What are the advantages and disadvantages of online distribution platforms?

1 Wider reach and lower costs

One of the main advantages of online distribution platforms is that they can help businesses reach a larger and more diverse customer base, without the need for physical stores, intermediaries, or geographical boundaries. Online distribution platforms can also reduce the costs of marketing, inventory, logistics, and customer service, as they often provide these functions or facilitate them through third-party providers. For example, a small business can sell its products on Amazon and benefit from its global reach, fulfillment network, and customer reviews.

2 Increased competition and dependence

However, online distribution platforms also pose some disadvantages for businesses, such as increased competition and dependence. Online distribution platforms can make it easier for customers to compare prices, features, and reviews of different products or services, which can erode the differentiation and loyalty of businesses. Online distribution platforms can also create a dependency on their rules, fees, and algorithms, which can affect the visibility, profitability, and control of businesses. For example, a hotel that relies on Airbnb for bookings may lose customers if Airbnb changes its commission rates, ranking criteria, or cancellation policies.

4 Privacy and security

On the other hand, online distribution platforms also have some drawbacks for customers, such as privacy and security. Online distribution platforms can collect and use a lot of personal and sensitive information from customers, such as their names, addresses, credit card details, browsing habits, and purchase history. This can raise concerns about how online distribution platforms protect, share, or monetize this data, and how customers can control or delete it. Online distribution platforms can also expose customers to fraud, scams, or cyberattacks, which can compromise their identity, money, or devices. For example, a shopper who buys a product on eBay may receive a counterfeit item, a phishing email, or a malware infection.

5 Innovation and collaboration

A final advantage of online distribution platforms is that they can foster innovation and collaboration among businesses, customers, and other stakeholders. Online distribution platforms can enable businesses to create new products or services, or improve existing ones, by leveraging the feedback, ratings, and suggestions of customers. Online distribution platforms can also facilitate the co-creation, sharing, and exchange of value among different actors, such as producers, consumers, suppliers, or partners. For example, a designer who sells their creations on Etsy can collaborate with other designers, suppliers, or customers to generate new ideas, sources, or markets.

6 Regulation and ethics

However, online distribution platforms also face some challenges in terms of regulation and ethics, which can affect their reputation and sustainability. Online distribution platforms can operate in multiple countries and jurisdictions, which can create legal and tax issues, such as compliance, liability, or evasion. Online distribution platforms can also raise ethical and social questions, such as fairness, transparency, or responsibility, especially when they involve human or environmental impacts. For example, a ride-sharing app like Uber can encounter conflicts with regulators, drivers, or passengers over its labor practices, safety standards, or environmental effects.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?