The Impact of E-Commerce on Small Businesses

Introduction

To comprehensively understand the impact of e-commerce on small businesses, it is crucial to conduct a multiple case studies analysis using a qualitative research design. The approach raises awareness for small businesses on the opportunities and challenges of the technology and its significance in the modern market context, such as increasing profits in the e-commerce sphere to more than $3 trillion in 2019 from a low $1.5 billion in 2017 (Mkansi, 2021). Using theories, such as the diffusion of innovation theory and the technology adoption model (TAM), also increases comprehension of the techniques small businesses can use to take advantage of e-commerce as an opportunity for expanding supply chains, strengthening partner and customer relations, enhancing competitiveness, and increasing profits, in addition to competing globally and locally. The analysis of the impacts of e-commerce on small businesses helps to determine the opportunities and challenges in the business operation process.

Research Objectives

Using a mixed-method qualitative and quantitative design, the objective of this research, therefore, is to investigate, through a conceptual framework and several theoretical approaches, the challenges and opportunities of e-commerce for small businesses, primarily in developing countries, as there is a significant research gap in this area of study. A comprehensive investigation of these factors helps improve insights about the e-commerce impacts small businesses will experience on adopting the strategy, how they can leverage opportunities, and overcome challenges that limit their onboarding this business process.

Literature Review

Overview of E-commerce, Opportunities, and Challenges for Small Businesses

From the past research conducted on e-commerce by peers, the section explores how e-commerce has revolutionized the business sector while sharing significant insights on the opportunities and challenges small organizations experience when using the platform. With the rapid spread of the internet globally and supporting technology like big data, machine learning, and artificial intelligence, e-commerce has helped many organizations, including giant corporates, to dominate trade. In their works, Xia & Lv (2021) define e-commerce as businesses with internet-reliant websites owned by organizations that enhance trade competitiveness by facilitating free information flow, capital acquisition, business transactions, and logistics. The business process is also critical to overcoming challenges, such as the COVID-19 pandemic that led to the closure of traditional stores and reduced supply chain effectiveness for many organizations, as Chen et a. (2023) indicate in their study.

Small businesses experience challenges before, when, and after integrating e-commerce into their operational structures internally and externally, such as perceiving the technology as an unnecessary business cost, lack of resources to fund e-commerce infrastructure, and absence of managerial support to adopting a radical approach to innovation and growth of the business. The analysis of the impacts of e-commerce on small businesses helps to determine the opportunities and challenges in the business operation process (Fouskas, K et al., 2020).

Conceptual Framework

This research’s conceptual framework will be the technology adoption model (TAM) developed by Fred Davis in 1985. It uses the information systems theory to explain the steps to new technology users accepting and using applications, especially if they align with their business goals (Taherdoost, 2018). Davis developed TAM by borrowing concepts from planned behavior and reasoned action theories. According to TAM, people will only accept new technology if they perceive it as practical or easy to use, effective approaches that e-commerce information “sellers” would benefit from if they want to push for more small businesses to use the platform. TAM is a compelling conceptual framework for the research because it has hypotheses that can justify why small businesses are yet to dominate the e-commerce platform globally.

Theoretical Frameworks

1. The diffusion of innovation theory: E.M. Rogers designed in 1962, positing that a new technology spreads in a social system over time depending on the rate at which different users perceive its usefulness or ease of use (Zhang et al., 2015). The theory labels small businesses as laggards, entities who significantly delay accepting a technology due to suspicion of revolutionary business processes they fear can unsettle their operations (Dearing & Cox, 2018). This theory, however, does not address the challenges small businesses face when attempting to adopt innovations, and thus, it is inapplicable to this research.
2. Organizational ecology theory: Hannan and Freeman created the organizational ecology theory, which views the organization as an interconnection of systems with routines that facilitate information processing and incremental innovations technology (Vargas-Hernandez et al., 2023). The organizational ecological theory assumes that firms collect knowledge over time, which increases their competence. However, many organizations hesitate to adopt new systems because they want to keep their knowledge and accept it is obsolete (Lindquist & Buttazzoni, 2021). The organizational ecology theory is applicable in this thesis because it helps understand why some small firms may hesitate to join e-commerce by highlighting the limiting beliefs these organizations have.
3. Theory of economic development: Another theory that can explain why small businesses hesitate to integrate e-commerce into their websites is the theory of economic development, which Joseph Schumpeter developed. It asserts that businesses are temporarily successful when there is an absence of new technology that radically transforms business processes. However, these organizations experience an economic shock when a new or existing entrant develops a new way of conducting trade that revolutionizes an industry and loses their competence (Tiberius et al., 2021). Small firms that had enjoyed periods of success before e-commerce existed may, as Schumpeter claims, may be immobilized by the progress new businesses are making due to the radical trading online innovation.

Gaps and Inconsistencies in Current Knowledge

Most studies focus on the benefits of e-commerce for multinationals while undermining the need for the model in the small business sector if they are to elevate to large organizations operating worldwide (Costa & Castro, 2021). Few studies, if any, assess developing economies’ underrepresentation in the e-commerce sector due to challenges such as inadequate infrastructure, lack of skilled IT personnel, managerial inertia due to fear of cybersecurity threats, unstable internet connectivity, and fewer customers having access to smartphones, tablets, or computers, which are necessary to transact online.

Thus, there is a need to increase awareness in small businesses, and especially those in developing economies, of the impact of e-commerce by focusing on opportunities, such as the ability to streamline information for consumers, overthrowing obsolete, profit-limiting old business processes, communicating “the best and most affordable” to clients across the globe, flexible sourcing of goods from other countries, and improved business process management due to moving all business activities on a single platform accessible through computer networks (Costa & Castro, 2021). This way, small businesses’ hesitancy to adopt e-commerce, especially when they perceive the model as radical, costly, and insecure, will diminish and pave the way for optimal business performance advanced by mentioned benefits.

Methodology

Research Design

Qualitative Design: This research will embody qualitative studies of current and past case studies to get insights on the opportunities and challenges of e-commerce for small businesses (Aspers & Corte, 2019). The qualitative design is an appropriate tool for the study because it provides an opportunity to collect data that will lead to thematic analysis, showing the trends and patterns of small businesses’ interest in e-commerce and changes in representation across the past decade.

Quantitative design: The research will also adopt a quantitative study design as they will use interviews and surveys to collect statistical data on small firms’ willingness to adopt e-commerce (Khan & MacEachen, 2021). A quantitative research design is suitable for this study because it eliminates the bias the researcher may express in analyzing data collected from case studies through a thematic approach.

Data Collection Techniques

Surveys: The research will use the structured survey to collect quantitative data from selected small business samples. The survey will have questions on the challenges and opportunities small businesses feel exist in the e-commerce sphere.

Interviews: The researcher used interview responses from the sample population disseminated through emails to get qualitative insights on their perceived usefulness of e-commerce and experience using the platform.

Case studies: The research will review multiple case studies on small businesses to get context-specific data on their e-commerce experience, including opportunities and challenges of the platform.

Data Analysis

Thematic Analysis: The research will use a thematic analysis of raw data to design themes that can lead to the formation of appropriate recommendations for small businesses on steps to follow when adopting e-commerce and how to sustain the model indefinitely. The thematic data analysis will increase comprehension of the opportunities and challenges of the e-commerce sector for small businesses. Further, thematic data analysis will increase the research findings’ robustness by ensuring the disseminated information’s reliability and validity (Aspers & Corte, 2019).

Statistical analysis: The research will also analyze the data collected from surveys and interviews statistically to gain insight into the willingness of small businesses to onboard e-commerce. Statistical analysis will eliminate personal bias that may arise from the thematic analysis of data collected from reviewing case studies from past and current studies (Rosário, A., & Raimundo, R. 2021). Thus, the researcher will integrate statistical and thematic data analysis to produce comprehensive results.

Research Findings and Discussion

From the data collection and analysis, E-commerce has valuable opportunities for small businesses, primarily those in developing economies in the severely underrepresented African continent. However, most interviewees indicated in their survey sheets that challenges, such as limiting beliefs about the riskiness of e-commerce platforms, perceiving integrating the model into business processes as additional costs, and lack of capital to implement new technology deter them from joining e-commerce. Other interviewees also felt that many firms need to be made aware of e-commerce opportunities, such as increased profitability, competence, efficient supply chain, and stronger relationships with clients and suppliers.

Thus, there is a need to sensitize small businesses about the opportunities of the e-commerce sector to increase their desire to onboard the business process. Interviewees also proposed that for the above procedure to be successful, e-commerce vendors must also create attractive design features with easy-to-use interfaces that will make small businesses perceive online trading as valuable. The surveys and interview results also show that small businesses willingness to join e-commerce increases with the likelihood of receiving government grants to implement the process.

Implications and Recommendations

The implication of this research for small businesses is to provide strategies for adopting e-commerce through a theory-based lens, extensive literature review, case study analysis, and real-life examples. Another significance of the research is to encourage the adoption of e-commerce by small businesses as a channel for achieving immense benefits from the opportunities the platform presents (Mkansi, 2021). This research’s result can help small businesses to identify the barriers to e-commerce they experience and create solutions that will enhance business processes performance after shifting trading operations online. Using the recommendations of this study, small businesses will improve their supply chains’ efficiency, achieve considerable market growth, attract new customers locally and worldwide, and enhance competitiveness in a dynamic modern market.

Benefits and Risks of E-commerce Adoption

Small businesses experience challenges, such as limiting beliefs about the riskiness of e-commerce platforms, perceiving integrating the model into business processes as additional costs, and lack of capital to implement new technology. Many firms need to be made aware of e-commerce opportunities, such as increased profitability, competence, efficient supply chain, and stronger relationships with clients and suppliers. Thus, there is a need to sensitize small businesses about the opportunities of the e-commerce sector to increase their desire to onboard the business process. For this procedure to be successful, e-commerce vendors must also create attractive design features with easy-to-use interfaces that will make small businesses perceive online trading as valuable. The surveys and interview results also show that small businesses willingness to join e-commerce increases with the likelihood of receiving government grants to implement the process.

Conclusion

Small businesses, predominantly those in developing economies, must integrate online trading or e-commerce into their business processes to access the platform’s opportunities. Despite having challenges, such as inadequate resources to set up and sustain e-commerce, small businesses can learn from organizations like Amazon.com the value of being early adopters of new technology. Future research, however, should be conducted to determine how governments can support small businesses to adopt e-commerce, as there is a significant research gap in this area.

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