Consumer Buying Behavior and Drivers of Online Shopping - Essay Example

? Emerging Themes in Marketing Purpose – The purpose of the paper is to examine the benefits of innovation in the field of online shopping the study will aim to find out the origin of online retailing and its evolution. The paper also aims to highlight the possible issues and opportunities evident in such a technological evolution and how it can be resolves with the help of innovation. Approach – A literature review on online retailing and innovations in the field of online shopping is undertaken, in order to develop and illustrate a holistic framework of the topic. Critical review of the previous literatures has been done highlighting the arguments and recommendations from various analysts and commentators from the field of online retailing. Independent research has been carried out on topics such as online shopping, its evolution and current scenario, a brief highlight on the online retail industry of UK and the current issues this industry is facing. The literature review also highlights the consumer behaviour and patterns during online shopping. Findings – Apart from an analysis of the benefits of innovation in online shopping, the paper also highlights the benefits and rising issues of online shopping sites. Originality/value –This paper also expands the literature on the various emerging issues in the field of online retailing and recommends strategies to improve the technological and overall innovations in online shopping, creating a better customer experience. Keywords - Online shopping, innovation, retail, sustainable growth, sales. Contents Contents 3 Introduction 4 Literature Review 5 Critical review 5 Online Shopping and Changing Retail Environment 6 Consumer Buying Behaviour and Drivers of Online Shopping 7 Online Shopping In UK- Emerging Issues 9 Figure 2- Online Retailing As Percent Of UK Shopping. 10 Conclusion and Future Recommendations 11 Reference List 13 Introduction Innovation can be described as establishing ideas in order to create new solutions to meet the requirement of the business or organisation. There is a widespread belief that innovations leads to exploitation of ideas which in turn are responsible for a sustainable and profitable economic growth. However, the exact practices, measurements and course of directions for the innovative activities of an organisation depend largely on their situation. Innovation varies widely in services sector, compared to any other physical or tangible sector. Innovation in retail also requires more support from the government, compared to other sectors (Brown, 1990). But it should also be noted that innovation retailing sector has provided with largest number of value added services and employment opportunities within UK. Retailing can be considered as a cross-functional economic activity acting as a bridge between consumption and production. Online retailing is a sector where organisations bring together products and services relevant to the requirements of the customers (Doherty and Ellis-Chadwick, 2010). Retailers from UK have become more active in terms of supply chain and innovation. Most of the big organisations in retail industry are managed by professionals and have widespread reach in the developed markets. Now these organisations are stepping into emerging markets to increase their market share. Most of the big retailers have earned a brand name for themselves with some of them having in-house brands which are levelled with branded manufacturers. While it is not possible for these brands to establish brick and mortar shop in every corner of the city or country of target, online retail shopping has given them eminent opportunities which have helped in the overall growth of the market share, profits and overall revenue generation for these online retailers. The present article will find useful insights on the present online retail industry; its nature and scope and forces which drive innovation in the online retail industry. Literature is gathered to find out the typology and behaviour of the online shoppers and the article also throws light on why consumers shy away from online shopping. Apart from that, literature review is also conducted to find out the barriers to further innovations in the online retail sector. Literature Review Critical review According to research performed by authors like Xing et al (2004), McQuitty and Peterrson (2000) and Keen et al., (2002), it has been found out that people have started accessing the internet in a much greater number and their involvement in online transitions has grown over the years. Business will grow all over the world with the advent of internet (Joines et al., 2003), and it will create a huge marketing opportunity for the organisations (Pollack, 1999; Hoffman, 2000). Bakos (1991) argued that e-market is an organisational function that helps the participating sellers and buyers to exchange useful information about product offering and prices. According to Meuter et al. (2000) online retailing in terms of internet market can be explained as a virtual platform where services and products existing as digital information can be exchanged with the help of channels which are informative. Today, organisations from various parts of the world are adopting this technology as a means for selling services and goods. This rapid acceptance of internet by customers at large for the purpose of online transaction has been due to the advancement of online technology, changing characteristics of consumers with respect to psychographic and demographic segmentation and situational influences. From the perspective of the organisation, e-retailing can be considered as an attempt to persuade and attract the prospective consumer for the successful conduction of business while ensuring loyalty and satisfaction among buyer making the purchase (Limbu, Wolf and Lunsford, 2011). According to authors Burt and Sparks (2003) the economy has witnessed the evolution of the internet or online retailing for the enhancement of the efficiencies of businesses. This has lead to the occurrence of new and innovative formats within the retailing sector. Such innovations have been successful in increasing pressure on the way traditional formats are working (Dholakia and Uusitalo, 2002). Some authors like Dennis et al., (2002) have suggested that the future of retailing lies in establishing multi-channel format. The authors also argue that rather than focussing on competition, the retailers should focus on incorporating online retailing as an integral part of the organisation’s retail strategy, and adopt a hybrid formulae accommodating both online and offline retail activities. However, most of the established brands are recognising the difficulty in transition from a traditional to an online environment. The challenges and opportunities offered by the electronic retailing are innumerable and appreciative within the committee of the business. At the same time there is a growing vision among the marketers about financial and fundamental viability, development of brand value and brand awareness among the consumers and the continuous development in making efficient and attractive websites (Monsuwe et al., 2004). The evolution of online retailing has increased its pace compared to the initial days of the e-commerce (Gibson, 2009). The evidence of this growth can be explained by the increased participation of customers in the online sales process, in the form of friend recommendations, feedback and product ratings in the public. Dibb et al. (1994) have identified six critical issues that affect retailing. These are property ownership, location, product assortment, atmospherics, retail positioning and image of the store. Online retailing in gaining popularity and there are product categories which are exclusive purchased through online sources. These include apparels, electronics, packaged foods etc. Products such as fresh food and other perishable items are still preferred through traditional brick and mortar format. A proper and positive image of the store also helps in quick establishment of online media. Online retailing has the capacity to impact these strategic factors significantly. Businesses are increasingly recognising the potential of the web-based technology and a number of analysts have cited that use of internet will become an important aspect of commercial and activities. Online Shopping and Changing Retail Environment Online shopping has seen a phenomenal growth all over the world. It is more dominant in countries where infrastructure is well-developed and internet is one of the rising areas for marketing activities. A study from International Data Corporation (IDC, 2002), has revealed that more than 600 million people are accessing internet and the number is continuously increasing. By the end of the year 2002, it was found that more than 1 trillion US dollars were spent by consumers in the purchasing of goods through online sources (Straits Time, 2002). Several reasons can be attributed for this continuous growth of online retailing. Development in the field of technology and innovations in the way a business is carried out are few of the facilitators. Use of internet is now smoother than ever and the very easy to handle. Not only from personal computers, people are now able to access internet from devices such as laptops, palmtops, smart phones and iPads and also from WebTV. With better search engine tools and navigation software, more and more customers are finding it convenient and easier to join internet community. Changes in the daily activities and lifestyles have also resulted in consumers opting for online shopping. People now prefer shopping through online sites instead of walking into traditional retail shops. Consumers are now buying a variety of services and goods from the internet. Ease of shopping from any location, time saving opportunities as well as transportation costs are few of the factors justifying growing popularity of online retailing. With the increasing trend of online buying, more and more number of companies is shifting their portfolio towards online retailing and providing their customers with the convenience of shopping online. A brief account on some statistics about the retail industry gives some useful insights about its growth pattern all over the world (Hristov, 2004). The total retail trade in the US account for 9.2 percent of the overall GDP and gives employment to around 17.4 percent of the total population working in US (Hristov, 2004). Coming to UK, retail trade accounts for 7 percent of the value added opportunities added to the economy and gives employment to around 10 percent of the total population in the working category (Burt and Sparks, 2003). In the year 2006, general retailing accounted for 8th best sector in terms of providing value-added services. Tesco, which is one of the largest online retailers of UK, provides employment to around 250000 people. It is also the 12th highest contributor in terms of value added services. Current growth and increasing creativity in the online retail environment has put a question mark on the viability of traditional brick and mortar outlets (Cho and Kim, 2012, 5-20). Traditional retailers are facing many issues in the current market place. As the cost of the business continues to rise, retailers are facing a rise in fixed as well as variable costs. A profound increase in the use of interactive services and an evolving technology has changed the overall shopping experience of the consumer. Because of the shrinking market, the competition has become fierce and more companies are turning towards online retailing as one of their strategies for expansion and growth. Consumer Buying Behaviour and Drivers of Online Shopping With around 60 percent of the total population of UK accessing internet on a daily basis, E-commerce is making a continuous growth (Office for National Statistics, 2012). Easy access to digital world has changed the attitude of consumers towards shopping (Monsuwe, Dellaert and Ruyter, 2004, 105-120). For getting inside the consideration set of consumers and include in their purchasing list, it is very essential for the retailers to understand the behaviour of customers towards e-retailing. Figure 1 Percentage of purchase made online (Source: Marketing Charts, 2013) Though online shopping is growing, there is still a varied difference between the categories of products which are purchased online and offline. The products or services which were purchased online provided value for money, better convenience and better information about the product than traditional outlets. Music, books and games showed highest penetration in online shopping with more than 50 percent of consumers buying through online sources (Kim and Park, 2005). Regardless of the final purchase of the goods or service, it is very clear that innovation in the technology has helped the consumers to gain more information about the products and services they wish to buy (Marketing Charts, 2013). Now consumers are more informed about the products and service and they do ample research before taking any final decision about the products or services they wish to purchase. A number of factors can be considered influential in stimulating the usage and growth of online retail channel. Consumers are seeking more value in their purchases. Consumers are now looking for a greater variety or choice of goods in their purchase patterns. The level of comfort and sophistication among consumers has also increased because of the ease of internet usage. Online Shopping In UK- Emerging Issues Online shopping has seen a constant growth in the recent years in UK with sales reaching almost 3.3 billion Euros in 2001 (Verdict, 2000). Even though this number represents only 2 percent of the overall retail sales in UK, it is expected to grow in a continuous manner. Most of the customers who are involved in online shopping prefer buying apparels, books, groceries and music CDs. Despite the growing popularity of online retailing, there have been evidences of online retailers not being able to deliver the standard as expected by consumers. According to a survey of 9500 shoppers, conducted by BizRate.com and Verdict, it was found that around 55 percent of the e-shoppers abandoned their carts before checking out. According to another report by (Blank, 2000) around 6 billion dollars are lost every year because of the failed attempts of online shopping. Figure 1- growth of online shopping (Source: Dennis, Harris and Sandhu, 2002) Figure 2- Online Retailing As Percent Of UK Shopping. (Source: Dennis, Harris and Sandhu, 2002) The major problems because of the consumer hesitation towards e-shopping were cited as lack of evening or weekend delivery and inconvenient and complicated systems during returning of goods or services. These problems are more profound in apparels and footwear and beverages sector. Figure 3- Why E-Consumers Buy Figure 4- Why E-Consumers don’t buy. (Source: Dennis, Harris and Sandhu, 2002) In case of these products majority of consumer complaints occur in product delivery, quality and exact specification of the product. Businesses are constantly innovating means and ways to increase their web-traffic and leverage on the constantly evolving technology. There are many ways through which innovation in the field of internet and online shopping can be beneficial to the organisations practicing it. One way is brand leverage. By integrating the technology of online retailing with an efficient branding experience, a business can put a strong brand image for the customers. Retailers can customise their web-sites according to the online store requirements and the profile of the traffic and their target customers (Mulhern, 2000). This will increase the ease of navigation and more number of customers visiting the sites. Online retailers should engage in providing superior delivery process, which should include timely delivery without any damage, exact product specifications reaching the consumer and ease in return and exchange of goods purchased online. Conclusion and Future Recommendations Innovation in online retailing has shown a rapid growth in past few years. Yet, the proportion of online retailing is very small compared to revenues earned through total sales. Innovations in the field of online shopping are making it a lucrative asset to any organisations and companies cannot dare to ignore this aspect of business (Doherty and Ellis-Chadwick, 2003). For the realisation of this potential, business needs to follow fundamental business principles of providing services and goods of high quality, high customer experience and efficient marketing activities. From the above analysis it is very clear that the advent of online retailing and continuous innovations is the field of online retailing have helped in substantial growth of the businesses. Most of the organisations dealing in online shopping have seen a substantial growth in their revenue and their profits have increased after including online retailing in their portfolio. Businesses are constantly innovating means and ways to increase their web-traffic and leverage on the constantly evolving technology. In a scenario like this, businesses will have to formulate strategies and techniques that are based on the knowledge of sound consumer behaviour, research and knowledge of innovations management and online penetration (Magrath and McCormick, 2013). Online retaining and media have become one of the important strategies in marketing communication. With competition increasing at a substantial rate, online retailers need to cope with the realities of online retailing and re-evaluate strengths and strategies (Rowley, 2005). A customer-oriented online system which is based on critical components such as innovative technology, brand experience, brand differentiation etc; can help to facilitate the popularity and quick acceptance of the online retail format (Smeal, 2006). By attracting customers, generating a positive customer response through testing and trial, inducing and encouraging repeat purchases, creating loyalty and retaining customers, a company can create a true online experience which is hard to imitate. These innovations in online shopping will increase footfall and the sellers would be able to transform the traditional shoppers into online shoppers. This would ultimately lead to an increase in overall sales and revenue. And managing and understanding the dynamics of an online shopping business have become critical for making a sustainable growth strategy for any business. Reference List Brown, S., 1990. Innovation and Evolution in UK Retailing: The Retail Warehouse. European Journal of Marketing, 24(9), pp.39 – 54 Burt, S. and Sparks L., 2003. Competitive Analysis of the Retail Sector in the UK, Institute for Retail Studies, University of Stirling p. 78. Burt, S. and Sparks, L., 2003. E-commerce and the retail process: a review. 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