The Commercial Exploitation of the Internet-Social and Legal Implications - Essay Example

Running Head: INTERNET RETAILING Internet Retailing - Impact of Computer Communications of the of the Internet Retailing - Impact of Computer Communications Introduction The emergence of the internet in the 1990s, and its application in electronic commerce, generated a huge amount of interest amongst academics, politicians, industrialists, bankers, managers and entrepreneurs. As an effective, new communications channel, the potential of the internet appeared obvious - easy access, flexibility, speed, ability to communicate large amounts of information, cost efficiency and easy maintenance - to name but a few. However, it was the internet's unparalleled potential for global connectivity, through its ability to "open up new avenues for business" (Pyle, 1996), that was the primary catalyst for the explosion of interest and activity in electronic business. At the forefront of this revolution have been the retailers, who have viewed e-commerce as a new front on which to compete and gain advantage over their rivals (Amit and Zott, 2001). In particular, its ability to provide information, facilitate two-way communication with customers, collect market research data, promote goods and services and ultimately to support the online ordering of merchandise, provides an extremely rich and flexible new retail channel (Doherty and Ellis-Chadwick, 2003). Indeed, online shopping is now estimated to be the fastest growing area of internet usage (Forsythe and Shi, 2003). Given the internet's potential to radically re-configure the underlying processes of retailing, and because of the highly dynamic and innovative nature of the electronic marketplace, there has been an explosion of academic interest in the application of this new electronic phenomenon, in the retail context. It is not, perhaps, surprising that from such a highly dynamic organizational phenomenon, an equally dynamic body of literature should emerge. Moreover, because the commercial exploitation of the internet has technical, logistical, commercial, strategic, behavioral, social and legal implications, the emergent body of literature is both extremely large and highly diverse. Consequently, it is important for academics to periodically stand back, and critically take stock of this body of literature. A small number of researchers have already risen to the challenge of reviewing the internet literature, and three reviews, in particular (Reynolds, 2000, Ngai, 2003) have been influential in shaping this study. However, all three have their limitations. Reynold (2000) and Ngai (2003) have both addressed the related field of internet marketing, but have chosen not to adopt an explicit retail focus, whilst the Reynold's (2000) review, which does have an internet retailing focus, is now rather dated. Consequently, the primary aim of this paper is to present a review and critique of the internet retailing literature, which seeks to highlight key themes, emerging patterns and perhaps most importantly gaps that are still to be filled. Given the growing recognition that the internet has the potential (Porter, 2001) to significantly affect an organization's strategic positioning, we were particularly interested to explore the extent to which strategic issues have been explicitly tackled in the internet retailing literature. Al-Hadaayah Bookstores Al-Hidaayah is predominantly a books retailer, with interests in books retailing as well as publishing. Its principal business is the retail sale of "trade books" (generally hardcover and paperback consumer titles, excluding educational textbooks and religious titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children's books, bargain books and magazines. Al-Hidaayah is the pioneer and still the leading operator of book superstores in the UK. Its flagship store on central London has been widely recognised as the most authoritative bookstore in the country, and perhaps, the world. Al-Hidaayah has a private label strategy, publishing books under its own Al-Hidaayah Books imprint. At the end of 2005, the company launched further into publishing by announcing it was to acquire Publishing. In 2006 the firm is planning to expand its market through adoption of internet retailing. Organisational Structure and Geographic Spread Al-Hidaayah operates entirely within the UK market. It has two main division: Bookstores and publishing. Within Bookstores, Al-Hidaayah has three brands: Al-Hidaayah Stores, which includes the brands Al-Hidaayah Booksellers, Bookstop and Bookstar; Presence by Books and Publishing Subsector Within the book retailing sector, AL-Hidaayah main business is in the retail sale of: - Trade books (hardcover and paperback consumer titles, and excluding educational textbooks and specialised religious titles); - Mass-market paperbacks (such as mystery, romance, science fiction and other popular fiction); - Children's books; - Off-price bargain books; and - Magazines. Together these account for virtually all of the company's sales and it should be noted that best-selling titles represent only 3% of its store sales, a fact that undermines accusations that the company focuses only on the sales of best sellers to the detriment of independent booksellers and publishers. Books and Publishing Sales and Importance to Company Until 1999, books retailing was Al-Hadaayah's only activity, apart from its small interest in publishing private label books. The books retailing division nevertheless performed well over this period. Sales slowed in the latter two years as a result of the general economic downturn in the UK, but sales still increased by 3.6% and 4.5% in the 2002 and 2003 fiscal years respectively. The main reason behind this slow down is the competition in the book retailing business. To stay in the business every firm needs innovation in the business process and move according to the trends followed by other competitors. After the emergence of the internet retailing many competitors have adopted it to further expand their business. Al-Hadaayah should also adopt internet retailing strategy to increase there sales. This paper will analyse all the prospects of internet retailing for Al-Hadaayah publishers. Internet shopping presents challenges for both the retailer and the customer. There is widespread awareness of these issues and various developments that seek to eliminate the problems are under way. Although improvements in technology will minimize the effect of these issues, it will be a long time, if ever, before they are eliminated altogether. The stages in electronic shopping are: - Search/Browse. - View/Select. - E-Order. - E-Pay. - E-Delivery. The overall challenge is to ensure success at all stages in this process. Locating the shops It can be difficult to locate shops on the Internet. For example, to identify a flower shop you either have to know the location of an Internet flower shop, or perform a keyword search using a search engine such as Web Crawler. First, you need to know where to find the search tool. Because the Internet is a co-operative, there is no one to co-ordinate all of the shops so that they are grouped into a single online marketplace. Identifying the products also requires sophisticated search software if users are to be supported both in their attempts to direct search and to browse. Operators, such as ISN, are working on improving these interfaces. Comparison shopping Most customers expect to be able to compare the available products and their prices from a variety of different outlets. (Drennan , 2003 295-311) For example, if you were considering the purchase of a new computer or modem, you might scan the advertisements in a couple of paper-based computer magazines. Performing this type of comparison on the Internet is difficult. Security The ability to keep monetary and proprietary information secure as it passes across the Internet and the need to authenticate the status and the identity of the sender are crucial for effective shopping transactions. (Wood, 2005, 181-190) Security has been a central concern both for customers and retailers. Businesses are experimenting with software solutions and various communications techniques for secure financial transactions. On the Web the basic approaches to creating a secure environment are as follows: Prior arrangements The consumer orders by making offline arrangements by phone, post or fax for payments through a credit card or line of credit. Orders can then be made using Web input forms or through e-mail. This approach is used by GNN Direct and ISN. This tends to lock a customer into the use of specific stores or malls. Maintaining these arrangements with several malls can become very tedious. Cybercash, a secure system for credit card purchases over the Internet, was introduced in early 1995.( Ngai, 2003, 24--49) Electronic cash Secure credit card transactions are appropriate for transactions in excess of say $200, but for vendors of low-cost items such as magazines e-cash is a more interesting option. DigiCash, for example, has a software product that can be downloaded onto a user's machine. The software is free to users; DigiCash hopes to make money by licensing its banking software to financial institutions that want to practise banking on the Internet. The GUI interface allows the dragging and dropping of icons representing stacks of coins, receipts, record books, etc. To shop on the Net, with e-cash, you first draw digital coins from your Internet bank and store them on your hard disk. You use the coins when the vendor's software prompts you for payment. E-cash has the advantage of being anonymous. Transactions are final. Some believe that the arrival of e-cash will have a significant impact on market activity (e.g. Rowley, 2000, 20-35). However, for e-cash to be successful, there need to be some clear ground rules about the standards associated with the implementation of e-cash; a universal protocol for electronic money is necessary. (Redmond, 2002, 56-66) While security remains an issue, some operators are still encouraging shoppers to place an order by electronic mail and then call a toll-free number to provide credit and shipping information to a personal shopper who creates the order. At the end of the day, however, it is necessary to recognize that "secure" is a relative term. Cheques, cards and cash are regularly used in fraudulent ways in normal business transactions. Businesses recognize these problems and take steps to minimize losses, but accept that there is no perfect system. (Drennan , 2003 295-311) Accordingly, it is not realistic to seek 100 per cent security on the Internet. Beyond security standards, there are also other problems associated with transactions on the Internet. Charge-back rules to cater for returned merchandise will need to be agreed. Also, pricing is currently at the 2 per cent bank card rate on mail order transactions; some believe that this should be reduced to the secure transactions rate of 1.35 per cent. (Jiang , 2005, 150-74) SWOT Analysis of Internet Retailing Strengths Access to information Internet retailing fulfills several consumer needs more effectively and efficiently than conventional store-based retailing. Access to price information As long as presale objective information, in terms of detail and variety, is more valuable than persuasive information, Internet retailing offers greater acquisition value for consumers as compared to conventional retailing. Novelty Given its relative newness, the Internet provides a unique shopping experience for customers. Accessibility Internet retailers enjoy a greater trading area, and thus potentially greater sales, than their bricks-and-mortar counterparts because the physical location of stores or distribution centers is of limited or no consequence. Convenience The Internet is open 24 h a day, 7 days a week. Busy consumers and those who simply do not enjoy the shopping experience may value the convenience of shopping online. Weaknesses Lack of trial Internet retailing, despite allowing for some multimedia presentation, is inherently deficient in offering pretrial experience and evaluation for a majority of commonly bought products, such as clothing, toys and furniture. Lack of interpersonal trust Internet retailing is inherently limited in its ability to offer high-trust persuasive communication. Lack of instant gratification Internet retailing is structurally disadvantaged to provide the type of instant gratification that can be obtained from simply visiting a conventional store and acquiring the product. High shipping and handling costs The higher costs of shipping and handling add considerably to the costs of fulfillment in Internet retailing. .Lower customer service Apart from the lack of high-contact pre- and postsales service, there are several customer service issues that are inherently limited in Internet retailing. Loss of privacy and security Issues of privacy and security generate greater concerns from consumers in an e-tailing environment. First, Internet transactions are carried out over a public domain. Lack of stable customer base Closely related to these scale issues is the lack of a stable customer base. While e-tailers spend a great deal on customer acquisition, repeat purchases are still low. .Poor logistics Some Internet retailers give more attention to front-end activities, to the detriment of critical back-end issues, particularly order processing and fulfillment. Lack of experience Over the years, traditional retailers have gained considerable experience with economic upswings and downturns, consumer preferences and shifts in tastes, merchandising challenges, supply chain challenges and intertype competition. (Levenburg , 2005 319-31) Opportunities Virtual malls (or portals) The virtual mall or portal is an Internet site that hosts several merchants. Aggregators Aggregators collect potential trading partners at one site, based on the requirements of individual buyers and sellers. Auction brokers Auction brokers bring together buyers and sellers for specific products and enable a bidding process. Reverse auctions Buyers specify their own prices for specified goods and services, and the broker seeks fulfillment from interested vendors. Search agent Search agents, or intelligent software agents, such as pricescan.com, search out the best price for a specific product and hard-to-find information for the buyer. Virtual merchants Such merchants are usually "pure play" in the sense that they have no other presence, except that on the virtual market space. Catalog merchants Several catalog companies have made an effective transition to the web, primarily because of their expertise in cataloguing products as well as the lower marginal costs of publishing their catalogs on the Internet Bricks and clicks These are traditional physical store retailers who may include Internet retailing into a well-integrated organization or operate Internet retailing divisions separately. Threats Increase in intertype competition Internet retailing as a distinct retail format has contributed to an increase in intertype retail competition. Increase in channel conflicts Because the Internet is viewed as another distribution channel, manufacturers and suppliers face the prospect of increased channel conflict. Increase in price competition The transparency of prices charged by Internet retailers is a pervasive impact. Shopping bots (What are "bots") and price comparison tools can tap into most e-tailers' prices. In addition, several e-tailers consciously partner with a variety of search engines so that they can appear price competitive. Increased attention to standardized products and brand names In general, "touch/feel" products-those that require sensory experience, evaluation and trial prior to purchase, such as clothing and fashion goods-are less likely to gain increased sales from Internet retailing compared to standardized products, such as books, music and computers. (Levenburg , 2005 319-31) Greater consumer sovereignty The Internet opens a new channel of distribution for manufacturers and retailers, thereby increasing channel options for consumers. Conclusion The history of retailing, if summarized concisely, is an endless search for convenience. Early on, department stores were predicted to be the place for one-stop shopping, then it was the shopping malls that received such accolades. More recently, the supermarket was considered to be the one-stop store, where consumers could not only shop for groceries and dry goods, but also rent videos, drop-off/pick-up dry-cleaning and fulfill their banking needs. To an extent, such superstores have been successful in small pockets of the US, Europe and South America, while by and large, most supermarkets still stock only grocery items. The future of Internet retailing began with predictions that it would supplant the physical world of retailing, and many convincingly stated that it would revolutionize the way we shop. The same was said of TV home shopping. Whether Internet retailing will remain a stagnant business with negligible market share, such as TV home shopping, or whether it will become as ubiquitous and enduring as the department store, remains to be seen. By adopting internet retailing strategy Al-Hadaayah can expand its market. There are several benefits and problems related to internet retailing but overall internet retailing is a prosperous strategy to adopt. As other booksellers (e.g. Amazon.com and Barnes & Noble) have gained from internet retailing Al-Hadaayah will gain more customers and expand its business globally. References Amit, R., Zott, C. (2001), "Value creation in e-business", Strategic Management Journal, Vol. 22 No.6/7, pp.493-520. Doherty, N.F., Ellis-Chadwick, F.E. (2003), "The relationship between retailers' targeting and e-commerce strategies: an empirical analysis", Internet Research, Vol. 13 No.3, pp.170-82. Drennan, J., McColl-Kennedy, J. (2003), "The relationship between internet use and perceived performance in retail and professional service firms", Journal of Services Marketing, Vol. 17 No.3, pp.295-311. Forsythe, S.M., Shi, B. (2003), "Consumer patronage and risk perceptions in internet shopping", Journal of Business Research, Vol. 56 pp.867-75. Jiang, P., Rosenbloom, B. 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