teleshopping”
(shopping at a distance), which can be seen as the precursor for modern online shopping. 
1982 – 1990: Early Ecommerce Platforms 

It was apparent from the beginning that these early advancements would make B2B online
shopping commercially lucrative. B2C would not be successful until the later widespread use
of PCs and the World Wide Web.  

In 1982, France launched Minitel, an online service that used a Videotex terminal machine
accessed through telephone lines. The Minitel was free to telephone subscribers and
connected millions of users to a computing network.  

By 1997, over 7 million homes had Minitel terminals. The Minitel system was popular before
falling out of favor after the success of the internet three years later.  

Early 90’s: The World Wide Web Arrives  

In 1990 Tim Berners-Lee and Robert Cailliau published a proposal to build a “Hypertext

project” called “World Wide Web.” The inspiration for this project was modeled after
the Dynatex SGML reader licensed by CERN.That same year, Berners-Lee created the first
web server and wrote the first web browser. Shortly thereafter, he went on to debut the web
on August 6, 1991 as a publicly-available service on the Internet. When Berners-Lee decided
he would take on the task of marrying hypertext to the Internet, the process led him to
develop URL, HTML and HTTP. 

In 1991, the National Science Foundation lifted its restrictions on commercial use of the
NET, causing online shopping to grow exponentially. In September 1995, the NSF began
charging a fee for registering domain names. The number of domain names quickly grew to
two million by 1993. By this time, the NSF’s role in the Internet came to an end and a lot of
the oversight shifted to the commercial sector. 

From the beginning, there were many concerns over the safety of  online shopping. However,
the development of a security protocol, Secure Socket Layers (SSL)—an encryption
certificate created by Netscape in 1994, provided a safe means to transmit data over the
internet. Web browsers were able to identify whether a site had an authenticated SSL and,
based on that, determine whether or not a site could be trusted. 

Now, SSL encryption protocol is a vital part of web security, and version 3.0 has become the
standard for most web servers today. 
Mid ‘90s to Present: Marketplaces, Payments and The Growth of
Ecommerce  

Major Marketplaces Emerge: Amazon, eBay, and Ecommerce Platforms 

In the mid-90s, there were major advancements in the commercial use of the Internet. One of
the first ecommerce sites was Amazon, which started in 1995 as an online bookstore but grew
to become the largest online retailer in the world. Traditional brick-and-mortar bookstores
were limited to about 200,000 titles. Amazon, being an online only store without physical
limitations, was able to offer exponentially more products to the shopper. 

Amazon’s range has expanded over the years and now includes music, video downloads,
electronics, apparel, furniture, food, and toys. The retail giant was one of the first online
retailers to add user reviews and a rating scale for their products. Product reviews are now
considered one of the most effective tactics for driving sales and building customer trust. 

Other ecommerce marketplace success stories include eBay, an online auction site that
debuted in 1995, and Etsy, which launched in 2005 and by 2019 saw gross merchandise sales
total $4.97 billion globally. 

The late 1990s also saw new ecommerce platform options for merchants. Miva’s first
catalog-based ecommerce product was launched in 1997, achieving wide distribution in the
late 1990s. 

In 2005, Amazon launched Amazon Prime, a membership offering free two-day shipping
within the contiguous United States on all eligible purchases for a flat annual fee. The
membership quickly became popular, putting pressure on other merchants to offer fast and
inexpensive shipping options.  

Evolution of Online Payments Security 

As more and more people began doing business online, a need for secure communication and
transactions became apparent. In 2004, the Payment Card Industry Security Standards
Council (PCI) was formed to ensure businesses were complying with various security
requirements. The organization was created for the development, enhancement, storage,
dissemination and implementation of security standards for protecting customer account
data.  
The Rise of Mobile Commerce 

Mobile commerce was first born in 1997, when two mobile device-enabled Coca-Cola
vending were installed in Finland. Mobile commerce gained speed over the next two decades,
as more users began conducting transactions from their mobile devices and websites evolved
to provide a better user experiences. Now, mobile sales are projected to reach 54 percent of
all ecommerce sales by 2021. 

Today, both consumers and business buyers turn to mobile devices for product research and
coupons, with engagement on social media becoming increasingly popular. Business buyers
are expecting more consumer-focused features like personalization and responsive design
and demanding the ability to quickly locate product details, secure pricing, and receive online
help. 

The Future of Ecommerce 

Competing (And Thriving) In a Marketplace Economy 

Although popular marketplaces like Amazon have been setting the standard for customer
experience and innovation in ecommerce, there are many things independent merchants can
do that Amazon can’t, including building a memorable brand experience and gaining loyal,
engaged customers for life. Thriving in the Age of Amazon

Buyer Preferences Drive Rapid Disruption and Growth 

What will shoppers want next? That’s what both online and offline merchants are trying to
figure out. And then there are Millennials, who have disrupted the way ecommerce is done. A
site that lags or struggles to load can lose Millennial visitors faster than you can say “avocado
toast”. As part of the self-directed buying process, Millennials will typically shop around a bit
and read reviews before making a purchase decision.To be successful in the current age of
ecommerce, sellers need to monitor comments and listen to what shoppers say about their
products and customer service. A site with an outdated design will communicate outdated
processes, products, and prices to Millennial buyers, hurting your sales and holding back your
business.  

So, what’s next for ecommerce? The only thing that is certain is that there will continue to be
more changes on the horizon. Your online store needs to be flexible, adaptable, and scalable
enough to meet these changes and future-proof your business for long-term success. 
History of ecommerce in India
The concept of electronic commerce first came in the year 1991, a time when the Internet was
not available in India. However, by the late 90s, more and more people became aware of the
Internet and they came to know that transactions can be done through this medium.

For most Indians, it remained a luxury until a few years ago. In 2002, when the IRCTC
launched an online reservation system, the public started accepting the Internet as something
useful. People came to know about the global leader Amazon and this marked the emergence
of e-commerce in India.
Flipkart was one of the major companies that contributed a lot towards the e-commerce
juggernaut here.

And then came the growth of ecommerce in India when a few years later, Mukesh Ambani,
the front man of Reliance Industries, announced the arrival of Reliance Jio. He gave away
SIM cards for free and this is when the Internet scenario in the country changed massively.

The user base in India just exploded with this and people started availing from the
ecommerce industry, thus poising the industry to thrive with prospects.

From ordering daily essentials such as medicines, milk, and groceries to gadgets, people can
now get almost everything delivered at their doorstep with easy return policies.
The evolution of e-commerce in India has been pretty interesting till now.

Over the past few years, India has been going through a digital revolution of sorts. Over 50%
of the country’s populace, now has access to internet abled devices, and owing to our massive
population, it translates to a user base of over half a billion people. These staggering numbers
have made India a hotbed for internet-based businesses, the largest gainer of which, has been
the e-commerce industry. A report by the India Brand Equity Foundation (IBEF), projects that
the revenue generated from the e-commerce industry in the country is well on its course to
breach the US$100 billion mark by the year 2020. However, this was not always the case with
online businesses in India. In fact, there was almost some kind of reluctance among the
masses, in accepting all things digital.

The concept of e-commerce first formally came forth in 1991, a time when internet practically
did not even exist in India. Even worldwide, very few could fathom that the act of buying and
selling goods and services over the internet, would be as widely accepted a practice, as it is
today. By the late ’90s, people became aware of this thing called the internet, but for a
majority of them, it remained a luxury they did not particularly need. In a truly
Indian manner, it was only in 2002, when the IRCTC introduced an online reservation system,
that the public widely accepted the internet as something fruitful, by which time a company
named Amazon, was already beginning to create a few murmurs in the US.The first real
stepping stone towards setting off the e-commerce juggernaut, was perhaps the creation of
Flipkart, when two engineers from IIT Delhi decided to sell books online from an apartment in
Koramangala area of Bengaluru. A business idea not too dissimilar to that of Amazon. Little
did they know that a decade later, US retail giants, Walmart, would acquire their business in a
US$ 16 billion-dollar deal, after a fierce bidding war with none other than Amazon.

However, even when Flipkart came into being, the internet still didn’t have the accessibility it
needed for such businesses to blow up. Reliance industries frontman, Mukesh Ambani,
corrected that in one stroke when he announced the arrival of Reliance Jio. If there is one thing
Indians, or anyone of any nationality unabashedly likes, it is free stuff. Perhaps, in what was
one of the greatest marketing strategies ever, Mr. Ambani handed out free sim cards as if he
had stumbled onto a secret dungeon with an endless supply of them, or at least a few months’
worth. He was offering data services at a fraction of the cost compared to what his competitors
were charging.

Naturally, this move of Ambanis’ had several implications. For starters, all other network
operators were forced to slash down their prices to a significantly more affordable range. All
of this together culminated in the aforementioned fact, wherein the user base in the country
just exploded. At this time the e-commerce industry was already doing quite well in India.
However, they were about to receive a massive push. ‘Data is the new oil’, screamed
journalists and newspapers. Of course, this also birthed a whole new set of cybersecurity risks,
but as we have witnessed, it’s a risk people are willing to take if they can have anything from
milk to even a new mobile phone delivered right to their doorstep.

What followed was a host of new policies, constructed by Prime Minister Narendra Modi. He
allowed for a 100% FDI cap, in B2B e-commerce businesses. Suddenly almost every business
had an online projection of itself. The existing e-commerce businesses were now worth their
weight in gold. India emerged as an e-commerce powerhouse, which will only grow in stature
in the times to come.
1.4 OPPORTUNITIES

E-commerce takes a number of forms: business-to-consumer (B2C), business-to-business

(B2B), e-procurement, and e-marketplace. According to Forrester Research (2000), the U.S.
share of global B2B e-commerce sales will grow to approximately $3 trillion by 2004, while
B2C e-commerce sales will account for $184.5 billion (see Table 1). E-commerce is growing
much faster in the B2B sector compared to B2C and is largely dominated by larger
companies. By the year 2002, 85 percent of small businesses are expected to conduct
business via the WWW.

Retailing or "e-tailing" is the most typical B2C activity. New ventures or small businesses
can use the Internet to either start a new retailing or service business, enhance an ongoing
business or provide hardware, software, or services that allow other businesses to integrate
the Internet into their business model. A small business selling from a traditional store, called
"bricks and mortar" may see the opportunity to increase market share by creating a Web page
and selling on the Internet.

While there are many large Internet service providers (ISP), such as America Online (AOL),
there are also many small businesses that provide this service. According to a report by
Williams (2000), most of the 7,100 ISPs in 2000 have fewer than 12 employees; the number
of ISPs is expected to reach 10,000 in the next 2 to 3 years; and the U.S. ISP market
generated an estimate of $15 billion in receipts in 1998. The number of small businesses that
provide Internet services have experienced tremendous growth because of the increase in
demand for Internet access. Many of them are finding opportunities in providing additional
hardware, software and service opportunities as they see the opportunity to host and design
web sites for Internet businesses. They are also providing consulting services for those new
businesses

One of the major opportunities for entrepreneurs and small business in the future will be in
the area of B2B. According to Boston Consulting Group, by 2003, more than 65 percent of
all B2B e-commerce purchases will be made by six sectors: retail trade, motor vehicles,
shipping, industrial manufactured equipment, and the government. This will provide ample
opportunities for entrepreneurs and small businesses to find niches in this market.

B2B e-commerce is primarily concerned with increasing the efficiency of businesses through
the use of Internet technology. It helps companies find buyers for specialized goods and
services, time-sensitive goods, second-hand goods, and excess inventory. Small businesses
can benefit from B2B e-commerce through the formation of coalitions that negotiate for
better prices.
Sellers of goods and services can benefit through the reduction of costs associated with
finding new customers. Other advantages of B2B e-commerce include improved service and
retaining customer loyalty. B2B e-commerce also provides small companies an alternative to
traditional EDI networks in doing business with large companies (buyers) who are
increasingly forcing all of their suppliers to trade electronically.

Marketplaces have recently become an Internet application for business-to-business

procurement using an auction mechanism where businesses that supply an industry bid for
the opportunity to sell their goods. A number of general sites such as Commerce One and
Ariba have pioneered this activity, but now individual marketplaces for specific industries
have grown, developed by companies within these industries.

For entrepreneurs interested in software development, it is important that software be

integrated with other software that the clients use. This can also be a barrier to entry if
programming skills and intimate knowledge of the programming in other software packages
is not available.

One of the primary reasons for the wide influx of new online ventures is the low barrier to
entry. You can start an Internet business for as little as a few hundred dollars. In addition,
companies like BigStep.com, eCongo.com, Earthlink.com, Tripod.com, and
Freemerchant.com offer free online services to setup a business with access to online
catalogs, credit card processing, and order-tracking services. However, entrepreneurs and
small businesses must use caution because some companies require long-term agreements
that would eventually lead to extra expenses for added services and expensive support for
technical problems. Microsoft, Intel, Intuit also offers inexpensive sites. These trends have
accelerated the migration of entrepreneurs and small businesses towards conducting
commerce on the Web.

There are several advantages to having an Internet presence. For example, statistics show that
the Internet is increasingly becoming global (Forrester, 2000). Furthermore, having an
Internet presence allows a company to remain open seven days a week, 24 hours a day. You
can also build your business in a phased approach. Additionally, in many cases the consumer
will not be able to tell the difference between a small versus a big business, thus limiting your
liability of smallness. You can be a one-person operation that competes with a 500-employee
firm.
Small businesses can use the Internet to expand their markets, improve efficiencies, attract
and retain customers, and exploit new e-Business opportunities (Oracle, 1999). Other
opportunities include customer service, technical support, data retrieval, public and investor
relations, security and payment issues, cutting costs, and obtaining advice/information.
Existing businesses have the opportunity to adopt e-commerce early and build an
infrastructure that dramatically reduces the costs of doing business while improving
relationships with buyers and suppliers. Through e-commerce efficiencies, they have the
ability to reduce the costs of billing, payment, customer service, distribution/ fulfillment
costs, reduce supply chain management, procurement, and expense management costs.

Small businesses have the advantage of using the Internet to build relationships with
suppliers who before gave them little recognition. With the Internet, small businesses have
the ability to gather information and goods much quicker, reducing inventory and thus reduce
costs. The use of customer service through the Internet can also assist a company through
product descriptions, technical support, and order status information online. This frees up a
company's customer service staff to handle more complicated matters. For example, Internet
sites like Realestate.com have allowed consumers to reduce the time to purchase a home by
75 percent by providing information on purchasing homes.

One of the key opportunities of the Internet lies within the value chain. Companies have the
opportunity to cut out the middleman or become a middleman. For example, the traditional
value chain flows from the manufacturer, wholesaler/distributor, retailer, and consumer. With
the advent of the Internet, entrepreneurs and small businesses have the opportunity to develop
relationships with the manufacturers and sell directly to the consumer without having control
of the products.
An example of an intermediary can be seen through an entrepreneur that developed a web site
called www.avengers.com. The Avengers is an old television series from the 1960s. The site
contains a plethora of information about the series and also has merchandise for sale that
includes copies of the old shows. When you go to purchase some of the videos, it sends you
directly to Amazon.com. If the person purchases the video from Amazon.com, the company
receives a percentage of the sale.
Other opportunities on the Internet include companies whose business models are standard
online storefronts (e.g., amazon.com), transaction brokers (e.g., e*trade), content providers
(e.g., espn.com), auction sites (e.g., eBay), software development companies (e.g.,
ariba.com), startup consulting companies (e.g., exodus.com), and hosting services (e.g.,
sitehosting.net).

Small businesses can learn from some of the most innovative companies that have
successfully used the Internet: Dell Computer, Sun Microsystems, and Cisco Systems. Dell
Computer has become the ideal example for B2B e-commerce. They set up premier pages
with over 5000 U.S. companies that allow businesses to order quickly with few errors. The
pages are especially designed for each company, connected into their Intranet, and allow the
employees to order directly online.

The Internet provides for improved customer service at a lower incremental cost. This is
important since we are moving from a product driven to service driven (supplier versus
demand) economy. The Internet also provides new distribution channels and new ways of
exchanging information. According to Porter (1999), supply chain management will be more
cost effective as a result of the Internet. However, the basics of business (e.g., design,
technology, and manufacturing) will not be altered. Porter states that the industries where the
Internet is likely to be transformational are industries that provide the service or basic
information (e.g., stockbrokerages, auctions, or providing digital goods). Table 2 summarizes
some of the opportunities of Internet/WWW for small businesses and entrepreneurs.
1.5 CHALLENGES AND STRATEGIES

Small businesses have been slower than big businesses to embrace e-commerce. Although
small businesses and entrepreneurs use of Internet is increasing, they will face a number of
challenges as they start using Internet/WWW for e-commerce. Further global expansion of e-
commerce will create new challenges for small businesses and entrepreneurs. This section
examines both challenges and the strategies that small businesses and entrepreneurs can
utilize to take advantage of e-commerce.

The B2C market is currently in its shakeout stage and is a low margin, high capital business
that will take until 2003 to be profitable. Over the past few years, B2C companies have
skyrocketed in value, however the recent downturn in the Internet sector has seen many
companies lose 50 percent or more of their value. Investors are putting pressure on these
firms to produce profits. In the past, these firms were valued by their sales, now investors are
demanding that these firms produce net profits along with a strong revenue model.

As a result of these activities, money raised by B2C companies has dipped 23 percent to $1.4
billion in the first quarter 2000 from the fourth quarter of 1999. During the first quarter of
2000, only 5 percent of venture capital funding went to e-Commerce startups, down from 12
percent in the previous quarter (Donahue & Girard, 2000).

An increasing number of B2C companies are withering away due to an increase in the
number of competitors (Oracle, 2000). This effect has been particularly felt in retail
industries such as toy stores, computer sellers, and office supplies. Survival projections for
several of the dot.com retailers look bleak (Forester Research, 2000). Clothing retailer
boo.com recently liquidated their company after burning $100 million in six months.

The low barriers to entry and increase in competition will have an increasingly negative
effect on entrepreneurs and small business owners' ability to survive within the B2C area.
Both traditional and virtual companies' weaknesses have been amplified. Consumers have
gained power in the distribution channel by demanding and receiving the lowest prices
available. Consumers can achieve this through information intermediaries like
CompareNet.com who have information on prices and vendors for over 100,000 consumer
products. According to John Hagel of McKinsey & Co., "Consumer infomediaries can save
an average client household the tidy sum of $1,100 a year by searching for the best deals on
its behalf. The reduction in transaction costs will give more power to the buyer." It is
estimated that these infomediaries will grow from $290 million in revenues in 1998 to $20
billion in 2002 (Hof, 1999).
There has been a tremendous surge in the number of B2B companies or exchanges, however
most of these businesses are nothing more than meeting places. Hence, it is likely that current
projections of large-scale bankruptcies among B2B companies will also become true due to
the lack of value-added services for the trading partners. These services typically include
integrating back end systems, providing industry specific content, and assisting in the
development of RFP's. Horizontal exchanges (e.g., Freemarkets) that provide trading services
for several industries are faced with the additional burden of providing compelling content
for their customers.

In a sense, the pressure is on for small businesses because they have to eventually participate
in buyer initiated exchanges. This is especially the case for small businesses that are tier two
or tier three suppliers for large companies like General Motors. In an effort to rationalize and
streamline their supply chain, larger companies are insisting their suppliers upgrade their IT
systems to a level of sophistication that is on par with the organization. Larger companies
want suppliers to deliver goods in a shorter period of time in a cost-effective manner. This
requires not only sharing demand forecasting and inventory information but also exchanging
information that is in compatible formats. It is also essential that transaction details be easily
integrated with back end systems. For example, suppliers are likely to insist that order
information should directly be pushed into their order processing systems, rather than retype
all the information. On the other hand, large organizations would prefer that supplier initiated
information be fed seamlessly into their internal ERP or legacy systems.

For small businesses that have not yet established formal relationships with large company's
supply bases, there is also the question of whether to become affiliated with horizontal versus
vertical exchanges. It is likely that eventually small businesses will have to participate in
several of these exchanges. Typically, several of these exchanges require registration fees,
subscription fees, and maybe even transaction fees. Hence, it is important for small
businesses to perform a cost benefit analysis before joining an exchange.
OTHER MAJOR CHALLENGES FACED BY SMALL BUSINESSESS
INCLUDE

Nowadays, people are more interested in buying and selling things through
electronic media. This trend has brought in an array of new opportunities and
challenges for small businesses. E-Commerce is a powerful tool that will help your
small business grow and glow all across the globe.  
In the e-commerce business, there are different sets of rules and regulations to
follow. Cybersecurity, competition and order fulfilment becomes more important,
both to the function of your business and its longevity. The major e-commerce
challenges faced by small businesses and the solutions to them are mentioned
below.

Cybersecurity

Small e-commerce sites need efficient cybersecurity practices and tools in place.
As a small business cannot afford to have downtime in operations and sales in case
of cyber attacks, they need proper cybersecurity framework to keep the data safe.
Small businesses should invest in implementing policies and technologies to deal
with the cyberattacks and should have an incident response plan to face them.

Order fulfilment

Order management and fulfilment processes have a direct and immediate bearing
on the success and even survival of the business. In an e-commerce business, you
should always be prepared to handle more orders than expected. To handle such
situations and to deliver products in a  specified time, order fulfilment should be
outsourced to a third-party.
Customer Experience

One of the biggest challenges in running an e-commerce site is to provide

customers with an experience better than or equal to what they get in a real store.
Price handling, analytics and customer segmentation should be given importance.
There should be clarity in product offerings, pricing and more, and it should be
same as that of a face-to-face purchase. For the success of an e-commerce venture,
consistent and profitable pricing is an important requirement .

Competition

Making your business stand out from your competitors is a tedious task in the
saturated e-commerce space of today. The first step to handle this is to build a
professional website and to make sure that it is optimized correctly to suit today's
Google algorithm. To increase your domain authority, focus on smaller
demographic by providing unique products or services.

Return and Refund Policy

To make your brand stand tall among the others, create a smooth, fast and easy
return policy. If you don't have a good return/refund policy, people are less likely
to trust you. Customers are reluctant to buy from sites that do not offer good
return/refund policy.
 
Design an attractive website for Better Conversions

12Design and develop a trustworthy website that is modern, clean, user-friendly,

and virus-free, to increase your conversion rates. Create an attractive website and
improve the quality of the content using various SEO techniques. Optimize the
webpages using short-tail and long-tail keywords for attracting relevant traffic to
your website. 
Visibility of the Website

The main issue with small businesses is the visibility of their website. If their
website does not show up on the first page of Google's search results for relevant
keywords, then it is unlikely that prospective customers will find them. Investing
in SEO is the best way to overcome this challenge. Understand and identify
your target audience to figure out which marketing channel will generate
traffic that actually converts into sales. Following the best SEO practices
will lead to higher search visibility and an increase in qualified leads.

Finding the Right Market

Small businesses find it difficult to find the right market for their products. To find
it out, initially make assumptions about the target market and start running
Facebook ads. When a sale is made, learn about the customer who bought your
product and try to collect all available details, to figure out your target audiences
and market.

Making or Increasing Sales

Once you have set up the website, identified the market and the target audience, the
next challenge is making/increasing the sales. For increasing sales, small
businesses should have the right product at the right price. As specified earlier, the
website plays a major role in increasing the sales too.
1.6 TECHNICAL CHALLENGES OF E-COMMERCE

Once a small business or entrepreneur has decided to conduct business on the Internet, their
next strategic decision is to decide how to host their web site. These businesses have three
options: host their own web site; host their site with a web hosting service provider; and host
their site with a portal such as Yahoo or GeoCities. For a small monthly fee, portals like
Yahoo will help any small business develop its site, perform payment processing and tax
calculations, maintain the site, and collect site statistics. While this really reduces the
development effort, it also reduces the flexibility. Most portals will not let merchants have a
virtual domain name. So instead of www.merchantname.com, the address will be
store.yahoo.com/merchantname. Also, these portal-based storefronts do not necessarily grow
with the business and could get tedious, expensive, and cumbersome when the order volume
increases. Since portals like Yahoo host several other storefronts, the download time for
potential customers could be very high. Increasing the growth rate will eventually require a
site that is more reliable. Finally, if the site requirements grow beyond the capability of a
portal-based host, it is impossible to transfer the site contents into a standard format.

This is because portals like Yahoo do not allow one to convert site contents developed in
their storefront into any recognizable format such as HTML.
Another alternative to portal-based hosting is buying a server. There are downfalls to this
strategy as well. For instance, the business might not be able to make decisions about
hardware, operating systems, and application servers.

This also requires considerable knowledge in installation and setup of a web server. Server
connection fees can be prohibitive. The merchant typically will need at least a 64 Kbps
connection line to the Internet backbone. This entails line installation costs as well as any
other costs for network routingequipment
In most cases it is best to start with a web-hosting provider where the business is not
concerned with hosting issues but at the same time has a certain degree of flexibility.
However, selecting a web-hosting provider requires careful consideration of several issues:
length of the contract, disk space offered per account, ability to run CGI (Common Gateway
Interface) and other scripts, conduct secure transactions, e-mail management, availability of
access logs, instant credit card validation, connection speed of the web host with the internet
backbone, server redundancy in case of traffic spikes, adaptive pricing plans which
correspond to scalable requirements, throughput--the number of http requests that a particular
web server can handle, and the response time for the server to handle a page request.

Hosting the site with a web-hosting provider might require the business to incur initial
development time, cost, and effort. However, with the advent of easy to use tools, this task
has become considerably easier. At the most basic level, a typical e-commerce infrastructure
for a small business or entrepreneur consists of a web storefront for buyers to browse the site
andapaymentgateway to collect credit card payments.

In order to perform these functions, several software components are required. First,
storefront content development tools such as HomeSite, FrontPage, and PageMill are useful
for developing site content and also include features such as creating customer survey
collection forms. Second, database connectivity tools such as ColdFusion, ASP, and
VisualInterDev are useful for creating database driven applications. Database connectivity is
crucial because the web catalog should be consistent with the actual inventory database.
Third, setting up a payment gateway requires an HTML based form that collects customer
credit card and shipping information. This information is then encrypted using Secure Socket
Layer (SSL) and sent to a third party provider (such as First Data), which then forwards the
information to the customer's credit card issuing bank. After authorization and a deduction of
transaction fees, the net amount is credited to the merchant's account. Typically, payment-
processing software like QuickCommerce take care of some of the above functions. It is also
important for the merchant to get authentication from a certification authority such as
Verisign. Ancillary tools are useful for functions such as tax calculations (e.g., Taxware), site
traffic analysis (WebAnalyzer), diagnostics (LinkSleuth), chat sessions (Ichat), live help
(Humanclick), and e-mail management (eGain).
Another challenge is to maintain the business 24 hours a day, seven days a week. This
requires staffing for customer service as well as technical problem troubleshooting such as
site upgrades, hosting failures (server crash), and environmental failures (power outages).
Sites also need to be constantly re-evaluated for stress testing (how well they handle peak
traffic), page download times, link validation, and usability. It is also important to evaluate
how many high margin transactions occur on the site. Small businesses and entrepreneurs
with low margin items should consider offline authorization or authorization on a batch basis
as opposed to real time credit card authorization. This is because third party payment
processors such as First Data as well as the customer's issuing bank charge fees for
processing every credit card transaction on a real time basis.

Security is one of the most important aspects of web site operations. Typical attacks include
hacking into the site for credit card numbers or even denial of service. Part of the reluctance
on the part of customers to buy on-line is their perception that their credit card and other
information is not secure. Hence, entrepreneurs and small businesses need to assure their
customers that they take adequate security precautions.

It is also important to have contingency plans in the event of an attack. The consequences of
not having adequate mechanisms and a contingency plan can be severe. The inability to
thwart security related attacks on the site would be unnerving to consumers. The direct effect
of this is an immediate drastic reduction in market share because the site is now branded with
an image that credit card and other private information is not secure. While contingency plans
do not really alter the damage, they can be more useful in that they can be used to reinforce
the impression of a secure site.
1.7 BUSINESS CHALLENGES

When developing a web site, small businesses and entrepreneurs must make sure that they
create an attractive site with a sense of community. Building one-to-one relationships and a
quick delivery of quality products will be keys to success. Customize your site for clients and
receive e-mail to get feedback about the site. If you are selling products, have a virtual
catalogue that includes pictures on the site. To save space and decrease the download time,
place pictures in small thumbnails. Give the consumer the opportunity to hit a thumbnail to
see the big picture.

One of the keys to having a successful online business is brand name recognition. With a lack
of brand name recognition, customer perceptions may lead to a lack of trust. Customers may
be reluctant to purchase online, especially give out credit card information for fear of hackers.
To overcome this objection companies are attempting to create a strong brand name through
heavy advertising. As competition increases on the Internet, companies will be increasingly
forced to develop their brand name on the Internet and the traditional marketplace. Some
strategies that companies have been using are creating gimmicks such as free shipping or
offering free items to entice customers to purchase items from their site. The problem with
these gimmicks is that they do not lead to a company's sustainable competitive advantage.

Innovative marketing is also a key to success. Some of the more common approaches
include: reciprocal links with complementary sites, banner advertising, retailer-search engine
portal alliances, prospect fees for visitors who complete some action, and affiliate programs
with other merchants. Given the click through rates of 2 percent and then further prospect
conversion rates of 3 to 4 percent, it is not only important to attract new customers, but also
devise strategies to increase purchases as well as strategies to retain existing loyal customers.
These strategies include: personalizing content and promotions, placing complimentary items
beside core products, attractive and functional design, and building a loyal user community
with chat rooms and discussion threads. For example, online grocery sites can be
personalized for specific tastes and preferences such as health conscious groups or
international foods.
For sites that feature several product categories and brands, a big issue is usability.
Navigation through 10 to 12 screens might result in a frustrating experience for the customer.
Instead, it might make more sense to create personal shopping lists that are based on usual
purchases. Yet another way companies can enhance their competitiveness is through the
reduction of problems related to logistics (e.g., late delivery) and poor inventory management
(e.g., out of stock). More recently, companies have found innovative ways of providing
customer service on the web. Having links with answers to frequently asked questions is an
innovative tool being used by companies.

The Internet has also created new challenges for companies that have traditionally fulfilled
the role of middlemen; i.e. bringing buyers and sellers together (for example insurance
agents). Companies that have been operating with physical storefronts have had to devise
new strategies to compete successfully. This includes the ability to leverage their offline
activities with their online operations. For example, Williams-Sonoma, a bridal registry,
allows couples to register online while gift buyers can use kiosks located at various places in
their physical storefronts to access an updated database of gifts bought.

It is also very important to understand the people who visit your site and which products they
purchase. It would be worth investing in site evaluation tools such as SiteAnalyzer to identify
typical customer profiles. These tools also provide information related to revenue by page or
by product and also revenue by the incoming referral url address. This will help the merchant
to evaluate the effectiveness of his banner advertising strategies. Other strategies include
developing strategic alliances with other net companies and exchange banners on their sites,
hosting a chat room or discussion group, or advertising on other sites.
1.8 IMPACT OF E-COMMERCE ON SMALL SCALE BUSINESSES

Use of electronic commerce (e-Commerce) in small and medium enterprises (SMEs) has
become an important topic in information research systems. E-Commerce is a technological
innovation that enables SMEs to compete in the same level with other major companies.
According to statistics, SMEs are the main sources of innovation and are a step forward
compared to large companies, because they are more flexible to market changes. The feature
of nowadays is the digitization of business; therefore the use of the Internet and the use of
technology has become a tool to gain competitive advantage in business. Competitiveness at
the global level and exports in the future will largely depend on the deployment of new
technologies in commercial matters. SMEs have grown significantly in the global economy
over the past two decades due to the fact that their number represents about 90% of the total
worldwide facilities. Even in Kosovo, SMEs represent the majority of production units of
Kosovo economy; therefore the current directions of national policy should address the ways
and means of developing capacities of SMEs. Like many other countries around the world in
Kosovo SMEs play an important role in generating employment and ensuring the economic
development, the rapid developments in information and communication technologies (ICT),
especially the Internet, have brought many changes in the world, both in developed countries
and developing countries. The purpose of this study is to determine how many SMEs in the
Republic of Kosovo are familiar with e-commerce, the opportunities it offers for business,
and how many of them use it as a basic strategic definition in their businesses. We will
explain the advantages of e-commerce for SMEs as an innovative way to improve business
performance. Given that e-commerce is the future of enterprises, managers of SME should
focus their efforts on innovation processes, as part of the development strategy of the
enterprises where they work.

Many governments have an active policy of intervention to promote Internet adoption in

SMEs, so knowing the importance of the internet and Kosovo government is paying attention
the support of SMEs in terms of the necessary technical infrastructure. SMEs are generally
willing to develop e-commerce systems or to change current business models. In this society
of knowledge, firms must develop competitive advantages based on an adequate and
intensive use of information and communication technologies (ICT), which is an essential
element of success in today's market. This fact is especially important for small and medium
enterprises (SMEs), whose survival depends, among other factors, in the use of ICT to
develop new organizational models, compete in new markets or to deepen their internal and
external relations of the communication. Although there is a major impact on the design of
strategies, most SMEs do not see the Internet as a key to their business strategy. Use of
ecommerce in small and medium enterprises (SMEs) is important and there are positive signs
that their benefits are by electronic commerce as a kind of ICT, for assistance in expanding
their business. Small and Medium Enterprises (SME) are the main promoter of economic
growth of a country, and should be studied in terms of their adaptation to new technologies
that make them faster and stronger, creating new channels, reducing time to market, offering
the opportunity to work more flexible and creating new jobs. To be able to reach new
customers who are away from their countries to compete with their rivals in the national and
international arena, SMEs need to be adapted to information and communication
technologies.

DEFINITION OF SMEs
The SME sector plays an important role in the economic development of any country, in
particular for Kosovo that is undergoing in the transition phase directed towards a market
economy. There are many definitions of SMEs, thus the determination and definition of
SMEs is not the same in all countries and therefore we conclude that there is no general
definition defining SMEs. There is no definition or criteria for deciding the term enterprise
respectively small and medium enterprises (SMEs / SMBs). The main factors that determine
whether a company is SME are: 1. Number of employees and 2. Turnover The definition of
small and medium (SME), according to the EU is divided into three categories: - Micro
Enterprises / businesses, have 1-9employees - Small Enterprises / businesses, have 10-49
employees - Medium Enterprises / businesses, have50-249 employees EU concept is a
concept accepted by Kosovo institutions.Following in Table 1, will be presented the
classification of SMEs according to World Bank standards and the European Union

Use of electronic commerce (e-Commerce) in small and medium enterprises (SMEs) has
become an important topic in information research systems. E-Commerce is a technological
innovation that enables SMEs to compete in the same level with other major companies.
According to statistics, SMEs are the main sources of innovation and are a step forward
compared to large companies, because they are more flexible to market changes. The feature
of nowadays is the digitization of business; therefore the use of the Internet and the use of
technology has become a tool to gain competitive advantage in business. Competitiveness at
the global level and exports in the future will largely depend on the deployment of new
technologies in commercial matters. SMEs have grown significantly in the global economy
over the past two decades due to the fact that their number represents about 90% of the total
worldwide facilities. Even in Kosovo, SMEs represent the majority of production units of
Kosovo economy; therefore the current directions of national policy should address the ways
and means of developing capacities of SMEs.
1.9 POSITIVE EFFECTS OF E-COMMERCE ON THE ECONOMY

Information Technology has come out as a game-changer in almost every walk of all. Book
your tickets, pay your bills, transfer your money, entertain yourself, it is all there. So, it will
not be wrong to say that the use of internet has acted as a game changer even for business
activities across the globe. In India, SMEs have been operating in a traditional manner and
have been dependent on domestic trading activities for a long time. But with the growing rate
of internet penetration, SMEs in India are also gradually modifying their activities to grab
opportunities to trade globally through e-commerce. It is very fascinating to note that around
43% SMEs are now involved in online transactions. These SMEs have an enhanced customer
base, better employment opportunities and increased profits. And the trend is on a rise,
wherein according to survey almost 565 SMEs believe that use of e-commerce will boost
their business growth. It was also observed that the SMEs who used the internet extensively
had a growth rate of around 19 % as compared to those who did not put the use of
Information Technology in an extensive manner. The growth rate of such SMEs was recorded
at around 13%. Those SMEs who used the internet extensively for their business purposes
also recorded export values which were approximately twice of those SMEs which did not
use much of internet for their business activities.

The traditional SMEs have not experimented much and have stuck to their core activities
while those who have entered the domain of e-commerce has not only seen a growth in their
business but also a growth in their status quo. It has also been ascertained that around 98 % of
the SMEs who use Information Technology and e-commerce contribute to the total exports of
the country while only 11% of the traditional SMEs are contributing towards the total export
values. This gap between the tech using SMEs and traditional SMEs can be explained by the
fact that e-commerce goes beyond the geographical boundaries and provides a level playing
field. E-commerce increases the trade visibility of the seller among the buyers who are
located in far flung geographical regions.

Potential Benefits to SME

1 Increase in revenues
One major disadvantage of being offline is that you are cut off geographically, and more
often than not, incremental efforts are made to expand the customer base. This takes a long
period. On the other hand, e-commerce helps SMEs carry on their business activities
transcending geographical barriers, thereby increasing the customer base, sales, and revenue.
It has been perceived that due to the increased speed to market and a global customer base, an
SME can boost its revenues by 51 %. Another benefit of e-commerce is that there is a prompt
feedback channel through which any complaint or mistake can be made good
immediately. The referral system on the internet also helps the business to tap into more
potential customers.
2 Low marketing and distribution cost
There is a very sharp rise in competition these days. Businesses try to draw in as many
customers as possible to beat their rivals. To do this, they spend heavily on traditional and
digital media. By adopting e-commerce methods, the SMEs can reduce their marketing costs
drastically by cutting down on expenses of trade shows, enormous offline advertisements and
call centers, thereby optimizing their spending. These savings can reduce their expenditures
up to 60-80 %. Moreover, adoption of e-commerce methods reduces the traditional marketing
cost and the cost of opening a store in multiple places also.

3 Increase in profit margins

SMEs can take advantage of a third-party trading platform with a very little or no investment
by implementing e-commerce methods. They can host and develop their online storefront and
also manage logistics, packaging and, warehousing. The reduction in overhead costs of these
activities can potentially increase the profits of SMEs by 49%. When costs are reduced, the
same resources can be used to develop a better and more competitive pricing strategy which
will have a constructive impact on the profit margins. Adoption of e-commerce also cuts out
the middle-man between the SMEs and the consumers, thereby cutting down cost further and
increasing profits.

4 Better Accessibility and Geographical Reach

The internet is not restricted by any geographical limitations. The seller can connect to
several buyers across different geographical areas. In the virtual marketplace, geographical
boundaries disappear and business can go on 24×7 without any time zone restrictions.

5 Faster approach to market

A key factor in increasing business is to come up with the product in the market before your
competitor does. Time is the essence where the window of demand for any specific product is
very short. E-commerce provides the ability to SMEs to approach the market faster by
avoiding possible chaos in the supply chain. The redundant processes can be eliminated, and
the process of communication can be streamlined to reach the customer as quickly as
possible.

6 Better experience for customers

In today’s competitive business world, the principle ” the customer is the king”, holds the
center stage. E-commerce helps the SMEs to provide a better experience to the customers.
Optimized after-sale services, quick responses to the inquiries of the consumer, and an
interactive and informative process of transactions creates a strong and loyal customer base.
1.9 Negative effects of e-commerce on economy

 Security aims to be a major problem in electronic commerce.

 Everyone, good or bad, can easily open a website, and there are many bad sites whose
goal is the money of cybercrime users.

 Before making instant online transactions, be sure to check the site security
certificates.

 It is easy and convenient to buy, No one needs the personal details to set the adoption
of electronic commerce, that is mainly in marketing and sales.

 India is gradually becoming the country with the largest number of literate people on
the Internet in the world, and Internet penetration is largely due to mobile phones, and
some of the cheapest and most basic phones now offer Internet access.

 E-commerce has the effect of increasing the transparency of the market at the macro
level and at the micro level, greater productivity.

 The greater productivity will be out in the market on the micro and macro level, E-
commerce has the effect of transparency