Introduction
Electronic retailing or e-retailing entails businesses transacted through the internet. It includes business-to-business (B2B) transactions and business-to-consumer (B2C) sales of products and services conducted via websites and smartphone applications. E-retailing categories include pure and hybrid internet retailing, with the first approach relying solely on the internet as its means of distribution. Pure retailers do not own products but rather depend on others in the supply chain actors. A good example is Buy.com, which relies on Ingram for warehousing and product distribution. Hybrid retailers are physical stores that have found ways to integrate internet channels into their business. The convenience of accessible information from websites and physical goods access makes these retailers very competitive. This paper analyzes the internet retailing economy today and future trends in this sector.
The State of Internet Retailing Economy
The primary function of the internet is to share information. In e-commerce, the internet facilitates while also reducing the cost of information flow; hence, there is a change from traditional retail practices. Currently, the industry has adopted procedures that utilize new technology tools (Caro & Sadr, 2019). One significant effect of this trend is the low cost of searching for buyers or sellers. The ripple effect is lower cost due to price comparisons, intense competitive pressure, and reduced operational costs. Today, most companies look for leverage toward success, and the internet is one of the factors that affect marketing activities. Digital information, search costs, and other emerging issues shape the current internet retail economy.
Digital Information
The web is abundant with information but buyers and sellers are not always adequately informed. There is a lot of amateurish website and personal web pages. Frequently, it is tough to ascertain the value of the material available. Digital information production is usually high, with little marginal cost, resulting in an average price decline with rising input. Therefore, digital information economies of scale are a critical consideration for retailers. According to Santalova et al. (2019), the material can also be repurposed to bring about economies of scope. Improvement in technology also lowers the fixed cost of providing information. Human capital is another factor in these fixed costs. It explains why although technology is continuously improving, fixed costs are not declining as fast. The penetration of the internet to many parts of the world has not bolstered competition due to these factors.
Search Costs
The significant advantage of retailing online is geographical freedom, as geography does not restrain businesses and consumers. As a result, there are more options for retailers than traditional approaches, as access to the internet is widely spread. Additionally, the cost and access to information are not affected by customer location (Caro & Sadr, 2019). Therefore, internet retailers have a larger customer base than traditional outlets do. Consumer search is also greatly influenced by search engines and other software that query many stores, simultaneously returning a consumer a comparative list.
Emerging Issues
Internet legislation related to tax is one major issue facing online merchants. Internet retailers have a competitive edge over traditional sellers, but new levies may hamper their growth. Another issue is the internationalization of retail business to overseas markets. A lot of internet retail brands are going global to improve their revenue. However, there is fear due to specific market variables such as language, culture, and legislation (Čolaković & Hadžialić, 2018). Another factor is the return of goods, which poses logistical problems to retailers. Consumer research points to returning products at the point of exchange. Goods requiring an operation to ascertain productivity remains a challenge.
Taxation policy changes will also dramatically impact online retail’s viability, as the implementation of a sales tax may reduce consumers’ willingness to purchase goods via the internet. Many of the hybrid and start-up businesses have copied a lot of features and functions from big e-commerce businesses (von Briel, 2018). However, the strategies employed are different as hybrid internet retailers seek ways to complement online presence with physical channels. The number of firms that have been traditionally physical in their operations has moved to the internet platforms. Vice versa, pure internet businesses are investing in a physical presence to gain more advantages using economies of scale. The indication is there for more firms to turn into hybrid internet retailers.
Future Trends in Internet Retailing Economy
A lot of well-known brands are now opting to bypass retail partners. Increasingly, Direct Consumer (DTC) business practices are becoming popular. One key benefit of DTC is that the retailer owns the customer relationship (Grewal et al., 2017). In turn, this relationship makes it easier to support services. Data collection and feedback are also readily available, leading to better customer experience and relationships. Additionally, DTC brands offer better after-sale services, including packaging, custom assortment, and product promotion.
The use of smartphones has become an increasingly important factor in online retailing. Although mobile phones account for fewer transactions than desktop platforms, they are expected to dominate the future market. Brands are opting for the development of advanced web applications, which are user-friendly applications providing optimal experiences (Caro & Sadr, 2019).
These applications intend to have fast loading speeds with a good response. Therefore, greater use of smartphone applications to improve the shopping experience and convenience is among the expected trends in this sector.
Artificial intelligence or AI is also an area of great interest in this sector. Automation without any human assistance will likely require high-level machine learning, and businesses are investing a lot in this area (Santalova et al., 2019). Although currently expensive, AI will reduce operational costs and eliminate human error in production. It will also be applied in search engines and areas of customer interaction for better service delivery. Efficiency gains from using technology will translate into higher profits for retailers. Big data and analytics will also be central to producing goods tailored to consumer needs and user expectations. Still, studies have found evidence of non-competitive pricing on the internet (von Briel, 2018). Consumers will not necessarily choose a product with the lowest price if they derive more value from additional retail services offered with a higher-priced good.
Conclusion
The online retailing economy is characterized by high competitive pressure to improve the user experience. Information sharing is high-speed, and online consumers today are very demanding. The inability to inspect goods and transaction security concerns physically are two of the main deterrents to online retail success. Future technology developments may provide solutions for these problems, thereby improving the internet’s prospects for success. The lowering of search costs and the abundance of information available online might greatly enhance consumer price comparison and reduce operational costs for businesses.
References
Caro, F., & Sadr, R. (2019). The internet of things (IoT) in retail: Bridging supply and demand. Business Horizons, 62(1), 47−54. Web.
Čolaković, A., & Hadžialić, M. (2018). Internet of things (IoT): A review of enabling technologies, challenges, and open research issues. Computer Networks, 144, 17−39. Web.
Grewal, D., Roggeveen, A. L., & Nordfält, J. (2017). The future of retailing. Journal of Retailing, 93(1), 1−6. Web.
Santalova, M. S., Lesnikova, E. P., Kustov, A. I., Balahanova, D. K., & Nechaeva, S. N. (2019). Digital technology in retail: Reasons and trends of development. In E Popkova (Ed.), Ubiquitous computing and the internet of things: Prerequisites for the development of ICT (pp. 1071−1080). Springer.
von Briel, F. (2018). The future of omnichannel retail: A four-stage Delphi study. Technological Forecasting and Social Change, 132, 217−229. Web.