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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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