Online shopping

Online shopping is a form of electronic commerce whereby consumers directly buy goods or services from a seller over the Internet without an intermediary service. An online shop, eshop, e-store, Internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or shopping centre. The process is called business-to-consumer (B2C) online shopping. When a business buys from another business it is called business-to-business (B2B) online shopping.

Contents

History

In 1990 Tim Berners-Lee created the first World Wide Web server and browser.[1] It opened for commercial use in 1991 . In 1994 other advances took place, such as online banking and the opening of an online pizza shop by Pizza Hut.[1] During that same year, Netscape introduced SSL encryption of data transferred online, which has become essential for secure online shopping. Also in 1994 the German company Intershop introduced its first online shopping system. In 1995 Amazon launched its online shopping site, and in 1996 eBay appeared.[1]

Customers

Online customers must have access to a computer and a method of payment.

In general, higher levels of education, income, and occupation of the head of the household correspond to more favorable perceptions of non-store shopping. Also, increased exposure to technology increases the probability of developing favorable attitudes towards new shopping channels.[2]

In a December 2011 study Equation Research found that 87% of tablet users made an online transaction with their tablet device during the early holiday shopping season.[3]

Logistics

Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine.

Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, like filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card numbers are not accepted by e-mail, for security reasons).

Payment

Online shoppers commonly use a credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

Some sites will not accept international credit cards, some require both the purchaser's billing address and shipping address to be in the same country in which site does its business, and still other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.

Product delivery

Once a payment has been accepted the goods or services can be delivered in the following ways.

Shopping cart systems

Online shopping

Like many online auction websites, many websites allow small businesses to create and maintain online shops (ecommerce online shopping carts), without the complexity that involved in purchasing and developing an expensive stand alone ecommerce software solutions.

Design

Customers are attracted to online shopping not only because of the high level of convenience, but also because of the broader selection, competitive pricing, and greater access to information.[6][7] Business organizations seek to offer online shopping because it is much lower cost compared to bricks and mortar stores, offers access to a world wide market, increases customer value and builds sustainable capabilities.[8]

Information load

Designers of online shops are concerned with the effects of information load - whether consumers can be given too much information in virtual shopping environments. Information load is a product of the spatial and temporal arrangements of stimuli in the webstore.[9] Compared with conventional retail shopping, the information environment of virtual shopping is enhanced by providing additional product information such as comparative products and services as well as various alternatives and attributes of each alternative, etc.[10]

Two major dimensions of information load are complexity and novelty.[11] Complexity refers to the number of different elements or features of a site, often the result of increased information diversity. Novelty involves the unexpected, suppressed, new, or unfamiliar aspects of the site. The novelty dimension may keep consumers exploring a shopping site, whereas the complexity dimension may induce impulse purchases.[10]

Consumer needs and expectations

A successful webstore is not just a good looking website with dynamic technical features, listed in many search engines.[12] In addition to disseminating information, it is about building relationships and making money.

Businesses often attempt to adopt online shopping techniques without understanding them and/or without a sound business model, producing webstores that support the organizations' culture and brand name without satisfying consumer's expectations. User-centered design is critical. Understanding the customer's wants and needs and living up to promises gives the customer a reason to come back and meeting their expectations gives them a reason to stay. It is important that the website communicates to the customer that the company cares about them.[12]

Customer needs and expectations are not the same for all customers. Age, gender, experience, culture are all important factors. For example, Japanese cultural norms may lead users there to feel privacy is especially critical on shopping sites and emotional involvement is highly important on financial pensions sites.[8] Users with more online experience focus more on the variables that directly influence the task, while novice users focus on understanding the information.[13]

To increase online purchases, businesses must expend significant time and money to define, design, develop, test, implement, and maintain the webstore.[12] It is easier to lose a customer then to gain one and even "top-rated" sites will not succeed if the organization fails to practice common etiquette such as returning e-mails in a timely fashion, notifying customers of problems, being honest, and being good stewards of the customers' data.[12] Because it is important to to eliminate mistakes and be more appealing to online shoppers, many webshop designers study research on consumer expectations.[14]

User interface

The most important factors determining whether customers return to a site are ease of use and the presence of user-friendly features.[15] Usability testing is important for finding problems and improvements in a web site. Methods for evaluating usability include heuristic evaluation, cognitive walk through, and user testing. Each technique has its own characteristics and emphasizes different aspects of the user experience.[15]

Market share

E-commerce B2C product sales totaled $142.5 billion,[3] representing about 8% of retail product sales in the United States.[16] The $26 billion worth of clothes sold online represented about 13% of the domestic market,[17] and with 72% of women looking online for apparel, it has become one of the most popular cross-shopping categories.[18] Forrester Research estimates that the United States online retail industry will be worth $279 billion in 2015.[19]

For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.

Advantages

Convenience

Online stores are usually available 24 hours a day, and many consumers have Internet access both at work and at home. Other establishments such as internet cafes and schools provide access as well. A visit to a conventional retail store requires travel and must take place during business hours.

In the event of a problem with the item—it is not what the consumer ordered, or it is not what they expected—consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund. Some online companies have more generous return policies to compensate for the traditional advantage of physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and does not charge a restocking fee, even for returns which are not the result of merchant error. (Note: In the United Kingdom, online shops are prohibited from charging a restocking fee if the consumer cancels their order in accordance with the Consumer Protection (Distance Selling) Act 2000.[20])

Information and reviews

Online stores must describe products for sale with text, photos, and multimedia files, whereas in a physical retail store, the actual product and the manufacturer's packaging will be available for direct inspection (which might involve a test drive, fitting, or other experimentation).

Some online stores provide or link to supplemental product information, such as instructions, safety procedures, demonstrations, or manufacturer specifications. Some provide background information, advice, or how-to guides designed to help consumers decide which product to buy.

Some stores even allow customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products. Reviews and now blogs gives customers the option of shopping cheaper org anise purchases from all over the world without having to depend on local retailers.

In a conventional retail store, clerks are generally available to answer questions. Some online stores have real-time chat features, but most rely on e-mail or phone calls to handle customer questions.

Price and selection

One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines, online price comparison services and discovery shopping engines can be used to look up sellers of a particular product or service.

Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.

Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.

Another major advantage for retailers is the ability to rapidly switch suppliers and vendors without disrupting users' shopping experience..

Disadvantages

Fraud and security concerns

Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.

Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.

Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party. Denial of service attacks are a minor risk for merchants, as are server and network outages.

Quality seals can be placed on the Shop web page if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent. A number of resources offer advice on how consumers can protect themselves when using online retailer services. These include:

Although the benefits of online shopping are considerable, when the process goes poorly it can create a thorny situation. A few problems that shoppers potentially face include identity theft, faulty products, and the accumulation of spyware. Whenever you purchase a product, you are going to be required to put in your credit card information and billing/shipping address. If the website is not secure a customers information can be accessible to anyone who knows how to obtain it. Most large online corporations are inventing new ways to make fraud more difficult, however, the criminals are constantly responding to these developments with new ways to manipulate the system. Even though these efforts are making it easier to protect yourself online, it is a constant fight to maintain the lead. It is advisable to be aware of the most current technology and scams out there to fully protect yourself and your finances.[20]. One of the hardest areas to deal with in online shopping is the delivery of the products. Most companies offer shipping insurance in case the product is lost or damaged; however, if the buyer opts not to purchase insurance on their products, they are generally out of luck. Some shipping companies will offer refunds or compensation for the damage, but it is up to their discretion if this will happen. It is important to realize that once the product leaves the hands of the seller, they have no responsibility (provided the product is what the buyer ordered and is in the specified condition).[20].

Lack of full cost disclosure

The lack of full disclosure with regards to the total cost of purchase is one of the concerns of online shopping. While it may be easy to compare the base price of an item online, it may not be easy to see the total cost up front as additional fees such as shipping are often not be visible until the final step in the checkout process. The problem is especially evident with cross-border purchases, where the cost indicated at the final checkout screen may not include additional fees that must be paid upon delivery such as duties and brokerage. Some services such as the Canadian based Wishabi attempts to include estimates of these additional cost,[21] but nevertheless, the lack of general full cost disclosure remains a concern.

Privacy

Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.

Many websites keep track of consumers shopping habits in order to suggest items and other websites to view. Brick-and-mortar stores also collect consumer information. Some ask for address and phone number at checkout, though consumers may refuse to provide it. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.

Hands-on Inspection

Typically, only simple pictures and or descriptions of the item are all a customer can rely on when shopping on online stores. If the customer does not have prior exposure to the item's handling qualities, they will not have a full understanding of the item they are buying. However, Written and Video Reviews are readily available from consumers who have purchased similar items in the past. These can be helpful for prospective customers, but these reviews can be sometimes subjective and based on personal preferences that may not reflect end-user satisfaction once the item has been received.

Product suitability

Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Other successful marketers use Drop shipping or affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory.

Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit in a standard mailbox—such as music CDs, DVDs and books—are particularly suitable for a virtual marketer.

Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets—in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.

Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings—most notably clothing—and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S.

Aggregation

High-volume websites, such as Yahoo!, Amazon.com and eBay, offer hosting services for online stores to all size retailers. These stores are presented within an integrated navigation framework. Collections of online stores are sometimes known as virtual shopping malls or online marketplaces.

Impact of reviews on consumer behaviour

One of the great benefits of online shopping is the ability to read others' reviews, which could be from experts or simply fellow shoppers on one product and service.

The Nielsen Company conducted a survey in March 2010 and polled more than 27,000 Internet users in 55 markets from the Asia-Pacific, Europe, Middle East, North America and South America to look at questions such as "How do consumers shop online?", "What do they intend to buy?", "How do they use various online shopping web pages?", and the impact of social media and other factors that come into play when consumers are trying to decide how to spend their money on which product or service.

According to that research,[22] reviews on electronics (57%) such as DVD players, cell phones or PlayStations and so on, reviews on cars (45%), and reviews on software (37%) play an important role and have influence on consumers who tend to make purchases and buy online.

In addition to online reviews, peer recommendations on the online shopping pages or social media play a key role[23] for online shoppers while researching future purchases of electronics, cars and travel or concert bookings.[24] On the other hand, according to the same research,[22] 40% of online shoppers indicate that they would not even buy electronics without consulting online reviews first.

See also

References

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  17. ^ NPD
  18. ^ National Retail Federation survey
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