INTRODUCTION TO ELECTRONIC RETAILING

INTRODUCTION TO ELECTRONIC RETAILING

 By

Miss. P. PIRAKATHEESWARI, Lecturer in Commerce,

Sri Sarada College for Women (Autonomous), Salem – 16.

Introduction 

The e-retailing(less frequently; e-Retailing, e-Tailing, etc.) is the concept of selling of retail goods using electronic media, in particular, the internet. The vocabulary “electronic retailing,” that used in internet discussions as early as 1995, the term seems an almost in evitable addition to e-mail, e-business and e-commerce, etc. e-retailing is synonymous with business- to- consumer (B2C) transaction model  of e-commerce. Although e-retailing is an independent business model with certain specific constituents like; trust model, electronic transaction process, etc, but in reality it is a subset of e- commerce by nature.

E-Retailing stores sell online promotion only for goods that can be sold easily online, e.g., Amazon did for Books & CDs, etc. The online retailing require lots of displays and specification of products to make the viewers have a personal feel of the product and its quality as he gets while physically present in a shop.

            E-Retailing refers to retailing over the internet.  Thus an e-Retailing is a B2C (Business to customer) business model that executes a transaction between businessman and the final consumer.  E-Retailers can be pure play businesses like amazon.com or businesses that have evolved from a legacy business such as tesco.com.  The e-retailing is a subset of e-commerce.  Thus, e-commerce is the master domain defining the e-retailing operation.

Essentials of E-Retailing

            Electronic retailing or e-tailing, as it is generally being called now, is the direct sale of products, information and service through virtual stores on the web, usually designed around an electronic catalogue format and auction sites.  There are thousands of storefronts or e-commerce sites on the Internet that are extensions of existing retailers or start-ups.  Penetration of computers and proliferation of the Internet has given rise to many new forms of businesses, such as business process outsourcing, call centre based customer relationship management, medical transcription, remotely managed educational and medical services and of course, electronic retailing.

            There are certain essential ingredients for an electronic retailing business to be successful.  One must consider these components well in advance before setting up an electronic storefront.  These essential components are:

• Attractive business-to-consumer (B2C) e-commerce portal
• Right revenue model
• Penetration of the Internet 

      E-Catalog – It is a database of products with prices and available stock.

      Shopping Cart – The customers select their goodies and fill shopping cart.  Finally, as in a real store, at the time of checkout, the system calculates the price to be paid for the products.

      A payment gateway – Customer makes payments through his/her credit card or e-cash.  The payment mechanism must be fully secure.

Support Services in E-Retailing

            The electronic retail business requires support services, as a prerequisite for successful operations.  These services are required to support the business, online or offline, throughout the complete transaction-processing phases.  The following are the essential support services:

• Communication backbone
• Payment mechanism
• Order fulfillment
• Logistics

Advantages of E-Retailing

            E-Retailing, either as an extension of the existing retail/distribution business or an altogether new start-up, has many advantages.  Traditional brick-store retailers are placing more emphasis on their electronic channels and evolving into multi-channel retailers to increase their reach and support their retail channels. The new start-ups in e-retailing can be launched from a small room with one PC attached with the outside world through the Internet.

1. The electronic channel gives the existing brick-store retailers an opportunity to reach new markets.
2. For the existing retailers, it is an extension to leverage their skills and grow revenues and profits without creating an altogether new business.
3. E-Retailing overcomes some limitations of the traditional formats, for instance the customers can shop from the comfort of their homes.
4. The e-commerce software that also traces the customers’ activities on the Net enables e-retailers to gain valuable insights into their customers shopping behaviour.
5. The e-retail channels transcend all barriers of time and space.  The retailers’ server must be on 24*7.  An order can come from any customer living any place at any time of the day.
6. E-Commerce channels are definitely efficient and retailers do not have to pay a heavy price for brick-n-mortar shops in costly shopping malls.

 Shortcomings of e-retailing

            The online retailing {e-retailing} process is not an ultimate in the field of retailing methods; it also suffers various drawbacks that are the qualifications of traditional marketing. Some of the drawbacks need mention. 

1. It has no theatrical ambience which can be the customer.
2. It lacks an emotional shopping experience that the customer can get in a personal shopping store.
3. It being container of intangible merchandise (i.e., virtual display of merchandise) does not provide sensory support to the customer, these the customer cannot hold, small, feel, or try the product.
4. On line customers are reluctant to part with their credit card details on net, fearing they may be misused. It arises security issues. The customers are not yet convinced about the foolproof status of this method, especially in Indian environment.
5. It provides, to a large extent, impersonal services which the Indian customers are not exposed to; they are rather used to the tangible personalized services which’s they miss in online retailing services.
6. It is lacking in family shopping experience which the Indian customers enjoy at the weekends, and particularly during festive seasons and marriage marketing.

               The advantages of e –Retailing outweighs its draws, thus it is showing a positive growth rate across the boundary. 

Success factors for e-retailing 

The success of e-retailing depends on multiple factors that are required to be taken into consideration as prima-facie, missing even a single small consideration is quite liable to create  a greater negative impact on entire business, since the customers and business both are far from each-other. The customer is aloof from reality of the business regarding with whom he is going to enter into a business relation; whether the relation will go for a short-term or for over a long-term, no matter.

            The e-Retailing business pattern is sophisticated as well as quite delicate; rather it may be defined more correctly as “fragile”.  Thus, every consideration requires equal importance in its own status.

            Following are some of the factors to be taken care of, however it is neither exhaustive nor the ultimate, since it may change according to the nature of business too.  At the same time the business ambience, magnitude and type of competition, changing need of consumer and many more external factors may influence it to a larger extent.  Thus, the early recognition of necessary current requirements and its implementation along with time is always a wise proposition. 

The important factors are: 

• Strong Branding
• Unique Merchandising
• Value Addition
• Competitive Pricing
• Better CRM
• Better Distribution Efficiency
• Soothing Website Design
• Transparency in Services. 

As e-retailer is alone in the e-Retailing market rather he is also surrounded with a number of competitors, thus to ensure sale he has to think competitive pricing so that he can attract his customer.  The competitive pricing finds scope from potential decrease in charges and expenditures that he had to bear while in brick-and-mortar mode of marketing.  It is a matter of careful exercise to enclose a real competitive price to its products or services.

The first abroad of the customer is website.  The aesthetic and easy handling facilities are two important terms in this relation.  The aesthetic provides initial attraction along with keeping the visitor long held with the site.  The maneuvering easiness keeps the visitor surfing it for long.

The aesthetics of the website must provide soothing look and feel and clarity of objects or scripts to the visitor along with sufficient ergonomic considerations, so that the visitor does not feel tired at the earliest.  The careful placement of buttons and links provides ease in handling it.

Finally, the transparency of services creates faith on the visitor of the site as well as on the customer of the business.  Transparency of services is identified with the “truth”.

Challenges of E-Retailing

1. Unproven Business Models

            In the formative years of dot-com era, most of the businesses on the Net were experiments in new areas and did not provide enduring sources of profit.  This was the primary reason behind closing down of 90 per cent of the purely e-commerce companies in the beginning of this century.  Today, dot-com businesses have matured a little.  Still some of the businesses are at experimental level and do not guarantee regular revenue.

2. Requirement to Change Business Process

            The process of procurement, storage and logistics in e-businesses is different from that in traditional brick-store businesses.  The e-retail organization has to carefully redesign and integrate various processes to suit the new e-business.  Traditional sections of departments and management hierarchy may pose hindrances and bottlenecks in the process of order processing and shipments, for example, the traditional business may require the goods to be present at the warehouse and inspected before being shipped to the customer, but in electronic retailing, shipping of goods from one place to another to a customer would not be possible.  The retailer may appoint a local supplier at the city where the customer resides and instruct the supplier to deliver the goods.  This would require by passing certain business rules and a lot of faith on the local supplier.  It would require business confidence that the supplier would follow the instructions and deliver the same product in good quantity and perfect quality.  Merchandise planning and demand analysis is also difficult in e-retailing, as compared to traditional retail businesses.

3. Channel Conflicts

            Companies selling through the Internet as well as through brick stores may find their interest conflicting at many places.  In electronic storefront orders, the goods directly reach the end-consumer and so the distributors and sellers may feel the threat to their existence.  Most of the time, it is seen that retailers tend to reduce price over the Net.  The sale at the brick store may store may drop because the retailer may tend to sell more through the Internet as a result of reduction of prices.

4. Legal Issues

            Proper laws have not yet evolved for Internet based transactions.  Validity of e-mails, digital signatures and application of copyright laws is being checked by various government authorities.  E-mail and digital signatures are now being recognized as valid for any legal purpose. Value Added Tax (VAT) is yet another area that creates problems.  Taxes on goods and services are still an issue.  Since the taxes are levied and shared by multiple government agencies at local, state or federal level, there are no clear rules to guide retailers on that.  In e-retailing, the place of billing, the place of dispatch of goods and the place of delivery all differ.  If these three places fall in different jurisdictions of governments, levy and submission of taxes would be a problem.

5. Security and Privacy

            Security is one of the major challenges in the digital world.  Despite a lot of security arrangements, such as passwords and firewalls, we come across the news of website hacking and data pilferages.  The Internet being on public domain is more susceptible to unauthorized peeping.  People are wary of divulging information regarding their credit cards and personal details on the Net because they can be misused.  Cyber criminals have exploited the Internet weaknesses and have broken into computer systems, retrieving passwords and banking information.  Security of payment gateway is a major concern, which has to be taken care of by the retailer by putting up proper security layers.

Conclusion

         Finally, to conclude that e-retailing isn’t just about building a pretty website. An established management consulting firm will bring in the requisite skills to evaluate business plan, check out revenue models, help identify alliances and integrate supply chain processes with e-commerce initiatives.

        As per the projection by internet and online association of India (IOAL), online shopping will increase to Rs.2300 crore by 2007. Today, around 38.5 million Indians use internet and the figures are likely to reach at 100 million by 2007-2008. Through online sales, some retail majors want to reach small towns where they do not have the outlets, when most are planning to go e-retailing, some are of the conventional view that it is essential to have look, and experience while shopping garment e- retailers should follow the above-mentioned strategies.

          The most and important concentration is focused on back- end system. Customers keep coming back only if earlier shopping experiences have been pleasant and successful.  Quit gloating over the 70% success rate of on-line purchases.  In this intricate business world, the e-retailing will become tremendous business strategic concept, and it may be very helpful and most profitable method of business process in coming decade to the textile and garment industries.