This system is known as the e-commerce paradox. “E-commerce firms must be open and closed at the same time” (Awad, 2004). They must be able to share information with suppliers, business to business (B2B), and with business to customers (B2C). E-retailers’ security includes firewalls, passwords and log-ins, and virtual private networks, as well as intrusion devices (Awad 2004, p. 405). Technology has introduced a ‘honeypot’ system, which is designed to showcase an artificial environment that lure attackers into thinking they have gained access, giving time for authorities to potentially track down the intruder (Awad 2004, p. 403).
Another important aspect for e-retailers to increase the likelihood of consumers purchasing on-line from their websites is Customer Relationship Management. The first step is for e-retailers to develop a strategy that will allow e-retailers to properly promote to their target market, and allow them to focus on customer requirements. However, understanding your customer needs has taken on a new avenue with advancements in technological software.
Technology gains have also been demonstrated in the marketing techniques of e-retailing. The concept of buying on-line is still relatively new, and many consumers are still hesitant of it. There is nothing to stop a consumer to research on-line, and then purchase the product at an actual outlet. Research has demonstrated that brand loyalty and price elasticity are less important compared to bricks and mortar shopping as consumers are exposed to a lot of information and therefore they usually look for the best value (Agrawal and Singh, p. 1549). In many instances, a person may abandon her shopping cart in the middle of the checkout process, but for reasons unknown. Forrester Research estimates that 82% of e-retailers depend on consumers to ‘hit’ the links to their websites and page view to manage the success of their websites, however only 2% of the visitors will actually purchase online (Ismretail 2002, p3). With this in mind, online intelligence has become a technical advancement to achieve. Click-stream technology allows e-retailers to ability to understand abandonment and provide them with the information to react accordingly.
By analyzing clickstream data – a trail of mouse clicks left by a user who visits a website – a retailer can make use of details such as the number of users, where they come from, which pages are visited, the order in which they visited them, how much time was spent on each page, and where they went after your site (Ismretail 2002, p3).
This information used properly can assist e-retailers in determining trends of their customers, their similar likes and dislikes, and where their websites can be improved. The information gathered can even determine if the consumer chose to go to a competitor site, and compare prices.
This data allows the e-retailer to market accordingly to each individual customer. On Amazon, when an individual purchases a book – the company will then analyze the purchase with other recent purchases and then promote other books that may be of interest. This is very similar to the movie Minority Report starring Tom Cruise which is set in the year 2054. There is a scene in the film that shows Cruise walking through a shopping concourse is ‘bombarded’ with personal advertisements based on marketer’s analysis on Tom Cruise’s role individuality. With new technology developed over the past few years (i.e. Clickstream software), consumers will be “more closely watched by sites and receiving personalized pitches based on past browsing behavior” (Stone 2004, p2). This may stimulate increased purchases, and higher sales for the e-retailer, but could be looked at an infringement on the privacy of consumers. Websites now include Meta data and extensible markup language (XML), which are standards for tagging data on web searches. Although, this may be a positive factor for e-retailers to analyze consumer behavior on an individual basis, the ethical side to this comes in to question. When is it crossing the line on consumers’ rights?
Web analytic companies are now increasingly offering their services from $30,000 to over a $100,000 a year (Stone 2004, p2). More recently, Sportsline.com has used a web analytical company to identify customers dropping out of an American football fantasy pool, which enabled Sportsline to address and improve its processes that led to an increased number of paying customers (Stone 2004, p2). Moreover, technology has led firms such as Atomz to offer advance search engines for e-retailers to attach special promotions to the searched item. PalmOne has recently used this service which has converted the number of searchers to buyers by over 60% (Stone 2004, p2).
With the immense competition e-retailers face, other global websites, and the traditional brick and mortar stores, it is important that they cater to their customer needs. The traditional statement that location is everything has little value in e-retailing as all websites have equal distance to their consumers. It is therefore essential that e-retailers seek means to ensure customers return to their websites. The key factors are “efficiency, personalization, socialization, and the look and feel of the site” (Agrawal and Singh, p.1537). Although, this may indicate that they may infringe on consumer privacy rights, they have used technology to their benefit to obtain information that is beneficial in making strategic decisions. However, having a strong front-end website does not guarantee success. Once the consumer initiates the first step by purchasing a product, the actual delivery of goods becomes just as important in the supply chain.
Back-end System Support
Once the e-retailer obtains a client, it is essential that they provide an efficient back-end system that will ensure availability, workable ordering website, and delivery on-time. Accenture international research has indicated that 1 in 4 internet purchases fail due to various reasons (Agrawal and Singh, p.1549). In the traditional avenue of shopping, many consumers will not go back to a store if the ability to purchase items fails 25% of the time. Accenture has also stated that one of the most common reasons for this failure include that items are usually out of stock, which indicates that the front-end systems are not connected to the back-end support systems (Agrawal and Singh, p. 1549).
A seamless integration of all systems, for example, implementing an Enterprise Resource System is required. This integration will allow the e-retailers to advise if the product is in stock, the expected delivery date, and substitute and compliment product availability. Moreover, systems that connect with vendors will advise the e-retailers if the products are in back-order, different characteristics of the product (size and colour) and delivery time. This connection of all information systems now provides the capability to consumers to select from a menu of shipping rates and schedules, and then be able to track the fulfillment of the order in real time.
Digital Deconstruction processes have accelerated in that “by creating digital interfaces between processes, companies can automate these processes to achieve scale efficiencies unattainable in the past” (Cucuzza and Cherian 2001, p.2). Studies have shown that when customers and vendors share a single system, and orders are entered once, a 75% to 90% reduction in transaction costs occur utilizing a web-based catalog. The different processes include:
- Preparation of purchasing requirements
- Identification of potential suppliers
- Deliverables – specification, volumes, price, delivery, transportation
- Fulfillment
- Receiving and holding supplies
- Relationship building with suppliers (Groucutt and Griseri 2004, p180).
The use of technology to improve the efficiency of the supply chain, and ensure customer satisfaction can be demonstrated using company examples.
Roundpeak
Although the company no longer exists, it was one of the first online retailers who used technology to manage its physical and virtual supply chain. It had partnerships with manufacturers across four countries, air cargo companies, and with warehouse, fulfillment and delivery operators. The numerous B2B partners created a need for Roundpeak to ensure that the various departments in the supply chain communicated accordingly. An online order was instantly fed to the fulfillment house, a packaging and inventory control center, and into a warehousing, inventory, and delivery data system that was accessed by all members of the supply chain. If a customer orders a product, a request to the manufacturer goes out electronically. Once it receives the goods from the manufacturer, a digital signature is sent to authorize receipt, which allows the purchase order and receipt to be matched digitally. The purchase order would then instantly be fed into the accounts payable system where funds are transferred at once. This system was known as the Electronic Bill Presentment and Payment system (EBPP). The benefits included streamlining relationships with suppliers and eliminating redundancies by inputting completed once by the consumer. (Case study developed by Pyne 2000).
Ritz Interactive
Ritz, a camera retailer and e-retailer, understands that it is vital in responding to your customer needs, and the use of technology assists them. “Businesses that couldn’t offer timely and accurate order fulfillment or secure online transactions were quick to fall off consumers’ bookmark lists” (Ismretail 2002). At the start, Ritzcamera.com did not have adequate real-time order management and lacked integration with the front-end software. All processes were done manually including customer service emailing customers when a back-order existed. Employees would manually print the order off the website, and enter the data into the inventory and warehouse management system. The invoice and packing slip would then be sent to another department where they would find the product off the shelves, package it and ship it to the customers. A new MQ Series middleware system was then installed that communicated to both the front-end and back-end platforms. This allowed customers to use interactive shopping carts, seek current prices, and be notified of the current availability status, all in real-time. It also allowed for credit card payments to be processed immediately, and ensured that the payments went through a screening process to avoid any fraud. In addition, the software searched all warehouses for products, which helped the company save money on fulfillment costs. Moreover, the software communicated with distributors to seek availability and delivery of products. This cut down customers calling to ask when their products would be delivered. This was furthered by communication with the actual delivery company, and provided a real-time order number. Customers would have access to this number, and be able to track the status of the product delivery online.
By having all their independent data systems communicate, it provided an electronic digital forum which allowed Ritz to expand via mergers and acquisitions without making any material changes to the current structure. The company demonstrated with the correct usage of technology integration that online success is possible. (Case study developed by Ismretail 2002).
Ace Hardware
Ace Hardware is a retail support company which acts as the intermediary for cooperative retailers. The firm utilizes Vendor Managed Inventory (VMI) for Ace to monitor daily stock status data and transfer the information via electronic data interchange to the manufacturers. The information created is the number of products sold, inventory levels, and amounts on order, where a weekly order is then placed automatically to replenish the stock levels. More recently, Ace has installed Web-Enabled Vendor Managed Inventory (VMI), which allows manufacturers to have direct access to the data systems via the internet. Some of the improved benefits allow the manufacturers to know which products Ace cannot fulfill on time, and what the best possible solutions are to ensure the end client receives the product in a timely fashion. The new system’s main goal is to ensure that it is the vendor’s responsibility to replenish the stock levels, and not that of Ace. This has created savings for Ace as it has reduced the many levels of their internal supply chain function. (Case study created by Ismretail 2000).
MyGrocer
The core objective for MyGrocer, an EU sponsored company is to create advanced B2C e-service intelligence via mobile access devices. The technology the company has introduced is to provide total supply chain management to achieve Efficient Consumer Response ECR initiative. This system will be realized through full interactivity, personalization, and automated replenishment of household goods using both radio frequency identification (RFID) and wireless networking (Kidd 2001). The end result would be to provide cost efficient savings from the supplier all the way to the consumer.
RFID capability is to provide “faster inventory counts based on shelf content as well as significant reductions in point of sale (POS) costs” (Kidd 2001). An Andersen Consulting study indicated that 53% of out of stock conditions are due to replenishment inefficiencies (Kidd 2001).
For MyGrocer to be successful, it is essential that all information systems be compatible from the manufacturer to the end consumer to exchange meaningful data. This has created the need for standardization which involves identification and intelligent tagging. The efforts of the Global Commerce Initiative (GCI) have become a forefront coalition for user groups to develop a Uniform Code. Other technological improvements for MyGrocer to work successfully include Enterprise Resource Systems (ERP), Supply Chain Management and Advanced Planning and Forecasting (ASP) systems to be implemented (Kidd 2001) which will allow the free flow of information between all participants.
As MyGrocer is continually developing technological advancements to create a working model, it has had some difficulties of acceptance by consumers. The main objective is the collection of personal data and RFID readers in consumers’ home (to enable intelligent homes) as well as a perceived lifestyle change for the customer. (Case study developed by Kidd 2001).
Current Issues
As technology has improved both the front-end capabilities for the consumer, the seamless integration to the back-end support systems to allow for improved delivery of goods – one issue that has not been fully automated and creates levels of discomfort for consumers is the ability to return goods. Traditional shopping allows the consumer to walk into the store, explain the reasoning behind the return, which allows the staff to recommend solutions that potentially may save the sale. However, this convenience – both to the e-retailer and the consumer does not exist. Some consumers are not comfortable buying online as the difficulty in returning the product. And when done so, it will be at an increased cost due to shipping and handling charges. In addition, it becomes a manual process for the e-retailer to retrieve the goods, ensure the product is in good shape, and then enter the return into the system. This is a costly procedure as it requires staff on hand to manually do this. Technology in the return policy and the e-retailers assurance to consumers to create an efficient process is a key for internet sales to become increasingly favourable.
Conclusion
The emergence of the internet and on-line shopping has developed a need to integrate all aspects of the supply chain management. With the usage of digital interfaces from the front-end spectrum of obtaining clients, to the back-end support system of ensuring the goods are available and delivering them on time – both the front and the back have now become one complete supply chain. Technological advancements have been used on both ends of the spectrum to ensure seamless integration, to promote to selective target markets, and to ensure customer satisfaction via back-end support efficiencies. The competitive market and the ability to utilize information technology as an advantage, e-retailers can now promote their products and services on a personal level through personal data collection and analysis on consumer behavior. Although, this has always been done on a collective, the personal promotion aspect is a new tool for marketers that some feel is an infringement on consumer rights. The understanding of consumer requirements for online purchasing is essential for the continual success of e-retailers. To be able to deliver goods on time, have sufficient stock available, provide a return policy similar to traditional shopping, and provide a safe and secure payment facility are the main issues consumers would like addressed. Managing these aspects of the supply chain, logistics, delivery, and sufficient stock levels have become the realized goal of e-retailers through the usage of information technology. The e-retailers that have been successful in addressing these issues by improving both ends of the spectrum have been able to succeed in a very competitive market.
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