The introduction of e-Commerce over the past 15 to 20 years has had a major impact on society and the way business is done on a global scale. This has had many positive effects on both the business and on consumers. Additionally there are risks that have had a negative impact on both the customer and businesses. This report discusses the impact and risks associated with e-commerce to an organisation and to global business and society in general. To help understand the impact of e-Commerce, B&Q which has a number of stores throughout the UK and Ireland has been chosen to discuss the impact and risks. B&Q are a ‘brick and click’ organisation. This means they sell goods both in-store (brick) an online (click) on their website www.diy.com. Use this article to help you understand different impacts so that you can research this topic further.
Enabling people to shop online has had a massive positive impact on consumers throughout the world. Consumers have become more empowered than ever before and have a greater choice of goods available to them at much lower prices than they would pay in a local store due to the fact that they can shop anywhere in the world and take advantage of currency exchange rates and economic differences throughout the world.
B&Q has expanded its business by offering customers the ability to go online and order large items online that can be delivered directly to the customer within a pre-agreed time scale. Taking a large item such as garden shed as an example http://www.diy.com/nav/garden/sheds-storage/wooden-sheds/Blooma-7×7-Shiplap-Wooden-Shed-Home-Delivered-with-assembly-and-base-11987585 which costs £729.98 including delivery. The free delivery is an incentive to the customer as delivery is free on all orders over £50. This is both beneficial to the business and the customer. The customer can have a large item sent directly to their home with a click of a mouse. The business itself encourages spending by offering free delivery on orders over and certain amount and this encourages the customer to spend at least that amount. This is more relevant when a customer would be purchasing an item at £49.99 and would be encouraged to buy another cheaper item than paying the delivery charge. Another benefit of online sales at B&Q is that past customers can review each product and therefore when you want to buy something you can see what others have said about the quality and value in advance.
Direct Communication with Customers
One thing you could say about using eCommerce as a means to sell your products could be that some customers may be wary of not having direct face to face contact with sales representative. This could be particularly apparent with the older generation who are not digital natives. There is a reluctance to purchase online as it takes away from the ‘try before you buy’ element. As an example a seasoned gardener who regularly shops in B&Q and who wanted a new spade may be apprehensive about purchasing online as they could not speak to a sales representative about the product quality and the warranty on the product. They might also prefer to get a look and feel of the product in advance. The other issue that might put people off from buying online is the returns policy as there isn’t as much opportunity to speak with someone about returning the product. The advantage that B&Q has here is that even if someone does buy something online they have the opportunity to return it directly to the store. On the flip side of this we have the younger generation of digital natives who are more trusting of purchasing online and see it as second nature. Although these would not be a massive target market for B&Q, people who are confident using the web to order can communicate online and are not as reliant on face to face contact. This does cut man hours and the need for direct contact with customers as products are ordered, packed and shipped. The communication takes place online and customers’ form of contact and ‘trying before they buy’ could be researching the product reviews for individual products to see what others have said.
Someone that is able to shop online has a wider choice of what to buy. If we look at B&Q again and you wanted to purchase a new lawn mower, the only direct completion and choice of products could be B&Q and one other gardening centre in the locality. Having established a strong reputation locally B&Q are in a strong position to make a sale to someone who is not comfortable with shopping online. However, if someone is confident of ordering online then they open up a global market place in which to shop for a lawn mower. Obviously there are issues with delivery costs and international trading laws when shopping outside your own company but the choice becomes much wider on a national scale. In this instance there may even be the opportunity to buy directly from the manufacturer and obtain the product for less or even purchasing used goods using eCommerce sites such as ebay. Just have access to a computer with web access and the ability to pay for something digitally opens up a massive range of products in terms of quality and price compared to shopping locally on foot.
Looking at the previous example with the lawn more it was mentioned that instead of buying directly from B&Q the same product could be sourced directly from the manufacturer. This is an example of how a customer could source an item at a lower price. Because of the reduced cost of not having a physical high street presence and online only company can offer items cheaper as they just need a limited amount of warehouse staff to pack and process the orders for delivery. The reduced cost of not having to set up a high street or customer facing retail outlet means that these savings can sometimes be passed directly on to the customer. Another instance where customers might see a reduction in price is by ordering regularly from the same eCommerce site. Online businesses have customer loyalty schemes were customers can get reduced rates based on repeat purchases. They also communicate with customers using email newsletters informing them of special offers and discounted stock that they might be interested in. Again this empowers customers and keeps them informed of the latest deals that may be of interest to them.
Availability of new products
As previously mentioned B&Q can communicate with customers and produce marketing materials to send to customers about new products. Everyone that ever buys something online needs to have an email address and B&Q would use this to their advantage targeting specific customers by advertising goods that they may be interested in based on their purchase history. An example of this would be someone that buys seasonal products such as gardening items on the B&Q website could be sent an updated brochure featuring the latest seasonal products in the Spring and Summer every year. When shopping online a customer may be able to purchase a product online before it is made available in their own country in a retail outlet. For example if a new automatic lawn mower was developed in the USA and was still waiting on the manufacturer to come to an agreement with a sole distributor in the UK then a customer may be able to order this product before
Using eCommerce websites to purchase goods online opens up a massive range of choice for the consumer. The fact that you can shop on sites with an international presence such as Amazon means that the goods being sold are available from all around the world. In the case of B&Q being a massive trader across the UK and Ireland with partners in the USA they will import the latest and greatest products to the UK marketplace more easily as they have established partners through which to do this. This means regular customers of B&Q have a direct door way to new products that can be bought through the B&Q website before they would be available at a local privately owned family run garden centre.
New marketing models
With the emergence of eCommerce, has come new marketing models such as mailshots, product review forums, targeted PPC adverts and customer loyalty incentive schemes. The fact that most marketing materials can be produced electronically makes them cheaper to produce and distribute and therefore a saving can be passed on to the consumer due to having a reduced marketing budget. Mailshots or email based newsletter can keep customers up to date with the latest products available from a company. They may also provide free information for customers that may be of use to them. For example, B&Q could offer a gardening based newsletter that gives tips and hints on growing vegetables throughout the year. They would then use the newsletter to promote their products directly linked to the advice and guidance available in the newsletter. Using product review forums also enables eCommerce companies to get customers to generate content on their website by reviewing products and offering advice on the quality and value of the product. This ‘word of mouth’ based content is valuable to the business in terms of offering free advice and because it is user generated content that will bring more traffic to their site as ‘content is king’. All relevant content on an eCommerce website boosts the chances of ranking higher on search engine results based on keywords. This can nearly be seen as free marketing after the initial investment of setting up the forum/review site has been done. Other ways that eCommerce based companies can market their business is by paying to have their advertisements placed in search engine ranking pages or other relevant websites using pay per click (ppc) ads. The benefits of this type of marketing is that the ads are targeted based on the search terms used or the content on the other website. This can achieve excellent results, for example B&Q may use PPC and the ads could be place on a gardening forum were users discuss items such as garden sheds. The PPC ads could then show up on the forum leading very targeted customers directly to the B&Q website.
As mentioned above online advertising can be used very successfully to get targeted customers to visit an eCommerce website. Businesses can also make money by allowing other companies to advertise on their site. This is something that can generate extra revenue and companies that are not directly competing with each other can often form valuable partnerships that are beneficial to both businesses by doing this.
As well as impacting on the consumer, having an online presence also has a big impact on the businesses. A traditional high street retailer will have to incur additional costs when setting up an online presence and the business model might not work for everyone. On the other hand a traditional trader that incorporates online sales into their business model might find that the reduced costs and suitability of their products for this model means that it may become their main source of revenue.
Global business and consumer markets
When a business that previously traded in the traditional way of using a retail outlet diversifies and adds an online presence they then automatically become a global business and reach out into a much bigger consumer market. The fact that their products or services are available online, means that there could be a demand for these in other countries throughout the world. Obviously some companies might only offer the option of nationwide delivery but even with this the business is expanded on a national level and reaches out to customers that were not previously in the direct locality. Another effect that having an online presence has in terms of reaching out into a global marketplace is that a company that manufactures a successful patented product could increase their distribution network as entrepreneurs in other countries may contact them to become distributors of their product to cut down on direct delivery costs. Trading online means a local or even national business cab expand and become a global business. The only limitations are those were the law restricts the delivery of goods/services between certain countries or when the eCommerce business itself restricts itself due to not wanting to trade outside of the host country.
Challenge of new technology (issues)
When establishing an online business, companies that did not previously have an online presence will need to expand in terms of the IT infrastructure needed to run the click part of their business. Third party vendors can be used to set up the eCommerce website structure but an internal database is normally the best option for maintaining a record of the stock that is available to sell online. If a company is to expand and become a big player as regards selling products over their website then they will probably need a dedicated technical support team to maintain their servers and a host of technology required to process orders for the customers to ensure they are processed and delivered correctly. Embracing new technologies and maintaining systems to become as fast as possible is an essential part of maintaining an eCommerce business. There are costs associated with this and it’s important to invest in the latest technologies to ensure the best online services are offered to customers. If B&Q managed their own servers from head office and did not connect to the internet through the fastest and most reliable internet service provider available then this could have a drastic effect on their business.
One major impact that having an eCommerce business is to ensure a safe and secure environment for customers to order online is provided. Customer trust plays a massive role in terms of ensuring that customer details are kept securely and that a safe gateway for payment is available. Technologies such as SSL (secure socket layer) and digital certificates are used to establish safe and secure payment gateways. On their website,B&Q have advertised the fact that they guarantee secure payment and have established payment partner ships with major credit card providers. Putting the consumers mind at ease is essential, and providing a guarantee that their identity or payment details will not be compromised means that you will establish repeat business and customer trust.
Impact and implications of dealing with customers on-line
When dealing with customers online businesses have to retrain staff to deal with them in a way that is fast and efficient. Email support, chat sessions and instant messaging support can be used to ensure customers have a 1 to 1 contact point when they have issues relating to their online purchases. Staff need to be proficient when using these mediums to communicate with customers and should be trained to use a list of pre-defined answers that support the customer in a friendly and professional manner. This may also require previous phone support staff that are not completely IT literate to retrain so that they can offer support using email and messaging. It’s important that online support is just as professional as verbal or written letter support and businesses need to be aware that using this medium customers expect things to be done much faster as they are used to high speed technology based purchases and require the same level of customer service. If B&Q were to ignore online communication and expect all customers to come to their stores then people who had bought online for the purpose of not having to travel to the store would be disappointed with the level of service. Online customers should be treated as such as do expect a certain level of speed and anonymity in terms of not having to go face to face to get customer service.
Creating new distribution channels
By adding an online presence B&Q have been able to sell to people who would not have easy access to a B&Q store. Most people would be reluctant to travel more than 20 miles to shop at a store but having a web store means that B&Q are able to offer their products to the entire nation. Delivery is not an issue as when the products are packaged it is up to an external delivery agency or the postal service to ensure the products purchased meet their final destination. As previously mentioned, having an online presence in on country can mean partners in other countries wanting to act as a licensed distributor of you have a successful business model. Working in this way means that you can have other organisations contacting you to set up new distribution channels without actually advertising for them to do so.
Although a business that operates as online trader sees many benefits in terms of opening up many new opportunities in terms of increasing their distribution network, there are also some drawbacks. A business is competing in a global marketplace and opens themself up to having other traders competing with them throughout the world. If B&Q have a very successful line of home intruder alarms that had excellent sales in the UK this would not guarantee good sales in other countries as natives there might be able to source similar products at a much cheaper price. UK customers may also be able to source similar products from the Asian market directly from the manufacturer at a much cheaper price. Obviously there may be delivery and trust issues but customers that are used to purchasing online are willing to risk this as the world of eCommerce becomes more secure and trustworthy by the day. Competition for eCommerce business is healthy but companies must be careful to market their products in areas that they believe they can offer good value to customers.
Challenge to monopoly power
Businesses that provide an online store generally increase their market share on both a national and global level. By becoming better known throughout the world by more customers finding your website then you have the opportunity to become a good player in your sector by reaching out to customers that want to order online. Although B&Q is mainly based in the UK mainland and in Northern Ireland their customer base extends to the Republic of Ireland as the company have grown. Although their retail store presence is not strong in the UK many Irish consumers will access their site as they will deliver to the Republic of Ireland. In doing this they are monopolising their power as a big player in the diy and gardening market and extending their marketplace due to their reputation. On the other hand a local family run business that has an excellent product to sell online can challenge the big players if their product is something that will be useful on a global scale. This is one way of reaching out to a wider marketplace and competing with the more popular companies in your market sector.
Retraining of staff
Business need to retrain staff when they add an e business section to their existing business. The way that the business operates is different and more IT based. Orders need to be processed and sent on time and the is not as much 1 to 1 communication with customers as most of the business end of things takes place in a warehouse. This is a new business model and existing staff may need training on how things are done and might need more health and safety training as more lifting could be involved when processing and packing orders. The main element of retraining is to ensure that all staff become more IT literate in terms of providing customer service. This was discussed earlier and companies need to focus on providing instant support over the telephone, online chat rooms integrated in the web shop and email. Training must be very specific so a consistent approach is used when dealing with all customers. Speed, professionalism and good spelling and grammar are essential here to convey the required element of professionalism. If B&Q had an employee giving online chat support that used text-speak it would not look very professional and may give the company’s customer care team a bad reputation.
When introducing an online presence with integrated web store to boost your business it will be a lot cheaper to set up than a normal customer facing retail outlet. The fact that you do not have to display the products using shelving with product information and pricing eliminates this aspect. If you have 3 retail outlets then all 3 of these can use the same web store to trade through. This shows how one online shop compares to the cost of setting up retail outlet. All marketing materials are digital and easier and less expensive to produce and the printing costs are eliminated. An online store can be run with much fewer staff as all orders are automated through the website so no sales staff are required as checkout and payment is completed digitally. This saving on staff is a massive overhead saving. The fact that all online trading can be done from one warehouse means that storage costs are cut and products do not need to be unpackaged and displayed. For the likes of B&Q they could obtain one picture of a picnic bench from the manufacturer and use this image to advertise this product online. If this was to be done in each of B&Q’s stores then the man hours that have to be invested would be a lot more than setting up the product information to display online. Other costs cut are the fact that the online store can operate using less hours in a day. Sales can be made 24 hours a day and processed at any time which cannot be done in store unless it is staffed. The set up costs are also less expensive as you do not need to make the warehouse as aesthetically pleasing as a shop. Insurance costs for public liability will also be less as no customers will be on site.
New selling chains (issues)
When introducing online sales careful planning needs to take place to ensure that a stock management system capable of matching that in a store is available. The fact that multiple customers can be online looking for something at the same time means that availability of items has to be accounted for at all times on a first come first served basis. Having this new online selling chain means that the business needs to liaise with suppliers and manufacturers to ensure goods are stocked at all times. Ensuring that good relationships are built with customers also helps run the business more effectively. With the online world changing so quickly businesses need to be aware of online marketing and selling through different avenues based on target markets and where they are online. An example would be if lots of gardening products were being sold on ebay then B&Q would need to look at advertising on here to direct customers back to their own site or even set up their own customised ebay store.
When selling online businesses need to adhere to certain laws such as The Data Protection Act (1998), The Distance Selling Act (2000) and The eCommerce Directive (2002). This ensures that customer information is held securely and it is made available as and when requested by the customer. The Distance Selling Act means that businesses need to advertise their goods and services correctly and not mislead the customer in any way. The customer must also receive written communication of their order to ensure them that it has been placed correctly and so that they have proof of purchase. Businesses also need to comply with these laws so that customers are aware of their sales and return policies. The eCommerce Directive overlaps a lot with the laws contained in the Distance Selling Act. It also ensures that companies communicate with customers correctly and identify unsolicited emails as such. Complying with these laws not only protects the customer, but also the businesses themselves. If B&Q did not comply with these laws then they could end up having a big legal battle on their hands as they will not have provided fair trade for the customer.