Online shopping rewards portals are a relatively new type of loyalty program.
The advent of online shopping has resulted in the rapid development of a large number of rewards programs that offer incentives for shopping. These programmes may be points-based (redeemable for products or vouchers), cashback, airline frequent flyer-miles-based, hotel points, donations to charity, or even carbon offsets.
These programmes are often presented to the consumer as coalitions of large numbers of retailers, but are probably better described as competitive loyalty programmes, to differentiate them from their pre-cursors the original single retailer non-competitive loyalty program.
History
Rewards portals have grown very rapidly in most major markets, especially in the US, Canada, UK, and Australia. While they have roots in traditional off-line non-competitive loyalty programs, such portals often add considerably greater value to the customer than their traditional off-line equivalent, which accounts for their dramatic growth and high levels of customer acceptance.
The marketing model
Cash back and reward based websites operate using a marketing model known as affiliate marketing, which is a performance based marketing tool. Affiliate marketing networks make it possible to track in detail where users come from (which website is referring the customers), what users buy (down to the product) and when. Rewards based websites track and reconcile this information with their own user database, and pass on a proportion or even all of the commission received to the customer. From the customer's perspective they are getting something back, usually at no extra cost and often with an additional discount or bonus. From the retailer's perspective, the role and costs of marketing are passed on almost entirely to the affiliate. While hundreds of thousands of websites can easily use affiliate programmes to advertise products and retailers (from sports blogs, fanzines through to almost any niche website), cash back and rewards based programmes are much fewer in number, because of the need to track, store and retrieve individual customer information with a high degree of precision.
A Typology
A related article describes a typology of incentive programs. Online shopping programs of the sort described here tend to be consumer oriented points based or cash back programs. Traditional programs focus their proposition on extrinsic rewards {see also Extrinsic motivation}: cash back or a choice of attractive rewards. A variant, though not unique to online shopping programs, is the intrinsic reward. Cause related websites, much like affinity credit cards give their users the opportunity to donate the cash back / points to a charity, or to a school or to a club. Other's still give their users a range of options. With consumer concern about climate change growing, a number of green rewards shopping portals have recently appeared. Instead of cash back or points these websites offer carbon credits (also known as carbon offsets) or green gadgets to encourage consumers to shop with particular retailers or make changes to their life style.
Criticisms
Points based web sites may have different currencies, which makes it difficult to compare the customer benefit.
Most reward websites retain a proportion of the commission, and only industry insiders are aware of the nuances of the business model used and therefore the customer benefit.
From the consumer's perspective it may not always be clear whether the benefit going to the supported cause is the most effective way of raising funds. For example, in some countries like the UK, a significant tax benefit can be provided to the charity by donating in cash.
While the majority of green reward websites also offer some useful information and advice on greener living, few of them seem to encourage more sustainable consumption.
Thursday, September 17, 2009
Online shopping malls
Online shopping malls are websites that have a directory of online shopping stores. Stores may include Best Buy, Aeropostale, Home Depot, Sears, Expedia, Zales, Old Navy and many more online shopping stores.
Most online shopping malls offer a loyalty program in the form of cash back rebate reward points or price comparison shopping. These online shopping malls include FatWallet, ClubShop Mall, Shopping.com, Shopzilla, PriceGrabber and many more.
But the biggest retail trend for online shopping malls is that consumers are taking to online shopping more and more every year according to research firm ComScore Networks. By online shopping malls offering easy access to online stores with online shopping directories, price comparison shopping and cash back rebates, this trend will continue to grow.
Most online shopping malls offer a loyalty program in the form of cash back rebate reward points or price comparison shopping. These online shopping malls include FatWallet, ClubShop Mall, Shopping.com, Shopzilla, PriceGrabber and many more.
But the biggest retail trend for online shopping malls is that consumers are taking to online shopping more and more every year according to research firm ComScore Networks. By online shopping malls offering easy access to online stores with online shopping directories, price comparison shopping and cash back rebates, this trend will continue to grow.
Online shopping
Online shopping is the process consumers go through to purchase products or services over the Internet. An online shop, eshop, e-store, internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall.
The metaphor of an online catalog is also used, by analogy with mail order catalogs. All types of stores have retail web sites, including those that do and do not also have physical storefronts and paper catalogs. Online shopping is a type of electronic commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions.
Webshop
The term "Webshop" also refers to a place of business where web development, web hosting and other types of web related activities take place (Web refers to the World Wide Web and "shop" has a colloquial meaning used to describe the place). Buying online introduced new ways of reducing costs by reducing the number of staff needed. It is a more effective way of getting products to people and spreading into different demographics.
Benefits of online shopping
1. Bargaining power of consumers. They enjoy a wider choice
2. Supplier power. It is more difficult for consumers to manage a non-digital
channel.
3. Internet increases commoditisation
4. Threat of new entrants. Online means it is easier to introduce new services with
lower over-heads
5. Threat of substitutes
6. Rivalry among competitors. It is easier to introduce products and services to
different markets
History
The idea of online shopping predates the World Wide Web, for there are earlier experiments involving real-time transaction processing from a domestic television. The technology, based on Videotex, was first demonstrated in 1979 by Michael Aldrich of Rediffusion Computers which designed and installed systems in the UK, including the first Tesco pilot system in 1984. The first B2B was Thomson Holidays in 1981.
In 1990 Tim Berners-Lee created the first World Wide Web server and browser. In 1992 Charles Stack created the first online book store, Book Stacks Unlimited (aka Books.com), two years before Jeff Bezos started Amazon. In 1994 other advances took place, such as online banking and the opening of an online pizza shop by Pizza Hut. During that same year, Netscape introduced SSL encryption of data transferred online, which has become essential for secure online shopping. In 1995 Amazon expanded its online shopping, and in 1996 eBay appeared.
Customers
In general, shopping has always catered to middle class and upper class women. Shopping is fragmented and pyramid-shaped. At the pinnacle are elegant boutiques for the affluent; a huge belt of inelegant but ruthlessly efficient “discounters” flog plenty at the pyramid’s precarious middle. According to the analysis of Susan D. Davis, at its base are the world’s workers and poor, on whose cheapened labor the rest of the pyramid depends for its incredible abundance. Shopping has evolved from single stores to large malls containing many stores that most often offer attentive service, store credit, delivery, and acceptance of returns. These new additions to shopping have encouraged and targeted middle class women.
In recent years, online shopping has become popular; however, it still caters to the middle and upper class.[citation needed] In order to shop online, one must be able to have access to a computer, a bank account and a debit card. Shopping has evolved with the growth of technology. According to research found in the Journal of Electronic Commerce, if we[who?] focus on the demographic characteristics of the in-home shopper, in general, the higher the level of education, income, and occupation of the head of the household, the more favourable the perception of non-store shopping. An influential factor in consumer attitude towards non-store shopping is exposure to technology, since it has been demonstrated that increased exposure to technology increases the probability of developing favourable attitudes towards new shopping channels.
Online shopping widened the target audience to men and women of the middle class. At first, the main users of online shopping were young men with a high level of income and a university education. This profile is changing. For example, in USA in the early years of Internet there were very few women users, but by 2001 women were 52.8%of the online population. Sociocultural pressure has made men generally more independent in their purchase decisions, while women place greater value on personal contact and social relations.
Trends
One third of people that shop online use a search engine to find what they are looking for and about one fourth find websites by word of mouth. Word of mouth has become a leading way by which people find shopping websites. When an online shopper has a good first experience with a certain website, sixty percent of the time they will return to that website to buy more.
Books are one of the things bought most online. However, clothes, shoes, and accessories are all very popular things bought online. Cosmetics, nutrition products, and groceries are increasingly being purchased online. About one fourth of travelers buy their plane tickets online because it is a quick and easy way to compare airline travel and make a purchase. Online shopping provides more freedom and control than shopping in a store.
From a sociological perspective, online shopping is arguably the most predictable way to shop. One knows exactly what website to go to, how much the product will cost, and how long it will take for the product to reach them. Online shopping has become extremely routine and predictable, which is one of its great appeals to the consumer.
Logistics
Consumers find a product of interest by visiting the website of the retailer directly, or do a search across many different vendors using a shopping search engine.
Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, by analogy with filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card numbers are not accepted by e-mail, for security reasons).
Payment
Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:
. Debit card
. Various types of electronic money
. Cash on delivery (C.O.D., offered by very few online stores)
. Cheque
. Wire transfer/delivery on payment
. Postal money order
. Reverse SMS billing to mobile phones
. Gift cards
. Direct debit in some countries
Some sites will not allow international credit cards and billing address and shipping address have to be in the same country in which site does its business. Other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.
While credit cards are currently the most popular means of paying for online goods and services, alternative online payments will account for 26% of e-commerce volume by 2009.
Product delivery
Once a payment has been accepted the goods or services can be delivered in the following ways.
. Download: This is the method often used for digital media products such as
software, music, movies, or images.
. Shipping: The product is shipped to the customer's address.
. Drop shipping: The order is passed to the manufacturer or third-party distributor,
who ships the item directly to the consumer, bypassing the retailer's physical
location to save time, money, and space.
. In-store pickup: The customer orders online, finds a local store using locator
software and picks the product up at the closest store. This is the method often
used in the bricks and clicks business model.
. In the case of buying an admission ticket one may get a code, or a ticket that can
be printed out. At the premises it is made sure that the same right of admission
is not used twice.
Shopping cart systems
Simple systems allow the offline administration of products and categories. The shop is then generated as HTML files and graphics that can be uploaded to a webspace. These systems do not use an online database.
A high end solution can be bought or rented as a standalone program or as an addition to an enterprise resource planning program. It is usually installed on the company's own webserver and may integrate into the existing supply chain so that ordering, payment, delivery, accounting and warehousing can be automated to a large extent.
Other solutions allow the user to register and create an online shop on a portal that hosts multiple shops at the same time.
Open source shopping cart packages include advanced platforms such as Interchange, and off the shelf solutions as Satchmo, osCommerce, Magento, Zen Cart, OpenCart, VirtueMart, Flying Cart and PrestaShop or the dual licensed PhPepperShop.
Commercial systems can also be tailored to ones needs so that the shop does not have to be created from scratch. By using a framework already existing, software modules for different functionalities required by a web shop can be adapted and combined.
Design
Why does electronic shopping exist? For customers it is not only because of the high level of convenience, but also because of the broader selection; competitive pricing and greater access to information. For organizations it increases their customer value and the building of sustainable capabilities, next to the increased profits.
Information load
Designers of online shops should consider the effects of information load. Mehrabian and Russel (1974) introduced the concept of information rate (load) as the complex spatial and temporal arrangements of stimuli within a setting. The notion of information load is directly related to concerns about whether consumers can be given too much information in virtual shopping environments. Compared with conventional retail shopping, computer shopping enriches the information environment of virtual shopping by providing additional product information, such as comparative products and services, as well as various alternatives and attributes of each alternative, etc.
Two major sub-dimensions have been identified for information load: complexity and novelty. Complexity refers to the number of different elements or features of a site, which can be the result of increased information diversity. Novelty involves the unexpected, suppressing, new, or unfamiliar aspects of the site. A research by Huang (2000) showed that the novelty dimension kept consumers exploring the shopping sites, whereas the complexity dimension has the potential to induce impulse purchases.
Consumer expectations
The main idea of online shopping is not in having a good looking website that could be listed in a lot of search engines and it is not about the art behind the site. It also is not only just about disseminating information, because it is all about building relationships and making money. Mostly, organizations try to adopt techniques of online shopping without understanding these techniques and/or without a sound business model. Rather than supporting the organization’s culture and brand name, the website should satisfy consumer's expectations. Many researchers notify that the uniqueness of the web has dissolved and the need for the design, which will be user centered, is very important. Companies should always remember that there are certain things, such as understanding the customer’s wants and needs, living up to promises, never go out of style, because they give reason to come back. And the reason will stay if consumers always get what they expect. McDonaldization theory can be used in terms of online shopping, because online shopping is becoming more and more popular and website that wants to gain more shoppers will use four major principles of McDonaldization: efficiency, calculability, predictability and control.
Organizations, which want people to shop more online for them, should consume extensive amounts of time and money to define, design, develop, test, implement, and maintain website. Also if company wants their website to be popular among online shoppers it should leave the user with a positive impression about the organization, so consumers can get an impression that the company cares about them. The organization that wants to be acceptable in online shopping needs to remember, that it is easier to lose a customer then to gain one. Lots of researchers state that even when site was a “top-rated”, it would go nowhere if the organization failed to live up to common etiquette, such as returning e-mails in a timely fashion, notifying customers of problems, being honest, and being good stewards of the customers’ data. Organizations that want to keep their customers or gain new ones try to get rid of all mistakes and be more appealing to be more desirable for online shoppers. And this is why many designers of webshops considered research outcomes concerning consumer expectations. Research conducted by Elliot and Fowell (2000) revealed satisfactory and unsatisfactory customer experiences.
User interface
It is important to take the country and customers into account. For example, in Japan privacy is very important and emotional involvement is more important on a pension’s site than on a shopping site. Next to that, there is a difference in experience: experienced users focus more on the variables that directly influence the task, while novice users are focusing more on understanding the information.
There are several techniques for the inspection of the usability. The ones used in the research of Chen & Macredie (2005) are Heuristic evaluation, cognitive walk through and the user testing. Every technique has its own (dis-)advantages and it is therefore important to check per situation which technique is appropriate.
When the customers went to the online shop, a couple of factors determine whether they will return to the site. The most important factors are the ease of use and the presence of user-friendly features.
Market share
E-commerce product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country. The $18.3 billion worth of clothes sold online represented about 10% of the domestic market.
For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.
Advantages
Convenience
Online stores are usually available 24 hours a day, and many consumers have Internet access both at work and at home. A visit to a conventional retail store requires travel and must take place during business hours.
Searching or browsing an online catalog can be faster than browsing the aisles of a physical store. Consumers with dial-up Internet connections rather than broadband have much longer load times for content-rich web sites and have a considerably slower online shopping experience.
Some consumers prefer interacting with people rather than computers (and vice versa), sometimes because they find computers hard to use. Not all online retailers have succeeded in making their sites easy to use or reliable.
In most cases, merchandise must be shipped to the consumer, introducing a significant delay and potentially uncertainty about whether or not the item was actually in stock at the time of purchase. Bricks and clicks stores offer the ability to buy online but pick up in a nearby store. Many stores give the consumer the delivery company's tracking number for their package when shipped, so they can check its status online and know exactly when it will arrive. For efficiency reasons, online stores generally do not ship products immediately upon receiving an order. Orders are only filled during warehouse operating hours, and there may be a delay of anywhere from a few minutes to a few days to a few weeks before in-stock items are actually packaged and shipped. Many retailers inform customers how long they can expect to wait before receiving a package, and whether or not they generally have a fulfillment backlog. A quick response time is sometimes an important factor in consumers' choice of merchant. A weakness of online shopping is that, even if a purchase can be made 24 hours a day, the customer must often be at home during normal business hours to accept the delivery. For many professionals this can be difficult, and absence at the time of delivery can result in delays, or in some cases, return of the item to the retailer. Automated delivery booths, such as DHL's Packstation, have tried to address this problem.
In the event of a problem with the item - it is not what the consumer ordered, or it is not what they expected - consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund. Some online companies have more generous return policies to compensate for the traditional advantage of physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and does not charge a restocking fee, even for returns which are not the result of merchant error. (Note: In the United Kingdom, Online shops are prohibited from charging a restocking fee if the consumer cancels their order in accordance with the Consumer Protection (Distance Selling) Act 2000.)
Information and reviews
Online stores must describe products for sale with text, photos, and multimedia files, whereas in a physical retail store, the actual product and the manufacturer's packaging will be available for direct inspection (which might involve a test drive, fitting, or other experimentation).
Some online stores provide or link to supplemental product information, such as instructions, safety procedures, demonstrations, or manufacturer specifications. Some provide background information, advice, or how-to guides designed to help consumers decide which product to buy.
Some stores even allow customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products.
In a conventional retail store, clerks are generally available to answer questions. Some online stores have real-time chat features, but most rely on e-mail or phone calls to handle customer questions.
Price and selection
One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines and online price comparison services can be used to look up sellers of a particular product or service.
Shoppers find a greater selection online in certain market segments (for example, computers and consumer electronics) and in some cases lower prices. This is due to a relaxation of certain constraints, such as the size of a "brick-and-mortar" store, lower stocking costs (or none, if drop shipping is used), and lower staffing overhead.
Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.
Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.
Concerns
Fraud and security concerns
Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.
Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.
Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party. Denial of service attacks are a minor risk for merchants, as are server and network outages.
Quality seals can be placed on the Shop web page if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent.
A number of resources offer advice on how consumers can protect themselves when using online retailer services. These include:
1.Sticking with known stores, or attempting to find independent consumer reviews of their experiences; also ensuring that there is comprehensive contact information on the website before using the service, and noting if the retailer has enrolled in industry oversight programs such as trust mark or trust seal.
2.Before buying from a new company, evaluate the website by considering issues such as: the professionalism and user-friendliness of the site; whether or not the company lists a telephone number and/or street address along with e-contact information; whether a fair and reasonable refund and return policy is clearly stated; and whether there are hidden price inflators, such as excessive shipping and handling charges.
3.Ensuring that the retailer has an acceptable privacy policy posted. For example note if the retailer does not explicitly state that it will not share private information with others without consent.
4.Ensuring that the vendor address is protected with SSL (see above) when entering credit card information. If it does the address on the credit card information entry screen will start with "HTTPS".
5.Using strong passwords, without personal information. Another option is a "pass phrase," which might be something along the lines: "I shop 4 good a buy!!" These are difficult to hack, and provides a variety of upper, lower, and special characters and could be site specific and easy to remember.
Although the benefits of online shopping are considerable, when the process goes poorly it can create a thorny situation. A few problems that shoppers potentially face include identity theft, faulty products, and the accumulation of spy ware. Most large online corporations are inventing new ways to make fraud more difficult, however, the criminals are constantly responding to these developments with new ways to manipulate the system. Even though these efforts are making it easier to protect yourself online, it is a constant fight to maintain the lead. It is advisable to be aware of the most current technology and scams out there to fully protect yourself and your finances.
One of the hardest areas to deal with in online shopping is the delivery of the products. Most companies offer shipping insurance in case the product is lost or damaged; however, if the buyer opts not to purchase insurance on their products, they are generally out of luck. Some shipping companies will offer refunds or compensation for the damage, but it is up to their discretion if this will happen. It is important to realize that once the product leaves the hands of the seller, they have no responsibility (provided the product is what the buyer ordered and is in the specified condition).
Privacy
Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.
Brick-and-mortar stores also collect consumer information. Some ask for address and phone number at checkout, though consumers may refuse to provide it. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.
Product suitability
Category U.S. online sales (2006)
Apparel, accessories and footwear $18.3 billion
Computer hardware and software $17.2 billion
Autos and auto parts $16.7 billion
Home furnishings $10.0 billion
Total products sales (excluding travel) $146.4 billion
Travel $73.5 billion
Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Other successful marketers use Drop shipping or affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory.
Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit through a standard letterbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer.
Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets—in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.
Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.
Aggregation
High-volume websites, such as Yahoo!, Amazon.com and eBay, offer hosting services for online stores to small retailers. These stores are presented within an integrated navigation framework. Collections of online stores are sometimes known as virtual shopping malls or online marketplaces.
Become.com is a product price comparison service and discovery shopping search engine with a mission to help shoppers make ideal buying decisions. Dulance was a price engine that specialized in searching for hard-to-find products often sold by small independent online retailers and or affiliate stores.
The metaphor of an online catalog is also used, by analogy with mail order catalogs. All types of stores have retail web sites, including those that do and do not also have physical storefronts and paper catalogs. Online shopping is a type of electronic commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions.
Webshop
The term "Webshop" also refers to a place of business where web development, web hosting and other types of web related activities take place (Web refers to the World Wide Web and "shop" has a colloquial meaning used to describe the place). Buying online introduced new ways of reducing costs by reducing the number of staff needed. It is a more effective way of getting products to people and spreading into different demographics.
Benefits of online shopping
1. Bargaining power of consumers. They enjoy a wider choice
2. Supplier power. It is more difficult for consumers to manage a non-digital
channel.
3. Internet increases commoditisation
4. Threat of new entrants. Online means it is easier to introduce new services with
lower over-heads
5. Threat of substitutes
6. Rivalry among competitors. It is easier to introduce products and services to
different markets
History
The idea of online shopping predates the World Wide Web, for there are earlier experiments involving real-time transaction processing from a domestic television. The technology, based on Videotex, was first demonstrated in 1979 by Michael Aldrich of Rediffusion Computers which designed and installed systems in the UK, including the first Tesco pilot system in 1984. The first B2B was Thomson Holidays in 1981.
In 1990 Tim Berners-Lee created the first World Wide Web server and browser. In 1992 Charles Stack created the first online book store, Book Stacks Unlimited (aka Books.com), two years before Jeff Bezos started Amazon. In 1994 other advances took place, such as online banking and the opening of an online pizza shop by Pizza Hut. During that same year, Netscape introduced SSL encryption of data transferred online, which has become essential for secure online shopping. In 1995 Amazon expanded its online shopping, and in 1996 eBay appeared.
Customers
In general, shopping has always catered to middle class and upper class women. Shopping is fragmented and pyramid-shaped. At the pinnacle are elegant boutiques for the affluent; a huge belt of inelegant but ruthlessly efficient “discounters” flog plenty at the pyramid’s precarious middle. According to the analysis of Susan D. Davis, at its base are the world’s workers and poor, on whose cheapened labor the rest of the pyramid depends for its incredible abundance. Shopping has evolved from single stores to large malls containing many stores that most often offer attentive service, store credit, delivery, and acceptance of returns. These new additions to shopping have encouraged and targeted middle class women.
In recent years, online shopping has become popular; however, it still caters to the middle and upper class.[citation needed] In order to shop online, one must be able to have access to a computer, a bank account and a debit card. Shopping has evolved with the growth of technology. According to research found in the Journal of Electronic Commerce, if we[who?] focus on the demographic characteristics of the in-home shopper, in general, the higher the level of education, income, and occupation of the head of the household, the more favourable the perception of non-store shopping. An influential factor in consumer attitude towards non-store shopping is exposure to technology, since it has been demonstrated that increased exposure to technology increases the probability of developing favourable attitudes towards new shopping channels.
Online shopping widened the target audience to men and women of the middle class. At first, the main users of online shopping were young men with a high level of income and a university education. This profile is changing. For example, in USA in the early years of Internet there were very few women users, but by 2001 women were 52.8%of the online population. Sociocultural pressure has made men generally more independent in their purchase decisions, while women place greater value on personal contact and social relations.
Trends
One third of people that shop online use a search engine to find what they are looking for and about one fourth find websites by word of mouth. Word of mouth has become a leading way by which people find shopping websites. When an online shopper has a good first experience with a certain website, sixty percent of the time they will return to that website to buy more.
Books are one of the things bought most online. However, clothes, shoes, and accessories are all very popular things bought online. Cosmetics, nutrition products, and groceries are increasingly being purchased online. About one fourth of travelers buy their plane tickets online because it is a quick and easy way to compare airline travel and make a purchase. Online shopping provides more freedom and control than shopping in a store.
From a sociological perspective, online shopping is arguably the most predictable way to shop. One knows exactly what website to go to, how much the product will cost, and how long it will take for the product to reach them. Online shopping has become extremely routine and predictable, which is one of its great appeals to the consumer.
Logistics
Consumers find a product of interest by visiting the website of the retailer directly, or do a search across many different vendors using a shopping search engine.
Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, by analogy with filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card numbers are not accepted by e-mail, for security reasons).
Payment
Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:
. Debit card
. Various types of electronic money
. Cash on delivery (C.O.D., offered by very few online stores)
. Cheque
. Wire transfer/delivery on payment
. Postal money order
. Reverse SMS billing to mobile phones
. Gift cards
. Direct debit in some countries
Some sites will not allow international credit cards and billing address and shipping address have to be in the same country in which site does its business. Other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.
While credit cards are currently the most popular means of paying for online goods and services, alternative online payments will account for 26% of e-commerce volume by 2009.
Product delivery
Once a payment has been accepted the goods or services can be delivered in the following ways.
. Download: This is the method often used for digital media products such as
software, music, movies, or images.
. Shipping: The product is shipped to the customer's address.
. Drop shipping: The order is passed to the manufacturer or third-party distributor,
who ships the item directly to the consumer, bypassing the retailer's physical
location to save time, money, and space.
. In-store pickup: The customer orders online, finds a local store using locator
software and picks the product up at the closest store. This is the method often
used in the bricks and clicks business model.
. In the case of buying an admission ticket one may get a code, or a ticket that can
be printed out. At the premises it is made sure that the same right of admission
is not used twice.
Shopping cart systems
Simple systems allow the offline administration of products and categories. The shop is then generated as HTML files and graphics that can be uploaded to a webspace. These systems do not use an online database.
A high end solution can be bought or rented as a standalone program or as an addition to an enterprise resource planning program. It is usually installed on the company's own webserver and may integrate into the existing supply chain so that ordering, payment, delivery, accounting and warehousing can be automated to a large extent.
Other solutions allow the user to register and create an online shop on a portal that hosts multiple shops at the same time.
Open source shopping cart packages include advanced platforms such as Interchange, and off the shelf solutions as Satchmo, osCommerce, Magento, Zen Cart, OpenCart, VirtueMart, Flying Cart and PrestaShop or the dual licensed PhPepperShop.
Commercial systems can also be tailored to ones needs so that the shop does not have to be created from scratch. By using a framework already existing, software modules for different functionalities required by a web shop can be adapted and combined.
Design
Why does electronic shopping exist? For customers it is not only because of the high level of convenience, but also because of the broader selection; competitive pricing and greater access to information. For organizations it increases their customer value and the building of sustainable capabilities, next to the increased profits.
Information load
Designers of online shops should consider the effects of information load. Mehrabian and Russel (1974) introduced the concept of information rate (load) as the complex spatial and temporal arrangements of stimuli within a setting. The notion of information load is directly related to concerns about whether consumers can be given too much information in virtual shopping environments. Compared with conventional retail shopping, computer shopping enriches the information environment of virtual shopping by providing additional product information, such as comparative products and services, as well as various alternatives and attributes of each alternative, etc.
Two major sub-dimensions have been identified for information load: complexity and novelty. Complexity refers to the number of different elements or features of a site, which can be the result of increased information diversity. Novelty involves the unexpected, suppressing, new, or unfamiliar aspects of the site. A research by Huang (2000) showed that the novelty dimension kept consumers exploring the shopping sites, whereas the complexity dimension has the potential to induce impulse purchases.
Consumer expectations
The main idea of online shopping is not in having a good looking website that could be listed in a lot of search engines and it is not about the art behind the site. It also is not only just about disseminating information, because it is all about building relationships and making money. Mostly, organizations try to adopt techniques of online shopping without understanding these techniques and/or without a sound business model. Rather than supporting the organization’s culture and brand name, the website should satisfy consumer's expectations. Many researchers notify that the uniqueness of the web has dissolved and the need for the design, which will be user centered, is very important. Companies should always remember that there are certain things, such as understanding the customer’s wants and needs, living up to promises, never go out of style, because they give reason to come back. And the reason will stay if consumers always get what they expect. McDonaldization theory can be used in terms of online shopping, because online shopping is becoming more and more popular and website that wants to gain more shoppers will use four major principles of McDonaldization: efficiency, calculability, predictability and control.
Organizations, which want people to shop more online for them, should consume extensive amounts of time and money to define, design, develop, test, implement, and maintain website. Also if company wants their website to be popular among online shoppers it should leave the user with a positive impression about the organization, so consumers can get an impression that the company cares about them. The organization that wants to be acceptable in online shopping needs to remember, that it is easier to lose a customer then to gain one. Lots of researchers state that even when site was a “top-rated”, it would go nowhere if the organization failed to live up to common etiquette, such as returning e-mails in a timely fashion, notifying customers of problems, being honest, and being good stewards of the customers’ data. Organizations that want to keep their customers or gain new ones try to get rid of all mistakes and be more appealing to be more desirable for online shoppers. And this is why many designers of webshops considered research outcomes concerning consumer expectations. Research conducted by Elliot and Fowell (2000) revealed satisfactory and unsatisfactory customer experiences.
User interface
It is important to take the country and customers into account. For example, in Japan privacy is very important and emotional involvement is more important on a pension’s site than on a shopping site. Next to that, there is a difference in experience: experienced users focus more on the variables that directly influence the task, while novice users are focusing more on understanding the information.
There are several techniques for the inspection of the usability. The ones used in the research of Chen & Macredie (2005) are Heuristic evaluation, cognitive walk through and the user testing. Every technique has its own (dis-)advantages and it is therefore important to check per situation which technique is appropriate.
When the customers went to the online shop, a couple of factors determine whether they will return to the site. The most important factors are the ease of use and the presence of user-friendly features.
Market share
E-commerce product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country. The $18.3 billion worth of clothes sold online represented about 10% of the domestic market.
For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.
Advantages
Convenience
Online stores are usually available 24 hours a day, and many consumers have Internet access both at work and at home. A visit to a conventional retail store requires travel and must take place during business hours.
Searching or browsing an online catalog can be faster than browsing the aisles of a physical store. Consumers with dial-up Internet connections rather than broadband have much longer load times for content-rich web sites and have a considerably slower online shopping experience.
Some consumers prefer interacting with people rather than computers (and vice versa), sometimes because they find computers hard to use. Not all online retailers have succeeded in making their sites easy to use or reliable.
In most cases, merchandise must be shipped to the consumer, introducing a significant delay and potentially uncertainty about whether or not the item was actually in stock at the time of purchase. Bricks and clicks stores offer the ability to buy online but pick up in a nearby store. Many stores give the consumer the delivery company's tracking number for their package when shipped, so they can check its status online and know exactly when it will arrive. For efficiency reasons, online stores generally do not ship products immediately upon receiving an order. Orders are only filled during warehouse operating hours, and there may be a delay of anywhere from a few minutes to a few days to a few weeks before in-stock items are actually packaged and shipped. Many retailers inform customers how long they can expect to wait before receiving a package, and whether or not they generally have a fulfillment backlog. A quick response time is sometimes an important factor in consumers' choice of merchant. A weakness of online shopping is that, even if a purchase can be made 24 hours a day, the customer must often be at home during normal business hours to accept the delivery. For many professionals this can be difficult, and absence at the time of delivery can result in delays, or in some cases, return of the item to the retailer. Automated delivery booths, such as DHL's Packstation, have tried to address this problem.
In the event of a problem with the item - it is not what the consumer ordered, or it is not what they expected - consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund. Some online companies have more generous return policies to compensate for the traditional advantage of physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and does not charge a restocking fee, even for returns which are not the result of merchant error. (Note: In the United Kingdom, Online shops are prohibited from charging a restocking fee if the consumer cancels their order in accordance with the Consumer Protection (Distance Selling) Act 2000.)
Information and reviews
Online stores must describe products for sale with text, photos, and multimedia files, whereas in a physical retail store, the actual product and the manufacturer's packaging will be available for direct inspection (which might involve a test drive, fitting, or other experimentation).
Some online stores provide or link to supplemental product information, such as instructions, safety procedures, demonstrations, or manufacturer specifications. Some provide background information, advice, or how-to guides designed to help consumers decide which product to buy.
Some stores even allow customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products.
In a conventional retail store, clerks are generally available to answer questions. Some online stores have real-time chat features, but most rely on e-mail or phone calls to handle customer questions.
Price and selection
One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines and online price comparison services can be used to look up sellers of a particular product or service.
Shoppers find a greater selection online in certain market segments (for example, computers and consumer electronics) and in some cases lower prices. This is due to a relaxation of certain constraints, such as the size of a "brick-and-mortar" store, lower stocking costs (or none, if drop shipping is used), and lower staffing overhead.
Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.
Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.
Concerns
Fraud and security concerns
Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.
Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.
Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party. Denial of service attacks are a minor risk for merchants, as are server and network outages.
Quality seals can be placed on the Shop web page if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent.
A number of resources offer advice on how consumers can protect themselves when using online retailer services. These include:
1.Sticking with known stores, or attempting to find independent consumer reviews of their experiences; also ensuring that there is comprehensive contact information on the website before using the service, and noting if the retailer has enrolled in industry oversight programs such as trust mark or trust seal.
2.Before buying from a new company, evaluate the website by considering issues such as: the professionalism and user-friendliness of the site; whether or not the company lists a telephone number and/or street address along with e-contact information; whether a fair and reasonable refund and return policy is clearly stated; and whether there are hidden price inflators, such as excessive shipping and handling charges.
3.Ensuring that the retailer has an acceptable privacy policy posted. For example note if the retailer does not explicitly state that it will not share private information with others without consent.
4.Ensuring that the vendor address is protected with SSL (see above) when entering credit card information. If it does the address on the credit card information entry screen will start with "HTTPS".
5.Using strong passwords, without personal information. Another option is a "pass phrase," which might be something along the lines: "I shop 4 good a buy!!" These are difficult to hack, and provides a variety of upper, lower, and special characters and could be site specific and easy to remember.
Although the benefits of online shopping are considerable, when the process goes poorly it can create a thorny situation. A few problems that shoppers potentially face include identity theft, faulty products, and the accumulation of spy ware. Most large online corporations are inventing new ways to make fraud more difficult, however, the criminals are constantly responding to these developments with new ways to manipulate the system. Even though these efforts are making it easier to protect yourself online, it is a constant fight to maintain the lead. It is advisable to be aware of the most current technology and scams out there to fully protect yourself and your finances.
One of the hardest areas to deal with in online shopping is the delivery of the products. Most companies offer shipping insurance in case the product is lost or damaged; however, if the buyer opts not to purchase insurance on their products, they are generally out of luck. Some shipping companies will offer refunds or compensation for the damage, but it is up to their discretion if this will happen. It is important to realize that once the product leaves the hands of the seller, they have no responsibility (provided the product is what the buyer ordered and is in the specified condition).
Privacy
Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.
Brick-and-mortar stores also collect consumer information. Some ask for address and phone number at checkout, though consumers may refuse to provide it. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.
Product suitability
Category U.S. online sales (2006)
Apparel, accessories and footwear $18.3 billion
Computer hardware and software $17.2 billion
Autos and auto parts $16.7 billion
Home furnishings $10.0 billion
Total products sales (excluding travel) $146.4 billion
Travel $73.5 billion
Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Other successful marketers use Drop shipping or affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory.
Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit through a standard letterbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer.
Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets—in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.
Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.
Aggregation
High-volume websites, such as Yahoo!, Amazon.com and eBay, offer hosting services for online stores to small retailers. These stores are presented within an integrated navigation framework. Collections of online stores are sometimes known as virtual shopping malls or online marketplaces.
Become.com is a product price comparison service and discovery shopping search engine with a mission to help shoppers make ideal buying decisions. Dulance was a price engine that specialized in searching for hard-to-find products often sold by small independent online retailers and or affiliate stores.
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