The Internet revolution Essay
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“The economics of information in the 1990s permanently altered the traditional linear supply chain of sources, manufactures, distributors, retailers, and customers… via the Web” (Pyne 2000, p1). With the emergence of the internet over the past fifteen years, the supply chains for e-retailers have evolved in a similar fashion to the industrial revolution. Unlike traditional brick and mortar retailers, e-retailers supply chains include the front-end interaction, the consumers themselves (Cucuzza and Cherian, 2001).
Therefore, it is essential that e-retailers ensure a smooth integration of information between the front-end users and the back-end support functions.
To be successful, e-retailers need to provide an efficient marketing strategy to understand the customer buying requirements, and to be able to address them. The role of technology has allowed e-retailers the ability to collect and analyze personal trends of their consumers, although at a possible personal infringement of their cliental.
In addition, as superb the front-end model may be, many companies fail today due to insufficiently integrating and ensuring a back-end support function is in place to provide efficient and timely delivery to consumers.
This paper will address the e-retailer supply chain addressing both spectrums — the consumer relationship management and the supply chain management. Moreover, this paper will also draw upon various companies’ strategic internet successes as examples. The Beginnings of the Internet Revolution
Similar to the Industrial Revolution, where growth was predominately spurred by standardized mechanical interfaces, breaking down procedures into many mini-procedures (Fordism), the Internet Revolution is “being stimulated by the standardization of interchangeable business processes” (Cucuzza and Cherian 2001, p. 3). The interchangeable business processes are the digital interfaces between e-business tools and the internet. These tools are derived from the improvements in technology, from the storage of digital data to digital information (Cucuzza and Cherian 2001). E-Business.
The buzzword ‘E-business’ has emerged as a new strategic initiative for companies to pursue. E-business can be defined as buying and selling over digital media, and “includes both front- and back-office applications… to maximize customer value” (Kalakota 1999, p4). With increased pressures on companies to perform and ensure quarterly growth, senior management has implemented numerous past initiatives including downsizing, re-organizing, and re-engineered processes to cut costs. Utilizing the benefits of technology to exploit the power of e-business allows for senior management to transform the existing business models.
As popular as the internet medium has become for on-line shopping for consumers — it is not a perfect system. Consumers are unable to touch, smell, or try on products. They may not be able to determine the quality of products, or how some products may compliment others (for example, ensuring the correct speakers are used for a specific amplifier). Although e-retailers do provide quality reports and analysis, it is not the same as experiencing the sound itself. In addition, payments are electronic and have been prone to security flaws, and the delivery of the goods has been cumbersome at times.
These difficulties have become a norm for many e-retailers to develop a sustainable business, however with the use of technology they have been able to create advantages that may not be found within the norms of traditional shopping. Marketing of E-retailers On-line shopping has numerous benefits to the consumers, it reduces time and is more convenient to shop from the luxury of your own home, and provides the consumer with the ability to compare prices, products, and availability. However, although this constitutes an opportunity for retailers, it is also a challenge.
The critical success factors include i.) use of customer databases; ii. ) easy ordering and; iii. ) quick delivery (Agrawal, Singh, p. 1538). With the notion that buying on-line is convenient, consumers expect e-retailer websites to be very useful and efficient. With the usage of technology, E-retailers have developed websites that are very informative, and easy to use. E-retailers provide information about the product, quality reports, customer reviews, comparison to substitutes, shipping rates and schedules. All the information is at the click of a button, 24 hours a day. The technology has provided the websites to be more interactive, and with better visuals.
It is essential that e-retailers provide additional services including a shopping basket for consumers to keep track of goods that have been selected, and a search engine which allows the consumer to search the website quickly without going through many different internet pages. Moreover, a safe and efficient payment system is required that has data integrity. This system is known as the e-commerce paradox. “E-commerce firms must be open and closed at the same time” (Awad, 2004). They must be able to share information with suppliers, business to business (B2B), and with business to customers (B2C).
E-retailers’ security includes firewalls, passwords and log-ins, and virtual private networks, as well as intrusion devices (Awad 2004, p. 405). Technology has introduced a ‘honeypot’ system, which is designed to showcase an artificial environment that lure attackers into thinking they have gained access, giving time for authorities to potentially track down the intruder (Awad 2004, p. 403). Another important aspect for e-retailers to increase the likelihood of consumers purchasing on-line from their websites is Customer Relationship Management.
The first step is for e-retailers to develop a strategy that will allow e-retailers to properly promote to their target market, and allow them to focus on customer requirements. However, understanding your customer needs has taken on a new avenue with advancements in technological software. Technology gains have also been demonstrated in the marketing techniques of e-retailing. The concept of buying on-line is still relatively new, and many consumers are still hesitant of it. There is nothing to stop a consumer to research on-line, and then purchase the product at an actual outlet.
Research has demonstrated that brand loyalty and price elasticity are less important compared to bricks and mortar shopping as consumers are exposed to a lot of information and therefore they usually look for the best value (Agrawal and Singh, p. 1549). In many instances, a person may abandon her shopping cart in the middle of the checkout process, but for reasons unknown. Forrester Research estimates that 82% of e-retailers depend on consumers to ‘hit’ the links to their websites and page view to manage the success of their websites, however only 2% of the visitors will actually purchase online (Ismretail 2002, p3).
With this in mind, online intelligence has become a technical advancement to achieve. Click-stream technology allows e-retailers to ability to understand abandonment and provide them with the information to react accordingly. By analyzing clickstream data – a trail of mouse clicks left by a user who visits a website – a retailer can make use of details such as the number of users, where they come from, which pages are visited, the order in which they visited them, how much time was spent on each page, and where they went after your site (Ismretail 2002, p3).
This information used properly can assist e-retailers in determining trends of their customers, their similar likes and dislikes, and where their websites can be improved. The information gathered can even determine if the consumer chose to go to a competitor site, and compare prices. This data allows the e-retailer to market accordingly to each individual customer. On Amazon, when an individual purchases a book – the company will then analyze the purchase with other recent purchases and then promote other books that may be of interest.
This is very similar to the movie Minority Report starring Tom Cruise which is set in the year 2054. There is a scene in the film that shows Cruise walking through a shopping concourse is ‘bombarded’ with personal advertisements based on marketer’s analysis on Tom Cruise’s role individuality. With new technology developed over the past few years (i. e. Clickstream software), consumers will be “more closely watched by sites and receiving personalized pitches based on past browsing behavior” (Stone 2004, p2).
This may stimulate increased purchases, and higher sales for the e-retailer, but could be looked at an infringement on the privacy of consumers. Websites now include Meta data and extensible markup language (XML), which are standards for tagging data on web searches. Although, this may be a positive factor for e-retailers to analyze consumer behavior on an individual basis, the ethical side to this comes in to question. When is it crossing the line on consumers’ rights? Web analytic companies are now increasingly offering their services from $30,000 to over a $100,000 a year (Stone 2004, p2).
More recently, Sportsline. com has used a web analytical company to identify customers dropping out of an American football fantasy pool, which enabled Sportsline to address and improve its processes that led to an increased number of paying customers (Stone 2004, p2). Moreover, technology has led firms such as Atomz to offer advance search engines for e-retailers to attach special promotions to the searched item. PalmOne has recently used this service which has converted the number of searchers to buyers by over 60% (Stone 2004, p2).
With the immense competition e-retailers face, other global websites, and the traditional brick and mortar stores, it is important that they cater to their customer needs. The traditional statement that location is everything has little value in e-retailing as all websites have equal distance to their consumers. It is therefore essential that e-retailers seek means to ensure customers return to their websites. The key factors are “efficiency, personalization, socialization, and the look and feel of the site” (Agrawal and Singh, p. 1537).
Although, this may indicate that they may infringe on consumer privacy rights, they have used technology to their benefit to obtain information that is beneficial in making strategic decisions. However, having a strong front-end website does not guarantee success. Once the consumer initiates the first step by purchasing a product, the actual delivery of goods becomes just as important in the supply chain. Back-end System Support Once the e-retailer obtains a client, it is essential that they provide an efficient back-end system that will ensure availability, workable ordering website, and delivery on-time.
Accenture international research has indicated that 1 in 4 internet purchases fail due to various reasons (Agrawal and Singh, p. 1549). In the traditional avenue of shopping, many consumers will not go back to a store if the ability to purchase items fails 25% of the time. Accenture has also stated that one of the most common reasons for this failure include that items are usually out of stock, which indicates that the front-end systems are not connected to the back-end support systems (Agrawal and Singh, p. 1549). A seamless integration of all systems, for example, implementing an Enterprise Resource System is required.
This integration will allow the e-retailers to advise if the product is in stock, the expected delivery date, and substitute and compliment product availability. Moreover, systems that connect with vendors will advise the e-retailers if the products are in back-order, different characteristics of the product (size and colour) and delivery time. This connection of all information systems now provides the capability to consumers to select from a menu of shipping rates and schedules, and then be able to track the fulfillment of the order in real time.
Digital Deconstruction processes have accelerated in that “by creating digital interfaces between processes, companies can automate these processes to achieve scale efficiencies unattainable in the past” (Cucuzza and Cherian 2001, p. 2). Studies have shown that when customers and vendors share a single system, and orders are entered once, a 75% to 90% reduction in transaction costs occur utilizing a web-based catalog. The different processes include: Preparation of purchasing requirements Identification of potential suppliers
Deliverables – specification, volumes, price, delivery, transportation Fulfillment Receiving and holding supplies Relationship building with suppliers (Groucutt and Griseri 2004, p180). The use of technology to improve the efficiency of the supply chain, and ensure customer satisfaction can be demonstrated using company examples. Roundpeak Although the company no longer exists, it was one of the first online retailers who used technology to manage its physical and virtual supply chain.
It had partnerships with manufacturers across four countries, air cargo companies, and with warehouse, fulfillment and delivery operators. The numerous B2B partners created a need for Roundpeak to ensure that the various departments in the supply chain communicated accordingly. An online order was instantly fed to the fulfillment house, a packaging and inventory control center, and into a warehousing, inventory, and delivery data system that was accessed by all members of the supply chain. If a customer orders a product, a request to the manufacturer goes out electronically.
Once it receives the goods from the manufacturer, a digital signature is sent to authorize receipt, which allows the purchase order and receipt to be matched digitally. The purchase order would then instantly be fed into the accounts payable system where funds are transferred at once. This system was known as the Electronic Bill Presentment and Payment system (EBPP). The benefits included streamlining relationships with suppliers and eliminating redundancies by inputting completed once by the consumer. (Case study developed by Pyne 2000).