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ONLINE RETAIL MARKETING

LEARNING OUTCOMES

To define e-commerce within context of

retailing management

To assess factors affecting development of

online retailing

To consider the future of online retailing

To discuss online in relation to the retail

marketing mix

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INTRODUCTION

e-commerce refers to transactions that are made totally

over the internet

Typically, buyer will visit web site. Browse and then

place order using suitable means of payment

Four different types of e-commerce

– Business to business

– Consumer to consumer

– Consumer to business

– Business to consumer

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Business to business accounts for 75%

– The buyer supplier relationship

Consumer to consumer

– Primitive and in infancy

– But e-bay

Consumer to business

– Reverse auction and co-operative buying

Business to consumer

– Most widely talked about and accounting for an

increasing amount of retail sales8

ONLINE RETAILING TODAY

More advanced in USA

USA a step ahead of the rest of the world

Higher level of internet usage per capita

USA can be used as guideline for likely

development

But rest of the world might develop in a

different way

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BCG suggest online sales in USA in 1999 worth $20bn

(2% of all retail sales)

Catalogue sales in same period accounted for 10%

Online sales in Europe were $3.6bn

Four main areas

– Computer hardware and software (9%) (3.5%)

– Travel (2%) (1%)

– Financial services (15%) (5.5%)

– Collectibles (2%) (1%)

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TYPES OF ONLINE RETAILER

Individual companies selling limited assortment

Companies selling wide assortment on one-

stop-shop basis

Trend is towards second which follows offline

But any forecast is an educated guess rather

than a solid prediction

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WIDE ASSORTMENT RETAILERS

Known as portals

Many similarities to offline

Bring wide range of goods from a wide range of

suppliers to the attention of a wide range of shoppers

Online achieved virtually, offline achieved physically

Vertical portals concentrate on specific retail area

Horizontal portals cover wide area and are true one

stop shops

MSN one of the most visited sites

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FACTORS AFFECTING DEVELOPMENT OF ONLINE RETAILING

POSITIVE

Convenient

Flexible

Operational and

financial benefits

Tailoring to individual

shopper

requirements

NEGATIVE

Delivery

Hidden costs

No social contact

No physical contact with

product

Limited impulse purchasing

Payment issues

Little opportunity for influence

no instant gratification

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CONVENIENCE, FLEXIBILITY AND OPERATIONAL BENEFITS

Shopper has access to wide assortment of

products at the “click of the mouse”

Retailers not constrained by store size

Wider product offering

Assortments can be changed quickly

Intermediaries may be cut out of the supply

chain

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Ability to reach a much wider audience

Scale advantages

Transaction data

– Search time

– Most frequently visited sites

– Previous purchasers

– 1-2-1 marketing

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PRACTICALITIES

Delivery and logistics

Requirement for systems capable of handling

large number of small packages

Logistics breakdown at busy times of year

Someone has to pay for the delivery

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ADVANTAGES OF OFFLINE

Shoppers handle own distribution

No limitations on store design or atmospherics

to influence the shopper

Personal service and contact

Point of sale promotion

Browsing and impulse purchasing

Process rather than outcome orientated

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FUTURE OF ONLINE RETAILING

There’s nothing new about distance shopping

Started in 1888 when Sears launched first

catalogue

New and novel and had similar positive and

negative factors

Now reached ceiling

Will online go the same way?

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But different constraints

– Property prices

– Site availability

– Planning restrictions

– Advertising regulations

– Opening hours

And constant progress

– Secure payment systems

– Links to call centres

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ONLINE RETAIL MARKETING

Main considerations for any retailer

– Location

– Assortment

– Pricing

– Promotion

– Customer service

– Store design

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ONLINE LOCATION

Few concerns

Physical accessibility not an issue

But need to maintain a reliable internet link

Can be anywhere in the world

Only have to maintain a small portfolio of sites

Physical locations can be kept to a minimum

Operational cost implications

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ONLINE ASSORTMENT

Types of product that can be sold, ability to

offer wide range of category with wide choice

Need to distinguish between high and low

touch products

Low touch tend to have highest rate of sales

but clothing is an exception

Virtual contact may eventually replace physical

contact

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Small purchases easy to deliver but

transportation of bulky, perishable or fragile

products a possible problem

As depth of assortment (number of varieties of

a given product) increases so does shopper

choice and could lead to shopper confusion

Perceptual overload can lead to purchase

deferment or an unsatisfactory shopping

experience 23

Increasing assortment width (a greater number

of different types of product) can lead to

assortment overlap

Affects nature of competition

As overlap increases so does competition

leading to retailers becoming more like

horizontal portals

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ONLINE PRICING

Fundamental factor is price search behaviour

Search behaviour is essentially a cost/benefit

analysis

Costs are associated with searching for price

information

Benefits are financial and emotional

Many sites now offer price comparison

Particularly appropriate for the cash rich/time

poor25

ONLINE PROMOTION

Essentially the same as for offline retailers

Communication with customers through both

market based and store based methods

Possibly more opportunities for direct

marketing and relationship building

Limits on some store based promotion

– Can’t touch, taste or smell but interactivity possible

Lack of personal selling is only real

disadvantage 26

ONLINE CUSTOMER SERVICE

Two benefits to shoppers

– Functional relating to time effort and specialist

advice

– Social relating friendship and intimacy

Functional benefits can be delivered but social

cannot

Relative importance will depend upon

individual shopper

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Three key areas

– The shopping system which covers all key actions

taken by shopper prior to purchase

– The buying system includes all actions relating to

shopper’s purchase

– The consuming system takes place outside store

and covers actual use of the product

Online suffers from being unable to be part of

the shopping system but can be at an

advantage in the buying system28

ONLINE STORE DESIGN

The store is the web site

It’s remote and there is no physical contact

Conventional aspects of store design can’t be applied

although some concepts do translate

Low technology leads to catalogues whilst high

technology produces a virtual store

Catalogue stores are first generation and offer an easy

to use service but still use atmospherics

High technology can utilise offline display techniques to

provide a better and enhanced shopping experience 29

CONCLUSIONS

Online retailing is on the increase but still

accounts for a relatively small proportion of

total internet business

Advantages include convenience and flexibility,

operational and financial benefits, wide

customer reach and ability to personalise the

offering

Disadvantages include logistics, remote nature

and absence of instant gratification 30

Location presents few problems but absence of

physical contact may limit product assortment

High touch products may be difficult to sell

online

Online retailing will continue to grow but by

how much?

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