Key themes and concepts

This chapter considers online B2C markets from two distinct perspectives:
 The consumer perspective – the first part of the chapter focuses on the online consumer, namely his/her
profile, which has been found to strongly influence the extent to which particular consumers shop online and
also online shopping experiences, which are likely to shape online shopping intentions.
 The company perspective – the second part of the chapter examines the development of online retailing,
types of online strategies, factors likely to affect how retailers develop online retailing activities, managerial
and strategic challenges.
This chapter provides illustrative case studies, examples of consumer and retailer behav- iour and graphics as
supporting material. Academic articles are used to support underlying theoretical issues and concepts.

Arguably, levels of consumer demand for online shopping and services determine the size of e-retail
markets and when or if a market saturation point will be reached for online purchasing. Various influences, such
as ease of access to the Internet, levels of competency in use of the technology, perceived benefits of engaging in
online shopping and various demographic variables, have been identified as key factors likely to impact on whether
an individual shops online or not.
Online retailing, sometimes referred to as e-retailing , offers the consumer an experience which is different
from shopping in a physical store. Web-based stores can: be open contin- uously around the clock; offer
instantaneous and individually tailored promotions; use dynamic pricing to enable real-time prices, which reflect
current market demand; provide recommendations and reviews from other site users. Indeed, many consumers, even
if they do not intend to buy online, turn to the Internet to find information about a product in the early part of the
purchase decision-making process. An example of an online brand, which facilitates comparison of products and
prices, is Kelkoo.com. The origins of the name from the French phrase ‘Quel coût?’ can be interpreted as ‘At
what price?’ or even ‘What a bargain’. As a result of the innovative characteristics of the online shopping envi-
ronment, the online consumer experience can become an elective and very goal-orientated activity whereby consumers
go to the Internet to seek the particular products and services they wish to buy. Perea et al. (2004) suggest there are
various factors, including ease of use, enjoyment and individual consumer traits, which will determine whether an
individual will become an avid Internet shopper, an occasional shopper, or just a browser. The next section
explores who are the customers who shop online?

Who are the online customers?

Many researchers have written about online consumer behaviour and a very wide array of factors and variables
have been cited as influencing the extent to which individuals are likely to shop online. Hoffman et al. (2004),
focussed on the impact of demographics, and highlighted inequities of Internet access based on race and gender
that still occur. Source et al. (2005) looked at age and found that ‘while older shoppers search for significantly
fewer products than their younger counterparts they actually purchase as much as the younger consumer’.
Doherty and Ellis-Chadwick (2006) suggest there is a large body of literature looking at online consumer
behaviour and the variables can be grouped into two broad categories: studies of consumer profiles and studies of
consumer experiences.

The consumer profile

A consumer’s profile can strongly influence where, when and how an individual shops online and also
have important marketing implications. We can break the consumer profile down into two distinct sub-categories:
classification variables and character variables.
Classification variables are those personal attributes that tend to remain static throughout an
individual’s lifetime or evolve slowly over time. These variables are particu- larly useful for marketers as they can
help to identify particular consumers and target groups. Moreover, according to Jobber and Ellis-Chadwick
(2013), profile segmentation variables can be used to group consumers together in a meaningful way so they can
be reached by suitable media communications. See Table 11.1 for a list of classification vari- ables and possible
implications for online target marketing. Remember that while many
 TableConsumer profile: classification variables

Profile variable Online marketing impact

Age Age can affect levels of access to technology, computer literacy and,
eventually, the extent to which individuals use the Internet as part of their
shopping routines
Education Education can affect how an individual uses the Internet, e.g. university
students find it is not only useful for shopping but indispensable to support
their studies
Employment status Employment places time constraints on online shopping behaviour, i.e. when
and where individuals can access online shopping channels
Gender Originally, male consumers made more purchases and bought higher ticket
items online than females. But now this has changed; according to research
by Comscore (2014) women account for 57 per cent of online sales. This
upwards growth trend is likely to continue as typically, (in the UK) women are
responsible for 83 per cent of purchases (on- and offline) (Bignell, 2013)
Geography Location is an important consideration: where people live can affect the
potential size of the online market; Asia now has the largest number of
Internet users, followed by the European Union. Interestingly the USA no
longer has the highest number of Internet
users. Also, shoppers living in remote locations are likely to do more online
shopping than those who live in or near a large conurbation
Household size Household size has the potential to affect the number of people involved in
purchasing decisions and the direction of influence. For example, research
has shown that in Europe children and teenagers can have a strong influence
on purchasing based on their levels of computing competency
Household type Household type has the potential to affect product and service requirements;
major shifts towards single-person households have led to a shift in
purchasing patterns and times
of purchasing. Online, such households can create logistical difficulties when
delivering bulky and perishable goods. Interestingly over three-quarters of all
households with children have access to the Internet as opposed to just over
half of households without children
Income Income affects purchasing power and also influences whether individuals
have access to the Internet. In the UK, AB, C1, C2 socio-economic groups are
significantly more likely to have access to the Internet and to subsequently
shop online than groupings D, E. Income is positively related to a tendency
to shop online
Mobility Mobility affects channel access; less mobile targets may be encouraged to
shop online. This also applies to macro-populations, which are poorly served
by public and private transport
Race and ethnicity Race and ethnicity affects access to technology and economic
circumstances. In the US, the number of African Americans with Internet
access is increasing to over 50 per cent but this sector of the population still
lags behind the Caucasians and Hispanics. See Mini case study 11.1 for
further insight into the uptake of online shopping around the globe

Character variables are less straightforward to understand and identify as they comprise
any attributes of a consumer’s perceptions, beliefs and attitudes, which might influence online
behaviour and also shape an individual’s intentions to shop online – e.g. innovativeness, enjoyment,
skills and experience and emotions. It is important to recog- nise that character variables are more likely
to develop, change and be significantly modi- fied over time by online shopping experiences than
classification variables. For example, if a consumer has negative beliefs about, say, privacy and
security of online transac- tions, which are due to lack of computer skills, these beliefs are likely to
shape negative attitudes towards the Internet and reduce the intention to shop online. Conversely, if
a consumer believes the Internet is, say, easy to use, they are more likely to have a positive attitude
towards the idea of online shopping and ultimately have an increased intention to shop online. Each
stance may be continually reinforced by positive or negative feedback from online shopping
experiences. See Figure 11.4 for a model of how character variables interact.

Attitudes
towards perceived
Shape
outcomes of
online shopping Influence
Beliefs
about the
Internet Intentions
shop online

Form

Character Variables
Innovative, computer- Online shopping
literate individual experience
who is confident and
enjoys shopping
online and offline Feedback

Figure 11.4 Character variables, beliefs, attitudes and shopping intentions

Consumers’ beliefs about a range of variables might ultimately shape their attitudes towards
the Internet and their purchasing intentions. Examples include:

● Security and privacy of information – customers have an expectation that if they are prepared to
provide detailed personal and financial information it will be stored securely. If this is not the case,
personal belief, attitudes and intentions to shop online are likely to be negatively affected when a
case of fraudulent credit card use or stolen identity occurs.
● Risk – online consumers are buying into a trading situation laden with uncertainty and a lack of cues
to reinforce trading relationships and risk. Bauer (1960) identified six key types of risk likely to affect
consumers: financial, product performance, social, psycho- logical, physical and time/convenience
loss. Online sales effectiveness can be increased significantly if the perception of risk is reduced.
Willingness to purchase is considered to be inversely affected by perceived risk. Stone and Gronhaug
(1993) state that ‘risk is the subjective expectation of a loss’.
● Trust – is a potential outcome of risk reduction. Arguably, it is difficult to completely eliminate risk
online therefore a possible strategy is to find ways to increase trust (Chang et al., 2013)(Chang,
Cheung and Tang, 2013). If trust is increased and perceived risk decreased consumers can develop
positive beliefs in the organisation’s online repu- tation The risk/trust debate should be addressed by
online retailers as lack of trust has been found to be a major barrier to online shopping (Chang et al.,
2013). Dimensions of trust include service provider expertise, product performance, firm reputations,
satis- faction (with past interactions) and similarity. It should be noted that some researchers have
suggested that not all online customers respond in the same manner. Newholm et al. (2004)
conclude that e-retailers should adopt a differential approach to building trust and raise the point that
types of customers and products can significantly affect how retailers should develop approaches
for handling risk and trust. Indeed ‘bargain hunters’ are inherently risk takers and in this case it
becomes the propensity to engage in risk taking, rather than being risk-averse.
● Perceived usefulness – is positively associated with the intention to purchase and is defined as
the extent to which an individual perceives that a new technology will enhance or improve their
performance. Applied to online shopping, usefulness relates to the amount of time and effort required
to learn how to shop online measured against the levels of service excellence provided by the retailer
(Perea et al., 2004).
● Ease of use – is an individual’s perception that using a new technology will be free of effort and
has been found to have particular influence in the early stages of a user’s experience with a new
 technology (Davis, 1993).

In summary, classification and character variables have both been found to play an im- portant role in
predicting how consumers might behave over time, but it should be ac- knowledged that only character
variables will be significantly affected by online shopping experiences (Doherty and Ellis-Chadwick,
2006, 2010). For example, the gender of a shop- per may influence the extent to which they shop online
but the gender of a shopper cannot be changed as a result of an online shopping experience.

The consumers’ online shopping experiences

Different aspects of the experience of online shopping have been found to have an effect on
consumers’ overall assessment of the online shopping process (Doherty and Ellis-Chadwick, 2006,
2010). Positive experiences in terms of convenience, service delivery and website security have all been
found to increase customer satisfaction (Szymanski and Hise, 2000). Unsurprisingly, website
design, ease of navigation, good levels of service and good-value products have been found to
increase consumer loyalty and also enhance the customer experience (Wolfinbarger and Gilly, 2003).
E-retailers should aim to understand how customer expectations have been raised. Some of the key areas
where customers have high expectations are:
● Delivery – the critical link between an online order and the delivery of the product is often referred
to as the final or last mile. The last mile, including product transpor- tation, is frequently considered
the most important element of the order fulfilment process, i.e. 89 per cent of online shoppers rate
on-time delivery high in importance and 85 per cent of buyers who receive their order on time would
shop at the Internet merchant again. Thus, delivery-related issues have been shown to have a high level
of importance to online shoppers (Esper et al., 2003).
● Timeliness – the speed of digital communications has raised customer expectations in terms of
response times and they expect a speedy shopping experience. It is no longer acceptable to take three or
four days to respond to an online customer enquiry; an online customer expects that the response will be
instantaneous or at least within a couple of hours. Additionally, they expect to be able to order goods
and services at any time.
● Availability – the Internet creates a sales environment which is not restricted by space constraints;
therefore there is an increased expectation that not only will there be a wider range of goods for sale online but
also the goods will be readily available for immediate delivery.
● Convenience – it should be easier and quicker to compare prices online; there should be easy access to a
wide range of retailers without the inconvenience of having to travel to a number of different locations.
● Customer service – customer value is the foremost driver of competitive advantage in the Internet
shopping environment and customer service can be measured by the consumer in terms of price savings,
service excellence, time savings and experiential values such as entertainment, visual stimulation/reward,
levels of interaction. At the start of Chapter 6 we read about the various dimensions of customer loyalty
and how they can be trans- lated into website features in Table 11.3. Digital marketing insight 11.2
looks at how Shop Direct is dedicating resource to improving the online consumer experience.
 Digital marketing insight 11.2 Shop Direct UX Lab helps understand consumer behaviour

The 20th anniversary of the first online purchase made by a consumer – a music CD by
Sting, titled Ten Summoner’s Tales (Spence, 2014) – was 11 August 2014. Two dec-
ades of online retailing have delivered many changes: one in four of us shop online, for
a wide range of products (see Figure 11.5).
At an increasing rate, we buy books, clothing, music and travel online, using a com-
puter, laptop or mobile device. Shop Direct is the first UK retailer to make a signifi- cant
investment (£100,000) into studying online shoppers. Its UX lab is an in-house laboratory
dedicated to looking into online users’ experiences using a sophisticated research
toolkit. The tools and techniques applied allow Shop Direct to see how con- sumers shop
websites. The lab provides a facility to observe how customers are mov- ing around
websites. It consists of two rooms: one for the shoppers and the viewing room, which
allows the retailers researchers to view online shopper behaviour through one-way
glass. Shop Direct is keen to know how to get closer to its customers who use its
websites: very.co.uk, Littlewoods.com and isme.com. The main aim of the lab is to bring
Shop Direct closer to its customers. Of particular importance are the journeys which
customers take when they visit the websites and then how they interact with the products
on sale (Shop Direct, 2014a). According to Jonathon Wall:
Having the UX lab on-site has acted as a catalyst for the acceleration of our testing
and experimentation programme. Since opening the lab earlier this year, we’ve dou-
bled the number of monthly lab studies that we undertake. We’ve also more than
doubled the number of split and multivariate tests running across our six transac-
tional websites every month, from 15 to 35 (Shop Direct, 2014b).

It is important to understand that the increase in customer expectations can have quite wide-
reaching organisational implications. The gap between customer expectations of the online offer and
the actual performance can have a significant impact on online perfor- mance. Now read Digital
marketing insight 11.3, which explores the relationship between experiences and online success.
(Note that the similar E-SERVQUAL and WEBQUAL frameworks are described towards the end
of Chapter 7.)
In summary, consumer demand for online shopping continues to grow at a rapid rate. As
the Internet infrastructure expands and develops, more parts of the world are able to have access
to the technology, which enables them to shop online. Political and economic development is also
playing a part in enabling certain parts of the world to take part in the e-commerce revolution.
At an individual level more is now known about online consumer behaviour and for retail
managers and marketers the key to online success is developing better understanding of the
consumer’s profile and the consumer’s behaviour when online shopping. The web analytics tools we
described in Chapter 10 are powerful in reviewing consumer behaviour. Online shoppers tend to
have different profiles and characteristics to offline shoppers, which shape their shopping
intentions. Online shoppers still tend to be younger, wealthier, better educated, have higher
‘computer literacy’ and more disposable income than the offline shopper. It is also important
when planning e-retail strategies to consider that as the Internet becomes a more mainstream
shopping channel there are likely to be a greater range of cultural differences as wider sectors of the
global populations have greater access to online shopping channels. The next part of the chapter
explores B2C markets from the retailer’s perspective and looks at how organisations are
developing the online shopping provision.
 Digital marketing insight 11.3 eTailQ

There has been a great deal of academic research looking at the relationship between
quality and online success in consumer markets. Wolfinbarger and Gilly (2003) used the
idea that quality is related to customer satisfaction and retention and ultimately customer
loyalty. The study identified four dimensions of e-tailing and in doing so ena- bled the
development of a reliable scale for the measurement of online retail quality called eTailQ.
The four key dimensions identified by the study can help managers to understand
customer judgements of a company website and how customers shape their attitudes
based on their experiences of visiting, say, a retailer’s website. The four dimensions in
rank order of importance are:
1 Website design:
● easy navigation;

● appropriate levels of information;

● effective information search facility;

● straightforward ordering;

● appropriate personalisation;

● appropriate product selection.

2 Fulfilment/reliability:
● accurate display aimed at ensuring alignment between customer expectations
and realisation;
● delivery of the right product within promised time frame.

3 Customer service:
● responsiveness to enquiries;

● helpful;

● willing service;

● immediacy of response.

4 Privacy/security:
● secure payment facilities;

● secure and private personal information.

Customer judgement of the quality of the website visit is an important part of the cus-
tomer’s online experience and the outcome of the evaluation process could determine
whether the customer (a) is sufficiently satisfied to return and make another purchase,
(b) develops loyalty intentions and subsequently recommends a site to friends and family
and (c) develops a positive relationship with the brand.
You can see that customer concerns from 2003 are similar in many ways to today.
Consider which are different. We think that the most significant omissions in this
framework are the integration between online and offline presences (click to reserve);
integration with social commerce facilities (reviews and ratings); and social networks,
although the notion of ‘community’ is considered.

Loyalty variable Website feature

Customisation Personally, tailored product ranges, for example lists of regular grocery
purchases, favourite products, brands, etc.
Contact interactivity Two-way communications that demonstrate the dynamic nature of the
online buyer/supplier–customer relationship
Cultivation Email offers relating to past purchases, informing customers when there is
a discount sale on items similar to their previous purchases
Care Real-time stock-out information/order tracking. Shoppers are looking for
evidence that the retailer has paid attention to detail throughout the
purchasing process
Community Product reviews from satisfied customers. Include a facility allowing and
encouraging exchange of opinions among shoppers
Choice Online shoppers expect greater choice online. Therefore, the retailer needs
to offer either wide or deep (or both) product and/or service choice
Convenience Easy access to required information and a simple transaction interface.
Over-designed and cognitively complex sites tend to lose visitors before
they make a purchase
Character Symbols, graphics, style, colours, themes can be used to reinforce brand
image and convey brand personality
Source: Based on Srinivasan et al. (2002)

Operational strategies
E-commerce sparked new thinking about how computer networks might facilitate and increase
trade in both business and consumer markets. In the retailer sector new opera- tional strategies
were devised which incorporated retail operations and Internet tech- nology. To begin to
understand the operational styles and strategies of online retailers it is important to consider
three main operational categories:
● Bricks-and-clicks retailers are generally long-established retailers operating from bricks-
and-mortar stores in, say, the high street and then the Internet is integrated into their
businesses either strategically or tactically as a marketing tool or a sales channel. According
to Dennis et al. (2004), online shoppers prefer shopping at websites operated by established
high-street retailers as they understand what a brand means in terms of value and the
physical part of the operation gives an increased sense of security.
● Clicks-and-mortar retailers tend to be virtual merchants and design their operating format to
accommodate consumer demands by trading online supported by a physical distribu- tion
infrastructure. Virtual channels have distinct advantages over traditional marketing channels in
that they potentially reduce barriers to entry. The location issue, considered to be the key
determinant of retail patronage (Finn and Louviere, 1990), is in the physical sense reduced,
along with the need for sizeable capital investment in stores. The best-known virtual merchant
using this format is Amazon.com, the world’s largest online bookstore.
● Pureplay retailers – ‘clicks-only’ or virtual retailers operate entirely online. In reality it is
almost impossible for a business to operate online without a point of access to the Internet.
Therefore, generally speaking, the term ‘pureplay’ refers to retailers who do not have fixed-
location stores and or own physical operational support systems, e.g. distri- bution
warehouses. While this category has produced some very innovative retailers, in reality few
retailers actually outsource all warehousing, picking, packing, shipping, returns and
replenishment requirement. Perhaps the key difference between these two companies is that one
sells products and the other services. In the case of services, the customer takes themselves to
the point of consumption rather than having goods delivered to their door.
As retailers develop their usage of the Internet for providing information, customer ser- vices and
online sales it becomes a retail channel. This term was introduced by Doherty et al. (1999) to
describe companies’ multi-purpose adoption of the Internet, using it as both a communication
and transactional channel concurrently in business-to-consumer markets. Traditionally the term
channel describes the flow of a product from source to end user. This definition implies a passive
unidirectional system whereby the manufacturer or producer markets through a wholesaler or
retailer to the consumer. This move may also suggest a shift towards a bidirectional retailer–
consumer relationship, in which more power accrues to the customer (Hagel and Armstrong,
1997). As a result of the techno- logical capacity, e-retailers are becoming increasingly creative
with how they are using the Internet and associated digital technologies to serve the needs of their
customers. A high proportion of customers are multichannel customers who combine research
based on use of a website with physical stores when making a purchase.

Furthermore, the steady growth of online retailing over the last two decades through the
applications of these three operational strategies and innovation in mobile technologies and use of
social media has influenced the way shoppers wish to connect to their preferred type of shopping.
Indeed, according to a report commissioned by eBay, connected consumers are driving the
development of retailing as ‘consumers want to be able to buy anytime and anywhere’ (Guardian,
2015). What this means is that shoppers are interacting with retailers across different channels. As a
result it is important not just to operate with one of the three main operation strategies described
earlier but to develop a hybrid model which allows shoppers to engage with the brand, products
and services at every possible touchpoint in their shopping journeys. This new operational
strategy is called omni-channel retailing.

Omni-channel retailing
The way people shop is changing as a result of the interventions of digital technologies and social
media. The basic consumer decision-making model discussed in Chapter 3 has become more
complex and as a result the shopper’s path to purchase can mean that they not only encounter all
of the traditional (pre-Internet) purchasing cues but also a range of new digitally enhanced cues.
Figure 11.7 shows the potential touchpoints a shopper might encounter prior to purchase (Fulgoni,
2014), where they might encounter cues which can inform their purchase decisions.
To begin with, digital technology has impacted on consumer decision making by
providing a vast store of information which shoppers’ access to inform their purchase choices.
So a path-to-purchase typically begins with an entry in a search engine or a visit to a retailer’s
website. Digital search tools play a vital role as consumers say they help to save time (Fulgoni,
2014). But digital marketers should not assume that consumers no longer interact with the
physical world as they are still likely to watch television and in doing so encounter more
traditional advertising. Equally, consumers are also likely to speak to family and friends both on-
and offline. Mobile devices facilitate interaction with actual products in physical stores. Indeed,
showrooming, where shoppers visit a store to touch and feel actual products but then make their
purchases online is becoming increasingly popular. The motivation to buy online is largely driven
by seeking lower prices (comScore, 2014). So physical retailers can no longer afford not to
operate online as well as offline because if they do they are likely to lose sales. Many physical
retailers are beginning to find ways to combat the potentially detrimental effects of
showrooming. For example, in November 2014 US department store retailer Macy’s, with over
850 physical stores, introduced a smart phone app which enabled shoppers to search to find out
whether a particular item was in stock in a local Macy’s store. Macy’s claims that every dollar it
invests in search marketing drives $6 towards a store purchase (Rodriguez, 2014).

How do retailers survive in the omni-channel world? According to Fulgoni (2014), there are three
priorities retailers should address:
1. Eliminate silos and create seamless experiences for consumers all the way along the path-to-
purchase. Look for ways to bring together the on- and offline world and avoid isolated
marketing campaigns, which do not integrate. If there is any friction along the journey a
shopper is likely to defect to another supplier (e.g. if a retailer sells products at different
prices online to in-store);
2. Increase opportunities to digitally interact – by understanding more about their paths- to
purchase (e.g. provide incentives along the way through digital advertising and mobile
promotions).
3. Analyse and measure consumer behaviour at all touchpoints in order to develop deep and
insightful understanding in what is driving shoppers’ choices and purchase decisions.
 Implications for e-retail marketing strategy
For the retailer, the impact of an increasing number of consumers and businesses accepting
the Internet and other forms of digital media as a stable channel to market is an increase in
customer expectations, which creates competitive pressures and challenges. In part, this has been
caused by new market entrants that have established their market position by, say, offering very
wide and deep product choice, dynamic demand-driven pricing or instan- taneous real-time
purchase and delivery. The result is that retailers are required to adopt a more dynamic and
flexible approach to dealing with these raised expectations. Allegra Strategies (2005) identified a
number of performance gaps and Table 11.3 presents some of the most significant gaps and the
managerial implications.
For the e-retailers it is important to identify any performance gaps and develop strate- gies
which help to close them. For example, in the case of logistics, research has found that utilising
carriers (road haulage, air freight) that have higher levels of positive consumer awareness with
appropriate online strategies (i.e. offering a choice of carriers) can contribute to the
consumer’s willingness to buy and overall satisfaction with the online buying experience.
Therefore, development of strong awareness and brand image among consumers can prove to be a
beneficial strategy for both the e-retailer and the carrier, since consumers have traditionally carried
out the home delivery function themselves (i.e. shop- ping in ‘bricks-and-mortar’ retail stores). Of
course, this in itself raises the expectations of the care taken by the delivery agent, which has the
implication of having to introduce better handling of goods as well as the speed with which the
goods need to be delivered (Esper et al., 2003). A further consideration is that the retailer and the
chosen carrier need to be able jointly to satisfy the consumer so that they may benefit from co-
branding.
How the online consumer accesses retailers’ goods has given rise to various opera-
tional formats (discussed earlier in the chapter) and distribution strategies but this only forms
part of the retailer’s e-strategy. Nicholls and Watson (2005) discuss the importance of creating e-
value in order to develop profitable and long-term strategies and agree that logistics and
fulfilment is a core element of online value creation but at two other impor- tant platforms: firm
structure, and marketing and sales.
Firm structure can be used strategically depending on organisational capabilities and
technology infrastructure. Porter (2001) described the emergence of integration and the potential
impact on e-value chains. Integration can ensure faster decision making, more flexibility and
attract suitable e-management specialists and capital investment (Nicholls and Watson, 2005). In
the case of the UK grocery sector, larger retailers have adopted different approaches towards
structuring their online operations. (See Case study 11 for a detailed discussion of how ASOS has
reinvented fashion retailing online.)
Marketing and sales can be used in customer-centric value creation strategies in the form
of interactive marketing communications strategies (see Chapter 9 for a detailed
discussion) and revenue streams. Indeed, according to Dennis et al. (2004), there are four revenue
stream business models, which in turn are based on advertising, merchandising and sales,
transaction fees and subscriptions.
Strategic implications for retailers wishing to be successful online are far-reaching and require a
retailer to develop a carefully informed strategy, which is guided by a business model that can
satisfy corporate objectives through deriving value from corporate capabil- ities while effectively
meeting the expectations of the online consumer. The target market and the product category can
have a significant influence on success.
In conclusion, it is now widely acknowledged that there is a need for a company to have
a coherent e-retail strategy underpinned by a clear vision of how to create sustained competitive
advantage if a business is to gain the maximum benefits from operating online. An online retailer’s
strategy is likely to be affected by the category and operational strategy it adopts, the type of
products and services it sells and the market segments it chooses to serve. Traditional offline
retailers will need to defend their existing market share as new entrants online are increasingly
shaping the future of the Internet as a retail environment. Retailers need to ensure that the value
created by online retailing is additional rather than a redistribution of profitability. It has been
suggested that by removing the physical aspects of the retail offer the Internet increases
competition.