E-RETAILING

CHAPTER 4
E-Retailing: Strategies

Background

• Companies approach e-retailing with no clear idea of where they are

going
• Fail to consider the level of commitment and organizational
redefinition that must occur behind the scenes
• Fewer companies have a formal E-business strategy in place
• Any company planning to offer e-retailing should have a long-term
vision and an objective of transforming itself into an E-business
• e-retailing requires the mastery of many interrelated skills — both
technical and business

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 e-retailing Strategy

• Steps to formulate an e-retailing Strategy

• Step 1: Making The Initial Decision to Offer e-retailing
• Step 2: Identifying the Business Aims for e-retailing
• Step 3: Analyzing the Feasibility of the e-retailing Initiative
• Step 4: Planning and Design of e-retailing
• Step 5: Implementation
• Step 6: Strategy assessment

Step 1: Making The Initial Decision to Offer e-

retailing

• A company may decide:

• Not to go for e-retailing at least for the time being.
• To use the web just as a means of advertising- this option
is popular as it involves low cost, no cost of security,
payment, web hosting etc.
• to open online stores to complement existing stores
• to establish a separate online division within the
company.
• to dissolve their regular business and go for a full online
business operation

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 Step 2: Identifying the Business Aims for e-retailing

• The aims behind an e-retailing strategy should include some or all of

the following
• To improve customer service and interaction.
• To increase brand awareness and awareness of the company.
• To expand geographic reach.
• To expand into new markets.
• To increase revenue and market share.
• To reduce operating costs
• To be seen as an innovative and progressive company through being an
Ecommerce leader.
• To compete with bigger rivals

Step 2: Identifying the Business Aims for e-retailing

• Company should focus its reengineering into areas where it gives

more return on investment. This requires clear well-defined
objectives
• To sell more goods and services by using the web.
• To provide customer ‘e-care’, i.e. online support.
• To support its business partners over the web: e-care for partners.
• To improve communication within the company: e-care for employees.
• To work more closely with customers and suppliers to improve the tendering
process and better administer huge number of transactions involved e-
procurement.

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 Step 2: Identifying the Business Aims for e-retailing

• The Role of the Company Web Site in e-retailing

• Is it for image? Do you need to be seen to keep up with
technology and competitors?
• Is it purely for information? For example to supply
addresses and contact numbers.
• Is it purely for internal use or for use by partner
companies?
• Is it to advertise products? In which case are existing
customers the target or is the objective to reach new
customers?
• Is it to supply services? Could the site be used to provide
a helpline or other backup service?
• Is it for delivery? Can your products be delivered through
your web site?

Step 2: Identifying the Business Aims for e-retailing

• The company must also consider the external viewpoint

• Are customers happy with existing services or do they require more?
• Are customers interested in buying on-line?
• Will supplier companies be willing to interact on-line?

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 Step 3: Analyzing the Feasibility of the e-retailing Initiative

• The company needs to carry out a feasibility study and analyze

whether it is possible for the organization to offer online services
with the resources available.

Step 3: Analyzing the Feasibility of the e-retailing Initiative

• How can the Internet further my business objectives?

• the company has to accurately articulate at the strategic level the
linkage between the current business objectives and the
objectives in the market place.
• What products and services will I offer and deliver on the Internet?
• How do I incorporate the Web into existing lines of business, supply
and existing channels of distribution?
• How can I improve customer service and satisfaction?
• How can I be sure that my data, and that of my customers, suppliers
and partners will be secure?
• Will I be at a significant disadvantage if my competitors provide these
capabilities to customers before I do?

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 Step 3: Analyzing the Feasibility of the e-retailing Initiative

• Cost Benefit Analysis

• Involve reviewing what is present at the moment in terms of skilled staff,
technology and resources, and estimating costs of building, implementing,
and supporting the hardware, software and human resources needed.
• In many e-retailing projects costs have been underestimated and benefits
overestimated so companies entering this field should exercise some caution.

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Step 3: Analyzing the Feasibility of the e-retailing Initiative

• Adds tremendous marketing power to any type of business for a fraction of

• the cost of traditional advertising and marketing methods.
• Opens up a global marketplace that would normally be unattainable for
most companies.
• 24/7 availability.
• Can reduce administration costs, as all communications are electronic
• faster processing of orders, reduced turn round time and the
consequential saving of administration costs.
• Can reduce costs and processing time when working with supplier
organizations if they too are using e-retailing. The B to B harmonization of
the supply chain can reduce costs even if a company does not itself sell its
products through the Internet.
• A low cost alternative to a traditional physical retail outlets.

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 Step 4: Planning and Design of e-retailing strategy

• Process of formulating e-retailing strategy

• Creating an independent e-retailing division or department with employees
having specialist skills.
• A mixture of skills are needed: technical skills and specialties in sales and
marketing, purchasing, human resources, training, finance and business
process re-engineering.
• Conduct SWOT (strengths, weaknesses, opportunities and threats) analysis.
• An ecommerce initiative needs to build on these strengths.
• The cost benefit analysis should enable managers to set targets and prioritize
e-retailing activities to give the greatest opportunities for the earliest
financial return with the minimum risk.

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Step 4: Planning and Design of e-retailing strategy

• Companies should not underestimate the amount of business re-

organization required to introduce e-retailing
• Companies need to consider whether they can carry out the
development work themselves or whether they should subcontract
part or all of this work.
• E.g. who is going to design the web site?
• How will the content be maintained and updated? Who will administer and
control the system after it is installed?
— The company must consider whether it has the
appropriate development resources and experience
to build e-retailing systems or whether there are
existing products that could provide the foundation
of a new system.

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 Step 4: Planning and Design of e-retailing strategy

• Designing the system

• How can an existing web site be developed to maintain customer loyalty?
The design should take into account
• the values the company wishes to promote,
• The image it wished to build and maintain
• the customer requirements of convenience and ease of use.
• Who will process the credit card orders? Will e-retailing be employed to
transmit credit card orders to the company’s merchant account provider?
• How will you get your order and fulfillment information into your
accounting system?
• How can you be sure that your data and that of your customers, suppliers
and partners will be secured?

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Step 4: Planning and Design of e-retailing strategy

• Some Pitfalls to Avoid During Planning

• Companies need to ensure they do not neglect planning for customer
service both before and after a sale.
• fail to integrate their e-retailing with their traditional business
• fail to prepare for success and the volume of business it may
generate, e.g. avoiding network traffic jams.
• underestimate the need to advertize the web site and e-retailing
facility.
• assume that the web site interaction is the only aspect that will make
the company different to its competitors - the underlying systems are
equally important and must be developed from the outset to avoid
failure.
• make hasty (and costly) decisions because of the pressure to get into
the market as quickly as possible. It is important to react quickly but
it cannot be done without a minimum of thought.
• neglect issues of scalability. If the company is successful it may have
to grow its e-retailing business very quickly. It is important that the e-
retailing system does not itself impose limits on growth.

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 Step 5 Implementation

• Organizational and cultural issues

• In order to have a successful e-retailing development it is necessary to have
board level commitment, and support from all departments, people involved
and stakeholders.
• Projects have been known to fail without such commitment.
• Some education and training will need to be implemented before any further
development is attempted.
• Introduce training on the business and technical issues of creating an e-
retailing system.
• Training is required for various disciplines of hardware, software, networks,
marketing, finance, and human resources.

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Step 6: Strategy assessment

• The objectives of strategic reassessment are

• To find out if the e-retailing system is delivering what it was supposed to
deliver.
• Common pitfall :selling over the web means the company must be making
money over the web.
• To learn from both the successes and failures of the system reviewed.
• e-retailing is a continually changing environment so initiatives that work in
the first instance may cease to be cost effective at a later stage.
• To identify failing projects as soon as possible and determine the reasons for
failures.
• There is no point in continuing with a project if it can’t be saved: learn from
the mistakes
• Feedback and corrective actions to give a policy of continual improvement
are needed for any development including e-retailing.

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 Step 6: Strategy assessment

For companies implementing an Ecommerce strategy, a set of questions are given below
which can be used as a checklist by the review team:
• What were the aims and objectives for e-retailing? Were they met?
• What were the expectations? Were they realistic?
• What products and services did the company want to offer? Is the system delivering
them? Can the proportion of offered services be quantified?
• Have unanticipated problems occurred? If so, what proportion were handled
successfully?
• What costs did the company hope to reduce? What cost reductions were actually
achieved?
• Did other costs increase unexpectedly? If so, why? What extra costs were incurred?
• What were the sales objectives were they realistic? How well were they obtained?
• Did web and Internet communications reduce traditional communication costs, if so,
by how much?
• Did you improve customer relations? What evidence is there for this? If not what went
wrong?
• Have your suppliers provided adequate services? If not, what cost was incurred?

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Step 6: Strategy assessment

• What internal issues have arisen? For example, has it had an effect on employees’
resistance to change, cultural change etc? Can any problems be quantified?
• Is your site making the best use of available technologies? How will you stay on
top of online developments in your field? Are all appropriate staff involved and if
not who else should be involved?
• Does your web site effectively convey the image and message the company
needs? Are there new media or public relations outlets that you could tap for
further promotion?
• What information has been gained from customer surveys, monitoring the use of
the company web pages and sales made through e-retailing. Does this point to
further opportunities for e-retailing expansion?
• Are there further efficiencies that you could achieve by more effective electronic
communication? If so what is the projected saving?
• Could the company’s database of electronic contacts be further extended and
used more effectively for marketing? Note however, that care must be taken over
privacy. The company should ensure it follows a clear privacy and ethical policy in
all its use of customer data

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 Step 6: Strategy assessment

• Review your Web traffic analysis:

• Are there any obvious patterns in the Internet traffic, or the paths the
company’s visitors follow that may give insights into their preferences or
provide opportunities for further e-retailing growth.
• What are the common routes users take through the web site and what are
the top exit points from your site? Are these appropriate? Can these be
changed by better site design?
• Which external sites link to you? Are these appropriate? How often are they
used? Are you generating sufficient return on investment for paid for online
advertising?
• If you provide a web site search facility, what are the most common search
phrases and do they give any ideas for new areas of business development?
• Track competitors developments in the field: examining new and old
competitors.

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