The Emergence of E-Commerce in Clothing Trade Industry - Research Paper Example

? E-BUSINESS Introduction “The emergence of electronic business is one of the most profound changes that revolutionized the process of buying, selling, and exchanging products and services over the Internet. Organizations and customers have access to vast amounts of data, information, and services that are not limited in time or space” (Lee, 2005). Traditional business models have been changing and being replaced by evolving value chains that are posing challenges to existing businesses across all industries. Unless businesses understand how internet changed the way business is done to include the whole range of supply and value chains and adapt to change, it is difficult to sustain and make profits. This paper tries to understand how the market for clothes/ textiles has changed over the years to adopt technology and gain competitive advantage. The past and present trends in clothes business will be studied to understand the impact of e-business initiatives in the sector. How value chain has emerged to impact the marketers of clothes will be discussed and recommendations for increasing online purchasing of clothes will be given. e-Marketing and clothing trade Noting Corral (2000), “The apparel industry has started using the Internet in an attempt to improve the efficiency and effectiveness of marketing, provide customers access to information about products and their availability, build brand value, and to offer customers a convenient medium to make purchases online. The most valuable aspects of Internet shopping, as compared to store-based ad catalog shopping, are typically perceived to be competitive pricing, one-source shopping, convenience and time-savings (Tuunainen and Rossi, 2002). Rapidly changing consumer preferences and distribution requirements in the increasingly globalized world where trade is liberalized and need innovation is also strong, textile and clothing sector has undergone a sea change as did the other sectors. Businesses in the sector are vying for differentiation on price as there is a high concentration on manufacturing and distribution. Companies that have tried to adopt change are increasingly focusing on reducing operational costs in the supply chain while reducing time to market and lead time. There is an increased use of information technology to integrate the supply chain to control quality, time and operational costs. The European Union is the largest trader and exporter of textile and clothing with a large portion of exports considered temporary as they are re-imported for final production and distribution (e-business watch, 2004). Although there are different opinions as to the impact of ecommerce on retailing in the clothing industry, one fact is true, that those that do not adopt technology will lose their competitive advantage. Ecommerce is set to make a significant and permanent impact on retailing as it is set to increase revenue flow phenomenally. In the US, it is seen that a significant portion of the economy is contributed by internet-influenced revenue with a seven percent sales on internet can reduce profits of brick-and-mortar businesses by almost 50 percent. While e-retailers deliver well on product, price and place, traditional retailers manage to deliver well on margin flexibility, location, selection and delivering physical products at the right time (Taylor and Cosenza, 2013, pp 46, 47). Businesses can transform into electronic enterprises to reduce operational costs and improve process productivity. The speed at which businesses transform to adopt electronic transactions determines the capacity with which they implement processes. Greater the speed of adoption and transformation, higher the number of processes they can execute and the more rapid their expansion since it reduces transactional costs. This also gives enterprises strategic competitive advantage. A business can have a website and the extent to which it is open to customers determines its adoption of ecommerce (Figure 1): Figure 1: Ecommerce industry transformation. Source: (Rollyson, 1999). It is noted that businesses in the clothing sector are usually smaller firms and have a significant number of relations with their consumers. The industry has challenges in terms of increasing international competition, advances in technology, import quotas and environmental compliance. As clothing traders are usually small companies, they do not have the need or access to resources to have a web presence and diffusion of internet is low and quality too is low. This makes data transmission and exchange less suitable. However, there is a high level of product innovation happening in the industry with a little lesser level of process innovation (e-business watch, 2004, pp 19-24). This suggests that although there is a low level of technology diffusion among the sector businesses, innovation in product and process happens in terms of new and improved materials, mass customized products, creativity as an asset in fashion-related industry and process innovation. This also has implications in that companies find it difficult to exhibit their competencies and capabilities as they usually are considered tacit knowledge, and demand is increasingly driving innovation for which reason, businesses need to increasingly depend on technology and e-business solutions. The more closely they communicate with customers and rapidly innovate, the better their chances of survival (e-business watch, 2004, p 24). E-businesses help offer cheaper products directly to customers or can shorten the link between suppliers and consumers. Normally, e-business models are extensions of traditional businesses or revisions of the same. Common ecommerce models Merchant, brokerage, advertising, mixed, info-mediary and subscription. While merchant model transfers the old model to ecommerce using the internet, brokerage model brings buyers and sellers together on the web while collecting a commission on transactions, advertising models are extensions of traditional advertising, mixed model generates revenue from both advertising and subscription, info-mediary model collects information of consumers and passes on to marketing firms and subscription model sells digital products online. Also, depending on the type of transaction, ecommerce types are classified into: business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), consumer-to-business (C2B), and non-business and government, and organizational (intra-business) (Introduction to ecommerce, 2013). Not just manufacturers but retailers in the industry are increasingly creating their own brands by contracting with overseas factories to broaden their core competencies and enter many aspects of supply chain. The complete supply chain needs to be integrated for retailers to leverage advantage of information technology. Functions like inventory management, logistics, warehouse management and distribution should be adequately processed through information technology. Every customer, internal and external customer needs to be integrated into the e-business supply chain. A typical e-business customer chain in apparel retail is shown in Figure 2 (Pfitscher and Wei, 2005). Figure 2: E-business customer chain in apparel industry. Source: (Pfitscher and Wei, 2005). E-business value chain and clothing industry The value chain involves processes or activities like designing, production, marketing, delivering or distribution and support for the product or service rendered. Each of these process’s adds cost and value to the chain. Use of internet helps companies reduce cost in the value chain while also helping them improve quality of the final product or service as it increases speed of communication and accuracy of information between suppliers, distributors and customers (Introduction to ecommerce, 2013). Internet is able to change the relationships between the different participants in the value chain. It provides them with the right information at the right time to make the right decisions. E-business using internet can actually shift the bargaining power to suppliers as it can enable them to utilize customer information to provide value-added services. The role of suppliers and other stakeholders in the value chain can also be expanded through e-business. However, the success with which e-business takes advantage of value chain dynamics depends much on the commitment of top management through the organization’s corporate strategy. According to Porter, nine value chain activities help add value to the business and reduce costs. Five primary activities: inbound logistics, operations, outbound logistics, marketing and service; and four secondary activities: procurement, technology development, human resource management, and firm infrastructure, are involved in creating value in a business (Figure 3) (Mohammed and Soliman, 2003). Figure 3: Value chain. Source: (Qingfeng and Lihua, 2004). The apparel industry uses internet mainly for enhanced communication and interaction and has adopted a range of strategies and e-business models. Although, both traditional and e-customer chain define a customer in the same manner, in an e-customer chain, communication is majorly through intranets and extranets while traditional customer chains use telephone and mail (Pfitscher and Wei, 2005). A business model for this industry ensures that there is product, service and information flow for creating value in the process. Business strategy, information system and business process are integrated through a business model along the value chain (Figure 4) (Qingfeng and Lihua, 2004). Figure 4: Relationship of e-business model of enterprise. Source: (Qingfeng and Lihua, 2004). Three business models: sourcing, closeouts and direct sales are the three e-business models that have been tried by apparel retailers and manufacturers (Tuunainen and Rossi, 2002). Based on the existing need for information exchange on an e-business portal, the supply chain management ecommerce platform is built. Typical supply chain ecommerce platform is shown in Figure 5 which has two parts: supply chain platform for the enterprise and partner traders and relevant information from customers and partner companies (Hehua and Yahui, 2013, pp 734, 735). Figure 5: Supply chain structure of clothing trade on ecommerce. Source: (Hehua and Yahui, 2013, p 735). According to resource based theory (RBT), value and thus a competitive advantage for business can be achieved through making the company’s resources heterogeneous and immobile. For this, the resources must have the attributes of being: valuable, rare, imperfectly imitable and non-substitutable (Richard, Robert, Richard et al., 2010). There are several issues in achieving success through e-business in clothing industry as customers prefer to see the physical good before buying, and are often wary of the costs, returns and security. It is hard to capture the physical and personal attributes of clothing using technology and gaining competitive advantage through a resource based view while integrating the value chain as per Porter’s value chain is the greatest challenge for e-businesses in the clothing industry. Increasing online purchasing The industry needs to focus on a few aspects before it can start leveraging the full potential of ecommerce. As transformation of the business and industry as a whole is of utmost importance in being able to achieve success in e-business, it is necessary that key players and informational needs of both the organization and the customer are identified immediately and there is innovation in the product/ service offered. Care has to be taken to integrate all of the stakeholders, both internal and external customers in the supply chain. Increased level of technology diffusion among the various customers needs to be stressed to achieve greater success. Further, integration of business strategy, business process and information system has to be improved to fully integrate the different components of Porter’s value chain. Appropriate business model has to be created to leverage the potential of e-business. Value can also be created through a resource based view of the business by making the products or services heterogeneous and immobile. Shift the bargaining power of suppliers through innovative value added services that also aid in increasing customer satisfaction while creating a brand value which the customers can vouch for. However, it is important that technology implementation be enhanced to allow for higher levels of communication and interaction while also enabling modelling of physical and personal attributes of clothing to a greater extent. Conclusion This paper attempted to understand how ecommerce changed the clothing industry. It is seen that the industry has been making strides in terms of enhancing communication and co-ordination between its different customers, internal and external, to improve its chances of sustainability while also increasing the level of innovation. As the industry has witnessed a sea change in terms of innovation and information flow in the recent decade, enhancing communication and integrating the supply chain activities can better equip it to create value in its value chain. Some of the issues like information flow and physical modelling of the attributes need to be addressed to make the industry more profitable. References E-Business Watch. 2004. Electronic Business in the Textile, Clothing and Footwear Industries. Sector Report: No. 01-II, European Commission. Hehua, L and Yahui, L. 2013. Research on Supply Chain Management of Clothing Trade Based on E-Business. Shanghai Second Polytechnic University, Tongji University, Shanghai. Pp 733-738. Introduction to ecommerce. Available online: http://ocw.metu.edu.tr/pluginfile.php/352/mod_resource/content/0/Lecture_3.pdf Accessed on: 05th March 2013. Lee, I. 2005. E-business research. International Journal of E-Business Research (IJEBR). DOI: 10.4018/IJEBR. Mohammad, H.A and Soliman, K.T. E-Business: A Value Chain Perspective. Idea Group Inc. pp 642, 643. Pfitscher, J and Wei, J. 2005. Value Chain based E-Business in the Apparel Retail Industry. Proc ISECON 2005, v22, pp 1-12. Qingfeng, Z and Lihua, H. 2004. 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