Transcript
Module 12: Electronic Commerce and Retailing
1-Introduction
There are a variety of ecommerce sectors, including business-to-business (B2B); business-to-consumer (B2C); business-to-government (B2G); consumer-to-consumer (C2C); and government-to business (G2B).
This module is concerned primarily with B2C and C2C
Pure players those retail companies that developed using the Internet as a means of exchange
Clicks-and-bricks: retailers that have added online retail formats to their physical store portfolios
Bricks-and-mortar: those retailers that operate traditional physical retail outlets
2- The Growth and Development of the E-Commerce Market
The growth of e-commerce was closely linked to the development of Internet usage.
Growth of broadband allowed faster download speeds, facilitated growth of successful e-tail websites
This, together with a strong focus on improving the security of transactions, encouraged growth in online spend by consumers
The rapid growth of mobile broadband added a further channel for e-commerce, bringing with it consumers who had never shopped via ‘traditional’ e-tail websites.
Businesses involved in exploiting these e-commerce markets are called infomediaries in that they are trading information and are facilitators in reducing transaction costs between buyer and seller.
The problem with the B2C model compared with the C2C and B2B models was the requirement to trade goods that were tangible and needed to be stored and transported to the final consumer.
Additionally, a market presence and brand identity were necessary ingredients to wean customers away from their traditional methods of buying behavior.
Disintermediation in B2C markets: This meant that the role of intermediaries – agents, wholesalers and even retailers – would be reduced as manufacturers were enabled to interact with and sell directly to consumers.
The clicks-and-bricks approach gave a customer greater flexibility, including, in the case of clothing products, the opportunity to return goods to their nearest stores
This customer flexibility was to be a focus for e-tail differentiation as the platforms for selling diverged
firstly with the growth of mobile retailing and retailing via social networks;
secondly as customers drew strength from their abilities to review products and retailers
thirdly as customers began to demand diverse delivery options for the goods they bought online
There has been a four-stage process in the evolution of e-tailing.
hype and experimentation
retrenchment and sobriety as funding sources
Sustainability, featured stability in the market and consolidation among e-tailers.
-30480045085000focus and fragmentation is evident as retailers provide shopping opportunities in multiple and mobile platforms, tailor their marketing mixes more
Web 2.0
Web 2.0 is a term encapsulating a number of software developments that allowed the web to be used for information sharing and collaboration, and for fostering creativity, user-centered design and interoperability.
The power of information sharing was understood comparatively early in the history of e-tailing by Amazon.
Web 2.0 allowed for the application of pure marketing principles to the e-tail market.
There was a move from straightforward brochure-like visual content on e-tail web pages to the placing of the user/customer at the heart of the service
The increase in power came from more information and transparency of information, which enabled group power, allowing consumers to influence products and prices.
Infomediaries can provide much of the information consumers need to proceed through each of the phases from problem recognition to post-purchase evaluation.
Infomediaries also provide much of the basic marketing information needed for both buyers and sellers, from providing search facilities to the collection and evaluation of data.
Exploiting the Long Tail
When e-commerce was in its infancy, a transformation of marketing was predicted, including the facilitation of one-to-one marketing, which is one of the features of e-tail today.
The web allowed for the accumulation and refinement of an enormous amount of customer data.
The relatively easy accessibility to a wealth of individualized customer data, including browsing and shopping habits, allows e-tailers to effectively and profitably market on an individual basis
The ‘long tail’ was a term coined in the early 2000s to describe an emerging feature of the online marketplace in which niche demands can be profitably exploited
The product becomes virtually abundant at such low costs that it can be provided at low levels of demand, whereas the costs of providing it through traditional channels outweigh potential revenues. Two examples are downloadable books and downloadable music.
The conventional Pareto Principle (or 80:20 rule) assumes that 80 per cent of sales can be attributed to 20 per cent of products – most sales are linked to bestselling items.
The evidence of the long tail indicates that this is not applicable for online distribution and that collectively niche products can rival best-sellers in terms of sales volume.
If Web 2.0 has enabled, simplified and reduced consumer costs for making buying decisions and underpins the ‘long tail’ of the online market
This includes reaching niche customers in innovative and cheap ways that will change over time. Some current examples include:
Exploiting the potential interactions through social networks and online networks;
Communicating via blogs, RSS feeds, webcasts;
stimulating ‘e-word-of-mouth’ through buzz and viral marketing;
pay per click (PPC) and search engine optimization (SEO) that focuses on less competitive long tail keywords that offer a higher return on investment than generic keywords.
Online Shopping Formats
Price formats which sell overstocks or products from previous seasons, and auction sites such as eBay, where buyers and sellers mutually agree the selling price.
Experiential formats apply the potential of technology in creating an interesting and enjoyable online shopping experience, leading the way in exploiting social networking and discussion forums. Examples include fashion
Community-based formats that placed a virtual social community at the heart of the shopping experience began to emerge. Amazon’s customer reviews and customer purchase trends positively affected sales of popular products
Mass customization formats that exploited the interactivity of the online environment emerged to provide merchandise precisely tailored to the individual desires of customers.
Merchandise-orientated formats focus on achieving a product mix that attracts customers. Types of merchandise-orientated e-tailer include:
Online department stores: which replicate or adapt the ‘high-street’ store online
Niche e-tailers are online specialty stores specializing in a limited product range.
Online market places like Tesco Direct and Amazon Marketplace allow customers to access a wide variety of products from partner organizations and/or from other customers.
Online category killers achieve depth of range of a limited product category: toys (Toys ‘R’ Us)
Multichannel Retailing and Growth of Brand Importance
Brand equity is a term used to denote the non-financial, market-based intangible assets that build long-term marketing success and create future profits.
Brand equity is an important source of competitive advantage, particularly where benefits of products or services are intangible and customers perceive high risk.
Customers shopping in online stores need to trust the e-tailers because of:
The intangibility of the Internet shopping experience,
the necessity of mediation technology to complete online purchases
the deferred benefit that is a result of the time gap between purchase and receipt of goods
The brand equity built by multichannel retailers based on existing customer trust in their store-based formats could be transferred to the online stores; their logistical frameworks, returns systems and established customer service centers facilitated fulfillment, gaining trust and building customer satisfaction.
International E-Tailing
While brand strength attracts customers and is related to customer satisfaction and loyalty, efficient and effective order fulfillment is essential in creating successful transactions, so good supplier relationships are an essential element in e-tail performance.
It was found that e-tailers with a market-oriented organizational culture were in a stronger position to achieve performance internationally.
The study recommended relatively basic fundamentals of market orientation.
Firstly, an e-tailer without foreign market knowledge or expertise needed to invest in acquiring this
Secondly, the development of customer-centric processes including understanding customers’ needs, communicating with them and sharing information about customers across business functions.
To perform in international markets e-tailers need to consider market differences rather than attempt a global approach.
Customer satisfaction depends not only on a successful shopping experience but also on efficient delivery and returns.Profitability is related to cost-effective logistics.
According to IMRG (2011), three types of organization support cross border logistics: postal networks, international carriers and local delivery solutions, some of which provide store-based collection points.
3- The E-Commerce Consumer
In only a decade or so, Internet connectivity changed from an English-speaking, developed country phenomenon to become a global one.
In the early stages of development the profile of the e-commerce shopper was a young male professional living in a middle-class neighborhood.
As the technology became more accepted, the gender and socio-economic mix also changed.
In a growing e-commerce market, the technology necessary for confident online shopping and the profile of those able and willing to exploit it to shop were evident first in prime urban areas. In terms of online grocery provision, shopping and delivery services all tended to become available in urban areas
Key influences on online behaviour include income, education, race, age and gender, with lifestyle, culture and social factors
The convergence of television and Internet technology was slower than expected, and to a large extent the rapid development and growth of mobile devices such as tablets and Internet-enabled mobile phones became the focus for shoppers and retailers.
4- E-Tail Store Development
The Role of the Web in Retailing
Online retailing offers retailers sales via potentially limitless shelf space, unconfined by store size, shape and location
The web plays a much wider role in terms of communication with customers.
It is used to communicate a retail or brand presence to a wider, more geographically dispersed audience and to enhance retailer image.
It is used to promote new products and offers and for selling excess stock
Providing customer service. Retailers can provide simple and easy routes for customers to secure advice, give feedback, make complaints or gain information about products.
It is used for personalized contact with customers via email and to provide a more targeted shopping experience
provide information for shareholders and potential investors,
an aid for recruiting employees or franchisees and as a resource for media and education
E-Tail Store Development
Berman and Evans (2010) identify five phases in developing a web presence. In the early years of e-commerce most established retailers did not progress past
Phase 1: establishing a brochure website with limited company, store location and product information.
Phase 2: comprises establishing an e-commerce transactional retail website.
Phase 3: integrating the transactional retail website with buying, inventory and accounting, so that: example: high-selling items are replenished or out of stocks automatically deleted from the website.
Phase 4: is the ‘webified store’. This is about integrating information among physical stores and transactional retail websites. For example, customers or staff can access web browsers in store to get real-time information on stock. They can buy items that are not available in store, find the location of a store carrying the items wanted or arrange delivery to a suitable location.
Phase 5 is where suppliers can automatically replenish stock or ship stock directly to the customer
5- Online Store Attributes
Broadly, online store attributes fall into the following categories: (5)
Navigation and convenience relate to a consumer’s ability to reduce transaction costs through visiting a website rather than a retail outlet. Navigating on easyto- use uncluttered sites will minimise the time and effort to search
Merchandise mix relates to the merchandise on offer with regard to the overall assortment, variety and product information. One of the advantages that pure-play e-tailers had over their bricks-and-mortar counterparts was that they developed their websites around their position in the market and the product assortment on offer
Pricing should be a key online shopping attribute in that consumers should have a reduction in search costs, more product information and a greater opportunity to compare prices. In practice, the importance of price as a choice attribute is not unlike the situation with conventional store choice
Customer service or the overall service quality experience embraces some of the other attributes discussed in this section, process. Customers surfing a website invariably need help with product selection and services available. store, customers need to know how/when to pay, when the goods will be delivered, and what after-sales service is available
Security was a major negative factor in deterring consumers from buying online in the early years of e-commerce development.
Factors Affecting Online Shopping
Lack of broadband access remains a problem for an increasing minority of people, and the inconvenience of shopping online also inhibits uptake of shopping opportunities
Lack of trust and fear are further inhibitors of online shopping. The growth of ecommerce has underpinned similar growth in fraudulent activity and websites
Buying from an unknown or unfamiliar e-tailer brings with it a fear that money may be lost, goods undelivered and customer service unavailable.
Lack of privacy is also a growing concern for online shoppers. With registration required to shop, personal data is available to retailers
Some people prefer the personal interaction and entertainment provided through shopping in bricks-and-mortar stores. They like to compare goods, touch and try out products or try on merchandise.
Others are put off by the cost of delivery; even though there is an increasing choice of price and method of delivery in some stores.
Critical Success Factors in E-Tailing
Critical success factors for online retailers include the following:
Simple and unambiguous purchase transactions;
Clear transaction policies;
Online interactivity between buyer and seller;
Transaction safety;
Transaction privacy;
Quick loading times;
Ease of navigation and search;
Accurate product and service delivery system
6- The Online Grocery Market
Online grocery shoppers bought for the family. They were younger, female and better educated with higher incomes. The final survey showed that customer retention rates were good.
Tesco also explodes the myth that online customers would not buy fresh products because of the so-called ‘touch and feel’ factor- the opposite is true
Commenting on why pure players have failed, Laseter et al. (2000) identify four key challenges:
limited online potential;
high cost of delivery;
selection variety trade-offs;
Existing entrenched competition.
For store shoppers, convenience is about location, interaction with staff and the store experience. Internet users tend to be trading off the time it takes to shop.
The 58 per cent net gain in convenience benefit is often eroded by ‘leakages’ in the process of ordering to ultimate delivery.
Price may have been competitive with stores, but delivery charges push prices up for the customer
E-grocery companies failed because an electronic copy of a supermarket does not work.
E-grocery should be a complementary channel rather than a substitute and that companies should be investing in service innovations to give value to the customer, the clicks-and-bricks model will lead to success for e-grocery.
7- E-Fulfillment
Regardless of the nature of the ‘accepted’ e-grocery model of the future, the ‘last mile’ problem continues to pose difficulties for e-grocers
Once an optimal level of demand is reached, picking centers become a viable option
As delivery to the customer was estimated to be around £5 per order, it is clear that, unless the order value is high, retailers will make a loss on every delivery that they make.
The potential solution to this ‘last mile’ problem is to have some form of unattended reception facility at home/collection or to persuade customers to accept more flexible ‘time windows’ for attended deliveries.
