How do businesses trade online, and what are the benefits and drawbacks of digital trading for the business and its customers?
Digital trading: e-commerce and m-commerce, online payment and shopping, the benefits and drawbacks of trading online for the business and the customer, and the effect on traditional shops.
A CCEA GCSE Business and Communication Systems answer on digital trading. Covers e-commerce and m-commerce, online shopping and payment, the benefits and drawbacks of trading online for both the business and the customer, and the impact of online trading on traditional high-street shops.
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What this dot point is asking
Digital trading is how businesses buy and sell online, and Unit 2 expects you to explain e-commerce and m-commerce, describe online shopping and payment, and weigh the benefits and drawbacks for both the business and the customer, including the effect on traditional shops. Almost every question here is an evaluation: list both sides and reach a judgement about whether trading online is worthwhile in the situation given.
E-commerce and m-commerce
The two key terms describe trading through different devices.
How online shopping and payment work
In online shopping, a customer visits a website or app, browses or searches products, adds items to a shopping basket (cart), and then checks out. Payment is electronic, typically by debit or credit card or a digital wallet, processed securely. The business then arranges delivery to the customer's address. Secure payment and clear delivery and returns information are essential to win the customer's trust.
Benefits and drawbacks for the business
Trading online changes a business's costs, reach and risks.
Benefits and drawbacks for the customer
The exam also asks about the customer's point of view, which is different.
- Benefits for the customer: convenience (shop any time from home), easy to compare prices and choice across many sellers, wider choice than local shops, and access to reviews.
- Drawbacks for the customer: cannot see or try the product before buying, must wait for delivery (and may pay for it), concerns about payment security and fraud, and the hassle of returns.
Effect on traditional shops
Online trading has reduced trade for many traditional high-street shops, because customers who once shopped locally now buy online, often more cheaply and with more choice. Some shops have responded by trading online themselves (selling both in store and online), focusing on service and experience, or specialising. This is a good point for an evaluation about the wider impact of digital trading.
Worked example: evaluating going online
Why this matters
Digital trading is one of the biggest changes in the business environment, opening huge markets to small firms while threatening traditional shops. Understanding the benefits and drawbacks for both the business and the customer, and being able to reach a balanced judgement, is exactly what Unit 2 examines. It links closely to the marketing mix (online changes place and promotion) and to the wider implications of digital technology.
Try this
Q1. State what is meant by e-commerce. [1 mark]
- Cue. The buying and selling of goods and services over the internet.
Q2. Give two benefits to a business of trading online. [2 marks]
- Cue. Any two: wider market, 24-hour trading, lower costs than extra shops, customer data for marketing.
Q3. Explain one drawback of online shopping for the customer. [2 marks]
- Cue. The customer cannot see or try the product before buying and must wait for delivery; or there are payment security and returns concerns.
Exam-style practice questions
Practice questions written in the style of CCEA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
CCEA Unit 2 (style)6 marksDiscuss the benefits and drawbacks for a small shop of starting to sell its products online.Show worked answer →
A 6-mark discuss question testing AO2 and AO3, needing two sides and a judgement.
Benefits: the shop can reach a much wider market, not just local customers; it can trade 24 hours a day, even when the shop is shut; it may keep costs lower than a second physical shop; and it can collect customer data to target marketing (up to 3 marks).
Drawbacks: there are set-up and running costs (building and maintaining the website, delivery); strong online competition from large, established sellers; the need for secure payment and the risk of fraud; and the challenge of handling delivery and returns (up to 3 marks).
Judgement: selling online is usually worthwhile because it widens the market cheaply and lets the shop grow, provided it can manage delivery and security; for a very small or local shop with limited resources, the costs and competition may outweigh the gains. Top marks need a supported conclusion.
CCEA Unit 2 (style)4 marksExplain two benefits and two drawbacks of online shopping for the customer.Show worked answer →
A 4-mark question: two benefits and two drawbacks for the customer.
Benefits: customers can shop at any time from home, which is convenient; and they can easily compare prices and choice across many sellers to get the best deal (2 marks).
Drawbacks: customers cannot see or try the product before buying and must wait for delivery; and there are risks around payment security, fraud and returns (2 marks). Other valid points: benefit, wider choice, reviews to read; drawback, delivery cost, no personal service. The marks are for clearly stated points seen from the customer's point of view.
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