Online Selling of Retail Industry in the US - Research Paper Example

Secondary research report Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Table of Contents Table of Contents 2 Abstract 2 Objectives 4 4 Theoretical/ conceptual framework 4 Statement of the problem 5 Scope and delimitation of the study 5 Importance of the study 6 Definitions of terms 6 Literature review 7 Methodology 10 Research design 10 Sources of Data 11 Tools of data analysis 11 Presentation, analysis and interpretation of data 12 Conclusion and recommendation 15 References 17 Abstract Online selling has experienced rapid growth in the recent past. As a result, this research is founded on the primary objective of examining whether opening a purely online store is an ideal option for an entrepreneur who is seeking to earn more money while at the same time promote the sustainability of his/her business venture. In regard to the scope, this research will focus on online selling in the US, predominantly in the retail industry. The key method in this study is secondary research whereby the data is acquired from two key sources on online buying and selling in the US. The results in this study indicate that entrepreneurs in the US can actually open purely online stores in the efforts to attain increased profitability and sustainability based on the growth trends of online business in the US. Nonetheless, they ought to increasingly invest and be committed towards consumer satisfaction which is key to attaining the above goals. It is concluded in this study that online stores can be a formidable mechanism of promoting the profitability and sustainability of online retail businesses in the US. Nonetheless, ideal interventions ought to be put in place to encourage more entrepreneurs into business in the US which will be imperative in boosting the national economy and minimizing the unemployment rates. Opening a purely online store is a better option for entrepreneurs because they earn more money while promoting sustainability Introduction Objectives The purpose of this research is to examine whether opening a purely online store is an ideal option for an entrepreneur who is seeking to earn more money while at the same time promote the sustainability of his/her business venture. The rationale behind this research is founded on the backdrop that due to the increased competition in selling products from physical stores, entrepreneurs are seeking alternative means of presenting their products to the consumers, a model which increases their revenues and at the same time promote the sustainability of their business. In this case, this research is a profound effort to examine whether purely online stores is a better option for entrepreneurs seeking to achieve the aforementioned goals. Theoretical/ conceptual framework Statement of the problem It is an apparent fact that the contemporary business environment is characterized by extensive competition as each firm seeks to expand its market share. This has culminated in the scramble for strategically located physical stores which will facilitate the firms to reach their consumers. This is a major problem confronting entrepreneurs, mostly those entering into a particular industry for the first time. Additionally, the recent dynamics in the technological front have resulted in elevated individuals and collectives being able to access various products online. This is coupled with the changing consumer demands who apart from seeking for enhanced quality and affordable prices for the products, they are increasingly in search for convenience while shopping. Both of these dynamics necessitate entrepreneurs to opt for ideal mechanisms of addressing these needs. This necessitates an enquiry into whether opening online stores can be a better option for such entrepreneurs seeking in the efforts to surmount the above problems and at the same time achieve increased profitability and heightened business sustainability. Scope and delimitation of the study In regard to the scope, this study will focus on online stores in the US. It seeks to explore whether opening a purely online store is a better option for entrepreneurs seeking to earn more money while promoting sustainability. Based on the large literature on e-commerce in the US, this study will focus only on two key secondary sources. Additionally, the data which will be used in this research will be derived from credible secondary sources, for instance, books and journals among others which will be central in increasing the reliability and validity of this research. Importance of the study Firstly, this study is important in contributing to the existing literature on E-commerce in terms of determining whether the engagement of entrepreneurs in online selling can be fruitful towards increased profitability and business sustainability. Secondly, this study is important to current and future entrepreneurs seeking to open online stores to increase the reach of their products to the target markets not only in the US bot also in other parts of the globe. Lastly, this study is important based on fact that future scholars in the realms of online shopping can use the findings in this study as the background of their thesis. Definitions of terms In this research, an online store can be perceived as a business establishment over the internet which enables buying and selling of goods and services from business-to-consumer (B2C) or business-to-business (B2B). It is also referred to as e-shop, webstore or e-store. On the other hand, an entrepreneur can be viewed as an individual who rather than working as an employee engages in running a business while assuming all the rewards and risks of a particular business venture, idea, or product(s) which are offered for sale. In this case, an entrepreneur is viewed as an innovator of new business processes and ideas as well as a business leader. Lastly, sustainability is defined in this paper to the ability of maintaining or supporting a process or activity over the long-term. Literature review It is imperative to note that there has been significant attention on the potential of the internet for retailers in the recent past (Hart et. al., 2000). Some of the scholars, for instance, Van Tassel and Weitz (1997) and Evans (1996) have proceeded to infer that the internet will be central in the provision of a new and novel retail format which will seize the tradition dominance of the fixed location stores. This can be perceived to be founded on the various demerits of fixed location stores in terms of convenience to the consumers who might be located far from these stores among other demerits. This phenomenon culminated in online sales being projected to exceed $36 billion in 2002 and attain an annual growth of 20.9% to reach $billion in 2006 (Monsuwe et. al., 2004). This drastic growth has led some individuals to infer that online retailing is currently the fastest retail sector in the US (Bell. et. al., 2012) and that businesses which fail to change the ways in which they conduct their businesses in this internet era may not survive the contemporary dynamics (Yannopoulos, 2011). Nonetheless, as it will be explored in the subsequent analysis, the increased utility of the online platform in the US among retailers has not been central in cautioning the country against the declining rates of entrepreneurship which have been experienced in the recent past, mostly with the advent of major economic recessions like the one experienced in 2008. Additionally, the increased popularity of online selling has been seen to be central to the establishment of online communities. According to authors like Kozinets (1999) and Muniz and O’Guinn, (2001) among others, online communities can be perceived to be places in which consumers often engage in informative discourses which are seen as an attempt to inform and influence fellow consumers regarding a particular brand or product. These establishments provide an ideal platform for retailers to popularize their products. The success of this latter move is bound not only to increase their market share and eventual profitability but also impact on the sustainability of their businesses. Nonetheless, despite this impressive development, there have been critiques who have argued that the utility of e-commerce is overhyped as revealed by Yannopoulos (2011). These critiques, for instance, Howard (2002) have argued that e-commerce is still governed by the same fundamental principles which have governed businesses in the past millenniums. As a result, they have argued that online selling fails to offer any new solutions and motivations to entrepreneurs seeking to enter into the business world. In the American context, entrepreneurship has for long been perceived as an integral route towards upwards mobility; an ideal mechanism through which average people in the society can build wealth (Lynn & Khan, 2012). Nonetheless, the recent past has seen members of the US population start up new businesses as well as being less inclined to move for new opportunities or change jobs (Casselman, 2013). The following figure shows the rates of jobs started over four administrations since 1989-2011. Figure 1.0: Start up job rates in the US Source: Weissman (2012). These rates reveal a worrying trend over the future of entrepreneurship in the US with figures in 2012 revealing a second consecutive year where there has been a significant decline of the number of Americans starting their own businesses (Falk, 2013). This trend can be attributed to several factors with some authors like Shane (2013) inferring that running a business in the US is not as profitable as it used to be and on the other hand, increased risks become a major threat to the sustainability of the businesses. If this trend goes unabated, this is bound to cause major challenges to the future growth of the US economy which has for long depended on entrepreneurship in various sectors to flourish. This informs the conduct of this research whereby despite the increased prominence of e-commerce among the US retailers, there is this sharp decline of the number of entrepreneurs in the country, mostly those founded on running their businesses through the traditional fixed location stores. Additionally, the increased competition for fixed location stores which are strategically located seems to disadvantage upcoming entrepreneurs who might not have sufficient funds to service the acquisition of these outlets. This can be perceived to be an extra impediment which confronts retailers seeking to enter into the business world. Thus, it is imperative to examine whether opening a purely online store is a better option for entrepreneurs based on the rationale that they are bound to earn more money while promoting sustainability of their businesses which is central to this survey. The reviewed materials have assisted the researcher in this study in terms of expounding on the recent trends of online selling among the retailers in the United States. Further, they have helped in unearthing a distressing trend of declining entrepreneurship in the country and thus the need to investigate whether opening up a new online store can be a better option for entrepreneurs seeking to increase their profit margins as well as boosting the sustainability of their own businesses. Methodology Research design It is imperative to note that this will be a secondary research. In this case, it will involve the summary, synthesis and collation to research information which is already in existence as opposed to primary research where data is acquired from research subjects or experiments. In this case, the data utilized for inferential purposes in this study will be obtained from secondary sources which are outlined in the subsequent section. Sources of Data The data to be used in this research will be acquired from two basic sources. The first source of data will be the US Online Retail Forecast from 2008 to 2013 as undertaken by Evans (2009) in the US. This will be central in informing this study whether the online platform in the US provides an ideal platform for entrepreneurs seeking to increase the profitability and sustainability of their businesses. This will be through the analysis of the prevalent trends over the 2008 to 2013 projections amid the socio-economic and technological dynamics which are present in this country. The second key source will be the research undertaken by Anderson (2012), an analysis of consumer satisfaction with 100 among the top 100 online retailers in the United States (according to internet retailer) during the holiday shopping season. The findings in this study from over 24,000 consumer surveys collected during the prime holiday season in the US is key in permitting the comparison of aggregate satisfaction as well as the satisfaction of consumers with individual retailers. This is particularly imperative for this research in determining whether there are some unique practices which can be adopted by entrepreneurs in the US in order to achieve the desired profitability and business sustainability. Tools of data analysis The data acquired from these sources will be primarily analyzed using descriptive statistics. These will mostly include graphs and tables which will be central in informing the conclusion and recommendations in the latter section of this paper. Presentation, analysis and interpretation of data According to the data US Online Retail Forecast from 2008 to 2013 as revealed by Forrester Research Inc., the online retail sales were projected to experience gradual growth over these years. This is epitomized in the following graph (figure 1.1). This infers that the level of consumer consumption of online shopping was bound to increase over the years, from $125.1 in 2007 to $229.1 in 2013. This represents an annual growth of not less than 5% in each year. Additionally, this increased sales point to the increase in output from the online sellers in the US which means that majority of the consumers in the US market will increasingly acquire the products which they require from the online platforms as opposed to the physical store locations. Subsequently, this can be interpreted to be an ideal chance for the entrepreneurs in the US, mostly in the retail industry to open online stores. With this trend being projected to increase in the future as a result of technological expansion whereby the consumers increasingly access and place their orders in the online stores through mobile phones and other hand held devices, this is projected to provide an ideal platform where the entrepreneurs in the US can gain increased profits through online selling. Additionally, the basic fact that this trend has experienced gradual and continued growth over the time under analysis points to the fact that online businesses will achieve the desired sustainability if at all no major factors will impede e-commerce in the US market in the foreseeable future. On the other hand, results from the research by Anderson (2012) reveal that the satisfaction of the consumers in the online selling framework is not only key in there retention but also instrumental in making them recommend the company to other prospective consumers. This is revealed in the subsequent figure 1.2 whereby consumers who are highly satisfied are 69% more likely to recommend a particular company engaged in online selling to a colleague, a family member or a friend when juxtaposed to unsatisfied consumers. On the other hand, shoppers who are highly satisfied are 67% more likely to purchase from a particular online retailer in the next time when they have the need of purchasing a similar product (consumer loyalty) while 65% and 61% are more committed to the brand and more likely to return to the website when compared with the dissatisfied consumers in a particular online outlet respectively. These findings among others are evidenced in the following table (figure 1.2) This data points to the fact that consumers who are highly satisfied with the services and products offered in a particular online retail outlet are increasingly bound to return to the same website to purchase similar or different products which has an extensive impact on consumer retention by a particular firm. Moreover, based on the fact that they are bound to increasingly recommend the particular online seller means that this has the impact on continuously expanding the market share of the online retailer overtime. In relation to an entrepreneur seeking to open an online store, the data presented in the above table point to the fact that they ought to increasingly invest and be committed towards elevating the level of consumer satisfaction. In this way, they will be in a position of retaining the consumers in their business while at the same time achieving an increased market share. This has positive impacts on the profitability of the business in terms of increased sales as well as the sustainability of the business in terms of long-term sustained competitive advantage in the US retail market. Conclusion and recommendation From the preceding analysis, it is evident that online stores can be a formidable mechanism of promoting the profitability and sustainability of online retail businesses in the US. In this case, evidence from the analysis has indeed fortified the fact that opening a purely online store is a better option for entrepreneurs because they earn more money while at the same time promoting sustainability. Thus, entrepreneurs in the US ought to increasingly engage in e-commerce in order to achieve the aforementioned goals. Additionally, this research has revealed that there has been a sharp decline of entrepreneurship in the US which is a really worrying trend. This is founded on the fact that they are bound to miss out on the benefits offered by online platforms. Nonetheless, it is recommended that entrepreneurs seeking to venture in this business ought to supplement their efforts with a significant focus on the fixed location outlets. This is based on the fact that with the promising prospects in the online store, they are bound to increase in number culminating in market saturation. On the other hand, it is recommended that the US government ought to initiate mechanisms of promoting entrepreneurship in the country. This can be through offering grants and subsidies in acquisition of materials for the upcoming entrepreneurs. In this way, these entrepreneurs will be increasingly encouraged to venture in business and take advantage of the benefits offered by online platform. In this way, this will have positive impacts on the US economy and at the same reduce the level of unemployment. Lastly, it is recommended that online sellers in the US ought to increasingly invest in ensuring consumer satisfaction through enhancing the quality of their products as well as improving the quality of their services, for instance, timely delivery of goods which is central in boosting the level of consumer satisfaction. References Anderson, J. (2012). Holiday Satisfaction with Online shopping Stagnates: The foresee e-retail Satisfaction index (U.S. holiday edition 2012). Retrieved July 10th, 2013 from http://www.waafiles.org/whitepapers/online-retail-satisfaction-index-u.s.-holiday-2012-foresee.pdf Bell. D.R., et. al., (2012). What matters most in internet retailing. Retrieved July 10th, 2013 from http://sloanreview.mit.edu/article/what-matters-most-in-internet-retailing/ Casselman, B., (2013). Risk-Averse Culture Infects U.S. Workers, Entrepreneurs. Retrieved July 10th, 2013 from http://online.wsj.com/article/SB10001424127887324031404578481162903760052.html Evans, D. (1996, May, 9). The merchants in Venice. Computer Weekly: 34 Evans, P. F. (2009). US Online Retail Forecast, 2008 To 2013. Retrieved July 10th, 2013 from http://www.199it.com/wp-content/uploads/2010/06/002284.forrester.usonlineretailforecast.pdf Falk, T., (2013). Why American entrepreneurship is declining. Retrieved July 10th, 2013 from http://www.smartplanet.com/blog/bulletin/why-american-entrepreneurship-is-declining/17934 Hart, C., et. al., (2000). Retailer adoption of the Internet: Implications for retail marketing. European Journal of Marketing, 34 (8): 954-974. Howard, C. (2002). Winning the Net Game. Irvine, CA: Entrepreneur Press. Kozinets, R.V. (1999). E-Tribalized Marketing?: The Strategic Implications of Virtual Communities of Consumption. European Management Journal, 17 (3): 252-264 Lynn, B.C. & Khan, L. (2012). The slow-motion collapse of American entrepreneurship. 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Impact of the Internet on Marketing Strategy Formulation. International Journal of Business and Social Science, 2(18): 1-7. Read More