Online shopping
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Online shopping is the process consumers go through to purchase products or services over the Internet. An online shop, e-shop, e-store, Internet shop, webshop, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall.
The metaphor of an online catalog is also used, by analogy with mail order catalogs. All types of stores have retail web sites, including those that do and do not also have physical storefronts and paper catalogs.
Online shopping is a type of electronic commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions.
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[edit] Logistics
Consumers find a product of interest by visiting the website of the retailer directly, or do a search across many different vendors using a shopping search engine.
Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, by analogy with filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card numbers are not accepted by e-mail, for security reasons).
[edit] Payment
Online shoppers commonly use their credit card for making payments, however some systems enable users to create accounts and pay by alternative means, such as:
- Debit card
- Various types of electronic money
- Cash on delivery (C.O.D., offered by very few online stores)
- Cheque
- Wire transfer/delivery on payment
- Postal money order
- PayPal
- Google Checkout
- Reverse SMS billing to mobile phones
- Gift cards
- Direct Debit in some countries
Some sites will not allow international credit cards and billing address and shipping address have to be in the same country in which site does its business. Other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.
While credit cards are currently the most popular means of paying for online goods and services, alternative online payments will account for 26% of e-commerce volume by 2009 according to Celent.[1]
[edit] Product delivery
Once a payment has been accepted the goods or services can be delivered in the following ways.
- Download: This is the method often used for digital media products such as software, music, movies, or images.
- Shipping: The product is shipped to the customer's address.
- Drop shipping: The order is passed to the manufacturer or third-party distributor, who ships the item directly to the consumer, bypassing the retailer's physical location to save time, money, and space.
- In-store pickup: The customer orders online, finds a local store using locator software and picks the product up at the closest store. This is the method often used in the bricks and clicks business model.
[edit] Shopping cart systems
- See also: Shopping cart software
- Simple systems allow the offline administration of products and categories. The shop is then generated as HTML files and graphics that can be uploaded to a webspace. These systems do not use an online database.
- A high end solution can be bought or rented as a standalone program or as an addition to an Enterprise resource planning program. It is usually installed on the company's own webserver and may integrate very well into the existing supply chain so that ordering, payment, delivery, accounting and warehousing can be automated to a large extent.
- Other solutions allow the user to register and create an online shop on a portal that hosts multiple shops at the same time.
- open source shopping cart packages include osCommerce and Zen Cart. Virtuemart is a shopping extension for the extremely popular CMS Joomla.
- Commercial systems can also be tailored to ones needs so that the shop does not have to be created from scratch. By using a framework already existing, software modules for different functionalities required by a webshop can be adapted and combined.
[edit] Market share
E-commerce product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country. The $18.3 billion worth of clothes sold online represented about 10% of the domestic market.[2]
For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.
[edit] Advantages and disadvantages
[edit] Convenience
Online stores are usually available 24 hours a day, and many consumers have Internet access both at work and at home. A visit to a conventional retail store requires travel and must take place during business hours.
Searching or browsing an online catalog can be faster than browsing the aisles of a physical store. Consumers with dial-up Internet connections rather than broadband have much longer load times for image-rich web sites, and have a considerably slower online shopping experience. They are more likely to find physical retail stores more convenient.
Some consumers prefer interacting with people rather than computers (and vice versa), sometimes because they find computers hard to use. Not all online retailers have succeeded in making their sites easy to use or reliable.
In most cases, merchandise must be shipped to the consumer, introducing a significant delay and potentially uncertainty about whether or not the item was actually in stock at the time of purchase. Bricks-and-clicks stores offer the ability to buy online but pick up in a nearby store. Many stores give the consumer the delivery company's tracking number for their package when shipped, so they can check its status online and know exactly when it will arrive. For efficiency reasons, online stores generally do not ship products immediately upon receiving an order. Orders are only filled during warehouse operating hours, and there may be a delay of anywhere from a few minutes to a few days to a few weeks before in-stock items are actually packaged and shipped. Many retailers inform customers how long they can expect to wait before receiving a package, and whether or not they generally have a fulfillment backlog. A quick response time is sometimes an important factor in consumers' choice of merchant.
In the event of a problem with the item - it is not what the consumer ordered, or it is not what they expected - consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund. Some online companies have more generous return policies to compensate for the traditional advantage of physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and does not charge a restocking fee, even for returns which are not the result of merchant error. (Note: In the United Kingdom, Online shops are prohibited from charging a restocking fee if the consumer cancels their order in accordance with the Consumer Protection (Distance Selling) Act 2000.[3])
[edit] Information and reviews
Online stores must describe products for sale with text, photos, and multimedia files, whereas in a physical retail store, the actual product and the manufacturer's packaging will be available for direct inspection (which might involve a test drive, fitting, or other experimentation).
Some online stores provide or link to supplemental product information, such as instructions, safety procedures, demonstrations, or manufacturer specifications. Some provide background information, advice, or how-to guides designed to help consumers decide which product to buy.
Some stores even allow customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products.
In a conventional retail store, clerks are generally available to answer questions. Some online stores have real-time chat features, but most rely on e-mail or phone calls to handle customer questions.
[edit] Price and selection
One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines and online price comparison services can be used to look up sellers of a particular product or service.
Shoppers find a greater selection online in certain market segments (for example, computers and consumer electronics[4]) and in some cases lower prices. This is due to a relaxation of certain constraints, such as the size of a "brick-and-mortar" store, lower stocking costs (or none, if drop shipping is used), and lower staffing overhead.
Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.
Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.
[edit] Fraud and security concerns
Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.
Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.
Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party. On the other hand, dealing with an automated system instead of a population of store clerks reduces the risk of employees stealing consumer information, or dumpster diving of paper receipts. Denial of service attacks are a minor risk for merchants, as are server and network outages.
Quality seals can be placed on the Shop webpage if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent.
A number of resources offer advice on how consumers can protect themselves when using online retailer services.[5] These include:
- Sticking with known stores, or attempting to find independent consumer reviews of their experiences; also ensuring that there is comprehensive contact information on the website before using the service, and noting if the retailer has enrolled in industry oversight programs such as trustmark or trust seal.
- Ensuring that the retailer has an acceptable privacy policy posted. For example note if the retailer does not explicitly state that it will not share private information with others without consent.
- Ensuring that the vendor address is protected with SSL (see above) when entering credit card information. If it does the address on the credit card information entry screen will start with "HTTPS".
- Using strong passwords, without personal information. Another option is a "pass phrase," which might be something along the lines: "I shop 4 good a buy!!" These are difficult to hack, and provides a variety of upper, lower, and special characters and could be site specific and easy to remember.
[edit] Privacy
Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.
Brick-and-mortar stores also collect consumer information. Some ask for address and phone number at checkout, though consumers may refuse to provide it. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.
[edit] Product suitability
| Category | U.S. online sales (2006)[6] |
|---|---|
| Apparel, accessories and footwear | $18.3 billion |
| Computer hardware and software | $17.2 billion |
| Autos and auto parts | $16.7 billion |
| Home furnishings | $10.0 billion |
| Total products sales (excluding travel) | $146.4 billion |
| Travel | $73.5 billion[7] |
Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Examples of this type of company include: Google, eBay and Paypal. Other successful marketers use Drop shipping or Affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory. Examples include numerous sellers on eBay.
Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit through a standard letterbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer, and indeed Amazon.com, one of the few enduring dot-com companies, has historically concentrated on this field.
Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets -- in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.
Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.
[edit] Aggregation
High-volume websites, such as Yahoo!, Amazon.com, and eBay, offer hosting services for online stores to small retailers. These Stores are presented within an integrated navigation framework. Collections of online Stores are sometimes known as virtual shopping malls or online marketplaces. Sometimes the metaphor is taken more literally, and a visual representation similar to a conventional shopping mall or village is presented.[8]
[edit] Discounts
There are multiple websites that compile coupon or discount information for most online merchants.
[edit] Notes
- ^ Celent Report: According to figures published by Celent 25 May 2006.
- ^ 6%, 10%Online sales spike 19 percent
- ^ http://www.oft.gov.uk/shared_oft/business_leaflets/general/oft698.pdf
- ^ http://www.earthtimes.org/articles/show/news_press_release,189445.shtml
- ^ http://www.statssheet.com/articles/article7322.html
- ^ http://www.shop.org/soro07/pr-051407.asp
- ^ $219.9B - $146.4B = $73.5B; $146.4B is from http://money.cnn.com/2007/05/14/news/economy/online_retailing/
- ^ Virtual Shopping Malls Making a Comeback?, Read/WriteWeb, 5 December 2006.
[edit] References
- Cumming, Maeve, et al. Management Information Systems, Third Canadian Edition. Canada: McGraw-Hill Ryerson, 2006.
- https://www.microsoft.com/windows/ie/ie6/using/articles/shopping.mspx
- http://money.cnn.com/news/newsfeeds/articles/prnewswire/LAM05119112007-1.htm
[edit] See also
- Bricks and clicks business model
- Electronic business
- Electronic commerce
- Open catalogue
- Retail therapycs:Internetový obchod
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