HBS Case - Retail Shopping in 2007: The Net versus the Mall
1 - Starting from the mid nineties till date the online retail business has grown by leaps and bounds, the growth is not only noticed in terms of the number of customers choosing web shopping as an option but the diversity among the options available has also increased and therefore a large market of consumers or potential buyers of any product is available online, and therefore it is important for any retail entrepreneur to add online retail business, so that he can approach larger number of customers. Moreover, the online presence adds a great diversity and reach to the customer which is helpful in making the approach more strong and the product delivery easy and quick, hence the future of e-commerce will be great and huge considering the continuous increase in the customer base.
2 - Let’s look at a few factors that create the influential effect on the newbies to go for an online retail store.
Growth from the early nineties to the end of century – The kind of extensive growth shown by the biggies in the last to last decade was good enough to set the tune right, for the new retailers and their desire to move into the online market with full commitment. Companies like Amazon, E-Bay and Yahoo have really created that impact which attracts everyone to go online.
Availability of Large number of Customers – The online market offered the opportunity to sell the products to a very large customer base and moreover there can be multiple transactions at one given time with out expanding the staff and allowing the customers to do self service and enjoy the option of al-a-carte.
Approaching Every corner of the world – The retail entrepreneurs were very impressed by the fact that an online outlet would give them the option to reach the customers sitting in every corner of the world and all this at no extra cost makes it extremely promising and influencing
Healthy Distribution Model and Inventory Management – The online retail channel enables any business to automate the customer activity and concentrate on other important aspects like distribution and inventory management, which can be handled from a low cost area thus saving huge expenditure on infrastructure and staffing.
Attacking market Strategy and Consumer Influencing Tools – The online marketing strategies are much more effective from both quality and cost perspectives, the influence that this can produce on the consumers is indisputable as there are multiple ways to promote the same in the customer's mind.
Its not a new story now that, few great stories of retail market from today started at a very gentle note some one and half decade ago, the diversity of the market and the number of customers increased by leaps and bounds all this while, and gradually the online stores started taking a good amount of market share from the actual retail business. The most important factor is that, the competition related to pricing makes an important impact on the customer mindset considering the fact that in case of online stores the “reduced transaction costs, reduced customer search costs, and disintermediation of the supply chain” leads to lower down the end selling price and this results in more and more number of customers choosing online shopping. Now since we know that e-commerce has become a great choice for the customer all the retail entrepreneurs want to add this feature to their business as it not only adds the diversity to their business but also makes them reach the customers present in every part of the world.
3 - It is a very important comparison that usually takes places to decide whether pure play online retailers have an advantage over the bricks-and-mortar retailers. Though an answer to this would involve a lot of subjectivity, it is more important to understand here that a pure play online retailer will have a very broad horizon and will have an access to large customer base, considering the product sales online there would be a very minimum cost involved in general logistics and operations; looking at the few major advantages we can count are:
Rise in Stock keeping Units – The hardcore online retailers like Amazon and E-bay would have never been able to give the great number of choices like 8,000,00 music CD's or millions of other goods, if they would have opened brick-and-mortar stores, definitely pure online retailing gives the advantage of adding huge variety to the products sold.
Finding a product – In case of a pure online retailer the approach of the customers to more positive towards exploring a brand and searching for more options available as the customer does not usually come with the idea of the kind of products that will be offered.
Better Influencing capabilities – Definitely the customers will only rely on the online marketing information to select the products from a pure online retailer and will not carry a perception that he would have made at the store while looking at the limited options available there.
Similarly, some of the disadvantages may be low brand-equity and trust, a customer has more confidence in a site that has a physical store as well and lastly having a retail store would mean an already existing supply chain structure.
4- This will always remain as an area of improvement as there can be innumerable ways of strategically playing in the market as a multi-channel retailer and success lies in maintaining a balance between the trust developed from a physical retail outlet to the extremely effective marketing strategy utilized for the online sales. Online retail business and physical outlets must work together as married segments completing each other, the best way to do it is by ensuring that the product and pricing have the same diversity across both channels, considering broader approach of the online retail business, it must be kept in mind that the brand value developed by the brick-and-mortar store will decide the future trust in the products available online. Moreover, it is the sole responsibility of the retailer to ensure that both the channels offer equal opportunity and product quality which is helpful to develop the brand value and can continue to remain as a competitive product in the market.