Mani - Etailing

"E-TAILING - THE KEY TO MODERN RETAILER's SUCCESS"

Dr.Deepti Singh Verma Dr. Sonali Dube

ABSTRACT

Internet is a potent medium that can serve as a unique platform for the growth of

retail brands in India. The Indian retail market is witnessing a revolution. The current

web-based models for e-tailing are part of an embryonic phase preceding an era of

rapid transformation, challenge, and opportunity in Indian retail market. It is not just

the metros that are fueling the online scene in India the demand supply gap in tier 2-3

cities where there is brand awareness but no availability of products and services is

also adding to growth. Online retailing portals such as eBay.in, Snapdeal.com, and

Naaptol.com are registering anywhere between 40 and 60% of their sales from rural

areas apart from the tier II and III cities. The penetration rate is quite low in comparison

to other countries worldwide; however the number of users is significantly high. The

present scenarios of e-tailing opportunities, its market, the viabilities and trends etc.,

have been discussed in this paper.

Keywords: E-tailing, Multichannel, Product Diversity, Service, Strategy, Online shopping.

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Altius Shodh Journal of Management & Commerce

INTRODUCTION

With rapid growth of the Internet and globalization of market, the retail sector has becomean increasingly competitive and dynamic business environment. Business and marketingactivities are affected by the invent of Internet technologies and the Internet is revolutionizingcommerce, marketing, retailing, shopping and advertising activities of products and services.There are several attractive attributes of Internet to not only e-customers but also companieson time and money saving, communicate, convenience, easy accessibility, selection from awide range of alternatives, and the availability of information for making decisions and allmarketing activities can be performed via the Internet efficiently. In the era of globalization,companies are using the Internet technologies to reach out to valued customers and to providea point of contact 24 hours a day, 7 days a week. E-commerce and e-marketing are the twoimportant terms in the new Internet-based business domain. E-commerce can be defined asa way of conducting business by companies and customers performing electronic transactionsthrough the Internet. E-marketing, (also known as Internet Marketing, Web Marketing, andOnline Marketing etc.) can be defined as the promotion of products or services through theInternet whereas; e-tailing can be defined as selling products and services by using the Internet.E-tailing is defined as retailing conducted online, over the internet.

The e-tailing industry is expanding rapidly with strong early life cycle growth. In U.S. between2003 and 2008 industry revenue rose at a CAGR of 20%. Even in 2009, when total retailsales fell 7.2%, online sales grew 4.3%. Despite the recent economic slowdown, the e-tailing sector enjoys continued growth due to increasing worldwide internet penetration andother factors. Long term trends driving increases in online activity remain positive. We expectsuch trends to support continued expansion by internet companies despite a weak economicenvironment. Coming to Indian scenario, the organised retailing is showing a tremendousgrowth in recent years (See Figure 1: Growth of Organised Retailing in India). Andproportionately the electronic retail growth of Indian market as estimated by Euro-monitorreport stands close to 48% CAGR and in value term it is going to touch INR 27 billion(Rs2700 crores) by 2010 from INR 4 billion in 2005.

LITERATURE REVIEW According to Turban (2006), e-tailing is defined as retailingconducted online, over the internet. Wang (2002) has provided a broad definition of e-tailing by defining it as the selling of goods and services to the consumer market via theinternet. Zeithaml (2002) has defined that the success of e-tailing depends on the efficientweb site design, effective shopping and prompt delivery. The other e-store services aredelivery on real time, return and replacement process, period of filling out online ordersform, speed of response time to e-customers queries. Ratchford (2001) has said that throughInternet, consumers can gather information about merchandise and they compare a productacross suppliers at a low cost.

Rao (1999), E-commerce offers increased market activity for retailers in the form of growingmarket access and information and decreased operating and procurement costs. Myerson(1998) expressed that consumers are getting smarter in using e-tailers (and online search

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engines and Rao (1999), E-commerce offers increased market activity for retailers in theform of growing market access and information and decreased operating and procurementcosts. Myerson (1998) expressed that consumers are getting smarter in using e-tailers (andonline search engines and agents) for convenience and comparison- shopping. Guttman (1998)describes several unique elements make online shopping different from the traditional in-store retail model. Besides offering convenience and expanded product variety, the onlinemodel also makes it easy for consumers to access and compare data from multiple sources.Meeker (1997), retailers might cry foul, but the new shopping paradigm they have to face isthat as premium customers begin to accept the e-tail alternative in larger numbers.

OBJECTIVE OF THE STUDY

This study seeks to highlight the issues, Challenges and opportunities and strategies for e-tailing.Other objectives of the study are as follows:

To draw out, the driving factors for growth of the e-tailing.

To elucidate the strategic role of e-tailing in achieving the retail organization objectives.

RESEARCH METHODOLOGY

This paper purely depends on secondary data. To collect the statistical data we have usedvarious sources like annual report, research articles from e-journals, reference books,research articles from news papers and off-line journals and sources from Internet etc.

Research Design: Exploratory

Type of data: Secondary data

Sources of data: Books, Journals, Magazines, Internet, etc.

NEED OF THE STUDY

Retailers are increasingly leveraging their presence across channels of catalogue, web, storesand kiosks, to increase their share of the customer's wallet and expand across consumersegments. Recent studies on consumer shopping behaviour indicate that multichannel shoppersshow a significantly higher value and frequency of purchase than single channel shoppers.Thus, the focus of modern retailing shifted to 'e-tailing', one of the most adoptive channel.

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Few 'Live Bytes' of organised retailers are quoted to emphasize the need of "e-tailing".

E-TAILING

E-tailing is defined as the sale of goods and services through the Internet. Electronic retailing,or e-tailing, can include business-to-business and business-to-consumer sales. E-tailingrevenue can come from the sale of products and services, through subscriptions to websitecontent, or through advertising. It is a play on the words "retail" and "e-commerce."

E-tailing requires businesses to tailor traditional business models to the rapidly changingface of the Internet and its users. E-tailers are not restricted solely to the Internet, and somebrick-and-mortar businesses also operate websites to reach consumers. Online retailing isnormally referred to as e-tailing. Chen et al. (2004) divided e-tailing into three categories:(1) pure online players, (2) click-and-mortar retailers, and (3) retailers who replace thephysical store with a wholly-online operation.

Relationship between E-Business, E-Commerce and E-Tailing

IMPORTANT FOR E-TAILING TO GROW IN INDIA

The growth of e-tailing in India will positively have four broad impacts:

A. Generate employment

B. Facilitate growth of allied industries

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C. Promote entrepreneurship

D. Reduce transaction costs

DIFFERENCES BETWEEN TRADITIONAL RETAIL AND E-TAIL

Traditional retailing

Physical branded goods easily identified and found.Most traditional and oldest location for retail.Commands attention In the retail landscape.

Signage other product nformation tools.

Promotional Activity

Pricing strategies and campaigns can be implemented on a daily basis

Pricing strategies and campaigns can be implemented instantaneously depending on internal organizational constraints

Inventory Management

Product must be available at multiple store locations to maximize purchasing opportunities

Multiple inventory ownership options, with most prominent being traditional, just-in-time and a hybrid of two.

Merchandising

Use of store space and proper assortment.

Web page layout

Relationship between product and textSignage and other product information toolsCategory search and sorting mechanismInteractive product locations

Location is the web address, available globally through internet connection.

Can establish a presence through cross promotions (links between sites)Location and Presence

E-tailing

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CHALLENGES AND OPPORTUNITIES ON E-RETAILING IN INDIA

We have identified about several impediments for the growth of e-tailing. They are:

(i) consumers can not touch and feel products,

(ii) orders can take several days to be delivered,

(iii) shipping costs are often excessive,

(iv) customer service is often poor and

(v) Returns can be difficult.

A number of consumer characteristics as potential obstacles to Internet growth, includingconsumer traditional shopping experiences, an aversion or lack of access to the requiredtechnology and the perceived risks of electronic shopping.

Controlling customer data

As the delivery services are becoming more modern in using information technology, e-tailersmay face some risks to properly handle on their consumer data. The data related to thesocioeconomic status of customers to their buying patterns and preferences, helpsintermediaries and shippers reduce costs.

Problems with the payment system

People in India are not accustomed to the online shopping system and moreover the onlinepayment system through the credit card is also totally alien to them. Most of them do notavail of the transaction facilities offered by the credit cards. They are also dubious regardingthe online payment system through the credit cards. Companies should protect their systemfrom hackers as customers often worry about theft of their personal information, such as acredit card number. Both technological and legal tools should be used to enhance the securityof e-commerce.

Lack of full cost disclosure

It is easy to compare the basic price of an item online, it may not be easy to see the totalcost up front as additional fees such as shipping are often not be mentioned.

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Handling returns

The problem of returns is very much prominent in e-tailing businesses in India. The customerscan return defective or unwanted merchandise which he receives. E-commerce retailers,with their emphasis on convenience and customization, must match this standard of service.At present, they do not.

Delivering the goods cost-effectively

At present, every single transaction challenges e-tailors to deliver the goods quickly, cheaplyand conveniently. The existing mode for home delivery works well for letters and flat packagesbut not for e-tailing as it encompasses with high volumes and wide variety of package shapesand sizes.

Problems with shipping

The customers using the online shopping channel should be assured that the products thatthey have ordered would reach them in due time.

Offline presence

The customers of India should be assured that the online retailers are not only availableonline but offline as well. This gives them psychological comfort and trust. The concept of e-retailing or online retailing in India has not gained prominence as Indians prefer to touch theproducts physically before buying them. Studies have also revealed the preferences of thecustomers towards the traditional shopping methods. Hence the online retailer in India shouldfirst make it a point to spot the potential customers and accordingly plan out the product.

Language problem

Most internet retail shops use English as their mode of communication. English may not becomprehensible to the majority of the Indian population. To increase the customer base,content in the online retail shops should be provided in local language.

The opportunities of e-tailing industry in India are as follows:

Convenience:

Normally online stores are usually available 24 hours a day, and many consumers have internetaccess both at work and at home.

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Price and selection:

One of the biggest advantages of online shopping is to find out quickly deals for items atservices with many different vendors. Search engines , on-line price comparison servicesand discovering shopping items can be used to find out sellers for a particular products orservices. Some retailers also offer free shipping on sufficiently large orders. Searching anonline catalogue can be faster than browsing the physical catalogue of a brick and mortarstore.

Market research:

Retailers can use their online presence as a tool to gain valuable customer information toforecast future customer demand. Online market research has some powerful advantages,such as monitoring real-time buying decisions. In addition, online customers have theknowledge and experience necessary to answer the questions, which produces more accurateand reliable data.

Online customer service:

In India, websites are becoming new channels for conducting customer service; thereforetheir general acceptance level will increase, due to the benefits provided to customers. Forexample, a customer could ask for a product introduction or a personalized product in thepre-purchase stage, and could also check the delivery status online. All such services can beavailable uninterrupted online, which is almost impossible in the physical world, due to thecost.

Promotional tool:

A website can be used as a medium to conduct promotional experiments, due to the widereach of the internet, and the low cost. Therefore, it will be a great opportunity for Indiancompanies to promote their businesses.

Marketing tool:

A website is also an effective channel to communicate with customers. Organizations do notneed to rely solely on one-way communication media, such as TV and newspapers. Theinternet provides a two-way communication channel. As a new communication channel, theinternet can provide benefits to retailers, such as low costs, interactivity, personalization,and continuous communication.

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GROWTH DRIVERS OF E-TAILING:

The key global e-tailing drivers includes, increasing broadband penetration Expansion in e-tailing services is closely correlated with an increase in broadband penetration. Continuinggrowth in broadband uptake, as well as faster connection speeds, provides support for growthat internet companies. Continuing increased broadband penetration will remain a key factorin the ability of e-tailers to acquire market share at the expense of general retailers.

Better technology = better services

Increased product diversity

More confidence in payment options

Reducing the incremental mark-up

THE ROLE OF SOCIAL SITES IN SHOPPING RESEARCH

Today's shopper is savvy with almost black belt certification in researching product andpricing. There is a method to their madness where they are willing to make a significantinvestment in time when the reward reaped is finding the right product at the right price.Concept of research via social sites and given their continued influence and time spent byconsumers in these communities, it appears to be a divide between community and commerceas just significant number of customers take advantage of social sites for research.

EXTERNAL BARRIERS TO E-TAILING

There are many external barriers to the diffusion and implementation of e-commerce. Thesebarriers include:

1. The high cost of internet access;

2. Lack of effective payment facilities and banking services;

3. Advanced retail network;

4. A cultural lack of trust;

5. Lack of government policy and legal frameworks;

6. Lack of education in e-commerce;

7. Customers' need for the physical shopping experience.

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INTERNAL BARRIERS TO E-TAILING

Barriers to the implementation of e-commerce implementation not only exist in the externalenvironment, but also in the internal organizational environment. These barriers are:

1. Business processes;

2. Strategic direction;

3. Senior management commitment to e-commerce;

4. Senior management knowledge of e-commerce;

5. Investment;

6. IT/IS expertise;

7. Organizational mission;

8. Profit objectives;

9. Information systems;

10. Integration;

11. Organizational culture;

12. Product categories and prices.

EFFECTIVE STRATEGIES ON E-TAILING IN INDIA

Prompt delivery

The first major challenge faced by e-retailers was high expectations for prompt delivery ofWeb orders by customers .One of several delivery options such as, express (next day),priority (three to four days) and regular (five to ten days) may be selected and paid for bythe customer while ordering the product.

Supply chain

Ensuring supply of required amount of raw materials and products at the right time for theright price as well as proper slotting and picking methods are very much important for effectiveoperating of e-tailing. E-retailers must have reliable supply-chain partners with the supportof a back end supply-chain management systems. Proper slotting and picking methods basedon the size, weight and demand nature must be devised to receive, slot, pick and packproperly. A warehouse management system should be a part of the supply chain managementsystem to oversee the activities like order sorting, packing, and final bar coding for shipment.

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Demand nature

Successful e-retailing companies will have to assess the supply and demand condition sothat they can meet unpredictable demand. A news-worthy event can create a huge demandfor a product within a short time. Seasonality factor also contributes to the unpredictabilityof the demand nature. Popular items and may need to be assessed on its future demand toavoid processing delays. Proper use of seasonality factors in forecasting models may contributeto better demand forecasting for highly unpredictable items.

Reverse logistics

In any retail business, some products are returned from the point of consumption. Therefore,the challenge is setting up infrastructure and procedures for reverse logistics. The process isnot only inevitable but also gaining importance as a viable, sustainable and profitable businessstrategy. Procedures need to be established for returning orders. Drop-off points must alsobe set up. A customer wanting to return merchandise should be encouraged to haveauthorization to do so through the Web site. The e-tailors need to have an understandableproduct return policy on the Web. A copy of the same policy may also be included in theshipped package. A customer must identify the reason for returning the item. Based on thereason, one of several actions such as, restock, recycle, remanufacture, send back to thesupplier may be taken. A flexible sorting or packaging line in the warehouse may be used tohandle returned items when needed.

Accuracy

To achieve high levels of accuracy in e-tailing business, the firm must consider the rightequipment to increase accuracy. This will augment the nature of its operations, and the levelof adjustment that managers are willing to make to minimize human errors. But if companiesgather and analyze warehouse performance statistics regularly, invest in automated datacollection and verification systems and equipment to the extent possible, create efficientpicking procedures, and train all employees thoroughly, then they can improve their accuracylevel and streamline the customer fulfillment process. Order fulfillment rate, accuracy oforder fulfillment and cost per order fulfillment are among important indicators need to beevaluated routinely.

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CONCLUSION

There are several important lessons to be learnt in the transition from bricks and mortarretail to the digital e-tail world. While skills like speed, differentiation, and branding areequally if not more important in the digital world, it is the ability to transform core operationsand practices to this new medium which might make the difference between success andfailure.Consumers are always hungry for modern ways of shopping. Indian retail sector isgrowing fast and its employment potential is growing fast. The retail scene is changing reallyfast. Retaining the e-customer is a tough challenge. The internet customer is very hard topredict and is different from the normal customer.The current growth in e-tailing was drivenby start-ups, and backed by venture capital and entrepreneurship. While the Indian e-tailingmarket is yet to achieve a steady state, these initial entrants have succeeded in capturing theimagination of a sizeable consuming class. These have also acted as a catalyst in the creationof an ecosystem necessary for the growth of e-tailing. E-tailing is an integrator of technology,logistics, and infrastructure, and creates a relatively efficient marketplace for vendors andconsumers. At present, the Indian e-tailing market is limited by its incapability to play therole of an efficient integrator. E-tailing possesses the potency to create new capabilitieswhich India needs and offer viable employment to Indian youth over the next decade. It hasthe prowess to act as a catalyst and support the growth of new skills and industries.

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Mani - Etailing