The Impacts of E-commerce upon Traditional Stores - Literature review Example

E-commerce vs Traditional stores: A Literature Review of The Impacts of E-commerce Upon Traditional stores Introduction The shifts in the technological advancements have triggered the establishment of electronic commerce. Electronic commerce is a form of a business model that allows people or organizations to carry out business via the internet. It entails the selling or buying of goods via an electronic medium (Bishan, 2000). E-commerce promotes faster selling and buying of goods. Given that this form of commerce involves no geographical limitations, it reaches more customers (Bishan, 2000). The explosion of electronic commerce in the modern world is leading to perceptive impacts on traditional stores. Researchers have assessed interests in the link among traditional stores and online shopping stores since the rise of the internet. While some researchers contend that online shopping is convenience and augments sales, others believe that online shopping has detrimental effects on traditional stores. Drawing on extensive literature review, this essay explores the impacts of e-commerce on the traditional stores and highlights the extent to which online stores affect traditional stores. E-commerce Overview The advancement in technology has triggered competition in the modern business environment. The advancement in technology has led to the introduction of online shopping. According to Milan, Bebber and Eberle (2015), online shopping involves the use of internet for distribution of products and services to prospective consumers. Online shopping entails the electronic selling and buying of services and goods to consumers (Bishan, 2000). Firms that require gaining a competitive advantage and augmenting their sales are using electronic commerce. According to Milan, Bebber & Eberle (2015), e-commerce facilitates communication buyers and sellers from all over the world. Chiozza (2011) who confirms that e-commerce promotes direct selling of products across different regions of the world echoes this assertion. Information Technology allows e-commerce to amalgamate and digitise the processes and procedures of business. E-commerce supports commercial businesses through minimising expenses, space and distance (Chiozza. 2001). E-Commerce Affects Consumer Buying Behavior E-commerce and the widespread adoption of mobile technology hold negative impacts on traditional stores. According to Massad and Beradelli (2016), the early 21st century will be recalled as a period when internet-based retail buying became mainstream. According to the two authors, shoppers worldwide have transitioned from in-store shopping to online shopping. New technological products such as smartphones are becoming common as consumers use them to buy products online (Massad & Beradelli, 2016). As a result, e-commerce is developing steadily. Mittal (2013) asserts that detailed product information and enhanced service that is as a result of the internet technology has made more people to change their consumer behavior. Consumers are now moving from traditional mode of buying into the more reliable internet shopping. The change of consumer buying behavior has made businesses to change their marketing strategy (Mittal, 2013). Milan, Bebber & Eberle (2015) confirm that the e-commerce has increased with online shopping becoming more popular. This cannot be denied given the rise of the number of online stores. The rapid rise in online shopping is because of the explosion of devices that make online shopping easier (Massad & Beradelli, 2016). In addition, the rapid development of the e-commerce is as a result of the benefits that comes with the internet. According to Mittal (2013), the internet provides consumers with different form of convenience. With the internet, consumers search for product information and prices online. Through the internet, consumers save time and get consumption-linked information (Mittal, 2013). In this perspective, e-commerce negatively affects traditional retail stores. Traditional Stores cannot be Replaced Completely Although internet has a major influence on the retail industry, vast majority of retail transactions continue to take place in conventional retail stores. According to Massad and Berardelli (2016), while shopping online may be convenient for some consumers, other consumers shop in conventional retail stores. Mehdi (2006) asserts that although online stores may threaten bricks-and-mortal business, they will not be replaced entirely. Mehdi (2006) further claims that conventional retailer stores will continue to grow and exist as long as illiteracy and poverty exist. A research carried out by Massad and Beradelli (2016) indicated that the global internet retail sales stood at 1.67 trillion dollars in 2015 accounting for only 7.3 %of all retail sales activities. It is projected that by 2019 the internet-based retail sales will account for 3 trillion dollars that translates to 12% of the global retailing (Massad & Beradelli, 2016). This is a clear indication that online stores cannot entirely replace traditional stores. Evidently, the current and projected percentage of online retail sales demonstrates minimal effects of e-commerce on conventional retail stores. Lambert, Poole and Woodford (2005) affirm that e-commerce is not going to replace bricks-and-mortar stores completely. This is because of the fact that the volume of online stores shops is not adequately high to trigger the closure of conventional retail stores. Despite the closure of numerous conventional retail stores, the situation in brick-and-mortal retail is not as miserable as people would think (Lambert, Poole &Woodford, 2005). Apparently, other factors such as the increasing energy prices trigger the closer of conventional retail stores (Katz, 2016). When oil prices are higher, customers are unable to maintain their vehicles an aspect that affects their trips to conventional retail stores. Cheaper oil prices are incentives to roads trips (Katz, 2016). When there are no incentives to road trips, conventional retail stores lose their market share to online retailers. According to Katz (2016), traditional retailers are working on bringing customers into their stores. According to Frasquet, Mollá & Ruiz (2015), the widespread adoption of mobile technology has triggered a phenomenon called “webrooming”. Webrooming accounts for seventy-three percent of all conventional retail stores purchases (Frasquet, Mollá & Ruiz, 2015). Customers are able to compare products and their process through webrooming. Conventional retail stores are using the internet to market their products. Conventional retailers are integrating physical commerce and e-commerce (Frasquet, Mollá & Ruiz, 2015) . A survey carried out by Preissl, Bouwman and Steinfield (2012), indicated that 40% of physical retail stores are not affected by e-commerce. In fact, retailers use elements of e-commerce to advertise their products through the internet. Therefore, the closure of some conventional retail stores is not as a result of e-commerce, but reputation. Preissl et al. (2013) assert that a high reputation in conventional business is a crucial factor in the survival and productivity of the business. E-Commerce Threatens the Future of Traditional Stores The increasing presence of e-commerce threatens the future of conventional retail stores. Lambert, Poole and Woodford (2005) assert that 65 percent of consumers have lowered their purchases from bricks-and mortal stores following the advent of internet. Brick-and-mortal stores retailers feel that they are disadvantaged compared to clicks-and-mortal stores. E-commerce has grown rapidly because of its costs of establishments and taxation (Lambert, Poole & Woodford, 2005). Evidently, one of the biggest arguments concerning e-commerce has focused on the comparative absence of online taxation. As opposed to products sold in conventional stores, products sold online are usually exempted from taxes. In the United States, as it is in other nations, taxes are a crucial source of revenue for a nation’s government (Lambert, Poole & Woodford, 2005). The fact that online stores are exempted from taxes makes their presence prevalent (Lambert, Poole & Woodford, 2005).. More so, e-commerce offers interactive and convenience services compared to conventional retail stores. Although the conventional shopping stores provide customers with more comfortable shopping environment and good quality products, e-commerce enhances products presentation. According to Mittal (2013), e-commerce negatively affects conventional retail stores because of its convenience. Mittal (2013) further asserts that a great number of researchers and consumers agree that convenience of e-commerce has attracted a number of consumers. Through e-commerce, consumers can shop anytime from anywhere. E-commerce works better for time-starved consumers. Because of the advantages of e-commerce that include better commodity price and convenience, Katz (2016) confirms that shoppers are migrating from bricks-and-mortal stores to click-and-mortal stores. Firms like “Sears Holdings” have closed 700 retail stores and is expected to close between 50 and 60 of its Kmart stores (Katz, 2016). This is a clear indication that big retails cannot keep up with the increasing desires of consumer to purchase products online. As a result, the share of retail sales of e-commerce has augmented swiftly in the recent years. Katz (2016) confirms that e-commerce retail sales stood at 10% in 2015. The author projects that online retail sales will increase by 15 to 17% percent by 2020. This is 3 to 5 percentage higher compared Massad and Beradelli (2016) projections of 12% by 2019. Evidently, rapid online development, specifically value-oriented players such as “Amazon” has negatively affected brick-and-mortal retailers. The Perceived Risks linked to E-commerce Arguably, e-commerce has minimal effects on traditional stores. According to Bishan (2000), e-commerce breaks the invisible and visible barriers between territories. Electronic commerce prompts shifts in standardization and readjustment of traditional commerce. Bishan (2000) asserts that e-commerce is different from traditional commerce. Compared to conventional retail stores, online shopping may augment perceived risks in the minds of customers (Massad &Berardelli, 2016). These risks include financial risk, delivery risk and time risk. According to Massad and Berardelli (2016), people still do their shopping from conventional retail stores because most customers consider e-commerce as a risk trade-off where they trade one set of risks for another. Most consumers like to test a product prior to purchase a thing that e-commerce does not offer. In addition, e-commerce does not guarantee timely arrival of products while products may be damaged before they get to the consumers. The risks linked to e-commerce are widespread and prevent consumer from using this form of commerce (Milan, Bebber & Eberle , 2015). According to Mittal (2013), online shopping hold potential risks to consumers that include payment safety and after service. Evidently, internet shopping has triggered the development of internet payment that sometimes is risky (Mittal, 2013). As a result, the percentage of e-commerce sales remains relatively low, hence no major effects on conventional retail stores. Dubas, Hershey and Dubas (2015) confirm that consumers are better off with bricks-and-mortal stores compared to clicks-and-mortal stores. This is well represented in the percentage of the e-commerce sales that has not yet hit 20% but projected to reached 17% by 2019 ((Massad & Beradelli, 2016). Younger people prefer online retail stores because they are risk takers and the fact that products are cheaper in online-stores compared to conventional retail stores. Richardson et al .(2016) claim risk-averse shoppers have a preference for online shopping while risk-neutral shoppers have a preference for shopping from traditional retail stores. Risk-averse shoppers tend to be loyal to a given brand and when conventional stores are unreachable, they quickly shift to online stores. Conclusion E-commerce entails the usage of internet for distribution of products and services to prospective consumers. With rapid development of the internet, consumers are shifting from conventional buying methods to online buying. Some studies report that clicks-and-mortal stores are beating most of brick-and-mortal retail stores. As a result, there is intense competition from both the online stores and conventional retail stores. Despite the fact that internet is revolutionising commerce in the contemporary world with increased number of online stores and closures of traditional stores, a good number of shoppers still prefer to shop from conventional stores. Drawing from several researchers, the e-commerce does not hold great effects on traditional stores given the risks linked to online shopping. Despite the fact that there are number of concerns for both consumers and retailers regarding online shopping particularly, how safe it is to pay for products online and how retailers can reduce the risk of damage to their merchandise, people in the contemporary business environment are adopting e-commerce. However, the percentage of sales linked to online stores compared to that of conventional stores is still below average. As a result, online stores hold minimal effects on traditional retail stores because people still prefer to shop from these stores. References Bishan, L.(2000). Electronic Commerce: the emerging technology and its impacts. Human Resources, 19(4):225. Chiozza, E.(2001). E-work and E-commerce: novel solutions and practices for a global networked economy, Volume 1. London: IOS Press. Dubas, K/L., & Hershey, L., & Dubas, S.D.(2015). An evaluation of the walk-in and online counterparts of the leading US stores. Academy of Marketing Studies Journal, 19 (1), 166-176. Frasquet, M., A Mollá, and E. Ruiz (2015). Identifying patterns in channel usage across the search, purchase and post-sales stages of shopping, .Electronic Commerce Research and Applications, 14(6), 654-665. Katz, D.M.(2016). The changing face of retail: Can innovation by traditional retailers overcome the disruptive force of e-commerce. The Magazine for Senior Executives, 32 (9), 24-26. Lambert, L., Poole, H., & Woodford, C.(2005). Internet: A historical encyclopedia. UK: ANC-CLIO. Massad, V.J., & Berardelli, K.(2016). The roles of bounded rationality and ethical self-efficacy in online shopping orientation. Academy of Marketing Studies Journal, 20 (3), 26-37. Mehdi, K.P.(2006). Encyclopedia of e-commerce, e-government and mobile commerce. India: IGI Global. Milan, G. S, . Bebber, S., & Eberle , D.(2015). Information quality, distrust and perceived risk as antecedents of purchase intention in the online purchase context. Journal of Management Information System and E- Commerce, 2(2) 111-129. Mittal, A.(2013). E-commerce: It’s impact on consumer behavior. Journal of Management and Business Studies, 3 (2), 131-138. Preissl, B., Bouwman, H., & Steinfield, C.(2013). E-life after the Dot Com bust. UK: Springer Science & Business Media. Richardson et al.(2015). Regional economic impacts of terrorist attacks, natural disasters and metropolitan polices. USA: Springer Group Word count: 1996 Read More