Retail Management and Merchandising - Term Paper Example

 Retail Management and Merchandising Name of the Student: Name of University: Course Number: Date of Submission: Table of Contents 1.Introduction 3 2.Introduction of E-commerce and the Changes that Followed 3 2.1 Changes in Developed Countries 5 2.2 Changes in Developing Countries 6 2.3 Changes in Retail Management 8 3. Conclusion 9 References 11 1. Introduction E-commerce sales in the world has increased steeply in the recent years due to the rise in the population having access to the internet and changes in the behavior of the consumers (Krafft & Mantrala, 2009). The total eCommerce sales have reached US $ 1 trillion for the first time in 2012 (JLL, 2013). The retail industry has been revolutionized by the introduction of the eCommerce. The growth of online retailing is observed everywhere in the world, the global eCommerce environment is highly diverse as different countries and regions are at various stages of online retail maturity. In the developed countries, the online retail sales accounts for 5% to 15% of the total retail business (JLL, 2013). In South Korea, this share is almost as high as 13% (JLL, 2013). On the other hand, the share of eCommerce in the retail sector in the developing countries is much lower than the developed countries due to low penetration of internet and huge contrast in the income between the high income classes and the middle and low incomes classes. Though there is significant difference in the online retailing between the developed and the developing countries, the gap is predicted to be shortened due to huge growth potential observed in the emerging economies. For example, though the U.S. has been projected to lead the world in retail business the till 2017, China will occupy the second place (JLL, 2013). The purpose of the report is to evaluate the changes in the retail management due to the introduction of eCommerce in the industry. 2. Introduction of E-commerce and the Changes that Followed In the 1970s, the retail distribution system was very much different from where it stands in the recent times. In those days, only the suppliers and the shops existed in the retail market. This indicates that the suppliers directly supply its products to sell in the shops. Later in the 1980s, centralization was introduced in the retail system. A retail distribution centre was established in order to facilitate interaction between the producers and the shops. In the 1990s, most of the economies were economically liberalized and international trade was introduced. Goods were imported from other country which first arrived at the retail import centre and then reaches the central distribution centre and finally get distributed among the shops (Wrigley, & Lowe, 2010). In the beginning of the twenty-first century, eCommerce entered the retail industry and as a result involved the parcel network in the sector (Figure 1) (JLL, 2013). Figure 1: The Evolution of the Retail Industry (Source: JLL, 2013) 2.1 Changes in Developed Countries In the developed countries, eCommerce acts as the main factor behind the change in the retail management and the physical distribution infrastructure. Among the developed countries, the United States, South Korea, Germany, United Kingdom and France are leading the market in online retailing (JLL, 2013). A number of characteristics of these developed countries had paved the way for their success in eCommerce. According to the International Telecommunication Union, internet user penetration has reached 78% in the developed countries in 2014 though the growth rate has been 3.3% in 2014 which is relatively low than the developing countries (International Telecommunication Union, 2014). Moreover, mobile and fixed broadband costs are very low among the developed countries (International Telecommunication Union, 2014). People have a high willingness to purchase goods online as in the developed nations the rate of digital buyer penetration among the internet users is high. Along with these characteristics of the population of the developed countries, the infrastructure available to the retail industry as well as the financial sector also helped the economies to succeed in online retailing. A well developed secured payment system along with an equipped retail management system supporting quick and easy fulfillment of online order and other strong regulatory systems contributed to the success e-commerce in the developed countries (JLL, 2013). In the countries like the U.S and the U.K., online retailing was influenced significantly by the increase in the number of people using smartphones and tablets. According to eMarketer, 78% of U.S. tablet user purchases through e-commerce and more over, 69.9% of the digital buyers will use the tablet for online shopping while 49.9% will transact through their smartphones (eMarketer, 2013). Figure 2: Number of Mobile Shoppers in the U.S. (Source: JLL, 2013) The brick and mortar retail markets are well established in these countries which make it difficult for the store owner to expand their business by opening new stores. As a result, most of the retail stores explore the online retailing sector to spread their business and use the opportunities in this system. E-commerce in the retail industry is more pronounced in the fashion, consumer electronics sector compared to food in the developed countries. 2.2 Changes in Developing Countries In most of the developing countries, e-commerce in the retail sector is on the first stage of development and the infrastructure for supporting the growth of e-commerce is lacking in many of them. Retail management is case of non-food items have been established in major cities across developing countries which are inhabited by a combination of high and middle income groups. In these locations, the rate of internet usage is relatively high than the other parts of the developing nations. For example, the eCommerce was at first practiced in only the Tier 1 cities in China such as Shanghai and Beijing but it has been observed that online retailer started developing distribution centers in the inland areas where the online retail market is emerging (A.T. Kearney. Inc., 2015). In Brazil, thrive in eCommerce has lead to an increase in the demand of warehouses and most of them are located along the road which leads to the major cities (A.T. Kearney. Inc., 2015). In India, infrastructure for eCommerce is available only to serve the Tier 1 cities, but the presence of multiple tax structure has lead to the need of decentralized warehouses with limited state-based facilities (CRISIL Research, 2014). Online retailing occupies only 1% of the total retail spending (JLL, 2013). There are various factors which act as barriers to the expansion of e-commerce in the developing countries. According to the Global Technology Report 2015, in the developing countries there is a wide gap between the well connected urban dwellers and the out of the grid rural population. The report also states that the developing countries are far away from the developed countries in terms of progress in the information and communication technology (World Economic Forum, 2015; Kenneth, 2011). The qualities as well as the quantity of retail management systems are variable across all the developing countries. The physical retail market is very much underdeveloped in the emerging economies as major percentage of the market is unorganized. This may also act as an opportunity for the online retailers to develop small scale warehouses in remote areas in respond to the increasing demand for good quality products at reasonable prices. Most of the developing countries such as India have adopted the cash on delivery (COD) system to overcome the barrier of the lack of secure payment systems (JLL, 2013). The cash on delivery payment platform ensures security of payment and reliability in the delivery process. 2.3 Changes in Retail Management Due to the increase in the demand for eCommerce, there has been a rising need for new management systems in the retail industry. The three main management systems that are required in the developed countries are mega e-fulfillment centers, parcel delivery centers and centers for sorting parcels. The goods are picked and stocked in the mega e-fulfillment centers which are generally very large size and works almost 24/7 for easy operation of eCommerce. At the centers for sorting parcels, the orders are sorted and sent to the next segment for customer delivery. The centers for delivering the parcels execute the last step of delivering the order to the customers’ home (JLL, 2013; Vedamani, 2003). As the number of digital buyers increases rapidly, the urge to deliver the customers’ orders increases among the online retailers as it will serve as an added advantage to the intensely competitive environment (A.T. Kearney. Inc., 2013; Fernie & Sparks, 2004). Thus, retailers using eCommerce as a medium to expand their business has stared exploring innovative ways to accommodate instant services in the distribution system to facilitate customer delivery. For example, Amazon in the U.S. has started operating small scale distribution centers, which facilitate the delivery of goods on the same day the order has been placed (JLL, 2013). “Cross border eCommerce” is rising rapidly and the online retailers who operate through multichannel distribution system are striving to explore the new horizons in “cross border eCommerce” (Guo, 2015).Though there is an immense opportunity in cross- border eCommerce, overcoming the entry barriers in most of the countries and e-fulfillment of orders in an international basis are very challenging for the online retailers (Forrester Research, Inc., 2014; Rendahl, 2009). The boom in online retailing has also lead to emergent of a new segment of distribution properties in e-commerce which includes the return processing sectors. Most of the online retailers perform this task in the e-fulfillment sectors, but an increasing growth in the cross-border eCommerce has given rise to the need for establishing separate warehouses for facilitating the return process. However, the infrastructure of the return processing sectors is very much different from the traditional warehouses that facilitate storage as these centers should be well-equipped for placing the returned items to the e-fulfillment centers. 3. Conclusion E-commerce has significantly changed the operational structure of the retail industry. It has reduced the importance of the location of the retailers as they can sell their products worldwide as cross-border eCommerce is emerging dramatically. E-commerce has helped in increasing the revenue as well as expands the customer base of the suppliers. It also increases the profit margin as producers directly supply products to the customers without the involvement of any middlemen. The introduction of eCommerce in the retail sector has changed the management of the distribution system in the retail sector. E-commerce has mostly evolved in the developed countries with high penetration of internet usage and a large proportion of digital buyers. The developing nations are also predicted to close the gap between the developed and the emerging nations. This is due to the high growth rate of internet users observed in the developing nations. The marketing the developing nations has immense potential as only the major cities of these nations can enjoy the facilities of online retailing. References A.T. Kearney. Inc. (2013). Online Retail is Front and Center in the Quest for Growth. Retrieved from https://www.atkearney.com/documents/10192/3609951/Online+Retail+Is+Front+and+Center+in+the+Quest+for+Growth.pdf/f6693929-b2d6-459e-afaa-3a892adbf33e A.T. Kearney. Inc. (2015). Global Retail E-Commerce Keeps On Clicking. Retrieved from https://www.atkearney.com/documents/10192/5691153/Global+Retail+E-Commerce+Keeps+On+Clicking.pdf/abe38776-2669-47ba-9387-5d1653e40409 CRISIL Research. (2014). CRISIL Opinion. Retrieved from http://www.crisil.com/pdf/research/CRISIL-Research-Article-Online-Retail-Feb14.pdf eMarketer. (2013). Smartphones, Tablets Drive Faster Growth in Ecommerce Sales. Retrieved from http://www.emarketer.com/Article/Smartphones-Tablets-Drive-Faster-Growth-Ecommerce-Sales/1009835 Fernie, J., & Sparks, L. (2004). Logistics and retail management: Insights into current practice and trends from leading experts. London: Kogan Page Publishers. Forrester Research, Inc. (2014). Seizing the Cross-Border Opportunity. Retrieved from http://images.fedex.com/us/ecommerce/pdf/whitepaper.pdf Guo, R. (2015). Cross-border management: Theory, method and application. Berlin: Springer. International Telecommunication Union. (2014). ICT Facts And Figures. Retrieved from https://www.itu.int/en/ITU-D/Statistics/Documents/facts/ICTFactsFigures2014-e.pdf JLL. (2013). E-Commerce Boom Triggers Transformation in Retail Logistics. Retrieved from http://www.jll.com/Research/eCommerce_boom_triggers_transformation_in_retail_logistics_whitepaper_Nov2013.pdf Kenneth, L. (2011). E-Commerce: Business, technology, society. (4th ed.) New Delhi: Pearson Education India. Krafft, M., & Mantrala, M.K. (2009). Retailing in the 21st Century: Current and future trends. Berlin: Springer Science & Business Media. Rendahl, P. (2009). Cross-border consumption taxation of digital supplies. Amsterdam: IBFD. Vedamani, G.G. (2003). Retail management. (4th ed.). Mumbai: Jaico Publishing House. World Economic Forum. (2015). The Global Information Technology Report 2015. Retrieved from http://www3.weforum.org/docs/WEF_Global_IT_Report_2015.pdf Wrigley, N., & Lowe, M. (2010). The Globalization of Trade in Retail Services. 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