Online Retailing Operates What Kind of Problems Term Paper

Excerpt from Term Paper :

online retailing operates, what kind of problems they face and the kind of environment they operate in. The author has also focused on Asian online retailing and special focus on Hong Kong online retailing. It has 22 sources.

Access of basic necessities of life has followed the conventional method of buying and selling. This pattern changed in the last decade with the emergence of information technology age. When consumers have the ability to access information instantly, technologists thought why not access to products has as well. Thus emerged the concept of retailing online.

Online market had initiated with selling of information but today one can interact on the internet and buy physical products without any fear, atleast in some parts of the world. The main concern for consumers today is not whether their regions have access to the internet or not but rather focused on how fast and how online retailers can promptly provide them with products / services. As a result of this attitude a lot of internet companies started to have a separate division for marketing - online retails or more commonly known among IT professionals as retail. Online retailer is a diversified version of the e-commerce sister. Today online retailers sell anything that they find feasible to sell- right from a hair pin to a car, all can be online.

The competitive factor concerned here is how efficient is the etailing system, that is whether it is to survive external as well as internal environment. Despite being one of the most lucrative hub of online retailers America today still fear for its survival. With the Asian crisis, the Latin crisis as well as the recent September 11 crises, the economy had lurched on and off. The major concern is the local market is not strong enough to survive. In the face of competition from Asians as well as from Europeans, online retailers fear they need to gauge their competitors' strength and weaknesses before they can progress further. In discussing one of the competitive region, Hong Kong has been taken as an example.


In the following section the author will provide the current environment, the scope and the pitfalls of online retailers in America and Asia. Special focus on Hong Kong has also been given to provide an in-depth view at a micro level.


Online retailing concept

The basic marketing concept of a business is easy to understand if one were to take into account of the customers. Customer retention is an important phoneme if a businessman considers their needs. It is important to note that the entire selling concept is dependent on the understanding of the importance of the model of customer valuation and base. Customer "acquisition" is therefore important if one need to develop a business. There are several factors responsible for the upkeep of a business where customers are concerned. These are as follows:

Good retention marketers have two objectives with any kind of customer retention marketing:

1. Hold on to the most valuable customers

2. Try to make less valuable customers more valuable

To retain and increase the value of customers, you have to create marketing promotions and execute them. To do this in the most efficient and effective way, you have to know the value of your customers and their likelihood to respond to a promotion, for these 2 reasons:

1. You don't want to waste money on promoting to low value customers because you can't make a profit

2. You don't want to waste money promoting to customers who won't respond because this is just throwing money away."

Customer Retention and Valuation Concepts

How one go about valuation and retaining customers is also important. Most of the retailers have utilized the package programs, catalogs and benefits of long-term relation strategies. But as time passes this tactic is having little or not effect. Consumers are looking for new tactics. Most retailers adopt the attitude of selecting customer identification at random and provide them added benefits. Others adopt the catalog to select a list of names to mail them offers in the hope to instigate their interest in buying products. While these tactics have proved effective in the past catalog sales no longer have the desired effect. The reason being that the internet has taken over this arena. As a result of this they need to analyze how the online retailing differs from the brick and mortar one.

Although consumers have looked forward to online retailers, online retailers have not been able to meet up with their expectations. Consumers look for product variety, timing, efficiency, quality and on time delivery. Where on time delivery is concerned most of the retailers lag behind brick and mortar retailers. What customers trend say:

1. Customers who purchased _Recently_ were more likely to buy again vs. customers who had not purchased in a while 2. Customers who purchased _Frequently_ were more likely to buy again vs. customers who had made just one or two purchases

3. Customers who had spent the most _Money_ in total were more likely to buy again. The most valuable customers tended to continue to become even more valuable.

As a result of this during the end of 1990s, many shoppers had to abandon the new media in favor of conventional retailers.

Consumer expectation

Online retailers, whose sole revenue is dependent on the small online consumer market, realize the importance of value chain development which would increase their efficiency in meeting consumer demands. As a result of this realization many adopted strategies that encompass CRM [customer relationship management] and Value Chain management. Due to these tactics, consumer confident had regained. According to Gold the Goldman Sachs/PC Data "online shopping survey reported that 40% of respondents said their year 2000 online shopping experience was better that the previous year, and 54% said it was the same. Five percent said that their online shopping experience was worse." [United Press International, 12-26-2000]. This survey only shows how the implication of customer service plays in determining consumer base for online businesses including retailers.

Creation of value chain and CRM

Where value chain and CRM is concerned, online businesses depend more on it then brick and mortar businesses do. Take a look at and Their businesses have become two of the most important markers for online transaction and retailing. This has been achieved through the CRM strategy and the value added formula.

Supply chain emphasize on maintaining an effective suppliers relationship. This relationship enables the company to concentrate on overall organization performance through the smooth flow of products. If the front window and back window both maintains a thorough and open communication link then the consumers at the front window does not need to face shortcomings of the organization. The Internet provides the lucrative open window for most retailers. Their job however is to manage the back end of the business, without which the company cannot function in a harmonious manner. For instance deliverance of goods on time is important for retailers of brick and mortar structure. But once a consumer moves his interest online then the risk of losing money is more. He demands trust and the only way that the organization can provide it is through efficient deliverance - as promised - implied through online service. According to a survey released by the Boston Consulting Group and Harris Interactive, "high consumer satisfaction with online shopping, but with remaining concerns about customer service and about delivery dates." [United Press International, 12-26-2000]. Indeed consumer satisfaction in today's day and age should be of the top priority because it is through them that any service is successful. Where online retailing is concerned the soul purpose of the company's existence is dependent on high number of consumers. If this target is not achieved then the overall organization stand to loose out against competitors. That is why the implication of Boston Consulting Group survey could be viewed as a marking point when "The survey reported that 79% of online holiday shoppers were either "satisfied" or "very satisfied" with their holiday shopping experience, with 90% indicating that the product selection online was as good as or better than it is off-line" [United Press International, 12-26-2000].

Affiliate programs

The ulterior motive of the online retailers in is not only fixated at the satisfaction of consumers. One of the reasons why most retailers are afraid to come online is because of the low margin of profits they gain through individual items. Unless the company sells in bulk, the required profitability is not achieved. For this reason they look for an alternative. This is through advertisement.

Most online retailers depend on their banner advertisement as well as alliances with other major websites to earn additional revenues. These are usually technology companies whose source of income is comparatively higher; therefore their advertisement quota is also high. They do not find it difficult to exact some additional money to serve this purpose that is to enhance the quality of their…

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