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3.3 E-Retailing

 

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The E-Business, the E-Customer, their Relationship and Interactivity

 

 

KunnskapskildenE-Business –
E-Business, E-Customer, Relationship and Interactivity

 

Dissertation
The E-Business, the E-Customer,
their Relationship and Interactivity 

Jan Vig 

Dissertation  av Jan Vig om E.Business, E-Customer, Relationship and Interactivity  (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.

 

The E-Retailer Business, the E-Customer,
their Relationship and Interactivity

Table of Contents

Chapter One Introduction to the study

Chapter Two Business in Cyberspace

Chapter Three E- Retailer Commerce

Chapter Four E-Customer, Relationship and Interactivity

Chapter Five A Successful Case study – Amazon.com

Chapter Six The Future, Critical Success Factors, E-Business Strategy, Results and Conclusion

Appendix

 

 

Chapter 3

The E-Retailer Commerce 

 

 

Chapter Three E- Retailer Commerce

3.1 Introduction
3.2 The E-Commerce Opportunities, Barriers and Challenges
3.2.1 SWOT
3.2.2 Opportunities and benefits
3.2.3 Barriers and Treats
3.2.4 Challenges
3.3 E-Retailing
3.3.1 Online Retailing
3.3.2 Requirements and elements for E-Retailer commerce
3.4 Agents, intelligence agents and technology
3.5 The Customer led E-Business
3.6 The E-Retailer site development process and project management
3.6.1 The E-Retailer Web development process
3.6.2 Team and skills
3.7 The E-Retailer and Promotion
3.8 Competitive Intelligence and Market Research on the Internet
3.9 Summary

 

3.3

E-Retailing 

 

 

3.3.1 Online Retailing

 

Electronic Commerce is one of the most important aspects of the Internet to emerge. It allows people to exchange goods and services immediately and with no barriers of time or distance. Any time of the day or night, the E-Customers can go online and buy almost anything they want.

However, the road to creating a successful E-Commerce can be a difficult and confusing one if the company is unaware of the concepts and principles behind E-Commerce. The trick to entering this market smoothly is to find out what the company needs to do before the company has to do it.

Most people think E-Commerce means E-Retailing or online shopping. But E-Retailer commerce is only a small part of the E-Commerce picture. The term also refers to online stock and bond transactions and buying and downloading software without ever going near a store. In addition, E-Commerce includes business-to-business connections that make purchasing easier for big companies.  Another way to differ is the expression tangible products, which are those things that can be physically touched and intangible products, which are digital products and services that can be delivered electronically.

This dissertation is concentrating on E-retailing or online shopping, which are selling tangible products.

 

Retailing is expected to change with the rapid development of new online sales and distribution channels that can be used from anywhere, anytime. Almost every retailer is re-evaluating every aspect of their operation from customer service to advertising, merchandising to store design, and logistics to order fulfillment.

 

As seen below the figur shows what kinf of difficulties the traditional retailer has and how E-Retailing will affect the desisions the retailers have to take today and for the future to secure their positions.

 

IMG_6345cr

 

Source: Source: Birch, Gerbert and Schneider(2000:16)

Figur 3.3 The future of retail is online

 

E-Commerce is here to stay. International Data Corporation has projected that 46 million Americans will buy $16 billion worth of goods annually by next year, and $54 billion by 2002. Forrester Research predicts e-commerce sales of almost $7 billion by 2000. Looking further ahead, Morgon Stanley Dean Witter estimates sales of anywhere between $21 billion to $115 billion annually by 2005

 

The best E-Retailer web sites succeed not merely by expanding into new markets. They must also build a strong customer relationship by providing a well-designed web site, fast and high-quality service, good customer support, and reasonable prices. Having a quality brand name and good reputation is more important than having the lowest price.

 

What E-Retailer must do is change the shopping experience for the E-Customer while keeping basic retailing services consistent. To succeed with that the retailer has to come up with new business models that create more and better value for the customer.
”We believe that the most significant benefits to commerce can be realized through augmented commerce, a combination of the best of physical and electronic commerce worlds.” (Dempski, 2000) The E-retailer can improve the adoption of the E-customers online purchasing by implementing methods and technologies that help fill in the gaps between the customer’s experience in the physical world shopping and the experience in the digital world. By identifying gaps between E-retailing and the physical world, the E-retailer can use and implement methods to help customers make the transition from being a shopper in the physical world to an online shopper.

 

Retailers exceed expectations by anticipating customer’s needs, such as suggesting related items, or providing services like new product notifications and surprising their customers with personalised options. When E-Retailers actively engage their E-Customers it customises the shopping and creates a friendship.

 

As in other areas, the growth of E- Retailer commerce is being driven by cost savings, the ability to customise marketing, and increased customer convenience.  The Internet offers the opportunity to take direct marketing to the next level, to market directly to target customers groups even to individuals and to do so profitably.

 

The E-Customer has a lot of demands for immediate gratification, no difficulties by returning products and a strong customer service. How should the E-Retailer best meet these demands?

The E-Customers are generally interested in speed of delivery and ease of return.

 

As E-Retailer commerce increases, overnight delivery and «drop shipping» services from manufacturers to the customer’s home are likely to grow as well. The E-Customers, who worry that they will have to make an extra trip to the post office or parcel delivery company if a product they order via the Internet is not what they had in mind may be surprised to learn that some companies will actually send packaging overnight, free of charge, to a customer’s home, along with instructions to return the product, free of charge, to the company. This is service at it best.

 

One thing which has to be stressed is that the E-Retailer has to find out what the E- Customers desire and design it’s Internet strategy to meet those desires. This is a basic idea, but one that too many retailers miss when going online.

 

Brame (1999)  presents five stages of retailers’ web site. These are the following:

 

  • Phase 1: Information, product searches, and phone orders.
  • Phase 2: Bare bones e-commerce with orders being re-keyed in the back office into existing systems and mail order programs.
  • Phase 3: Integrated e-commerce that communicates with purchasing, inventory, price management, accounting, credit card authorization, and other systems. Automated removal of out-of-stock items from the web site.
  • Phase 4: «The Webified Store Network» brings the Internet into the brick and mortar location with browser-based kiosks, POS, or terminals that direct customers to items in store, provide additional information from manufacturers’ sites, and allow for online orders of items not carried at that brick and mortar location.
  • Phase 5: Integrated e-commerce with manufacturer’s systems, combining Internet with Extranet for collaborative sales that moves toward retailers taking orders with manufacturer’s providing direct fulfillment.

 

 

One thing the E-retailer has to be aware of is their fullfillment process and their delivery performance guarantee.

As more and more retailers open up online shops, each must successfully integrate its front-end commerce sites with back-end fulfillment houses.
As more sites begin to offer the same products, the efficient fulfillment of orders will be one factor that distinguishes one site from another.
Recent surveys have indicated that efficient product presentation, delivery, and customer support are more important
than relatively small differences in price for online shoppers.

With competitors’ sites a few clicks away, those sites that are best able to display up-to-date available product offerings,
accent those products with descriptive content, efficiently and properly transmit orders to fulfillment centers,
and reconcile the results will have a clear advantage in capturing customers and market share.
(Mesrobian & Ringer, n.d.)

 

Veteran Internet law expert and author of Internet and Technology Law Desk Reference, Michael D. Scott, warned that retailers need to protect themselves from dissatisfied online shoppers.

 

For some e-commerce companies witnessing only their first year of operation, many legal safeguards such as disclaimers on their Web sites may have been overlooked. They will need to carefully review what is currently posted on their sites and ensure that any complaints are dealt with fairly and swiftly in order to head off potential litigation,» Scott said. «This includes making sure their customer return policies are in line with the expectations of their customers and are executed exactly as represented. (Perkin Coie, 1999)

 

Here is a five-point checklist for actions the E-retailers should take offered by Rips, Katz and Scott (1999)

  • Does your Web site clearly post your policies and guarantees about shipment of products and gifts? Does it detail what happens in case of a missed delivery? Does it comply with Federal Trade Commission rules?
  • Do you have clear procedures and information in place showing customers what to do with gift returns or how to get a refund?
  • Do your agreements with third-party vendors and fulfillment houses indemnify you against their failure to deliver goods or process transactions on time?
  • If you are using a third party Internet Service Provider or Web-hosting service, what safeguards do you have if the site crashes or if bandwidth is insufficient to meet all of your customers’ needs?
  • Is your customer sales support staff knowledgeable and sufficiently trained to handle questions and inquiries from dissatisfied customers?

 

 

 

An interesting fact for the E-Retailer to be aware of is the comparisment between figures in the online world and in the physical world. According to Grover (1999) the E-Retailers have little room for profit even if marketing and rent fall, as shown below.

 

  Superstores On-line
Average sale $100.00 $100.00
(Discount) -10.00 -20.00
Shipping & handling 11.00
Sales tax 7.00
Customer pays 97.00 91.00
Cost of sales 67.41 57.60
Shipping & handling 2.88 9.90
Gross profit 26.71 23.50
Operating expenses  
Rent 0.96 4.55
Labor & store 10.75
Web site development 2.90
Marketing 2.50 17.29
Total 14.21 24.74
Operating profit per order 12.50 -1.24

 Source: Christopher Vroom, Thomas Weitzel Partners.

Table 3.2 Comparisment between figures in the online world and in the physical world

 

It’s no longer true that the Internet is a less expensive way to do business. That isn’t to say retailers are unhappy with E-commerce. Benefits range from ease of expansion, adding a server is still faster and cheaper than opening a new store, to drawing new customers and boosting overall sales. And many firms on the Internet would still disagree that the web is as expensive as other channels. One important thing is that the cost of technology and the cost of marketing have both gone up more than people expected.

 

The hurdles can be even higher for traditional retailers going digital. Their on-line sales may simply cannibalize sales they would have racked up off-line—that is, in the real world. Their backshop infrastructures were built to dispatch truckloads of goods to hundreds of stores—not ship small orders to millions of individual customers. (Grover, 1999)

 

3.3.2 Requirements and elements for E-Retailer commerce

 

Before companies start to do E-Retailing they should ask themselves the following questions:

  1. Who will be the potential customers?
  2. Why do they shop online?
  3. What are their shopping habits on the street?
  4. How do they choose a company or a brand?
  5. How many segments are there in a certain market?
  6. Is there a niche market that’s best for the Web business?
  7. What are the winning strategies?

 

 

Doing business on the Web can be broken down into five main requirements.

  • Online Store
  • Payment Processing
  • Shipping/ Order Fulfillment
  • Customer Service
  • Promotion

 

 

 

The following list highlights all of the elements of a typical E-Retailer commerce activity:

  • A product /service.
  • A place to sell the product/service, in the E-Commerce case the E-Retailer web site displays the products in some way and acts as the place.
  • A way to get people to come to the E-Retailer web site.
  • A way to accept orders, normally an on-line form of some sort.
  • A way to accept money, normally a merchant account handling credit card payments. This piece requires a secure ordering page and a connection to a bank. Or the E-Retailer may use more traditional billing techniques either on-line or through the mail.
  • A fulfillment facility to ship products to customers. In the case of software and information, however, fulfillment can occur over the Web through a file download mechanism.
  • A way to accept returns.
  • A way to handle warrantee claims if necessary.
  • A way to provide customer service (often through e-mail, on-line forms, online knowledge bases and FAQ’s, etc.)

 

 

 

For the retailers it is important to have all the above mentioned in mind when they develop the strategy for E-Retailer commerce.

 

 

Download Dissertation

 

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