Information Sheets > E-Biz for You

E-commerce offers alternative channels for commerce, but business fundamentals remain unchanged. Many people have decided they have to be part of this brave new world of e-commerce, but many of them have not thought why.

Assuming e-commerce will fit with the company's business strategy is naive. There are many areas of business where the benefits of e-commerce will be marginal or non-existent in the short to medium term future.

Having acknowledged this fact, the opportunities for e-commerce must be part of any appraisal of business strategy. The fact that it was not part of the business strategy a year ago does not mean the company should never do it. Strategy is never forever.

E-commerce must be evaluated in the same way as any other business decision such as a new department or a new product line. A business model should be created that establishes the resources, risks and potential returns.

There are some business issues that arise in e-commerce with which people are unfamiliar. The significance of security concerns. That is a simple risk management issue. There are elements of fraud in every realm of business.

Far more significant are issues relating to VAT and direct taxes. Not many people are even aware of the tax issues but there is an ability to secure a significant competitive advantage by choosing your VAT rate.

Depending on your product and your residency you can exploit international differences in sales taxes. The country in which the "server" (the machine on which the web site is located) exists is the country in which the transaction takes place. Choose the location wisely and the tax rates may be much lower.

It is not as simple as locating one's server in another country with lower taxes on your category of goods and services. This is a complex issue which has arisen because no-one had conceived of the World Wide Web when the legislation was drafted. Proper professional advice is essential.

Existing retail businesses in some sectors will quickly come under threat from e-commerce enterprises. The threats are largest for those where there are substantial price differences between national markets - particularly for higher priced items. British businesses currently retailing premium branded goods and cars will rapidly come under threat from competitors selling equivalent products obtained in cheaper markets.

E-commerce will tend to drive prices down for directly comparable goods. Consumers will be able to easily exploit different price levels around the world, so retail margins will shrink.

GOLDEN RULES