ONLINE RETAIL MARKETING

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1 1 ONLINE RETAIL MARKETING

2 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 2

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7 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 7

8 8 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 sales

9 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 9

10 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%) 10

11 TYPES OF ONLINE RETAILER Individual companies selling limited assortment Companies selling wide assortment on onestop-shop basis Trend is towards second which follows offline But any forecast is an educated guess rather than a solid prediction 11

12 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 12

13 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 13

14 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 14

15 Ability to reach a much wider audience Scale advantages Transaction data Search time Most frequently visited sites Previous purchasers marketing 15

16 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 16

17 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 17

18 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? 18

19 But different constraints Property prices Site availability Planning restrictions Advertising regulations Opening hours And constant progress Secure payment systems Links to call centres 19

20 ONLINE RETAIL MARKETING Main considerations for any retailer Location Assortment Pricing Promotion Customer service Store design 20

21 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 21

22 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 22

23 23 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

24 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 24

25 ONLINE PRICING 25 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 poor

26 ONLINE PROMOTION 26 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

27 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 27

28 28 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 system

29 ONLINE STORE DESIGN 29 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

30 CONCLUSIONS 30 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

31 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? 31