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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
CHAPTER 8e-Tailing
  • Overview:
    • Understand what e-tailing is
    • Estimate size & potential of S.A. e-tailing
    • Understand drivers and impediments to


    • 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
what is online retailing
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
size and potential of s a environment
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
advantages of internet for retailers and e tailers
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)
disadvantages of the internet for retailers and e tailers
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
uses of the internet for retail
Uses of the Internet for retail
  • Sale of goods
  • Ordering goods
  • Communication with suppliers and customers
  • Market research
  • Promotional tool
product consideration when setting up an e tailer
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
types of internet retail business models
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
types of internet retail business models11
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.
  • 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.













Traditional distribution system

Direct Marketing through Internet

Electronic Intermediaries

consumer issues
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
consumer issues contd
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
consumer issues contd16
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
the role of trust

Trustworthiness of e-tailer

  • Ability
  • Integrity
  • benevolence
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
the role of trust18
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
the pillars of retailing
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