Electronic Commerce and Today’s Strategies, Research Paper Example

Abstract

Internet Usage has been growing at explosive growth rates yet the benefits are not transferring to E-commerce. Some of the major obstacles in the wide scale adoption of E-commerce include but not limited to consumers’ online privacy and security concerns, confusing websites navigation and boring designs. Many failed ideas of the internet bubble era represent huge profit opportunities if executed carefully but the disappointing memories of internet bubble bust are alive and as a result, discourage risk taking and experimentation in E-commerce business ideas. This paper mentions several strategies that could be implemented to attract and keep website visitors as well as build online reputation.

Electronic Commerce (E-commerce) refers to a range of online business activities that result in products and services transactions. Technically speaking, E-commerce encompasses business transactions done through all kinds of electronic means but the term has come to define primarily business transactions over the internet. There are five major types of E-commerce which are Business-to-Business (B2B), Business-to-Consumer (B2C), Business-to-Government (B2G), Consumer-to-Consumer (C2C), and mobile commerce (m-commerce). Mobile commerce is the latest trend, fueled by the  growth of smart phone users and faster cellular data networks (E-Commerce and E-Business/Concepts and Definitions, 27 November, 2010).

The most dominant type of E-commerce is B2B, accounting for approximately 80% of all E-commerce transactions. E-commerce has been gaining traction and capturing increasing share of the local and global trade because of its numerous advantages over traditional sales methods. E-commerce not only lowers transaction and production costs but also reduces development time. In addition, it helps sellers reach a wider targeted audience, stay in constant touch with their customers, share information, standardize certain aspects of production and services, send quicker (non-physical goods and services) and improves accessibility to supply sources. Since E-commerce allows immediate access to information and price data, it also increases the intensity of competition and thus, lowers prices for the customers. Being relatively a new mode of carrying out business transactions, E-commerce is still evolving and thus, it will be some time before credible management theories and effective business strategies related to E-commerce are developed.

The dominance of B2B E-commerce type may in part due to the frequency as well as the sizes of transactions that happen between large scale businesses, but consumer oriented E-commerce types such as B2C and C2C have also suffered from slower than expected consumer adoption rates. Some of the factors discouraging the adoption of E-commerce by consumers are online privacy concerns, security concerns, cyber frauds, lack of knowledge about E-commerce, infant cyber laws, lack of personal shopping experience on the web, and potential of fake or damaged goods among many other things. Moreover, current state of consumer oriented E-commerce technology remains suited to low priced and small size items because manufacturers and retailers still prefer to sell big ticket and big size items through brick and mortar stores. The challenge to sell big size and big ticket items on the internet and encourage consumers to buy such items represents a strange contrast from the earliest days of internet retailing when Jeff Bezos of Amazon wondered how to convince consumers to buy small size and low priced items through internet in such a manner that Amazon can still make profits despite shipping costs often exceeding the item’s price. Different strategies have been identified over the years that are deemed essential for the success of both commercial and non commercial websites. They are:

Ease of Navigation

Internet was meant to be easy and intuitive so that it can be used by even the most technology novice individuals. There is no reason why a website should not be easy to navigate. This is why it is important to create user friendly websites whether commercial or non commercial because internet users have very short attention span. If they find your website confusing, it is far easy for them to go to your competitors because unlike real world, it takes few seconds to browse through virtual shops.

Keeping Visitors Happy and Busy

Addiction doesn’t usually arouse positive images but there are few things both commercial and non-commercial websites desire as much as addictive visitors. These addictive and loyal visitors tend to visit their favorite websites frequently and spend a great deal of time on each visit. Websites’ valuations are not only determined by their earnings potential but also the amount of traffic they attract. Moreover, by keeping visitors for long time, commercial websites also increase the chance of turning visitors into customers. Probably no other website today enjoys as many addictive users as Facebook. Facebook’s lofty valuation is the result of its ability to keep visitors on the website for longer period than any other website in the world. No wonder, Facebook is gradually turning into a huge commercial enterprise from being a social networking website.

Address Security Concerns

No one denies internet shopping is convenient (in most cases), faster, offers greater choices and prices, and yet the adoption rate of online shoppers doesn’t compare to the adoption rate of internet. Average user in the US carries at least 6-7 credit cards and yet most of them are hesitant to shop online from the comfort of their homes. It’s not that the internet security companies are doing a bad job of addressing online security concerns. It’s just that E-commerce websites have done a poor job of educating internet users and addressing their security concerns. News of customer data sales by online companies are such a common occurrence that an extremely thick wall of distrust lies between the internet users and the majority of the E-commerce retailers.

Develop New Models, or Just Improve Upon Old Ones

The pain of internet bubble bust still seems to be alive, even after a decade. In the hindsight, internet bubble was not created by the failure of innovations and experimentations going on in the Silicon Valley but by the speculative financial institutions and overzealous public that bestowed unrealistic valuations upon every new internet company. Whatever the reasons, the propensity to take risk and experiment with new ideas has certainly gone down since the internet bust. Amazon.com is probably the greatest representative of the internet revolution that not only survived the internet bubble bust but is now a thriving, profitable company. In fact, Amazon was a riskier and far grander idea than many failed ventures such as webvan.com and etoys.com. It has survived only due to carefully executed strategy. Whereas webvan, etoys, petco, and others focused on particular market segments, Amazon’s goal was to become a multi-category online retailer for both small and big size items as well as low and high priced items.

The opportunities and market niches still exist and are waiting to be exploited but there has been a hesitation to tackle the failed ideas of internet bubble bust. Some profitable regional online companies such as New York City based freshdirect.com are a concrete proof that literally anything that can be sold in retail shops, can be sold online as well.

In addition to above strategies, there have been some ideas that have been gaining ground within the E-commerce industry. One key to gaining customers in E-commerce is establishing credibility which becomes even more important of a factor given the distrust that consumers have of E-commerce companies. The good thing is that almost all of these strategies can be pursued with no or very little financial cost. They are:

Investing in Social Media

Investing in social media has become a must-do marketing strategy. According to an Internet Retailer Survey conducted in summer 2010, 54% of the largest retailers have presence on Facebook (Matsumoto, 29 November, 2009), social networking website that boasts over 500 million members worldwide. Forrester Research reports that 64% of retailers surveyed invested in social media this year. Social media is one of the most inexpensive marketing strategies and the trend has caught such traction that there are now specialized social media marketing companies whose services are utilized by such high profile companies as Pepsi. This also supports the fact that websites can enhance their commercial potential by identifying ways to enhance visitors experience and keep them busy on their websites. Facebook’s marketing value mainly derives from its huge base of addictive users.

Customer Service

Customer service is even more important for E-commerce enterprises than it is for brick-and mortar retailers. First of all, adoption rate is already low for E-commerce, even in developed economies such as US as compared to brick and mortar commercial enterprises. Second, it’s far easy to setup an E-commerce website than building a brick and mortar retail shop, thus, there are thousands of competitors competing for the same customer base that you are targeting. This is why E-Commerce retailers have to work harder than their brick and mortar counterparts to secure customers’ loyalty. Customer service presents huge profit opportunities if done right because there is a general consensus even among the most frequent online shoppers that majority of the E-commerce retailers do a very bad job at customer service. This is confirmed by the phenomenal success of online shoe retailer Zappos that enjoys one of the highest customer satisfaction and retention rates in the E-commerce arena and does so in spite of charging premium prices. Almost every customer review raves about Zappos customer review but very few dare to complain about high prices as compared to other online shoe retailers.

Newsletters

Smart businesses see opportunities in problems. Newsletter is one of the most effective ways to build credibility, establish reputation, and keep customers and followers engaged (Catone, 23 November, 2010). In addition, it also helps to promote the brand through regular interaction with customers. Social media is a great marketing strategy but with most of the retailers establishing presence on Facebook and Twitter, it is easy to get lost among the hundreds and thousands of other businesses. Newsletters such as weekly editions don’t come as intrusive and by avoiding brand promotion and focusing on related news, they build goodwill and loyalty. Moreover, they are only sent to those who sign up for the newsletters, thus, giving E-commerce business a good idea of loyal customers who could be targeted for focused marketing efforts. Newsletters are even better for one man E-commerce retail operations since they establish the credibility of the individual. It’s no wonder that newsletters have become one of the preferred modes of communication for many Silicon Valley Investors and watchers whose E-commerce success and personal reputation is often dependent upon their personal brands.

Customer Reviews

One of the main concerns of online shoppers is the potential of fake items as well as online fraud in addition to horrible customer service. Customer reviews within the website as well as on outside opinion websites goes a long way towards establishing confidence in the legitimacy of the website. In addition, customer reviews on websites such as epinion.com also help propel website up in search engine results. Customer reviews are especially helpful to less known E-commerce retailers (Pratt, 6 March, 2009, Pg. 16).

E-commerce like any other unexplored territory carries lot of unsolved challenges but these uncertainties also translate to many unexplored opportunities. Even though researchers and observers are still struggling to mutually agree upon a common set of effective E-commerce marketing strategies, a greater degree of agreement does exist in regards to the problems that are preventing the widescale adoption of online shopping by the majority of internet users. It would be a good start and an effective strategy to first target the problems shared by the majority of the internet users. Once their concerns have been addressed, new strategies could be developed to encourage desirable shopping traits in customers and convert them into a loyal customer base.

References

Catone, J. (23 November, 2010). 5 Ways to Sell Your Expertise Online. Retrieved November 27, 2010, from American Express Open Forum: http://www.openforum.com/idea-hub/topics/technology/article/5-ways-to-sell-your-expertise-online-josh-catone

E-Commerce and E-Business/Concepts and Definitions. (n.d.). Retrieved November 27, 2010, from WikiBooks: http://en.wikibooks.org/wiki/E-Commerce_and_E-Business/Concepts_and_Definitions

Matsumoto, F. (29 November, 2009). 2010 Social Commerce Strategies: Reaching Beyond the Web Site. Retrieved November 27, 2010, from E-Commerce Times: http://www.ecommercetimes.com/story/68744.html

Pratt, N. (6 March, 2009). Delivering Customers to Your ECommerce Website. Cabinet Maker , pp. 15-17.