Business Model of On-Line Retaining - Essay Example

Business Model of On-Line Retaining ID 19714 Order No. 267918 17 January 2009 Table of Contents: Executive Summary: On-Line retailing is a much different business compared to traditional retailing and has its own market which is growing considerably, year after year. On-line shopping businesses like eBay, Amazon, shopping.com, etc. has taken the world by surprise by virtue of their consumer acceptance, competitive advantages & seamless growth. Given the huge potential of this business, its own management methodology has evolved which is substantially different from traditional retailing in some areas. This paper evaluates the management methodology & success factors of an on-line retail business, the eBay, & attempts to advice on the future potential that this business possesses amidst management & technology innovations in the modern global computing world. On-Line Retailing Overview: On-Line retailing business runs over the Internet through well designed user friendly portals, whereby the products & services are displayed through electronic means (like photographs, images, videos, etc.) and payments collected either electronically or using a system that accepts remote checks, wire transfers or on-delivery cash. On-line Retailing is different from the traditional business primarily from the perspective of product display, business expenses, business location, communication & customer engagement, and technology. Supply chain management of both businesses are similar with the only exception that on-line businesses have to manage their deliveries remotely and in larger geographies (even at global levels) whereas the traditional retailers may have to carry out lesser remote deliveries within a fixed locality. We hereby analyze the on-line retailing process deployed by eBay through their portal named (www.ebay.com). The process of on-line shopping starts from a search engine - either global search engines like Google, Yahoo or the search engine built within the eBay portal. Products advertised on eBay can be approached through both the mechanisms. Figure 1: On-Line Shopping Process (Sourced from: Chatpar and Venugopalan, 2007) Once the buyer reaches the on-line display of the product of choice (two or three dimensional graphics or video along with specifications, pricing details, terms & conditions, etc), he/she can evaluate the product using published specifications & pictures/videos and then open a shopping cart where the products selected for purchase can be collected. After collecting all products, the buyer can proceed for payments where the terms on eBay are electronic (credit cards or debit cards. Given that eBay is a global on-line shopping portal, they do not offer localized choices of payments. The soft products can be downloaded online and the hard products are transferred to the customer from the warehouse that is closest to the physical address of the Customer. eBay also offers international delivery of products through world class renowned courier services which is charged to the buyer at the time of purchase. [Chatpar and Venugopalan, 2007] Key Traits and Bases of success of the marketing strategy of Online Retailers The key factors of success of Online Retail businesses are the following: (a) Excellent User Friendly Portal system: eBay is one of the most user friendly on-line shopping portal of the world. The buyers are able to quickly search and select products of their choice through well deigned categorization & guidance systems and make secured & reliable payment. (www.ebay.com). (b) High Quality Customer Services: To serve their customers, eBay has on-line chat & message boards, e-mail ids through which trained customer support specialists respond quickly to address queries or grievances. Extra information on every product is available through local product catalogues whereby the products in stock exactly match the appearance & specifications of the product being launched. This requires dynamic & proactive website updating that eBay has taken care of proactively. Speed of delivery, tracking during transit, timely answering E-Mails, live chat, quality of the delivered products, money back policy, ethical transactions, confidentiality, etc. are key traits that eBay follows. eBay also has a global conflict resolution system between the buyers & sellers using the services of their group company Paypal. (c) Market Research and adaptation to demands: Market research in on-line retailing needs to have much larger span & depth compared to traditional retail businesses. The demands need to be assessed at global levels and not just pertaining to a locality, or a city. Also, it is very important to assess "what sells online" and focus more on them rather than the products that are better preferred through retail outlets. eBay has created their own community center (which is substantially large today) where discussion boards, Blogs, answering centres, news, on-line groups, etc. are operational on-line. eBay provided options to fill surveys within the personalized login and for the guest users if the customer prefers to do so. (d) Understand the Customer Buying behaviour and establish marketing strategies: eBay is one of the largest on-line retailing site and hence has multiple databases that are formed after capturing search engine statistics, customer personalized profiles, blogs, community discussions, message board logs, chat logs, e-mail archives, etc. which can be assessed in depth to understand and create classifications of on-line market segments & their customers by virtue of behavioural patterns of customer buying decisions. This is evident from the fact that eBay offers enormous information about alternate product choices or shopping mixes (like customer who bought this product also bought the following products), hot items, rating of items, etc. to the shoppers during the on-line shopping experience. (e) Customer Relationship Management: eBay offers secured customer personalization & relationship management through https://signin.ebay.com through which Customers can get a range of personalized services while eBay can push campaigns & offers. The level of Customer relationship management through this system is extremely effective which a physical retail system like shoppers stop cannot implement in the physical outlet system. The site offers a personalized environment for the customer protected by a customer specific password and secured socket layer & cryptography security technologies. The customers can track all their purchases in the form of purchase history, create personalized product profiles, access free articles & newsletters, avail discounts & free offers, access sales campaigns, track deliveries, use chat system, message boards or e-mail, take help from on-line product specialists/sales staff, carry out credit card or Paypal based transactions, etc. through their secured personalized profiles on the eBay portal. Such a system offers astounding levels of personal treatment to customers, which is almost impossible in traditional retail shops. [eCommerce Optimization, 2006; eCommerce Optimization, 2007; eCommerce Optimization, 2008; Chatpar and Venugopalan, 2007] Distinctiveness of the Marketing Strategy approach of Online Retailers The marketing strategy formation in any business requires loads of data and structured, accurate analytics over them. Marketing operations of organizations fetch such data through market research companies & consultants that not only collect samples but also analyze the same. In traditional retail business, accurate data capture is a huge challenge and hence almost all the predictions are based on approximations. Information technology plays a major role by virtue of RDBMS systems, Business Intelligence Systems and On-Line Analytical Processing systems. However, manually fetched data does not allow even such powerful systems to avoid approximations. Some stores use electronic systems to track customer movements & purchase behaviour within the store but again the data is not that useful for predicting buying behaviours. This is one of the major advantages of on-line retail systems. Data capture & accuracy is not a problem at all because every aspect of the business is electronic. Practically "everything" gets logged in electronic databases automatically whereby the accuracy is not based on batch mode perception analysis but is dependent upon continuous mode data & activity logging. The only challenge left out is to organize the data & analyse the trends which, undoubtedly is more accurate compared to traditional retail businesses. The process of on-line shopping is much different from the traditional retailing model. In traditional retailing, customers are visible physically and hence store owners track their movement and choices within the store to understand their buying behaviour. Some stores run short & crisp surveys in lieu of some free gifts or discounts. However, on-line retailers track & analyze the records of search engines, product combinations chosen, on-line polls/surveys, service calls/chats/e-mails, etc. to understand the customer buying behaviour. The market segmentation is virtual and normally not bound by small physical territories, communities, religions, classes in society, etc. The market segments over Internet are much larger looking into the size of companies that offer the retailing services. The targets are established based on the records of sales captured in the software such that Customers that have entered their contact details in portals are attracted by means of E-Mail campaigns, on-line promotions, free electronic coupons, articles/newsletters, telemarketing voice calls, etc. Cost, quality, secured payment & reliable delivery are the most critical aspects of on-line businesses and personalization plays a major role in offering these to customers in addition to giving them a feeling of "special treatment". [Girish. and Vempati, 2008; Hennessey, Mike, 2005; eCommerce Optimization, 2006; eCommerce Optimization, 2007; eCommerce Optimization, 2008] Likely future of Strategy in Retailing and the role of Online Retailers As per an estimate by Forrester Research, the on-line retailing in USA alone is expected to reach $331 billion by 2010. The market size across globe is increasing very rapidly whereby the key factors that are going to contribute are ethics, quality & variety of products offered, customer services, personalization services, security, fast & reliable delivery, global networks of supply chains, cost competitiveness, legal & regulatory support, conflict resolution, enhancement of on-line marketing strategy, improvements in the Internet, and technology innovations. Services like Paypal conflict resolution of eBay (www.paypal.com) and validity of electronic contracts (software based contracts signed with electronic signatures) & E-mail based contracts in courts of Law (already applicable in US) are expected to boost the acceptance of online retailers considerably. [Hennessey, Mike, 2005; Arias, Martha L, 2007; O' Connell, Kelly, 2008; Rath, Tiare. 2008] Conclusion: On-line Retailing is an emerging business segment with a rapidly growing market whereby the methodology of marketing, customer engagement, personalization, market analysis, product positioning & communications is considerably different from traditional retail businesses. The primary hitches in on-line retailing, viz., security, reliability, quality, legal support, conflict resolution, etc. are already addressed to a good extent such that customer acceptance is improving considerably. 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