Blog: Has the Internet Changed Business?

Has the Internet changed business? I would say, “Yes, kind of.” The Internet has changed how business is done, but it has not changed what business is. There has always been one fundamental factor for a successful business – it must produce a product or service that people are willing to pay for at a cost that is less than what people are willing to pay. This is true whether a business is a “brick and mortar” business or an on-line business.

However, the Internet has changed how business is done in a couple of significant ways. First, it has enabled businesses to sell to customers that are anywhere in the world. Second, the Internet has increased the number of ways that customers can pay for a company’s products or services. I do not mean only directly paying by credit cards or PayPal, but people may also pay indirectly for access to a site and the services on that site. For example, I read, but I do not pay ESPN directly for access to their site. Rather, I implicitly agree that I will pay slightly more to buy the products of the companies that pay to advertise on; in other words, I do not pay to directly, but I pay the advertisers who pay Prior to the Internet, this type of paying indirectly for something was not available on such a wide scale.

So, while the Internet has changed some elements of how business is done, the fact that the basics of business are unchanged is evidenced by all of the .com companies that did not survive. These companies may have had a “great idea” of a product or service to provide, but I would suspect that many of the companies that failed did not ask if people would be willing to pay (one way or another) for what that site provided. When the site closed, the great idea was left behind.

There is another unfortunate result of the rise of Internet businesses, which is the anonymity that the Internet provides to sellers. When a person opens a physical store or restaurant and provides personal services to customers, the owner has to have a sense of responsibility for what they sell because they will actually see their customers on the street, in the park, or around town. If the seller sells a bad product, they will have to deal with their customers face-to-face every day, and if they do not take responsibility for their products, they will soon go out of business.

On the other hand, with an Internet-based business, there is almost no chance that the business owner will ever come face-to-face with unhappy customers. This makes it easier to sell low quality products or services, or to over-promise and under-deliver. By the time the customer knows that they have paid too much for something, or bought something useless, it is too late. Those customers do not have the opportunity to deal with the seller directly because the seller hides behind a website.

So, yes, the Internet has changed how business is done, but it has not changed the fundamental nature of what a business is. Further, while the Internet has been beneficial to both buyers and sellers by making the world smaller, it has also raised the risk for the buyer when they buy something on-line. Unfortunately, there is no easy way to tell whether or not the Internet based seller is an honest one. But, there are a couple of things to keep in mind when shopping online:

  1. If it sounds too good to be true, it probably is.
  2. If a company is online only, you should consider why they do not have a physical presence anywhere. (Remember that some businesses might not make much sense as a “brick and mortar” store.)
  3. Reviews published on unbiased third party web sites can provide insight into the company’s products and services.
  4. Make sure that the checkout process is secure so that you know that they take your privacy and security seriously.

What other steps do you take when evaluating an online store before making a purchase?

Brian Hock, CMA, CIA