Who are the eretailers and what are they selling

According to Doherty et al. (1999, 2003), there are a number of characteristics of a business that are likely to determine the extent to which retailers have adopted the Internet, the online format they might choose and the products they sell. The characteristics include the following.

Size

Small and medium-sized retailers are increasingly adopting the Internet as a channel to market (see Chapter 11). The advantages include access to a wider market previously inaccessible and low-cost advertising, but the disadvantages include medium-term financial risk and scalability. Small-scale operations may be able to handle the picking and logistics due to the small numbers involved but problems will arise when expansion is considered and the need to sustain a larger operation becomes apparent. Indeed, it is large retailers (across Europe) that have been quick to incorporate the Internet into their retail offer. Examples are: in France, Carrefour (www.carrefour.fr). in Italy, Benetton (www.benetton.com), and in Austria, Magnet online (www.magnet.at). However, the web offer varies considerably -increasingly some retailers offer their entire range of goods and services via the Internet while others present selected ranges of information content only.

Activity 10.3

Activity category

The particular products and services offered to consumers can affect a business's usage of the Internet (see Mini Case Study 10.4). Products and services may be in a tangible or intangible form, each of which has associated advantages and disadvantages. Delivery is an issue for sellers of physical goods as is the Internet's inability to let customers experience the tactile qualities of a product prior to making a purchasing decision. Indeed, product category has had a profound effect on the success rate of certain online businesses. For instance, in Europe, the top product categories account for over 75% of the sales and these categories include books, music, DVD (movies), groceries, clothing games and software (Dennis et al., 2004). Whilst some of these products do not require extensive product descriptions, high-fashion items present difficulties and often there is a high return rate for clothing sold online. Digital products do not encounter the logistical difficulties associated with physical goods but encounter problems with pricing and control of copyright as a digitised product can be copied, as can music products. Ticket and online booking services (e.g. e-bookers.com. expedia.com) are enjoying comparative success online as they offer secure online transaction facilities.

Logistics

Accommodating demands for new levels of service in global electronic marketplaces could reinforce the critical significance of logistical infrastructures in determining online success (see Chapter 11). Logistical infrastructure might even determine the next generation of market leaders as its effective management provides an opportunity to create competitive advantage (Fernie and Sparks, 1998). From a retail perspective it is important to consider how the Internet is incorporated into retail activities in order to determine the importance of logistics (see Activity 10.3). If the Internet's primary role is as a promotional tool rather than a retail channel to market there is obviously less emphasis on the logistical infrastructure. Establishing a new logistical infrastructure to service the needs of Internet customers is proving to be a barrier to its immediate development as a retail channel. Established mail-order and direct marketing operators (e.g. Great Universal's www.areatuniversal.com) are taking advantage of the Internet channel, due to their not being store-based and having established direct distribution systems.

Outsourcing

If companies lack internal capacity they could decide to employ a third party to manage their online access, outsourcing some or all of their Internet operations (Abdel-Malek et al, 2005). From an operational perspective, fixed-location retailers might involve a third-party distribution company to bridge the gap between the customer order and delivery to the customer.

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