E-tailing

From Isopedia

1 E-tailing Defined
2 The Emergence of E-tailing
3 Technical Aspects of E-tailing
4 Changes Experienced by E-tailing
5 Advantages of E-Tailing
6 Disadvantages of E-tailing
7 Market Conditions
8 Customer Profile
9 Firms in the Market
10 Substitutes for E-tailing
11 Future Conditions of the E-tailing Market
12 Group Members
13 Resources

E-tailing Defined

E-tailing, short for “electronic retailing” is the “selling of retail goods on the internet” (1). E-tailing is known as the “cousin” of catalog retailing and has proved to have many advantages over the traditional at home catalog (3). For example, E-tailing enables consumers to have “a wider choice at their fingertips (many e-tailing sites)” due to the Internet (3). Additionally, E-tailing has taken off due to its convenience factor since people have the ability to stay at home and shop; however, a disadvantage of E-tailing is that not everyone has access to the Internet. For those with access to the Internet, E-tailing has helped connect the globe since individuals have access to items found around the world (4).

The Emergence of E-tailing

E-tailing discussions emerged “as early as 1995,” however Dell Computers launched one of the first E-tailing sites in 1997. Dell “reported multimillion dollar orders taken at its website” (1). The success of Dell encouraged other companies such as Amazon and Barnes and Nobles to follow in their path. Additionally, many believe that E-tailing emerged due to the “.com boom” (2).During the ".com boom", the stock market began to soar. With the stock market rising, consumers were more willing to spend and therefore helped along the industry. The stock market rising was especially helpful for E-tailing, as with the ".com boom," since many websites were founded (8).

Technical Aspects of E-tailing

E-tailing begins when consumers access the Internet from their home computers. As consumers select their desired goods on the e-tailing sites their item numbers are simultaneously transmitted to the inventory warehouses. “E-tailing can facilitate the transaction, the selling of the product, however unless the transaction involves a digital product, the way in which the product will be delivered needs to be considered” (3). Therefore, E-tailing companies have begun making a conscious effort to improve customer satisfaction with regard to delivery. “Many e-tailers have begun to outsource their delivery systems to catalog retailers such as FingerHut, in order to capitalize on their expertise” (3). Lastly, since e-tailing sites have paired together with delivery companies, consumers have the ability to track the progress of their order via an online tracking number. These improved delivery methods have increased consumer confidence in e-tailing websites; therefore, the number of e-tailing sites continues to grow.

Changes Experienced by E-tailing

At the beginning of E-tailing, only a certain amount of products were available over the Internet, yet recently entire catalogs have been available for consumers to buy from. Also, “with more households shifting to faster broadband and online shopping increasingly friendly, Americans are purchasing more stuff on the web” (5). Recently, smaller companies have been able to have more success in the E-tailing industry due to an increase in consumer willingness to buy products via the Internet. On the other hand, E-tailing “giants” such as Sears and Wal-Mart have begun to develop new markets online by utilizing their size as a means for lowering prices. Due the technological advances that have emerged since the launch of E-tailing, Sears and Wal-Mart have realized success in lowering their prices.

Furthermore, E-tailing has enabled smaller companies to advertise through companies such as Google and Yahoo. These companies have begun offering smaller online E-tailing sites the option of promoting their websites through Google and Yahoo. These E-tailing companies have negotiated with Google and Yahoo so they are only responsible for paying an advertising fee if and whenever their links are clicked.

E-tailing also underwent a major change in the early 2000s as a recession began throughout the economy. The recession was due in part to low-inflation rates and low unemployment. Consequently, consumers began to purchase less online. In the United States, the recession became worse as the economy took a large hit due to the events on 9/11. Many say this is when the .com bubble “popped” (7). While the before the recession, E-tailing was making great strides, it slowed once these events occurred.

Advantages of E-Tailing

The emergence of E-tailing has provided some noteworthy advantages to consumers around the globe. A main advantage of E-tailing relates to the purchasing of digital products because the “internet provides virtually immediate gratification” and thus ideal for “impulse buyers” (p 64, resource 6). Furthermore, since the “Internet eliminates geographic confines,” e-tailing sites have enabled products in thin markets to be traded (p 67, resource 6). Since thin markets “have few buyers (and usually few sellers) of a product,” e-tailing sites bring “buyers and sellers to one location, and by providing good search tools, buyers and sellers of unusual commodities can interact” (p 67, resource 6).Additionally, the lack of taxes is an advantage of E-tailing because "the Internet has benefited from its status as a tax-free haven" (68).

E-tailing also provides delivery advantages because the Internet provides "the most immediate delivery, the least costly delivery, and the most informed delivery" (p 71, resource 6). Minimal investment is another advantage of E-tailing because retailers simply “operate through their web sites and thus save drastically on real estate costs” (9). Furthermore, e-tailing provides a “worldwide reach and an increased potential customer base” (9). Locating a particular product has been made easier through the use of e-tailing and resulted in “consumer empowerment” since “the consumer decides what he wants to buy rather than the retailer offering what he wants to sell” (9). Lastly, E-tailing has provided retailers with the advantage of price discrimination. Once retailers obtain information on previous transactions, they can determine the likelihood of “products being purchased at certain price points” and price discriminate accordingly (9). Overall, E-tailing provides consumers with "a large selection, no lines at the register, and perhaps lower costs" (p 61, resource 6).

Disadvantages of E-tailing

Though very successful, there are some disadvantages to E-tailing. First, a consumer may become frustrated with E-tailing, as they cannot physically touch, smell or feel the product they would like to buy. Also, since the products have to be shipped to the consumers, there are shipping costs that are not present when a consumer buys a product from a store. Since the product is not immediately delivered to the consumer, the possibility of immediate gratification from the product is eliminated. Lastly, perishable items are not ideal for E-tailing. "Poor candidates for Internet sales are those with high bulk relative value, perishable products (fast food), experience products (cars), and products providing instant gratification" (p75, resource 6).

Market Conditions

Due to e-tailing being such a widespread phenomenon, the competition is very competitive. The internet provides many advantages including the well-known market that is available to customers. They have the option of looking through many stores to compare and contrast the difference in the products that they wish to purchase, and still find their individual preference. A retail store itself, can only cater to a certain product of choice.

The internet and mobile phones are doing away with the traditional value chain. It is now being replaced with manufacturers reporting directly to the consumers. In retrospect, retail specialists have said that e-tailing has created new ideas in the value chain for retailers. In addition, the Internet offers a forceful primary benefit to the retailer. The low costs can’t even compete with the physical action of retailing.

The growth of e-tailing has created many advantages in ways to save money. One of the most popular advantages in the e-tailing industry is the tax advantage. Most e-tail stores are tax free, which saves a lot of money yearly. No real estate costs are included in the method of e-tailing. There are no monthly building, insurance, or tax fees that have to go to the government monthly. Minimal investment is required. The consumer can compare prices by the click of a button by going to different websites to see which website sells their product for cheaper. E-tailer's only receive the information of what the customer wants to buy.

In other terms, the idea of insourcing comes into play. For example, UPS, the United Postal Service does all the packaging and shipping to the customer. All the manufacturer does is deliver the message that a certain product from their warehouse needs delivery. Disadvantages include limited access to the Internet, search problems, and a lack of “hands on” interaction with the products. E-tailing is rapidly growing and its advantages to consumers are over-taking the retail industry.

Customer Profile

Personal preference is the basis to the type of customer that e-tailing conveys. The convenience of doing all your shopping in one place appeals to many different types of people. The Internet is user friendly and provides a person with many different options on where to buy the specific product that they want. The Internet is also globally accessible. If a store is not located in your area, or takes too long to get there, most likely, they have an online store which is very handy. Not only are you doing all your shopping by staying put, but you are also saving money in gas. Now-a-days, the gas prices are rapidly increasing, so to save any money helps. Everything is all at one location. Usage of the Internet is fast, easy, and involves customer interaction. 81% of buyers are very satisfied with purchasing products through the Internet.

There are some disadvantages that customers consider about online purchases which deter them from online shopping. Security is a huge issue when dealing with the Internet. In order to make purchases online, you have to provide the e-tailer with credit card information, and personal information. Some customers feel very unsafe doing so. As they say “whatever is put on the Internet is there forever.” Consumers would rather the inconvenience of driving out to a local store than having the risk of their information being put on the internet. Overall, e-tailing is based on what the consumer prefers, and what risks and advantages are involved.

Firms in the Market

Established Firms in the Market

E-tailing has grown so much that most retail stores are also available online. There are however many new company’s that are only available online due to the widespread growth of e-tailing. Amazon is one of the largest e-tailing firms that has been stated as one of the foundations for e-tail growth. Barnes and Noble created their online website due to the success of Amazon. Other popular e-tailers consist of Walmart, Target, Macy’s, and all the other little stores that carry your everyday needs. On the flip side, there are also many many e-tailers out there that are unheard of, and contain products and accessories that may appear in your everyday popular stores. They can be used to compare and contrast prices, and availability. E-tailers on the Internet can go on forever. There are so many different types of e-tail businesses that cater to every consumer.

Substitutes for E-tailing

Because E-tailing is a rather new industry, there are a few more traditional alternatives to shopping online. These alternatives include catalog retailing and store retailing.

Catalog retailing was developed over a century ago and became popular at an extremely rapid pace, similar to current E-tailing trends. This form of purchasing was expected to become a very important part of the retailing world and currently accounts for about 10% of all retail purchases. Catalogs enable people to shop when they want, where they want, and at their own leisure. Catalogs make it very easy for a consumer to shop at a certain company because of the many different ways they can send in their orders. Through the use of telephone, fax or ground mail, a company can receive an order in a matter of minutes or business days and it is then shipped to your doorstep, enabling a consumer to never leave the comfort of their home or office.

Store retailing requires consumers to visit an actual location and accounts for the majority of consumer purchases. This type of retailing is also known as a brick and mortar business, which is another term for a company that occupies a building for operations. Many stores stand alone, while others are found in shopping centers and regional shopping malls. Store retailing allows consumers to see the products first hand and allows customer interaction with employees knowledgeable in their trade.

Future Conditions of the E-tailing Market

Because the Internet is know for its limitless opportunities and potential, the future of the e-tailing market is hard to predict or even imagine. The e-tailing environment keeps assuming greater importance as the Internet is constantly growing and no one can begin to quantify its possibilities. JupiterResearch, an unbiased research firm that helps companies profit from the impact of new technologies and the Internet, predicts that by the end of 2010 E-tailing will grow to $318 billion. Because competition is a mouse-click away, companies are and will continue to struggle to beat out competitors by making sure that they have what most appeals to their target audiences.

Despite E-tailing’s extraordinary growth in the past few years, there are several barriers that could prevent its future expansion. These include:

• Concerns related to customer service, distribution and logistics- many companies spend an exorbitant amount of money to attract their customers, but tend to slack when it comes to sufficient delivery of their products and additional customer service. They also have difficulty keeping their current customers interested which prevents them from maintaining loyal group of consumers.

• Concerns related to the form of payment- Because credit cards are the most common and preferred form of payment, credit card companies are taking a percentage of every product purchased through E-tailing, which could be negatively affecting sales. Sometimes this percentage is even greater than the percentage taken out when the product is purchased in a retail store. Other forms of payments are available but have not become extremely popular in the United States.

• Concerns with privacy issues- Many consumers are hesitant to use the E-tailing resources available because they are afraid to expose their personal information on the web. Although the companies enforce security actions, leaks of information could still occur and this frightens consumers. More extensive procedures must be enforced in order to gain potential user's trust.

• Legal concerns in the global business environment- Because E-tailing extends to many countries across the world, there are different terms of commerce and legal strategies that are used in different areas. In order for E-tailing to continue to grow, a common legal framework needs to be enacted that is functional anywhere in the world. Also, there is no sales taxation on E-tailing purchases with businesses that do not a have physical locality. This causes a loss of revenue for state and country governments, which will most likely be addressed within the next few years.

In the future, companies as well and consumers would profit from a balanced co-existence between store retailing, catalog retailing and E-tailing, and hopefully one day this can become a reality.