As compared to operating a retailer business, an e-business involves applying information and communication technologies, abbreviated as ICT, to support of all business activities. In both businesses, the main objective is to have customer satisfaction by offering easy means of purchase and delivery of purchases to the required places. Therefore, in both businesses, transport costs are incurred by both customers and suppliers depending on the supply chain involved. In a retail business that deals with selling home improvement materials, transport costs are dependent of the nature of goods, transport involved or the means of delivery and the length of chains of supply before the goods reach the consumer. In an e-business, various transport costs do not exist, since the ordering and purchasing are via the Internet, the web, intranets, extranets, or some combination of the above as compared to a retailer who needs to travel long distances to make orders and purchases.
The division of transport costs in both businesses is into three categories: Fixed costs, Variable costs and Semi fixed costs.
Fixed costs are independent of the distance travelled during the supply and delivery of the home improvement materials. These include costs of vehicle purchase for delivery, interests on loans and depreciations of vehicles due to aging. For a retailer business such as Home Depot, the fixed costs are higher as compared to those of e-business such as Amazon.com. A retailer needs to travel to the wholesaler or manufacturer to make purchases for his store as well as deliver the materials to the store and to the customer’s residence if need be (Stecker). This requires more transport aids, for example, vehicles and containers. An e-business operator delivers products to the customers once they are purchasing online.
Variable costs are dependent of the distance travelled until the customer receives the goods (Beggs). These include fuel costs, depreciation of goods from mileage and time costs during transport. For retail trade, the variable costs seem to be higher due the length of the chain of supply involved. The fuel costs are the highest due to the distance covered from the wholesaler or manufacturer to the consumer via the retailer
If the retailer imports the goods, they pay the shipping costs or air transport costs and customs levy. For an e-business, the variable costs are lower, depending on the distance of delivery. Fuel cost constitutes the highest percentage of the variable costs although these are lower as compared to those of a retailer since the chain of supply is shorter. However, transport costs for both the e-business operator and the consumer are higher in case of shipping or flying of the products.
Semi-fixed costs are partly fixed and partly variable. For example, the e-business operator or the retailer may hire drivers who may be idle during the day. In both businesses, this may happen to incase there is less purchasing of the home improvement materials by consumers. Transport costs are, therefore, high since drivers receive payment with or without deliveries. The idleness of transport aids, for example, vehicles during a period where the purchases are low add to the cost of transport due to lower sales during such a period. The semi-fixed costs are not entirely dependent on the business dealing with the selling of home improvement materials, though they vary regardless of whether it is e-business or a retail trade.
References
Beggs, Clive. Energy: Management, Supply and Conservation. Oxford: Butterworth-Heinemann, 2009.
Stecker, Pamela. The fashion design manual. Basingstoke: Palgrave Macmillan Australia, 1996.