Economic and Social Impact due to Speed of Changes
Trading by e-commerce allows businesses to react to changes in the economy and society more quickly than a traditional business. High street stores would find lowering prices very difficult and time consuming because all price labels would have to be changed as well as the information on the barcodes along with any advertisement. However E-commerce businesses simply have to change their databases. E-commerce has also opened a wide range of services and products that were formerly unheard of. This includes social networks such as: Facebook, MySpace, and Twitter. Also allows e-based services such as Google, an internet search engine that also supplies online maps and a variety of other services.
Bricks and Clicks
A number of high street stores that have been running for years on end have expanded into E-commerce. As long as this is done quickly and efficiently then the transition to a ‘brick and click’ can be very profitable. ‘Bricks’ have customers that visit daily or weekly and that trust the store and its products; provided that the store keeps the house style (font type, logos, colours) then those customers will know that they are the same business and that the site can also be trusted. Making a website to sell or advertise on also opens up a wider target audience, in act they can now sell to the entire world – from these customers the business can now collect more information. The business can record sales of specific customers and then give those customers a list of recommended products using their shopping history. Using the same technique they can also collect information for themselves, for example: popularity of a specific product, the amount of money people spend in January compared to June. Even though this information can be collected in a physical store; it takes a lot more time. Finally expanding into E-commerce is cheap, there are even less overheads, if any, than just ‘clicks’ due to the fact that there is already a shop/warehouse being used for the ‘brick’.
Benefits of E-commerce
Global Marketplace – E-commerce gives customers access to your business all over the world at home, all they need is a computer, an internet connection and disposable income. Shopping is then delivered straight to their doors.
24/7 Trading – Customers can shop online day and night all week long, even if your business only supplies during the working week, your site can store and process orders ready for the next working day. Also no staff are needed to overlook the orders until they are ready to be packed and delivered, this lowers costs.
Relatively low Start-up and Running Costs – If your business is changing from a ‘brick’ to a ‘brick and click’ then these costs are minimal as the overheads are already being paid to maintain the ‘brick’. This will increase running costs as more customers will be shopping with you, so more staff and assets will be needed.
Competitive Edge – This will give your business a big edge on any ‘brick’ in your niche. Better deals and cheaper prices will be viable due to the profits of more customers but only slightly increased running costs (overheads).
Search Facilities – Customers can shop for specific products easily by either using the general search or using an advanced search that allows you to define further search criteria, such as price range, brand, rating, availability, and much more. This makes shopping faster, more rewarding and convenient for the customer.
Pricing Opportunities – Stores on the high street need to charge higher prices to balance out their overheads. However this is not necessary for an online store so businesses can sell products cheaper; changing prices is simple because the data’s stored in a database. Whereas physical stores need to change barcodes, labels, advertising and their database.
Gathering Customer Information – Both ‘bricks’ and ‘clicks’ can gather customer information in a variety of ways, ‘bricks’ use: surveys, questionnaires, membership cards and loyalty cards. But ‘clicks’ use: page tracking, shopping history and customer accounts.
Alternative Income Source – Selling online also makes it easier to expand your product lines or even create new ones. For example, Amazon started selling books exclusively online; they then spread to books and CDs and finally sold a wide variety of different products. To promote your businesses products you can advertise on frequently visited sites to up your sales. Google is a popular site to advertise on, because it is on of the most visited sites in the world and customers use it to search for what they want, whether it is information, entertainment, consumables or services.
Drawbacks of E-commerce
Consumer Trust – Customers shopping online have no idea whether the sites they visit are reliable or trustworthy. Everything from the product itself, the checkout, where your money goes, and delivery can all go wrong. Even though the site may be reliable, they may make a mistake and dissuade them from shopping with you again. They buy products at their own risk, however they can use reviews or the site hit count to assist them in there decision.
Lack of Human Contact – Shopping online is very impersonal; there is no one that a customer can talk to for guidance, to help them choose what they want. Also if there is a problem with the product then there is no shop to return to, and sometimes there’s not even a number to call, just a complaints inbox.
Delivery Issues – If a product is not delivered, is the wrong product, or charged the wrong price, then it can be very difficult to get your money back, or chase up the product.
International Legislation – Sites are not allows clear about which country their products come from, if a product comes from America then there will be an added shipping cost, there may also be added tax for buying the products abroad. Businesses may also be charged for the rights to sell to different countries and it may even be illegal to sell your product abroad.
Product Description Problems – The only information that the customers know about online products is what’s advertised in the image and the description. Product descriptions may be misleading and customers who buy them may not get what they thought they ordered. For example, on EBay a company was selling furniture, they described the products as high quality and displayed an image of the product, however they did not state the dimensions of the product, and any customer who brought from them discovered that this furniture was in fact miniature, and fit in the palms of their hands.
Security Issues – Customers buying from the internet must be aware of the security issues involved. Otherwise the site they are shopping from could be a scam and the customers could lose money. To avoid this it is good to use https as a secure site or look for the padlock next to the address bar.
Task 4
Brick and Click: Boots
John Boot, an agricultural worker, moved to Nottingham to start a new business. He opened a small herbalist store on Goose Gate in 1849, from which he prepared and sold herbal remedies. This is the first building block of the firm we call Boots.
The origins of Alliance Pharmacy date back to the 19th century with the birth of Edgar Moss in 1879. During the course of his life, Edgar built up a network of pharmacies throughout Middlesex, Surrey and Buckinghamshire. From here on both stores developed and grew in size and success until 2006 when the two companies formed to create Alliance Boots.
In 2003 Boots decided to move into E-commerce and created a website to sell their products to the world. This development will help them reach their aim in business:
"Boots aims to be the place for health and beauty customers. We want to secure market leadership in the UK and build on our brands' growing success internationally." – Boots mission statement
Their aim to move into E-commerce was to increase their global image; Boots is already the leading pharmaceutical company in Britain and the third largest in Europe. With this move into the e-world Boots will be able to build on their international success which fulfils their mission statement.
Customers now have a brand that they have discovered is trustworthy in respect to their high street stores and have the choice to shop online with the same levels of customer service and reliability. This saves Boots customers from having to travel to buy their pharmaceuticals and pay lower prices. People either in other countries or without the opportunity to go to a Boots store now have the chance to shop online; this will increase profits and exponentially affect popularity.
The main benefits of this move into E-commerce is the ability to have completely flexible prices that can be changed in minutes, this gives the online branch of the store better deals and lower prices. Boots can afford to offer deals and low prices online as they have next to no overheads; the main overheads are lost at the high street stores and warehouses. However the drawbacks of this move are that customers lose the contact with the trained Boots staff that helps them make their choices and give them general healthcare advice.
Also I think that Boots is focusing too much on UK and Europe, in their mission statement they stated that they want to secure a monopoly on health and beauty in the UK which they have secured already, they should now be focusing on getting high street stores in large international cities like New York and Beijing to give residents a sense of trust in the company that current boots customers have already. To advertise further they could supply a series of free samples of exclusive products like No7 range and Bliss.