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CHAPTER 8 e-Tailing. Overview: Understand what e-tailing is Estimate size & potential of S.A. e-tailing Understand drivers and impediments to e-commerce See how the Internet can be used by e-tailers Determine which products are better suited to the internet

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Chapter 8 e tailing l.jpg
CHAPTER 8e-Tailing

  • Overview:

    • Understand what e-tailing is

    • Estimate size & potential of S.A. e-tailing

    • Understand drivers and impediments to

      e-commerce

    • See how the Internet can be used by e-tailers

    • Determine which products are better suited to the internet

    • Appreciate different types of e-tailing business models

    • Reflect upon disintermediation and re-intermediation

    • Understand consumer issues that are relevant to e-tailers

    • Appreciate role of trust in e-tailer transactions

    • Evaluate role of service quality in e-tail environment

    • Apply pillars of retailing to e-tailing


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What is online retailing?

  • Focus is on Statistics South Africa definition of retail trade: “the resale (sale without transformation) of new and used goods and products to individuals/the general public for household use”

  • Online retailers are defined as “those retailers who use the tools of the Internet, whether they be email-based or web-based, for any or all aspects of sales, that is negotiation, confirmation, authorisation and conclusion of sale of tangible, physical goods.”

  • Business to consumer markets and to the sale of tangible physical goods.

  • e-Tailers can outsource certain aspects of sales


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Size and potential of S.A. environment

  • S.A. offline retail market worth R173 billion (2000) and R188 billion (2001)

  • Online S.A. market worth R84 million (2000) and R162 million (2001)= between 0.05% and 0.1% of total retail sales.

  • American online retail was 1% of total retail market= $31 billion in sales.

  • S.A. has problem of online access and lack of access to credit cards.

  • However, S.A. e-tailers can cater to niche market of high-middle income group.

  • S.A. goods can also target techno-savvy international markets


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Advantages of Internet for retailers and e-tailers

  • Cost

  • Flexible physical location and reach:

  • Larger variety of goods and wide inventory

  • Flexible time: 24/7

  • Providing goods

  • Greater communication ability

  • Consumer data collection through cookies and web usage

  • Customers avoid unpleasant sales environments

  • Promotional capabilities online

  • Dynamic pricing (see chapter 6)


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Disadvantages of the Internet for retailers and e-tailers

  • Cost: maintenance and sales service

  • Size of the market

  • Fulfillment problems: Slow deliveries

  • Payment and security concerns

  • No physical immediacy

  • Lack of sensory appreciaton of product

  • Lack of sales persons and personal service

  • Lack of social environment

  • Stranded assets

  • Cost of customer acquisition

  • Techonological issues: South African users pay high costs for Internet usage.

  • Availability of a number of credit facilities offline

  • Difficulty in return of goods


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Uses of the Internet for retail

  • Sale of goods

  • Ordering goods

  • Communication with suppliers and customers

  • Market research

  • Promotional tool


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Product consideration when setting up an e-tailer

  • Not all products can be sold online

  • Goods high in search and credence qualities do well on the Internet, these are:

    • Information rich products

    • Product evaluation without personal interact or product trial

    • Value to weight ratio

    • Products easy to customise

    • Products with widely dispersed target markets

    • Products usually sold in bricks ‘n mortar environments

  • Replenishment-driven goods

  • Convenience goods

  • Speciality goods

  • The culture of direct marketing


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Types of Internet retail business models

  • Internet retail business models can be classified in several ways:

    • The degree to which the retailer is online

      • Pure play e-tailers: have only one retailing channel- the Internet

      • Clicks ‘n bricks (multichannel retailers): e-tailers that are also offline retailers

      • Catalogue retailers

      • Bricks ‘n mortar stores: physical stores


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Types of Internet retail business models

  • The variety of goods on offer: horizontal or vertical focus

  • Stand-alone websites and cybermalls: the degree to which e-tailers group with others to market their online presence and support each other through a digital mall

  • Manufacturers dealing directly and e-tailers as intermediaries: manufacturers can deal directly with the public.


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Intermediation

  • There was speculation that the Internet would eliminate intRermediaries in the supply chain.

  • The process of shortening the supply chain is known as disintermediation

  • New intermediaries often arise to facilitate the shortened supply chain. This is known as re-intermediation

  • Re-intermediation means that the intermediary function is shifted rather than completely eliminated.


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Manufacturer

Manufacturer

Manufacturer

Wholesaler

Electronic

Intermediaries

Disintermediation

Distributor

Retailer

Consumers

Consumers

Consumers

Traditional distribution system

Direct Marketing through Internet

Electronic Intermediaries


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Consumer Issues

  • There are a number of consumer issues that are important to Internet retailers.

    • Technical issues are important as they replace the conventional retail store ambience:

      • Access speed

      • Speed of navigation and downloading

      • Network security issues

      • Bandwidth

      • Access restrictions


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Consumer Issues (contd)

  • Consumer individual characteristics

    • Higher educated, younger and have higher household incomes. In the U.S. the Internet is reaching most of the population – not SA

    • Consumer resources, knowledge, beliefs, values and attitudes affect consumer computer self-efficacy.

    • Self-efficacy influences adoption of online behaviour

    • Even if consumers have the necessary facilities to use the Internet, they need computer skills

    • E-tailers can help by using online and offline media, advertising security issues.

    • Consumers can be overwhelmed by the information overload so e-tailers must make their sites easily navigable


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Consumer Issues (contd)

  • Shopping experience

    • Live entertainment is not easily replicated online

    • How to make the surfing experience pleasant

    • Internet communities can be built around the brand or product lines i.e. chat-rooms encourage conversation

  • Online browsers cannot be treated equally: Direct purchasers who purchase right away online

    • Search and deliberation buyers who search for purchases that they do eventually intend to buy

    • Hedonic browsers who are Internet surfers engaged in electronic window shopping

    • Knowledge builders who often engage in ongoing searches to improve their knowledge of the market or of a particular product area. Opinion leaders would engage in such behaviour


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The role of trust

  • Trustworthiness of Internet

  • Shopping medium

  • Technical competence

  • Reliability

  • Understanding of medium

  • Individual trust propensity

  • Consumer demographics

  • Personality characteristics

  • Clue seeking

Consumer trust in Internet shopping

  • Contextual factors

  • Effectiveness of third party certification

  • Effectiveness of security infrastructure

  • Current media reportage

  • Other factors

  • Size

  • Branding

  • Presence of physical store


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The role of trust

  • Internet represents risk:

    • cannot monitor the safety and security of sending personal and financial information

    • cannot physically check the quality of the products

    • do not always know who the other party is

    • do not always know the physical location of the other party

    • Purchasers (not sellers) incur nearly all of the risks

  • 3 main factors influence consumer trust in Internet shopping:

    • Trustworthiness of e-tailer

    • Trustworthiness of Internet shopping medium

    • Contextual factors

    • Minor factors like size, branding, and the presence of a physical store


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Service qualityKey dimensions of Internet service quality


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The pillars of retailing

  • Solving customer’s problems

  • Treating customers with respect

  • Connecting with customers’ emotions

  • Setting the fairest (not the lowest) price

  • Saving your customers’ time


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