The internet has become a truly interactive medium and consequently, is opening new avenues and opportunities for organizations (Harry, 2001). Web sites are used for many purposes. Organizations use their web site to provide information to their stakeholders about the organization, ranging from its origin, business mission and areas of activity, standards and values, brands, financial performance, job opportunities and contact points through to quite specific information about products and their applications. E-commerce involves the use of web sites and e-mail to inform customers about a product, solicit their questions and accept their questions directly through the electronic medium (Karayanni & Baltas, 2003). In simplistic terms, e-commerce is the concept of selling and making transactions on the internet or the World Wide Web. The transaction can take any shape or form and can be between business to consumer or business to business. ‘Online sales are not just the wave of the future: They’re the wave of the present.’ You should be riding that wave.’ (Simmons,2007; pg76). The study examines the relevance of e-commerce within the context of current business climate. It takes the case of Tesco.com and Tesco Direct (Tesco’s online subsidiary) to highlight the importance of e-commerce activities.
Analysis and Discussion
The Internet has become an important part of the marketing mix. Dozens of Internet-only companies have surfaced in many industries and numerous conventionally operated companies have adopted the Internet (Yang et al., 2004). Consumers who shops for products and services on the internet are empowered consumers who can easily go online to check out competition, prices, better products and service. They are no more a static acceptor of marketing messages but have the power and technology to investigate the truth about the messages (Damanpour, 2001). The fresh boom in e-commerce and online shopping has left traditional retailers in a quandary about how to sell – or where to advertise (Clarke, 2003). The internet has become a truly interactive medium and consequently, is opening new avenues and opportunities for organizations. E-commerce is gaining momentum in different industry sectors and its specialty lies in the fact that its business is conducted on the internet which is an ‘anytime-anywhere’ medium and gives organizations a chance to transact for 24 hours a day with little extra cost. (Aditya, 2001; pg 736). The topic of e-commerce has been of particular interest to practitioners, academics and marketing strategists and lot of research has already gone into determining whether e -commerce and internet marketing is significantly different to traditional commerce and offline marketing practiced by organizations over the years. With companies expanding their online operations, e-commerce is slowly becoming a norm.
One of the reasons for the rapid surge in e-commerce can be attributed to change in consumer buyer behavior. Research done by Eatock (2002) revealed that consumers are tempted to spend more on when they shop online and there are systemic differences in consumer choice behavior between internet and regular shopping. The research is valid even today because differences in online and regular shopping behavior still exist. People still hesitate to buy items like clothes etc online. There are some exceptional examples of online companies like Google, Yahoo and Amazon which have grown to become major global brands in their own right. These companies are purely online companies (e-commerce) and sell their products solely on the internet while others like Tesco, Sainsbury’s, Marks and Spencer etc have successful online operations, but their online operations only supports their regular operation. Sales from Tesco.com formed 24% of the total revenue (Tesco Company Reports, 2007).
Doole et al.,(2004) mentions that the obvious advantage of transacting on the internet is that products or services can be ordered 24hours a day wherever they are. The internet also offers consumers reams of comparative information about companies, products, competitors and prices without leaving their offices or homes. It offers fewer hassles such as customers do not have to face salespeople and emotional factors that they do not have to wait in line. One of the most important advantages is lower cost as e-commerce companies avoid the expense of maintaining a store and the cost of rent, insurance and utilities.
Tesco Direct and Tesco.com
Tesco is one of the largest food retailers in the world, operating around 2,700 stores. The group operates through multiple store formats, including Extra, Superstore, Metro, Express and hypermarkets. The group provides online services through its subsidiary, Tesco.com. Tesco.com has more than 750,000 regular web shoppers, and posted in excess of £1bn in online revenue in 2006. (Walmsley, 2006) It is one of the largest online grocery shopping services in the world and is the fourth biggest online retailer in the UK, behind Amazon, Dell and Argos. Its revenues grew by 31.9% in 2006, reaching £1 billion in turnover, while net profit increased by 54.9% to £56.2 million during the same period. Tesco.com serves 170,000 households in the UK, which include households from both urban and rural areas. A strong online presence enables the group to serve new customer segments, avoid investments in physical infrastructure and earn better margins. Tesco Direct is the online subsidiary of Tesco Plc which deals with home-ware, electrical and other related product. It competes against the likes of Argos and Homebase. Tesco is in the process of revising the structure of its marketing department following the expansion of its Tesco Direct. Majority of its promotion is handled by its online subsidiary Tesco.com. Tesco Direct has re-launched its catalogue with an increase in its catalogue range from 1500 to 7000 products and a 25% expansion of its offer online (Quilter, 2007).
Success of all the big online retailers like Tesco Direct is primarily because of their use of traditional offline methods to raise awareness of product range and special offers and using internet marketing tactics to encourage consumers to buy online as a cost-effective way of raising response rates. Tesco is one of the benchmark retailers which have shrewdly used the strength of its offline brand to tap into new markets and sell products which are not available in store through Tesco Direct. Developing a new store online through its website increases and gives a separate entity status for the ‘new’ online store (Swaminathan, 2006; pg 71). Previous researchers done by (Kolsaker & Payne, 2002) revealed that online consumers tend to visit their preferred main brands on the Internet within a relatively short period of time, predominantly for curiosity. Also, when consumers associate an online store (e-commerce) site with trust, privacy and value, the online site has the opportunity to get into cross-selling and up-selling because the consumers have crossed the first layer of test (perceived low risk with the online retailer) and are getting interested in shopping products of topical interest through the e-commerce site. Such customers and strategies contribute to the long-term profitability of the site and the business (Grewal et al.,2005).
One of the major reasons behind Tesco Direct’s success is the fact that it provides the salient attributes of familiarity, a signal of presence, commitment, and substance due to its huge offline operations which help prosper its online brand (Erdem, 2006). The fact that Tesco is a tried and tested brand means that it is capable of providing sufficient information for consumers to predict satisfaction without experiencing the merchandise which eases the decision making for consumers when they shop online with Tesco Direct/ Because of its offline operations, Tesco is on a stronger foot than other smaller brands offering the same range of products.
The USP of Tesco Direct and Tesco.com’s e-commerce success are:
- Strong knowledge of their customers and accurate customer profiling. E-commerce activities of Tesco Direct are tailor made to the needs of their target audience. Tesco Direct rides on Tesco’s Clubcard data to figure out the best customers and the customers it needs to target.
- It also conducts surveys and market researches before coming out with a new product portfolio and refreshing its catalogue and websites.
- Tesco Direct takes special care in website development and the content displayed and advertised on their site. Their designs reflect their unique selling proposition. Tesco Direct’s USP is better value products and its site and catalogue highlights it. It makes sure that its site is easy to download and navigate for customer convenience and satisfaction.
- Customer Service and contact details feature prominently to assist customers before making the purchase decision.
- Tesco.com Direct also uses online behavior analysis tools to integrate information coming from their sites and the affiliate network
- It effectively integrates its online and offline marketing activities and makes sure that its online activity is not viewed in isolation. Its online marketing generates demand for its offline channel (Tesco Stores) and visa-versa. Similar research carried out by Datamonitor (2006) revealed that retailers of high value goods report that people who visit their on-line store are much more likely to buy in a high street store, and are better informed about their requirements, having already researched the products on the web.
Tesco’s case reveals that for an organization to be successful in its e-commerce operations, it is important to integrate both its online and offline operations. Already mentioned within the text; trust between the organization and the customer/potential customer also plays a crucial role in e-commerce success. Website design and content also plays a vital role. Tesco Direct and Tesco.com make sure that they keep their site simple and don’t clutter their site with excess information so that customers won’t lose direction on their website. There is a general tendency of web developers and business decision makers to absorb information on a Web page and in most cases they end up cluttering it with text and images (Weinberger, 2007). Internet marketers should take advantage of the highly interactive nature of Web sites by recognizing that users are active acquirers of information.
E-commerce activities should have clearly defined, strategic goals which can be varied depending on the size and position of the company. Tesco Direct’s goal is to design and deploy the Internet to strengthen its current business and to improve services offered to its customers. Tesco.com offers customers many ways to place orders, track invoices, and pay (e.g., online, mail, telephone, personal contacts). Its customer care and loyalty seeking positioning offers it with the possibility of direct, continuous contact with customers who will feel protected and cared for by the company, which is transferred to a loyal attitude to its products. One of the objectives of Tesco Direct’s website is to obtain continuous qualified visits. It is being monitored carefully by technological tools which monitor the number of visits as well as the followed path through the Web page. The other thing which gives Tesco Direct’s website a competitive edge is its ability to identify visitor profiles. Through its club card, it knows better about its internet user tastes/similarities and needs which permits in appropriating its market strategies according to customer needs and requirements.
The changing face of e-commerce
It has to be kept in mind that the web is a fluid environment which allows visitors to quickly jump from one site to the other which means organizations have to structure their website in the most optimal manner so that it loads fast and is more customers friendly. Website is the face of the organization which interacts with the customer (Simmons, 2007). Good e-commerce makes sure that their web site allows for immediate interaction. With a plethora of e-commerce sites, it is becoming exceedingly difficult for organizations to get noticed. Even search engines keep updating and changing their algorithms which mean that organizations have to continuously find new ways to make their listing rise to the top by experimenting with links, banners, and Meta tags (keywords or descriptions used by search engines).
For e-commerce to be a success, marketers have to learn to understand the online user’s intention rather than grabbing attention to increase sales. Messages to promote online transaction and purchasing have to be personalized, contextual, localized and relevant (Magill, 2007). Response to customer queries with regards to the product has to be prompt because prompt responses can capture a customer’s attention, loyalty, and orders.
Limitations of E-commerce
Apart from all the benefits of e-commerce highlighted above, transacting online has its limitations. Online marketers and strategists have to correctly size up the plus and minus of the web before taking the plunge.
- E-commerce may not be suited for all the products or may be suited for one product more than the other. E.g. when the German Electronics maker went online, they had to select a few products and keep the other off. (Okumura, 2006)
- Costs involved are not inconsequential – Costs involved in e-commerce selling are not often as low as they are made out to be. The costs do not stop with a one-time expenditure on the setting up of the website to market the products. The marketer is required to keep spending sizeable amount on running, maintaining and updating the site. Moreover, websites have to be kept alive round the clock, as customers are spread over different time zones, and want to do business on the internet according to their time convenience.
- Question marks about profitability – One has to take note of the fact that as of now most internet marketers are struggling to make their business viable and profitable. Even Amazon, the world’s biggest e-commerce site is yet to break even. While e-commerce is full of potential, the execution part is beset with difficulties (Smith, 2007).
Merely deciding on the target market doesn’t ensure e-commerce success. The biggest problems facing organizations is to differentiate themselves with their e-commerce activities (Smith, 2007). Almost every organization has web presence and majority of them already transact online. As internet culture sweeps out at a dizzying pace, figuring out how to increase sales and revenue, increase profitability and make effective use of online space is the biggest problem online marketers face (Gumpert, 2007).
Legal/Regulatory problems – E-commerce activities need effective and trusted mechanisms for privacy and security. This has several dimensions such as confidentiality, authentication, non-repudiation and certification (Roman, 2007). For the consumer, security relating to credit card numbers and password protection is a big concern. A framework is needed for dealing with cyber crimes.
Infrastructural problems – For e-commerce to be a success, the infrastructural constraints have to be dealt with. Constraints such as low density of telephone, PCs and broadband internet connection can lower the power of e-commerce success. E-commerce caters to a global customer base; some countries have low density of internet access to support viable e-business. Also, in some cases countries face bandwidth limitation (the bandwidth available is not enough to meet the user load). Other technical barriers relate to networks and infrastructural bottlenecks at the delivery end (Roman, 2007).
Commercial problems – Problems relating to payment is a significant element of commercial problems. Apart from the legal dimension discussed earlier, there is a commercial dimension to the payment problem. Corporate and household consumers are still skeptical about the efficacy of the process. Marketers, in such a scenario, have to create the necessary confidence among the potential customers and persuade them to see electronic commerce as a perfectly normal way of doing business; they have to make them comfortable with purchasing online.
While e-commerce has witnessed extensive growth in recent years, so has consumers’ concerns regarding ethical issues surrounding online shopping. Internet represents a ”new environment for unethical behavior” (Roman, 2006; p. 126).Findings from Citera et al. (2005) revealed that ethical transgressions are more likely to happen in e-transactions as compared to face-to-face transactions. For example, the Internet can be used effectively by a small company to appear deceptively large, as the webpage on the computer screen does not distinguish between a large and a small company. Additionally, internet transactions are carried out over a public domain. Therefore, personal and financial information that is collected can be easily stored, copied, and shared. Bush et al. (2000) assessed the perceptions of the ethical issues concerning marketing on the internet among a sample of 292 marketing executives. The ethical concerns most often mentioned regarding marketing on the internet was the security of transactions. The next three most often mentioned ethical concerns were illegal activities (e.g., fraud, hacking), privacy, and honesty/truthfulness of the information on the Internet. The same security issues are still relevant today and issues such as fraud and hacking have become even more prevalent than before.
The factors that consumers feel most concerning while shopping online are:
Privacy – Related to a variety of concerns such as unauthorized sharing of personal information, unsolicited contacts from the online retailer, and undisclosed tracking of shopping behavior.
Security – Concerned about potentially malicious individuals who breach technological data protection devices to acquire consumers’ personal, financial, or transaction-oriented information.
Online retailer fraud – Focuses on concerns regarding fraudulent behavior by the online retailer, such as purposeful misrepresentation or non-delivery of goods.
E-commerce has increased remarkably over the last decade, yet consumers’ concerns regarding ethical issues surrounding e-commerce also continue to grow.
The most powerful internet marketing ideas are simple, and adhere to the same rules. Creating simple, but powerful differentiation in the minds of the customers, staff, all of the stakeholders, requires a clear and compelling message that is expressed in everything a company does; from product to service, through environments, to the people they hire and the way they market themselves. Maintaining this simplicity throughout the complex online transaction processes is a considerable task which requires absolute focus, passion and conviction. Although E-commerce does increase sales and is a good medium to communicate with the customers, it is slowly becoming as competitive as traditional retailing / selling. Organizations need to have compeitive strategies, resources and execution abilities to be successful in their web commerce activities. Because of the internet, the speed of the business is accelerating all the time. Online shopping has led to even faster cycle times and cost reductions. To beat competition, organizations have to work faster and smarter with their e-commerce activities. Successful e-commerce sites have an eye on desirable economic outcomes and successful organizations make sure that they establish what they are trying to accomplish with their online marketing efforts.