Electronic Business: Direct Purchase Online - Term Paper Example

? The proliferation of the Internet has brought about a number of social changes which has resulted in the emergence of the Internet as market space (Bonera, 2011). Commercial websites offer products and services for direct purchase online. Globally the number of website offering online purchases has gone up from 23,000 in 1995 to over 55 million in 2005. Commercial websites, online marketing, online shopping tools and purchasing methods are increasingly being provided by several industries without which they fear losing customer segments (Phelan, Christodoulidou, Countryman and Kistner 2011). Online marketing has gained momentum in recent years because of higher disposable income, need for comfort, and lack of time (Sharma, 2011). As far as the marketers are concerned online marketing has increased the reach, reduced planning time, lowered the costs and with the use of technology they are able to reduce the sales points and offer a number of payment options to the customers. The prevalence of the Internet provides efficiency and convenience but as technology has developed, risks and uncertainties too have developed which directly impact online shopping behavior and customer satisfaction. In the case of internet banking, the perceived security risks are high as a third party can easily intercept the system (Mann and Sahni 2011). On the supply side too, the sellers are subject to security and fraud risks. E-business and online purchase subjects the customer to unique risks such as credit card fraud, non-delivery of goods after purchase, private information being shared with other portals, and lack of guarantee of the good and services purchased (Koyuncu and Bhattacharya 2004). Such risks prevent the customers from buying high-priced items online or items that would require visual inspection. Customers also fear delays in delivery or goods damaged in delivery, which poses a challenge for the sellers (Sharma 2011). Lack of face-to-face interactions emphasizes the role of trust in online payments (Ranaweera, McDougall and Bansal 2005). Trust in an online environment takes time to develop and is based on past experience and recommendations by the third party (Mann and Sahni 2011). Fraud and security risks faced by the sellers have limited the growth of e-business. However, as technology has developed secure transactions and encryption have developed too, offering guarantees and security to buyers and sellers. E-business has more risks than retail shopping but in spite of the risks internet business has grown because of the numerous advantages it offers. These advantages include lower transaction cost, lower search cost both in terms of time and money; wider range to select the products from, lower prices and savings on time as shopping is much faster (Koyuncu and Bhattacharya 2011). However, if the delivery time increases, or the risks of payments increases, the customers are likely to engage less in e-business. The theory of reasoned action (TRA) explains that human behavior is based on the beliefs and intentions. Bonera (2011) finds that online purchase intention could be influenced by the construct of playfulness but then perceived security and usefulness influence the purchase intention. Thus, if the perceived security level is low, online purchase is likely to be adversely impacted. Apart from the security concerns, ease of use and website quality can influence consumers’ online purchase behavior. A satisfied customer would have the intention to return to the website and also be willing to recommend the website to friends (Ranaweera, McDougall and Bansal 2005). While the first transaction may stem from curiosity or playfulness, subsequent transactions would depend upon the actual delivery and consumption relating to the first transaction. Acquisition costs are higher than retention costs and hence it is a challenge for the marketers to convert the first-time visitors to actual buyers. There exists a definite relationship between website quality and website satisfaction. At the same time consumer characteristics also influence the purchase intentions. Thus website satisfaction would also depend upon the technology readiness of the consumer, perception of risk, trust disposition and purchase involvement. If the consumer does not have the right disposition and technology readiness the experience can be frustrating. Customer satisfaction in online purchase for consumer goods such as apparel, toys, electronics, home and garden goods, and beauty products, depend on website design and customer service. Customer satisfaction also depends upon the information content provided on the website. In the online banking environment particularly, accurate and timely information, security and trust can enhance customer satisfaction (Mann and Sahni 2011). Phelan, Christodoulidou, Countryman and Kistner (2011) suggest that the aesthetic quality of the website can induce online purchase especially in the case of hotel sales. While the internet based room reservation system facilitates global distribution, the success depends upon the aesthetic appeal of the website. Apart from informational content, visitors seek an interesting experience while making online room booking. Here too customer disposition becomes important as some find it time-consuming if graphics and pictures take time to load thereby placing demand on the server. Dynamic and graphic websites are resource-intensive but unless the user has high bandwidth internet connection, the experience can be frustrating. Customer satisfaction, loyalty and repeat business also depends upon effective supply chain management. Demanding customers, information revolution and the emergence of new types of organizational relationships have driven the organizations to have an integrated approach towards effective supply chain management. An effective supply chain management requires mutual faith, co-operation, collaboration, partnerships, sharing information and technology. Organizations have to invest in B2B relationships to ensure repeat business. Dow Chemicals used technology to ascertain inventory levels and forecast demand. They started a private exchange with 200 customers in 1999 and by 2001 they had 8000 customers spread across 35 countries (Hoffman, Keedy and Roberts 2002). The customers derive benefit as they can view their purchase histories, check availability of products and accordingly plan future orders. The sellers too understand the buying habits of the consumers which helps them forecast demand, schedule manufacturing and control inventory. Business-to-business coordination has been able to enhance collaboration and coordination in the organic coffee industry. Traders and roasting companies did not have access to markets which was restricted to those who had signed long-term contracts with the producers (Claro and Claro 2004). The trade was marked with uncertainties and risks as producers faced hazards of the climate while the roasting companies were finding it difficult to store, roast and grind coffee in a way that the attributes of organic coffee were retained. Consumers were willing to pay a premium price for quality organic food. With proper information exchange, long-term integration and effective cross-border relationships, miscommunication was eliminated resulting in an effective supply chain. SCM can succeed only if it is based on mutual trust, has a long-term orientation, and is based on long-term investments and planning. However, supply chains face innumerable barriers such as multiple tiers, many suppliers, several outsourcing partners, varied transportation mode (Sapient 2002). Uncertainties are high as the multiple players in the supply chain come from diverse backgrounds and systems and attempt to integrate the supply chain activities (Lippert and Forman 2006). Buyer behavior is uncertain and is sensitive to economic and political situations. As such it becomes difficult to forecast demand. Both Intel and Cisco suffered millions of dollars of loss when the market demand dropped suddenly. Small incidents in any organization take place virtually every day but these small incidents impact demand. A late shipment can result in stock out or a lost order can affect customer levels. If an organization does not respond promptly to such situations it could lead to escalation, expediting costs and dissatisfied customers. However, Croom (2001) contends that excessive attention on integration is not necessary. Supply chains also lead to price pressures and cost reductions. An organization’s majority costs are vested in the supply side of their operations. Competitive pressures make it imperative for organizations to bring about improvements and efficiency in the customer-facing activities. This exerts a ‘squeeze’ pressure on most organizations. To remain competitive customer service should be the focus for supply chain integration rather than costs. Effective supply chain strategy includes maintaining customer loyalty and customer relationship. To encourage and attract new customers, internet advertising has become an important marketing strategy (Wu, Lin and Lin 2011). This has prompted many marketers to advertise on the internet and even on competitor websites. However, the consumer feels lost amidst large number of advertisers and the effectiveness of online advertising remains a debatable issue among marketers (Wang and Sun 2010). For instance, Amazon’s pages are extremely cluttered as they have excessive advertising for other products. This can make the website look clumsy and diminish the overall experience. The consumer attitude towards online advertising is an important indicator of the effectiveness of online advertising. Internet advertising takes various forms and banner advertising is one of the cheapest forms that is displayed arbitrarily regardless of the content of the web page (Lee and Lee 2006). However, the authors find that internet advertising is enjoyed by internet users and they appreciate the information and utilize it for making purchase decisions. Banners are personalized to make it more relevant to the information that online consumers seek. Hsieh and Chen (2010) differ with this opinion and contend that banner advertisements have become redundant as the viewers have developed what is known as ‘banner blindness’. Based on the traditional attention theory, the authors suggest that people pay lesser attention on other objects if the main browsing contents occupy more of the viewer’s mental resources. Internet users have leant from their past surfing experience to ignore banner advertisements, and they know how to quickly focus on the main viewing content. There is abundance of advertisements on the internet and the user needs to target the useful information and ignore the irrelevant ones. Lee and Lee find that consumers also perceive the comparative advertising before they make the purchase decisions. They perceive similarities between the advertised and compared brands and they find that the comparative advertisement is more effective that non-comparative advertisement. It creates attention, enhances messages and brand awareness thereby influencing the purchase intentions and purchase behavior. However, the advertising format should be compatible and ease of use is essential. According to Sharma (2011) people do not find internet marketing very persuasive. They also perceive internet marketing and advertising to be intrusive and distracting. When people are associated with certain activities, they do not want to be sent any links which could distract them. Hsieh and Chen also argue that to effectively draw the attention of more internet users remains a controversial issue. This is because attention is a limited mental resource and an individual has limited amount of attention available at any given time. If the task is difficult or unfamiliar, it would require more mental resource leaving no time to look at advertisements that may not be necessary at that point of time. It has thus become challenging for the marketers to verify what can influence or what can sustain the attention of the internet users to make internet advertising more effective. For e-businesses to be more effective, trust and security concerns need to be addressed by the online marketers. The benefits of e-business are immense both for the customers and the sellers. The customers benefit through lower transaction cost, lower search costs, and wider range of products, lower prices and savings on time as shopping is much faster. The sellers too have a wider reach and lower distribution costs. The concept of e-business has enhanced efficiency and convenience but as technology has developed, risks and uncertainties too have developed which directly impact online shopping behavior and customer satisfaction. Consumer characteristics are as important as website design in providing customer satisfaction in online shopping. The sellers have been trying to leverage benefit through effective supply chain management which helps to forecast demand, understand consumer buying behavior and plan production. To derive benefits marketers engaged in online advertising but to effectively draw the attention of more internet users remains a controversial issue. Thus e-business offers several benefits but these can be leveraged only through consumer trust and co-operation. Technology by itself is not sufficient to generate profits. Works Cited Bonera, Michelle. "The propensity of e-commerce usage: the influencing variables." Management Research Review 34.7 (2011): 821-837 Claro. Dick M. & Claro, P B. "Coordinating B2B cross-border supply chains: the case of the organic coffee industry." Journal of Business & Industrial Marketing 19.6 (2004): 405-414 Croom, Simon R. "Supply Chain Management in the E-Business Era." Warwick Business School. Hoffman, William. Keedy, Jennifer & Roberts Karl. "The unexpected return of B2B." The McKinsey Quarterly, Web August 2002, online July 29, 2011 http://www.mckinseyquarterly.com/article_page.aspx?ar=1210&L2=16&L3=44 Hsieh, Yu-Chen & Chen, Kuo-Hsiang. "How different information types affect viewer’s attention on internet advertising." Computers in Human Behavior 27 (2011): 935–945 Koyuncu, Cuneyt. & Bhattacharya, Gautam "The impacts of quickness, price, payment risk, and delivery issues on on-line shopping." Journal of Socio-Economics 33 (2004): 241-251 Lee, Jae Won. & Lee, Jae Kyu. "Online advertising by the comparison challenge approach." Electronic Commerce Research and Applications 5 (2006): 282–294 Lippert, Susan K. & Forman, Howard. "A supply chain study of technology trust and antecedents to technology internalization consequences." International Journal of Physical Distribution & Logistics Management 36.4 (2006): 271-288 Mann, Bikram Jit Singh and Sahni, Sunpreet Kaur. "Inter-Relationship of Web Site Interactivity and Customer Outcomes: Building Trust in Internet Banking Web Site." Global Business Review 12.1 (2011): 99-115 Phelan, Kelly Virginia. Christodoulidou, Natasa. Countryman, Cary C. & Kistner, Leonard J. "To book or not to book: the role of hotel web site heuristics." Journal of Services Marketing 25.2 (2011): 134-148 Ranaweera, Chatura. McDougall, Gordon & Bansal, Harvir. "A model of online customer behavior during the initial transaction: Moderating effects." Marketing Theory 5.1 (2005): 51-74 Sapient Corporation. "Tackling Uncertainty: Improving Responsiveness with Supply Chain Event Management." Tse, Tim. "Reconsidering the source of value of e-business strategies." Strat. Change 16 (2007): 117–126 Sharma, Amalesh. "Take-off of online marketing: casting the next generation strategies." Business Strategy Series 12.4 (2011): 202-208 Wang, Ying. & Sun, Sahojing. "Assessing beliefs, attitudes, and behavioral responses toward online advertising in three countries." International Business Review 19 (2010): 333–344 Wu, Sheng. Lin, Cathy S & Lin, Jean. "An empirical investigation of online users’ keyword ads search behaviours." Online Information Review 35.2 (2011): 177-193 Read More