Electronic retailing (e-tailing) is an internet-based sales platform where consumers are able to buy and sell goods online directly from a business without physically inspecting the goods. When retailing is done completely online, organizations are faced with a plethora of different challenges and difficulties when constructing their business model.
When designing an e-tailing business model, organizations strive to capture market share by producing the best web pages which attract the most shoppers and convert them to buyers.
When selling products online, logistics and distribution are of critical importance to ensure customers are satisfied with the timeliness of delivery for their purchase. It directly correlates to why businesses such as Amazon are focussed on finding ways to decrease shipping times and offer options such as “one-day delivery.”
Regardless of whether a transaction is being conducted online or in person, there are two specific subcategories of transactions that are executed. They are B2C and B2B transactions, and they carry different implications when conducted in the electronic retailing market.
1. Business-to-Business (B2B) E-tailing
Business-to-business (B2B) e-tailing occurs when a business purchases a product or service from another business’s website, for its own use or to use as a component in its own products. The business model differs in B2B transactions when conducted online because fast shipping, quality, and price become increasingly more prominent.
Generally, when a business purchases wholesale products online, they are buying large quantities of goods. Therefore, it is important to negotiate reasonable prices with fast shipping and safe handling.
In order to develop the best e-tailing business model for B2B transactions, the wholesale business must offer quantity discounts, reasonably fast shipping, and ensure that the goods remain undamaged.
2. Business-to-Consumer (B2C) E-tailing
Business-to-consumer (B2C) e-tailing transactions are when a consumer buys a product or service from a business’s website, such as shoes off a sports apparel company’s website. The business model differs in B2C transactions when conducted online because consumers are very demanding and expect fast delivery and guarantees that the product’s quality matches the online description.
This makes shipping times and handling standards very important in any company’s e-tailing business model.
Types of Electronic Retailing (E-tailing)
There are two main types of businesses that offer e-tailing:
1. Pure Play E-tailers
Pure play e-retailers are the types of business that only offer e-tailing and do not operate any sort of physical stores that customers can walk into.
Examples of pure play e-retailers are businesses such as Amazon, Ali Express, Ali Baba, and drop-shipping businesses.
2. Brick and Click E-tailers
Brick and click e-tailers are businesses that offer both e-tailing and maintain physical brick-and-mortar stores that customers can shop at.
Almost every brick-and-mortar business uses some form of e-tailing but more prominent brick and click e-tailers that offer exceptional service include Apple, Foot Locker, and Sport Chek.
When operating a segment of a business completely online, there are a number of challenges that businesses face and seek to overcome. They include:
Some target consumers lack access to the internet
Complexity in conducting business completely online
Hackers will attempt to gain consumer information
High return rate because of lack of physical examination sizing of the good
Decrease in experience compared to brick-and-mortar shopping
High costs associated with maintaining a website
Need for warehousing
Need for a customer support team for product returns and complaints
E-tailing legal concerns
Compared to physical retailing, e-tailing provides an inferior customer experience and produces less consumer loyalty. They can both be improved over time, making e-tailing an immediate threat to traditional retailing.
The challenges faced while operating an e-tailing storefront are immediately offset by the large number of benefits that are attainable. The strengths are listed below:
E-tailing is able to reach a broader range of consumers.
Consumers are able to purchase unique products not offered in their country.
Most of the world enjoys easy access to the internet and is educated on how to use it.
Overhead is significantly reduced (i.e.. rent, sales staff).
E-tailing is a rapidly growing market that will eventually out-grow regular retailing.
A widened market range and market differentiation.
Customer intelligence tools to target and retain new customers.
E-tailing increases consumer convenience (i.e., reduces travel time if they were to shop at a regular retailer).
Advertising becomes more meaningful and impactful to customers.
Compared to physical retailing, e-tailing triumphs in ease of use and customer intelligence and provides a system that notably reduces the operating costs of a business.
CFI offers the Certified Banking & Credit Analyst (CBCA)® certification program for those looking to take their careers to the next level. To keep learning and advance your career, the following resources will be helpful: