Consumers are driving change in the retail and consumer goods sector with demands for transparency of environmental impact and the re-emergence of e-retailing. Private equity is the catalyst for change in the sector, the result has been an industry revolution as many investors seek to introduce global best practice and address supply chain and operational issues at a very fast rate.
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In 2007, PricewaterhouseCoopers retail and consumer outlook, released today, examines current issues facing the retail and consumer goods sector and sheds light on the drivers of and reasons of these changes.(Pricewaterhouse Coopers, 2007)
E-retailing involves purchasing or shopping on-line. It is re-emerging in Australia. Although it is in its infancy, more consumers are becoming comfortable with online shopping and are seeking out retailers who can satisfy their needs to purchase online. As e-retail returns, retailers need to learn how to hunt, capture and keep their customers and evolve as their acceptance of the internet as a shopping domain increases. They need to provide the services their customers demand, or loose them altogether. Marks and Spencer, a popular retail brand in the UK, indicates it is perhaps struggling in this area.
Many e-retailers have focused on significant marketing efforts to attract customers in order to execute transactions, but have not focused on the less glamorous, but equally important, aspect of keeping the customers, by facilitating flawless delivery. Not only is it important to follow through and make sure delivery is facilitated, but companies can use the web to enhance delivery via customer service by allowing customers to track the status of the transaction. (Private equity, 2007)
Pros and cons of e-retailing
E-retailing can be considered another form of non store retailing. Its closest cousin in terms of other forms of non store retailing is catalogue retailing. Catalog retailing accounts for about 10% of all retail transactions. It is therefore instructive to compare e-retailing to catalogue retailing to gain some insight in to its potential impact. (Zeller, 2000)
Advantages of e-retailing
Customers have a much wider choice at their fingertips (many e-tail sites) thus the web creates a global bazaar style marketplace that brings together many consumers and many retailers. With web search capabilities (which need further development) it is easier to find the types of goods a customer is searching for, catalogs are received passively, at the behest of the retailer. Customers can execute transactions via the same medium the information is providing, so there is no disconnect between the desire to purchase and the ability to purchase. (Payment skills are schemes evolving and therefore this advantage is likely to become more apparent in the future).E-retailers can use price discrimination more efficiently than catalogue retailers, which may use coupons to lower fixed prices.
They can use previous transactions to identify the likelihood of products been purchased at certain price points-retailers can change the product placement (user display), based on previous transactions. To increase the visibility of goods that the user is more likely to purchase based on there close relationship with previous purchase. This placement can be designed based on the context of the previous purchase. (Zeller, 2000)
Disadvantages of e-retailing
Not all customers have access to the web, as they do to the postal system. This is a temporary issue as the evolution of the web continues. Ease of use is a problem, as the web design is still complex or at least some how chaotic-retailers stores are not standardized in design in the way catalogs and retails stores have become. Therefore different user behaviours (navigation schemes) need to learn for each e-retail store. This is a temporary issue as the evolution of the web continous. Trust, security and privacy concerns prevail. Consumers are concerned with the use of the data they provide during transactions. Graphic presentation is not as compelling for the web as it can be for catalogs. This is temporary issue as the evolution of the web continuous. (Zeller, 2000)
The customer- Focused Business Model
Zeller stressed that the development of a strict customer focused business model is critical for the e-retailer in attaining success. A traditional economics business model is characterized by maximizing shareholder wealth and individuals being motivated by economic goals. The consumer is not an integral part of the model. A customer focused business model recognizes the consumer as the central component. Working relationships across company departments in order to identify what the consumer wants is imperative. (Zeller, 2000)
In this article, we are introduced to the unique nature of the e-retail industry. We have examined the disadvantages and advantages faced by the industry and identified specific activities that pertain to e-retailing
Private equity, (2007). E-retailing: Driving change for retail and consumer goods sector.
Pricewaterhouse Coopers, (2007). Retail and consumer outlook.
Zeller, T (2000): Measuring and Managing e-retailing with activity-based costing. Journal of cost management.