Opportunities For The Retailer In E-Commerce Report
Management of E-Commerce
Management of E-Commerce
Introduction of the internet and digital environment has altered the manner in which businesses and customers interact worldwide. It occurred through the creation of e-commerce. E-commerce involves the selling, buying or exchanging of services, information or products on the internet. It can also broadly include online collaboration with business partners, servicing of customers, and conduction of electronic transactions within an organization (Daniel, 2011). The process of e-commerce provides new opportunities by ensuring reduced transaction costs and access to information. It ensures easier interactions between sellers and customers in various places. If used properly, the digital environment is likely to guarantee economic benefits through an increase in creativity, innovation, learning, unlimited, and instant access to information sources. It can also reduce the environmental costs associated with business transactions. The report carries out an analysis of e-commerce through a focus on; B2B e-commerce, B2C e-commerce, opportunities and challenges in e-commerce, current consumer behavior, and strategies applied in the satisfaction of consumer preference online.
E-commerce can take various forms depending on the process, degree of digitization of the products and services, and delivery agent (Manzoor, 2010). Taxonomy of e-commerce also focuses on the nature of the transaction relationship between the participating entities. The types include; Business-to-Business, Business-to-Consumer, Business-to-Government, Consumer-to-Business, Consumer-to-Consumer, and Business-to-Employee among others.
Business to Business E-Commerce
The model of e-commerce involves electronic transactions between businesses conducted over the Internet, intranets, extranets, and private networks (Pearson Higher Education, 2012). It is the largest category and is expected to grow faster than B2C. Its two primary components are E-markets and E-infrastructure. E-infrastructure is the category’s architecture that consists of application service providers, logistics, and outsourcing of functions in the process of e-commerce. E-marketplace, on the other hand, is an online electronic market where sellers and buyers convene; they exchange information, goods, services, and money. The marketplace can be one-to-many or many-to-one. Some well-known B2B models include Hewlett Packard (HP), IBM, Marks and Spencer, and Cisco. They receive most of their product orders online; this occurs through contract electronics manufacturers that build the products according to the companies’ specifications.
Basic B2B transactions and activities include; buy-side, sell-side, supply chain improvements, exchanges, and collaborative commerce (Pearson Higher Education, 2012). It involves sellers, buyers, and intermediaries. The intermediaries are third-parties concerned with the brokering of transactions between sellers and buyers. The transactions can occur through strategic sourcing or spot buying. Strategic/systematic sourcing involves the purchase of long-term contracts; this often focuses on private negotiations between the buyers and sellers. Spot buying involves the purchase of needed services and goods. B2B’s benefits for buyers include; search and comparison shopping, 24/7 ordering, volume discounts, detailed information, fast delivery, community participation, and access to new suppliers among others. Benefits to sellers include; globalization, reduced ordering errors, new sales channel, efficient inventory management, and reaching new customers easily.
Business to Consumer E-Commerce
It involves online businesses’ attempts to reach individual customers according to Pearson Higher Education (b). The businesses sell services and products to the general public through catalogs using shopping cart software. It has grown steadily, over the years, resulting in a large global community of online shoppers (Manzoor, 2010). Some examples include; Amazon.com, Drugstore.com, Barnes, Noble.com, Beyond.com and ToysRus.com.
The transactions involve an availability of various products and services, discounts, delivery, and shipment options. It benefits both sellers and buyers through; online customer service, customizations, increased opportunity for direct marketing, round-the-clock shopping, and accessibility from any part of the world. The B2C model is suitable for; goods that can easily transform into digital formats such as music videos, clips, software packages, and books. It is also useful for highly-rated brand items, items with return security, items following a standard specification, relatively cheap items, and those sold in packets. The method is efficient due to a reduction in transaction costs; this is because customers can easily access information and acquire the most competitive prices for various products and services (Strebinger and Treiblmaier, 2006).
According to Muller et al. (2011), e-commerce provides a variety of opportunities and benefits to retailers that embrace e-commerce strategies. First and foremost, the internet provides new opportunities for retailers reach customers through the adoption of new sales and advertising channels. It makes it easy for retailers to make their products and services readily available, in the market, for new customers. Secondly, e-commerce ensures the maintenance of good supply-chain management; this is because the retailers are aware of what they have sold before delivering it to the customer. It enhances the retailer’s ability to serve the current customers effectively and efficiently. Thirdly, the online environment allows retailers to display a video of their product and its benefits. It ensures the provision of more information to customers on the quality and benefits of available products. It also allows the retailer to benefit from the information provided by potential customers through a forum for customer feedback (Zappala and Grey, 2012).
Subsequently, the use of online platforms allows retailers with strong brands to build and exploit brand loyalty. It is because consumers in the current online market tend to be more loyal to brands in the digital environment. The online environment gives retailers an opportunity to adopt varied business models in ensuring profits, customer satisfaction, and expansion of their ventures. The three main models include; sale via third-party, pure play, and bricks and clicks (Muller et al., 2011).
Bricks and clicks involve the retailer’s combination of a network of physical stores with an online store (Manzoor, 2010). They use the internet retailing in acquiring new and more customers, marketing purposes, and providing a wide range of services and products. Pure play model helps retailers whose operations are exclusively online; they have few physical places where buyers can acquire or return products. The model saves the retailer on staff, infrastructure, and inventory costs. It is beneficial to retailers that already have brand loyalty and many customers. The third model involves third-party platforms; this includes online auctions and electronic marketplaces. The use of such intermediaries allows the retailer to connect with customers they were not able to attract before; this is beneficial to young and small businesses.
E-commerce activities focusing on social commerce allow retailers to benefit from consumer feedback and an increase in revenue through increased website traffic. It also allows retailers to increase sales through techniques based on personal preferences; this includes targeted advertisement and collaborative filtering. It also facilitates an increase in the customer base through acquisition and retention of new customers. The retailers take advantage of models such as; group buying; social ratings, recommendations, comparisons, reviews and conversations; deal purchases; shopping clubs and communities; and location-based shopping. They also utilize peer-to-peer models, F-commerce, Twitter, and other innovative shopping models.
Challenges for the Retailer in E-Commerce
Online retailers face the challenge of costs associated with online trading; this includes start-up costs, operational costs, legal and compliance costs, and uncertainty about costs. Start-up costs are a challenge for retailers lacking the practical and IT skills needed in ensuring efficient e-commerce (Muller et al., 2011). There are also considerable operational costs associated with the opening and maintenance of websites. It includes delivery and transactional costs. Thirdly, legal and compliance costs occur in reference to; taxation, consumer rights, product liability, advertising laws, product labeling requirements, warranties, and guarantees. The costs also involve technical regulations, national fiscal regulations, and environmental regulations. Uncertainty about cost involves retailers’ worry over lack of trust in consumers and fraud during online trade.
Despite the numerous opportunities, access to e-commerce also exposes retailers to numerous challenges. Muller et al. (2011), states that some businesses acquire an unfair advantage over others by manipulating consumers’ behavioral biases. Certain retailers may exploit the biases at every stage of the purchasing process. For instance, they may manipulate the way in which information is presented to make their products and services appear more attractive. They also take advantage of consumers that do not search the market properly; this results in the sale of poor quality services and products. It destroys the reputation of straight forward businesses.
Retailers may fail to acquire maximum benefits from e-commerce due to the concerns expressed by consumers. Online purchase of products and services causes concerns over fraud, privacy, security, quality of UGC, and integration with existing systems. Customers hesitate to engage in certain online purchase due to the inability to distinguish between legitimate and illegal businesses. Trust is the essential and basic element of building a relationship with customers online (Mittal, 2013). Thus, low trust limits purchases. It is also crucial for retailers to strive to increase the customers’ perception of their competence, integrity, security control and ability to provide privacy security during purchase.
Consumer behavior and how consumer preferences can be satisfied in the worldwide web
E-commerce remains one of the most distinctive features of the internet era. Online shopping is at the top of the list of most popular internet activities worldwide. According to Muller et al. (2011), about 40% of consumers engaged in the online purchase of services and goods between 2009 and 2010. Internet access facilitates the increase in e-commerce in various countries as online purchases remain directed at domestic of consumers. In reference to consumer behavior, the traditional economic theory views consumers as rational parties that systematically seek and analyze information available in the market before purchasing a product. They also tend to seek redress whenever the purchase has problems or complications. However, online search for and analysis of information regarding various purchases may be costly. Thus, rational customers fail to search the entire market before making purchasing decisions (Phang et al., 2010).
An analysis of behavioral economics literature and empirical data reveals that current online customer behavior is influenced by various behavioral biases. Some of the biases include; default positions, cognitive limitations, hyperbolic discounting, loss aversion, and framing of information. The biases influence the quality of consumers’ decisions and ability to make rational and well-informed decisions. It influences accessing information, analyzing and assessing information, acting on information and complaints and remedies (Muller et al., 2011). The biases result in suboptimal search effort and decision errors.
Many online business models take advantage of the growing popularity of Social Network Services such as Twitter and Facebook. The platforms provide opportunities for online businesses to reach customers and satisfy their preferences in terms of products and services. Social commerce is an effective way of meeting customer preferences. It is a combination of social media and e-commerce; the two largest digital trends (Jain, 2014). It uses social media in helping customers with buying and selling of services and products online. Social media include the online tools and platforms used by people to share experiences, opinions, perceptions, insights, and various media. Some of the media include videos, pictures and music. Social media provide retailers with vital information on consumers’ current needs and preferences in reference to services and products. Thus, through Social Media Marketing, retailers advertise and make available services and products suited to the customers’ preferences. SMM involves the use of platforms such as online communities, networks, wikis, blogs and other online collaborative media. The platforms help in; market research, marketing, sales, CRM, and customer service through the incorporation of concepts and ideas from social capital.
Customers can have access to and make decisions on a wide range of products and services through social commerce. Retailers facilitate the satisfaction of customer preferences through; social ads and promotions, customer service, video marketing, viral marketing, forums, crowdsourcing, and discussion groups among others (McMullan, 2012).
Although the emergence of the internet and development of e-commerce opened many opportunities for retailers worldwide, they also exposed retailers to a variety of challenges. The report explores the management of e-commerce activities through a focus on the challenges and opportunities emerging from online business operations; this occurs in reference to e-commerce strategies. It also analyzes B2B e-commerce, B2C e-commerce, current consumer behavior, and how retailers satisfy customer preferences through the worldwide web. The information provides an understanding of the features of e-commerce and how businesses can take advantage of various factors in ensuring better access to larger markets. Retailers can ensure customer satisfaction and profits through strategies promoting convenience, affordable costs, and availability of a wide range of products and services.
DANIEL, I. (2011) E-Commerce Get It Right: Essential Step-by-Step Guide for Selling & Marketing Products Online. NeuroDigital. ISBN: 978-0-9565262-5
JAIN, V. (2014) The Impact of Social Commerce on Consumer Behavior. Social Science Research Network. [Online] Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2403898 [Accessed: 13th March 2015].
MANZOOR, A. (2010) E-Commerce: An introduction. Berlin: Lambert Academic Publishing. ISBN: 978-3-8433-7030-1
MCMULLAN, B. (2012) Marketing and Advertising in E-Commerce. Pearson Education.
MITTAL, A. (2013) E-Commerce: Its impact on consumer behavior. Global Journal of Management and Business Studies. [Online] Research India Publications 3(2). p. 131-138. Available from: http://www.ripublication.com/gjmbs_spl/gjmbsv3n2spl_09.pdf [Accessed: 13th March 2015].
MULLER, P., DAMGAARD, M., LITCHFIELD, A., LEWIS, M., and HORNLE, J. (2011) Consumer Behavior in a Digital Environment. European Parliament: Directorate-General for Internal Policies. Policy Department A: Economic and Scientific Policy. [Online] Available from: http://www.europarl.europa.eu/document/activities/cont/201108/20110825ATT25258/20110825ATT25258EN.pdf [Accessed: 13th March 2015].
PEARSON HIGHER EDUCATION. (2012a) Chapter 4: B2B E-Commerce.
PEARSON HIGHER EDUCATION. (n.d.) Chapter 1: The Revolution is Just the Beginning. Part 1: Introduction to E-Commerce. Available from: http://www.pearsonhighered.com/samplechapter/0131735160.pdf [Accessed: 13th March 2015]
PHANG, C. W., KANKANHALLI, A., RAMAKRISHNAN, K., and RAMAN, K. S. (2010) Customer’s Preference of Online Store Visit Strategies: An investigation of demographic variables. European Journal of Information Systems. [Online]. Operational Research Society, Ltd 19. p. 344-358. Available from: http://uxscientist.com/public/docs/uxsci_25.pdf [Accessed: 13th March 2015].
STREBINGER, A. and TREIBLMAIER, H. (2006) The Impact of Business to Consumer E-Commerce on Organizational Structure, Brand Architecture, IT Structure, and their Interrelations. [Online] Structures: 81-113. Available from: http://www.sbr-online.de/pdfarchive/einzelne_pdf/sbr_2006_jan-081-113.pdf [Accessed 13th March 2015]
ZAPPALA, S. and GRAY, C. (eds.) (2012) Impact of E-Commerce on Consumers and Small Firms. Hampshire: Ashgate Publishing Limited. ISBN-13: 978-0-7546-4416-3