Management and Customer Service in Online and In-Store Retailing - Example

Online Retailing Name Institution Date Table of Contents Table of Contents 2 Executive summary 3 Introduction 4 Differences between order management and customer service in online and in-store retailing 5 Australian distribution centre design and operations in online retailing and in-store retailing 8 Differences between Australian physical distribution in online retailing and in-store retailing 12 Conclusion 15 References 16 Executive summary The increasing interest by consumers to carry out shopping over the internet has fueled retail companies to develop and sell goods and services online even in regions that were in the past solely dominated by traditional businesses. Businesses that sell their products to consumers over the internet are referred to as online retailers or e-tailers. Some of the key reasons to why an expanding number of customers purchase goods online are universal to all online purchases, entailing better prices, convenience, time savings and larger selection. Home delivery of purchased products is appealing to individuals who find it hard to go out to shop due to numerous reasons such as lack of convenient or adequate transportation. Buying products online liberates customers physically shopping in and driving to physical stores. Online retailers offer information along with services and products. From a business point of view, online retailing has numerous benefits over in-store retailing. Online retailing doesn’t have high costs linked with several retail locations, entailing parking and rent. Additionally, through pooling its inventory in fewer sites, an online retail company is able to have a better management of inventory and reduce inventory holding costs as well as increase turnover rates of inventory. Through practicing online retailing other than in-store retailing, retail is able to collect in depth information on preferences and buying habits of consumers, which can then be utilized in personalized promotions and targeted marketing. Introduction The development of electronic commerce and information communications technology has enabled companies to be flexible and responsive to the increasingly changing market requirements. Due to emergence of new organizational environments and information technologies, businesses are able to adopt electronic logistics activities as well as retail products through the internet. According to Commonwealth (2011) online retailing is a type of electronic commerce and is the sale and purchase of services and goods between retailers and consumers utilizing the internet. In online retailing, consumers directly purchase services or goods from the retailer via the internet with the absence of an intermediary service. Through online retailing, consumers finds products or service of interests through visiting the retailers website directly or through searching amongst alternative vendors utilizing vendors utilizing a shopping search engine. Consumers are attracted to online shopping because of greater level of convenience and also due to wider selection, increased access to information and competitive pricing. Retailers seek to provide online shopping because low costs are incurred in comparison to nricks and mortars retail stores, provide access to a global market, and create sustainable capabilities and raises customer value. This report looks at relevant logistics activities involved in online retailing and the differences between online and in-store logistics activities (Falk & Sockel, 2005). Differences between order management and customer service in online and in-store retailing According to Commonwealth (2011) Australian consumers are attracted to online retailing because of lower prices, convenience and availability of information. Through the employment of online retailing, the company will be able to cut costs connected with numerous retail locations, entailing parking, property taxes and rent. Also, through pooling its inventory in fewer sites, the company will be able to efficiently manage its inventory, reduce costs of inventory holding and increase its turnover rates. This results to reduced spoilage of products as well as shorter led times from producer to consumer. Online retailing enables producers and suppliers of products to gather detailed information on their consumers’ preferences and buying habits, which may then be utilized for personalized promotions along with targeted marketing. Enrique (2005) note that this is an effective marketing strategy compared to one to one marketing used in instore retailing, where retailers attempt to utilize loyalty cards in tracking purchases. In spite of its advantages in order management and customer service, order fulfillment is the greatest challenge for online retailing. In online retailing, online information gathering is more frequent and detailed. In addition, due to lack of the capability to inspect merchandise prior to purchase, customers are at a greater risk of deception on the portion of the merchant than in in-store retailing. Merchants are also at the threat of deceptive purchases utilizing pilfered credit card and fraudulent repudiation of online purchase. With the presence of a warehouse other than retail storefronts, merchants face reduced threat of physical theft (Enrique, 2005). Click stream data offers details on manners in which a customer shops, whilst virtual shopping charts act as loyalty cards that track the purchasing habits of consumers. As a consequence, online retails can be able to increase their sales through targeting repeated consumers based upon personalized content for every shopper. Kumar et al (2004) note that in addition, online retailers are able to mine customer behavior date to abandoned shopping baskets or switching decisions into operational markers. Online retailing minimizes transactions costs especially search costs through increasing customer access to information and permitting customers to attain the competitive price for the service or product. Online retailing also minimizes market entry obstacles because the cost of establishing and managing a web site is cheaper when compared to the installation of a brick and mortar structure for the company (Kumar et al, 2004). In regard to information about goods, online retailing is highly attractive since it saves retailers from factoring extra cost of physical distribution network. Falk and Sockel (2005) argue that online retailing enables mass customization because it allows easy to utilize ordering schemes that allow consumers to select and order products in accordance to their unique and individual specifications. For instance, the newly formed Australian online retailing company can use online retail strategy that allows online orders for car accessories and tools to be quickly created based on the specifications of customer. Online retailing offers the consumer’s greater influence over how and what products are create and the way services are delivered, thus widening consumer choices. It permits for a more open and faster procedure, with consumers having increased control. Online retaining makes information about products and services and the entire market accessible and readily available, and promotes price transparency, which in turn enhances consumers to make suitable purchasing decisions (Falk, & Sockel, 2005). According to Enrique (2005), in-store logistics entails a series of operations in the management of inventory the sale point and flow or movement of goods from the loading dock of the store the store warehouse or stock room. In-store logistics entails services that go before the real sale of products to the consumers. In-store logistics services can entail store, packaging and refilling of stocks. Instore retailing focuses on supporting sales through taking responsibility and charge to a variety of retail activities, like store inventory, instore refilling management, inter store transfers, reporting, and store logistics operations. Instore logistics is mainly required in shops or stores that adopt a merchandising design which optimize sale space with sample products being on display and inventory being in stock rooms. This certain form of store layout s viewed as greatly appealing and defines neat spaces in which every product stacks on display surface. Application of superior logistics practices in retail store setting helps in the maximization of inventory which is on the display. Kumer et al (2005) note that there have been numerous reengineering of conventional retail supply chain to create customer driven networks of supply chain. Instore retailing business possesses physical presence and provide face to face consumer experiences. This is in contrast with an online presence of transitory business like an online store, which lacks physical presence for customers to visit and directly buy, although these online businesses usually possess physical facilities which are not open to the public, in which they conduct their business operations or warehouse for huge physical product distribution and storage. A physical store within geographic proximity to customers may put brick and mortar retailers for an increased expedited return policy as well as a reduced purchase risk through the web. The capability to go into a physical store which acknowledges returns from the online purchases promotes trust factor. Australian distribution centre design and operations in online retailing and in-store retailing Distribution centers are facilities that perform warehousing, consolidation, decomposition, packaging and other activities connected with handling freight. The main aim of distribution centers is to offer value added services to the freight. These centers are usually in proximity to main transport terminals or routes. They may also undertake less complex manufacturing activities like labeling and assembly. Because it is greatly illogical to directly ship gods from produces to retailers in in-store retailing, distribution centers usually operate as buffers where products are amassed, at times from other distribution centers and shipped in batches (Xing, 2010). According to Xing et al, (2010), through direct shipment, products can be directly shipped from manufacturers to the retailers. Direct shipments eradicate the costs of operating a direct shipment and lessen lead times. However, if a customer shipment size is not big and consumers are dispersed over a broad geographic region, a huge fleet of small track might be needed. As a consequence, direct shipment is widespread when completely loaded trucks are needed by consumers or when fresh products are required to be delivered on time According to Commonwealth (2007), the lessening of Australia’s manufacturing to approximately 10% of the GDP has lead to a rise in imported consumer goods from, for instance China. As a result of low cost manufacturing capability in China as well as a reduction in global trade barriers since China entered into the World Trade organization, several huge retail chains have set up region based sourcing offices in China and Asia. Since the new online retail company want to pursue the approach of procuring low cost manufactured products from China, online retailing will enable the company to perform electronic procurement at reduced products costs and add value to place and time utility. Online retailing can enhance electronic procurement which is the sourcing of products or service via electronic means, typically the internet, will enable the retail company to lower the expenditures incurred in identification and subsequent selection of the most superior suppliers, increase value of purchases on basis of their quality price relationships and also reduce costs of transactions connected with increased process efficiency. Outsourcing warehousing logistics and electronic fulfillment is a great means of gaining considerable benefits for the online retailing company, but the choice to outsource as well as the selection procedure should be thoroughly approached so as to make sure that perceived gains are attained (Xing et al, 2010). According to Williams and Ozment (2002), distribution centers and warehouses are usually expensive to construct, maintain and operate. Vehicles of transporting goods amid shops and warehouses are expensive on basis of both running costs and capital. There is therefore a cost imperative to ensuring that logistics is performed efficiently and effectively, via the most suitable allotment of resources along the entire supply chain. Through appropriating integration of supply and demand, primarily via the widespread utilization of information systems and technology, the online retail company will be able to offer superior services to its customers, through, for instance, having timely delivery of products to meet consumer demand (Williams, & Ozment, 2002). The modern forces shaping the supply chain continues to promote transformations in distribution and warehousing. Competition is pressing operations to be highly effective whilst catering to highly demanding consumers. Williams and Ozment (2002) note that Conventional brick and mortar retailers continues to expand their distribution centers and operations into other channels while manufacturers are being pressured by retailers to directly ship to tender shipments or stores that are able of being swiftly cross docked at flow via distribution centers. Manufactured are required to expand demands on the suppliers so as to support the more responsive and leaner supply chains. Consumer demands is compelling all links in the supply chain to offer novel value added services which might not fit into their present operating mode. Several retailers have chosen to outsource their distribution and warehouse functions via third party logistics providers. A third party logistics offers the capability to leverage the distribution experience and infrastructure of an external entity other than internally creating, supporting and maintaining logistics resources. According to Grewal and Levy (2004) logistics and retailing are concerned with the availability of product. This implies that both online and in-store retailers should be greatly concerned with flows of information and product both in the business and in broader supply chain. So to ensure availability of products, retailers are supposed to manage their logistics effectively in terms of demand management and product movement. They are supposed to be aware of the products selling in the stores and distribution centers and anticipate as well as quickly react to shifts in demand. Through online retailing, the online retail company will be able to utilize a logistics management approach that will integrate logistics tasks and also minimize the functional barriers. Thus, if the retailing company attains superior sales rate from checkout systems, it can use this data to schedule transport and decide locations and levels of stock holding. If inventory level will be reduces, fewer warehouses will be required (Grewal & Levy, 2004). Ablbjorn and Halldorsson (2002) note that through effective linkage of transport and communication, the new online retailing company will be able to move from storing stock in a warehouse to run a distribution center that will sort products for instant store delivery, an approach refereed to as just in time system. Through performing it logistics activities via the internet, the new online retailing company will have greater regulation over secondary distribution through channeling a greater proportion of its supplies via distribution centers. Its logistical operations will be greatly dependent upon information t technology, especially the huge incorporated stock replenishment schemes that regulate the storage and flow of a huge quantity of separate goods. By online retailing, the company will also be able to adopt quick response which is aimed at cutting the levels of inventory and improving the speed of the flow of product. This will entail reduction of order lead time and a move to a greatly frequent delivery of small consignments both between the shop and distribution center and between the distribution center and supplier. This has the capability of increasing the stock turn rate and also the quantity of goods that is cross docked other than stored at the distribution centers (Ablbjorn, & Halldorsson, 2002). Differences between Australian physical distribution in online retailing and in-store retailing In online retailing the retailer and consumer do not have to see each other during the preliminary phases of the purchasing process. However, for the sales procedure to be completed the consumer is supposed to pay for the services or goods to the retailer and the retailer should physically deliver the products purchased to the customer. Physical goods such as car accessories and tools, leisure products for boating, fishing and camping and electrical appliances which the online retailing company is interest in should be physically transported from the sited where they are manufactured to retail purchaser. This procedure of physical movement of goods from their manufacturing sites to the consumer is refereed to as physical distribution (Ablbjorn, & Halldorsson, 2002). The form of physical distribution in online retailing is quite dissimilar from in-store retailing where products move via a distribution chain channel partners like distributors and wholesalers. In online retailing, goods directly move from the retailer to the consumer. Additionally, online retailing entails delivery of goods to the door step of every buyer, other than the consumer collecting the goods from the physical retail store. Graham & Hardaker (2000) note that this form of direct deliver y from the retailer to the consumer needs that the products meant for deliverance to every customer should be recognized and linked to the order of the customer at the duration of dispatch from the place where the retailer is located of from other main distribution center. In addition, the cost of transportation tends to steeply rise as a result of average size of the transport consignment is a bit smaller. Physical distribution in online retailing consists of transmission of consumer order to the site where manufactured goods are stored in bulkiness. Normally a single consumer order might need supply of products from diverse sites. In such a situation, every location should attain the information on the products to be supplied from a particular location. The most common form of logistics has been based on the movement of big shipments of goods in bulk to chosen strategic consumers in particular geographic locations. Through online retailing, the new online retailing company will be able to use online logistics activities to enhance value added, timely and cost effective global transportation of goods from Asia and China to Australia. The company will be able to move online purchased products and also subordinate its own business identity and plan to become an integral portion of its online business consumer’s supply chain (Graham, & Hardaker 2000). The surfacing of logistics in modern supply chains is based upon constant improvements in inventory management and transport costs, which usually leads to reduced lead times, the duration required for the fulfillment of an order. While both in-store and online retailers might possess in house transportation departments, the intricate needs of supply chain are increasingly being outsourced to third parties. 3PL or third party logistics providers have surfaced from the conventional intermediaries like forwarders, or transport providers. Graham and Hardaker (2000) argue that these two groups are in the front position of intermodal revolution which is presently presuming highly organizational forms and significance. In online retailing, the retailer offers doorstep delivery of goods, without the consumer having any knowledge or necessarily being concerned with the manner in which the shipment reaches to the destination. This is the opposite of in-store retailing, where the consumer is the one who purchases and transports goods. According to Grewal and Levy (2004) in online retailing, there is the requirement that the online purchases are promptly delivered to the customer. Online retailers utilize subsisting postal companies such as main freight and courier, or their individual vehicles to take the purchased goods to the consumers’ door steps. In in-store retailing consumers are presented with complex shopping trips decisions. This is because there are several physical stores located at different places to choose from, certain stores to target, transportation choices to consider as well as time limits to shop within. Transport influences both the demand and supply sides of both online and in-store retailing. In in-store retailing, consumers are likely to find it expensive to travel to physical stores to purchase and transport their purchases. Online retailing poses both opportunities and threats for present retail models. At times, individuals look for goods online and then get and buy these goods in physical stores, but online purchasing usually replaces trips. Whilst several retailers have internet substitution, there might exist complementary relationships concerning information, either in-store or online information and online and in-store purchase respectively. Grewal and Levy (2004) state that the efficiency of online shopping is affected by intangibility of product as well as perceived hazard concerning the product. Determining the way in which a retailer moves goods through the supply chain from the source to the consumer is an intricate challenge. It is greatly crucial than in past years due to international sourcing along with multichannel retailing. Multichannel retails depend upon relationships with reliable vendors for both outbound and inbound logistics and for handling merchandise returns. Online logistics has led to the revolution in the way goods and products are sold and also the manner in which they are delivered. Consumers demand goods that are delivered at extremely high speed with inclusive order convenience and flexibility. Additionally, contemporary online consumers are capable of instantly tracking their orders, from the time of making the order to the time they get the order delivered at their door steps (Grewal & Levy, 2004). Conclusion There are several differences between online and in-store retailing logistics. In online retailing, the consumer searches for a particular product on the internet, and order the product online, with the retailer delivering the product at the consumer’s door step. This is different in in-store retailing where the consumer physically drives to a physical store to purchase the product. Consumers attracted to online shopping over In-store shopping because of a greater level of convenience, broader selection, greater availability of information and competitive pricing. The type of physical distribution in online retailing is different from in-store retailing where products are moved through distribution channel partners like distributors and wholesalers. In online retailing, there is direct movement of goods from the retailer to the consumer. Online retailing entails delivery of products at the door stop of the buyer, rather than the consumer collecting goods from a physical retail store. References Ablbjorn, S., & Halldorsson, A., (2002). Logistics knowledge creation: reflections on context and processes. International journal of physical distribution and logistics management, 32 (1), 22- 40. Falk, K., & Sockel, H., (2005) "E-Commerce and Consumer's Expectations: What Makes a Website Work." Journal of Website Promotion, 1, 65–75. Kumar et al., (2004). "User interface features influencing overall ease of use and personalization", Information & Management, 41, 289–302 Graham, G., & Hardaker, G., (2000). Supply chain management across the internet. International journal of physical distribution and logistics management, 30(3/4), 286-295. Williams, T., & Ozment, J., (2002). The electronic supply chain: the impact of the current and f uture structure of strategic alliances, partnerships and logistics leadership. International journal of physical distribution and logistics management, 32( 8), 703-719. Xing, Y., Grant, D., Alan C. McKinnon, A., & Fernie, J., (2010).Physical distribution service quality in online retailing. International Journal of Physical Distribution & Logistics Management Volume: 40 (5), 415 - 432 Enrique, B., (2005). "The Impact of Internet User Shopping Patterns and Demographics on Consumer Mobile Buying Behavior". Journal of Electronic Commerce Research, 6 (3), 110- 123. Grewal, D., & Levy, M., (2004). Internet retailing: enablers, limiters and marketing consequences. Journal of business research, 57(7), 703-713. Commonwealth (2007). Australian Manufacturing: Today and Tomorrow, House of Representatives Standing Committee on Economics Finance and Public Administration, Commonwealth of Australia, Retrieved on January 11, 2012 from http://www.aph.gov.au/house/committee/efpa/manufacturing/ Commonwealth (2010). Economic Structure and performance of the Australian Retail Industry July 2011, Australian Government Productivity Commission, Commonwealth of Australia, retrieved on January 11, 2012 from http://www.pc.gov.au/projects/inquiry/retail-industry/draft Read More