Online Retail

Click to edit Master subtitle and Future Retailing Present, Past, style

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Learning Objectives

Understand the environment in which the online retail sector operates today the early vision, and todays reality, for online retailing the advantages and disadvantages associated with online retailing the challenges faced by the different types of online retailers the factors that impact the evolution of retailing and how this led to Internet retailing
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Discuss

Describe Identify

Recognize

The Retail Industry

By In

any measure, the size of the US retail market is huge a $14.2 trillion economy, personal consumption of retail goods and services accounts for $10 trillion (about 70%) of the total GDP of personal consumption shows that 61% is for services, 10% for durable goods, and 29% is for nondurable goods goods are those that are consumed over a longer period of time, such as automobiles, appliances, and furniture
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Examination

Durable

Composition of the US Retail Industry

The

retail industry is composed of many types of firms that each fit into one of the following eight segments:

Consumer durables merchandise and fuel stores

29% 16% 12% 12% 10% 10%

General

Gasoline Specialty Food

and beverage and drinking retail 5%

Eating Online MOTO

6%
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E-Commerce Retail: The Vision

In

the early days of e-commerce, literally thousands of entrepreneurial Web-based retailers were drawn to the marketplace for retail goods was primarily because it offered the largest market opportunities in the US economy entrepreneurs initially believed it was easy to enter the retail market were that the existing retail industry would be revolutionized and blown to bits
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The

Many

Predictions

E-Commerce Retail: The Vision (cont.)

The

basis for this revolution was fourfold:

Because

the Internet greatly reduced both search costs and transaction costs, consumers would use the Web to find the lowest cost products was assumed that the entry costs to the online retail market were much less than those needed to establish physical storefronts prices fell, traditional offline store merchants would be forced out of business some industries such as electronics, apparel, and digital content the market would be disintermediated as manufacturers and distributors sold directly to consumers
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It

As In

The Online Retail Sector Today

The

Internet has created an entirely new venue for multi-channel firms that have strong offline brands in some situations the Internet has supported pure-play online-only merchants new online channel can conflict with a merchants other channels, such as direct sales forces, physical stores, and mail order, but this multi-channel conflict can be managed and turned into a strength like channel choices intermediaries continue to play a 7/12/12

And The

Consumers Online

The Online Retail Sector Today (cont.)

Although

online retailing is one of the smallest segments of the retail industry, constituting about 6% of the total retail market today, it is growing at a faster rate than its offline counterparts the high failure rate of online retailers in the early years, more consumers than ever are shopping online retail revenue is expected to be about $189 billion in 2012, $207 billion in 2013, and $223 billion in 2014
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Despite

Online

Online Retail Advantages

Lower Lower Ability Ability Ability Ability

supply chain costs cost of distribution

to reach and serve a larger geographic market to react quickly to changes in customers tastes and demand to change prices nearly instantly to rapidly change visual presentation for goods of direct marketing costs for catalogs and physical mail 7/12/12

Avoidance

Online Retail Disadvantages

Consumer Consumer Delays

concerns about the security of transactions concerns about privacy of personal information given to websites in delivery of goods when compared to store shopping associated with returning damaged goods or exchanging goods lack of consumer trust in online brand names cost for website multimedia
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Inconvenience Overcoming Added

E-Tailing Business Models

Virtual

merchants

Single-channel

Web firms that generate almost all their revenue from online sales (Amazon)

Multi-channel
A

merchants: bricks and clicks

network of physical stores as the primary retail channel, but also have introduced online offerings (Wal-Mart, JC Penney)

Catalog
Have

merchants

a national offline catalog operation that is the largest retail channel, but also have developed online capabilities (Lands End, L.L. Bean)
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Manufacturer-direct

The Evolution of Retailing

The

next question is: how did we get from the earliest forms of retailing to today? is the earliest example of retailing?

What What What

societal changes provided the basis for creation of these early retail markets? phases in the evolution of retailing have occurred following the development of these earliest retail markets?

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Phases in the Evolution of Retailing

Catalog Chain

retailing supermarkets retailing

stores

Grocery Mass

merchandise discount chains

Internet

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Forces Affecting the Evolution of Retailing

The

growth of mail order catalogs, supermarkets, and mass merchandise chains was driven in each case by three distinct forces:
declining

costs of accessing a larger market that had prior retail formats, customers with lower prices to achieve higher sales volumes in the new retailing format, and customers with convenience in shopping by offering a wide range of products at a single location
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providing

providing

Internet Retailing
The

same basic forces that drove the growth in previous revolutions in retailing are also driving the growth of this new Internet retailing format
declining

importance of distance and larger potential market, focus on providing attractive prices, and

increasing offering

added convenience by offering more goods in one location (your home)

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The Future?
What How

is next?

could a new retail format improve on one or more of the three forces related to the evolution of retailing?
Efficiently Provide

reach a larger market

lower prices convenience

Improve

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