The Relationship Between Electronic Commerce & Networking

The Relationship Between E-commerce or Electronic Commerce and Networking

The term Electronic Commerce also known as E-commerce is not new to us. We have been hearing it for quite some time now. We have been doing online shopping, booking goods & commodities from various online sites so we all are familiar with this term. In general, we know broadly the merits of online shopping therefore, we buy things online based on our needs . Have you ever thought about the network effect in E-commerce? If not then this post will provide you more insight into this topic. After reading this article, kindly share your inputs in the comment section. 

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When E-commerce companies set up networking with non competitive prices then it is called as networking strategy which is regarded pretty beneficial. In all those areas of such businesses where interaction amongst users exists, this effect comes handy. 

TYPES OF NETWORKING USED 

1. Business - to - Business also Called as B2B.

2. Business - to - Consumer also Called as B2C. 

3. Consumer - to - Business Known as C2B.

4. Consumer - to - Consumer Known as C2C.

5. Consumer - to - Administration also Called as C2A.

6. Business - to - Administration also Known as B2A. 

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These 6 types of networking plays a pivotal role in driving online business in E-commerce. They tap the potential in the right manner by encouraging and creating an ecosystem, capable of providing impetus to sales.

Coming back to network effect, it can be construed as a method whereby increased number of people enhances or improves the value of goods or services. This effect is regarded significant in the context of online business. It's fairly simple to understand, when more number of people associates with your products or use it then it leads to increase in value of your products, which makes it more profitable. The idea is to reach out to as many people as possible so that the value of the products increases.

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When it comes to fixing the price of your products, you need to take into account the unique value your product offers and how much the customer is willing to pay for it ? Without having a proper answers for these two questions , you can't think of proceeding ahead with your business. Once you have an answer for these two questions then you must also consider the profit margin required to be obtained in order to reach the target set by your company.

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The value of a product or service depends on the number of people who are keen enough to use the same. The more number of people uses your products, the better it gets for you. The reason being, if the network effect is greater than the value it will create will be bigger as well. The buyers are willing to pay more when the number of buyers or sellers of the product increases.

If you carefully analyse the growth of companies like Facebook , Snapchat, Instagram, Twitter, Uber Eats, Amazon, eBay, Alibaba, Ticketmaster, SeatGeek etc, you will see a common trend with each one of them. The value they offer to their esteemed customer increases as they obtained more users. The idea is to acquire more customers. 

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TWO TYPES OF NETWORK EFFECT 

1. Direct Network Effect : This effect highlights the fact, that with the increase in value of products or services there is an increase in the number of customers or users, which in turn increases or strengthens the network to grow.

2. Indirect Network Effect : This essentially portrays that the value of services of one user group increases when a new user of a different user group attach or joins the network.

Conclusion

So the significance of network effect in respect to E- Commerce is massive. Online business draws plenty of benefits by network effect. In business, one of the biggest  priority is to make profits. Business houses tries to incorporate new ideas to ensure that their products and services makes a widespread impact adding more number of people. Various business campaigns are launched by big , medium or smaller concerns in order to pull customers. Network effect is obviously a strong initiative to associate more number of people in order to increase the value of products and this effect has been greatly admired and successful in the context of E- Commerce business sites.

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