Development of the World Wide Web: Trends In Electronic Retailing - Essay Example

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Contents Executive Summary………………………………………………………………………………..2 Introduction…………………………………………………………………………………………2 Internet & World Wide Web…………………………………………………………………….3 Historical Development………………………………………………………………………..3-4 E-Commerce & E-tailing: A Brief Overview…………………………………………………...4-5 Global Market Analysis………………………………………………………………..……….5-6 Australian Online Retailing……………………………………………………………..……...7-8 Economics of Australian e-tailing………………………………………………………………8-9 Consumer Activity……………………………………………………………………………...9-10 What Will Be The Impact? ……………………………………………………………………..11 Close Economy…………………………………………………………………………………11 Open Economy………………………………………………………………………………….11 What are the positive aspects of e-tailing? ……………………………………………………11-12 What are the barriers constraining growth of e-tailing? ………………………………………13-14 Challenges faced by E-tailers……………………………………………………………………..14 Future of E-tailing in Australia…………………………………………………………………….14 Expanding your eBusiness: Create an Effective Website……………………………………...17 References……………………………………………………………………………………………………..18 Executive Summary With the evolution of internet many facilities have evolved. Businesses have been digitized and are now successfully prospering. One of the key advancements of the century is electronic retailing or online shopping. Online shopping is flourishing leaps and bounds and new markets are emerging. Australia is considered to be an emerging market as Australian retailers are claiming more and more online space. Small retailers are rapid acquiring online business models and so are large traditional brick-and-mortar businesses. There are certain barriers to the growth including international competition, logistics, marketing and pricing. On the other hand the consumers are also placing their trust in online shopping. There are a few concerns regarding the security of transactions and shipment issues which are critical for the retailers in the online space. However, with proper measures taken these barriers will no longer retain. Introduction This is the era of modern technology which has brought a drastic change in our lives. It seems almost impossible to live without the Internet and the World Wide Web. Any information is just one click away from any common man. Internet is a powerful medium of communication and not only common people but huge organizations are benefited by it. Businesses have been digitized and a whole new entity of e-commerce has been evolved. Online shopping or e-retailing has not only provided the opportunity for the buyers to choose from a wide range of products but also has given a chance to the sellers to expand their businesses. E-tailing has become a successful business and is exploring new horizons. E-tailing market is expected to grow two folds as compared to the traditional retailing markets in the coming few years. Before describing e-tailing in detail, we take a brief look into the history of Internet and World Wide Web because of which e-tailing came into being. Internet & World Wide Web The terms Internet and World Wide Web (commonly known as Web) both are used synonymously most of the times. These terms are however, related but separate entities. The Internet is a global network of millions of networks, which allows the computers to connect, communicate and share information via standard networking protocols. (Whinston, Stahl & Choi 1997) The World Wide Web is a global information-sharing medium which is accessible to the user through computer connected to the Internet (Murphy, 2008). The Web utilizes different browsers through which information regarding any topic can be accessed. Internet explorer and Mozilla Firefox are two popular examples. Historical Development The concept of Internet came into shape around 40 years ago in 1960s. A MIT researcher J. C. R. Licklider in 1962 proposed the idea of sharing and accessing information by connecting computers globally via “The Galactic Network”. In 1967 Larry Roberts from ARPA (a research agency under U.S. Department of Defense) proposed to build a wide ranged packet-switched computer network for military to communicate securely during war times. In 1969 the first computer to computer message was sent successfully via the network called APRANET. This success led to further development in the field. During 1970s and 80s the TCP/IP protocols were not only being installed in main frame computers but also on Personal computers which were being introduced in the market for the first time. By mid 80s a great many people were using Internet including students, professionals, military personnel etc. The World Wide Web on the contrary was introduced in 1990. Tim Berners-Lee and his colleagues at CERN put all the tools together; the Hyper Text Transfer Protocol (HTTP) 0.9, the Hyper Text Markup Language (HTML), the first Web browser called WorldWideWeb, which was also a Web editor, the first HTTP server software, the first web server and the first Web pages. The browser could access Usenet newsgroups and FTP files, which could run only on the NeXT. Another simple text browser called the Line Mode Browser that almost any computer could run was created. And hence, a platform for scientists to access, share and exchange information for free was developed. Another historical point was the release of first graphical browser “Mosaic” in 1993. It was developed by Marc Andreessen and his team at National Center for Super Computing Application (NSCA) in UIUC. Mosaic was later developed commercially in 1994 and was named “Netscape” which further evolved into “Netscape Navigator”. In 1995 NSF terminated its sponsorship of the Internet and handed it over to the commercial networks. The full scale entry of Microsoft with its browser “Internet Explorer” in the market brought a revolution to the commercial Internet. This era of enormous growth of commercial networking brought businesses into the arena. Free services including free web pages, chat portals and message boards for community building, supported by advertising were introduced. These temporarily deviated some of the direct costs from the consumer. (Kizza, 1998) Apart from free services online sales have grown rapidly during these years. e-Commerce & e-Retailing: A Brief Overview Short term for electronic Commerce, e-Commerce is basically the “online business” where the products are being advertised and sold on the Internet. It has changed the very ways of conventional business. However, e-Commerce is not just confined to buying and selling of products. It gives the dealers a freedom to bring a novelty to their whole business processes, for example product range and prices are revised according to consumer feedback. This in return could effectively change the dealer-customer relationships as well have a positive effect on business (Whinston, Stahl & Choi 1997). eCommerce basically originated when Jeff Bezos started Amazon.com in 1994 and since then online businesses began to launch. “Electronic retailing” or simply e-retailing is a type of eCommerce where a firm advertises its product or products for sale on its website and its ultimate consumers make purchases via the Web for their personal use. It is also called online selling or Internet marketing (Dennis, 2004; Cox, 2006). There are two types of e-tailing: Cyber malls - like Amazon and eBay, which offer a large variety of products from independent retailers. Individual websites – include two types of retailers, those who operate solely on web and traditional brick-and-mortar firms who have expanded their horizons to the World Wide Web and now are operating successfully. Some of these stores include GAP, Nordstrom’s, Macy’s, Dell, Hewlett and Packard, Wal-Mart and Barnes and Noble. Global Market Analysis With the rapid increase in the online population of the world an increase in e-tailing has been observed in past few years. Following pie chart describes the current population of internet users in the world: The online sales statistics are however, not very reliable since the stats research organizations tend to underestimate the size and growth of the e-tailing market. Internet retailer® reports that in US the biggest e-tailing market first quarter of 2011 the sales was increased by 12%. The sales of first three months of 2011 equaled $38.00 billion against the $33.98 billion in first quarter of 2010. Centre for Retail Research reports that in UK the online sales were ?44 billion (€52 billion) or 10.7% of UK retail trade. In Europe (including UK) online sales totaled ?145,600 million in 2010 (up from ?102,900 million in 2008). Only UK, Germany and France’s online sale accounted for 71% of European online sales. Canada’s e-tailing sales were reported to grow by 8.1% to an estimated $8.0 billion in 2010 from $7.4 billion in the year 2009. Markets in Asia continued to grow at an enormous speed. Online sales in China rose up to US$77.78 billion in 2010 as it still holds the claim to be the retail powerhouse in Asia. The online sales of Japan which is considered to be a relatively mature market with a 100 million online shoppers, was $45.0 billion. The report also says that developing markets like South Korea with online sales revenue of $11.0 billion and India with $680 million are expected to rise in a few years. While the emerging markets are likely to gain a strong hold in the industry, like Vietnam where a 36% and Indonesia with a 20% rise in online sales was observed in 2010. Reports say that currently online sales in Australia and New Zealand makes up 5.5% and 5.1% of the economy respectively which leaves a lot of space for growth. Following pie chart is an estimate of global e-tailing by region (2010): Sources: Internet Retailer® Australian Online Retailing Despite the rapid growth of e-tailing globally Australia is still considered to be a developing market in comparison to countries like U.S, U.K, China, Japan and Korea. Following chart is a comparison of online retail sales as percentage of revenue between the largest e-tail markets and the developing markets like Australia and New Zealand: Strong Online Consumer Value Proposition (CVP), Proper investment and Multi-channel retailing are the reasons these markets are growing leaps and bounds. Australian e-tailing market is said to be three years behind as compared to the US and the UK markets because of the mere online presence of its largest retailing brands according to Frost & Sullivan, 2010. E-tailing makes 5% of the economy and if spending on overseas sites is excluded it falls to around 3%. Economics of Australian e-tailing The economics are still vague for there is very little regular and detailed data is available. This limited data has proved to be a barrier in economic analyses and calculating the over impact of the business in Australia. However, we can get a relatively clear picture from following: According to the Australian Bureau of Statistics (ABS), domestic e-tail sales estimate was between $19 and $24 billion in 2009. Australia has taken online orders which are worth $143 million which is a 13% increase than the previous year. It is estimated that online retailing will increase consecutively by 13.5 % for the next four years hitting the $ 1.4 trillion by the year 2015. PayPal Australia reports that online purchases by Australians totaled $26.86 billion in 2010, a significant increase from the $24.02 billion in 2009. The rate was higher in 2010 due to the launch of new online stores and increasing proportion of online shoppers. The report says these factors will help online shopping to grow in the coming three years. Frost and Sullivan reports a conservative estimate, the value of e-commerce purchases equaled $12 billion in 2010. The sales according to them would rise by a 13% in 2011. However, this estimate excludes some service-based purchases and hence does not provide a full-scale report of the activity. According to Frost and Sullivan around one third of mobile internet users (i.e. smartphones, tablet devices) are apparently playing an important role in the growth of online retailing business. A report in Communications Day (Issue No. 3845, September 2010) shows that around one out of four Australian mobile phone owners are making online purchases using mobile internet, including more than 80,000 on eBay alone in June 2010. Another research commissioned by eBay shows an elevation of over $13 million in July 2010 which was $7 million in January 2010. Consumer Activity According to Frost and Sullivan 95% of online shoppers do a thorough research before buying, e.g. product specs, price comparison and reviews. A survey conducted by ABS in 2009 shows around 64% Australians of ages 15 and above purchased online goods. The factors that drove the online sales could be apprehended from the following chart; most popular reason being the better value. (Sands and Ferraro, 2010) What will be the Impact? The economic impact of online consumption is directly proportional to the source of the product. That is whether the e-tailer is local or international; if former then are they selling a local or an imported item? If the item is imported then; whether the consumer prefers to buy it from a local e-tailer or from a non-Australian website? The possible economic impacts can be described as follows: Closed Economy-In a closed economy there would be a lesser impact on the total domestic output, however, it would lower overall employment, which in turn would reduce domestic demand and lower domestic output. An increase in productivity represents substantial economic growth. Productivity gains could be achieved through many factors including reduced search time for consumers; reduced advertising costs (e.g. via social media sites); lower employment costs due to lesser staff and reduced property costs. Open Economy-The impact of is greater on the economy because of the wider choices for consumers. International markets provide consumers with a larger product range and lower prices. The exposure of domestic e-tailers to international competition could also have a positive impact as it would provide a chance to develop and stand up to the foreign retailers. However, at the same time it could be a tough competition for many domestic e-tailers. For example, international book sellers possess a constant threat by providing books at a lower cost in comparison to local e-tailers. What are the positive aspects of E-tailing? E-tailing offers unique advantages to the consumer as well as to the seller because of its wider approach in comparison to traditional retailing. There are many factors due to which e-tailing is going to be the Next Big Thing, such as: Easy Access & Global Reach – When product info is just a few clicks away and the consumer can easily compare the prices and browse through a wider range of products available in local as well as global online stores. E-tailing is definitely easier that the burdensome traditional retailing and it saves a lot of time as well. In other words e-tailing empowers the consumer. Minimal Investment – Operating through websites e-tailers save property costs and they operate as effectively as any brick-and-mortar firm. Moreover, maintenance costs of a virtual store are inconsequential. Consumer Interaction - The greatest advantage e-tailing is direct interaction with the consumers which allows better product review and response and the sellers can improve the product quality according to consumer demands. Interaction acts as a vital tool for greater customization for example online marketing of books, electronics and software. Moreover, Social Networking sites has made e-tailing more popular as sellers can reach a greater audience by advertising on these sites. Consumer satisfaction is also achieved via greater interaction. According to a research agency, 81% of the buyers were found to be highly satisfied with their online purchases. Easy Transactions– In e-tailing process transactions can be easily executed via same channel through which the product is being purchased and hence there is no connection barrier. It is easier for sellers also to keep the transaction record without hiring any extra staff. Moreover, new consumer friendly payment schemes are emerging and therefore, e-tailing would be more popular in near future. Customized Product Display – A popular product based on its previous sales and peer reviews could be effectively displayed in order to increase the visibility and consequently attracting consumers. What are the barriers constraining growth of e-tailing? Where there are benefits to e-tailing, most ventures have not been as beneficial as they were expected to be, the elementary reasons being: Consumer Concerns - There are many reasons why a lot of people do not shop online. Following chart describes a few: It shows that most of the consumers still prefer traditional shopping over online e-tailing. Security issues are yet another problem for consumer when it comes to shop through the online media. Consumers are also concerned about the privacy of their data provided during online transactions. A lot of consumers also find the shipping time, costs and delivery process tedious as the process vulnerable to many mishaps. In short this creates consumer retention. Unsuitable products– In contrast to products like books and CDs where consumer involvement is relatively there are certain products for example, clothes, cosmetics etc. which require greater consumer involvement. The consumer may want to know critical details while buying clothes which cannot be provided very adequately online. In this case e-tailing lags traditional retailing because only seller knows the critical details of the products and hence born the “information asymmetry”. Online payment – Online transactions are made by credit cards or direct debt because of convenient use and wider coverage. However, consumer is concerned about providing security details online. Moreover, credit cards do not support micro transactions, which give an opportunity for other services to emerge. Other payment services include; Smart Cards, PayPal, VeriSign etc. Safe and trust worthy transactions are still a reason for customer retention and in order to flourish online markets must develop a secure medium for online exchange. Challenges faced by E-tailers Australian e-tailing market is emerging strongly however, there are certain challenges faced by the sellers as well. Australian PayPal reports that there are recruitment problems for large brick-and-mortar brands as they need professionals to run their online shops, which is very difficult for a small e-tail market. On the other hand small e-tailers are having trouble with managing logistics due to their short operating histories and less funds. Price of delivery is another major issue for Australian e-tailers as they are attempting to upgrade the delivery process by increasing investment and providing consumers the options of free shipping and return. Future of E-tailing in Australia There is a lot of space and potential for online retailing to grow in Australia. Less usage of online retailing by domestic firms provides opportunity for further advancement as a large number of firms are entering the online scene as well as an increase in the number of online shoppers. According to Australian PayPal online travel and grocery will remain the largest category in e-tail but music and games would grow strong as more and more buyers prefer to buy content online. Expanding eBusiness: Create an Effective Website One of the causes of consumer retention is a poor website. Success of online shopping depends primarily on an effective website. Following features are considered necessary while designing a website for business: Selection of an easy to remember domain name should be the priority. Consideration of other good websites as a model while designing. Graphics should be of higher quality but kept at minimum so as to avoid crowding. Company logo, contact number and useful links must be present on the web page. There should be a consistency throughout with regard to colors and fonts. The content should be compelling and easy to read. Updating website daily or weekly could also help in revisits from customers. The Navigation should be designed keeping customers in mind and should be kept as easy as possible. Site maps could be added for more convenience. Publishing a privacy policy helps the customers to keep faith in the sellers. Product specs in clear details and zoom in option for product images should be provided which gives more exposure to the customer. Addition of a shopping cart button allows the customers to view and review the contents they are going to purchase. Customer feedback should be appreciated and certain web element should be available on the web site where customers can have their say. Occasional polls and surveys are also helpful. Online assistance like, Chat Live or Virtual Skype should be provided. There should be a frequently asked questions (FAQ) portion for certain problems that customers encounter during online shopping like transaction, shipping and delivery etc. (McGrath, 2006; LearntoSucceed.com Inc., 2005) References Cox, R., 2006. Retailing: An Introduction, 5/E. Pearson Education India. Dennis, C., 2004. e-Retailing (Routledge eBusiness). 1 Edition. Routledge. Kizza, J. M., 1998. Civilizing the Internet: Global Concerns and Efforts Toward Regulation. Edition. Mcfarland & Co Inc Pub. LearntoSucceed.com Inc, 2005. Fundamentals of Effective Online Selling: Use the Power of the Internet to increase your sales. Productive Publications, Canada. McGrath, B., 2006. 100 Steps for Improving Your Website and eBusiness - Effective Tips for Building a Better Web Business. USA. Murphy, C., 2008. HTML and CSS Web Standards Solutions: A Web Standardista's Approach. 1 Edition. Apress. Whinston, A. B., Stahl, D. O., Choi, S-Y., 1997. The Economics of Electronic Commerce. MacMillan Publishing Company. Statistics, Surveys & Images: 8128.0 - Household Use of Information Technology, Australia, Feb 1998. (n.d.). Australian Bureau of Statistics. Retrieved December 6, 2011, from http://www.abs.gov.au/ausstats/abs@.nsf/PrimaryMainFeatures/8128.0 Access Economics, 2010. House Hold Ecommerce activity and trends in Australia. Department of Broadband communication and Digital Economy: Australia. 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