Global Trends in E-Retailing and Shopping

Major Industry Trends

Electronic commerce, or e-commerce, involves the sale of goods and services via electronic means—principally over the internet, although sales via television (terrestrial, cable, and satellite) are also included. E-commerce can be further divided into the following sectors: business-to-business (B2B), business-to-government (B2G), consumer-to-consumer (C2C), government-to-business (G2B), government-to-citizen (G2C), and business-to-consumer (B2C). Retailers that rely primarily on e-commerce to sell goods or services are often referred to as e-tailers.

Retailing over the internet generally takes one of two forms:

• Cybermalls—the most famous cybermall is eBay, which offers access to products from a variety of independent retailers.
  
• Individual websites—most major retailers now have their own websites, which complement their traditional “bricks-and-mortar” outlets. Some retailers operate solely over the internet.
  

In terms of television sales, programs on dedicated shopping channels generally feature a presenter who demonstrates products on air. Viewers can buy these products by telephoning an order line with their credit card details, or, in the case of interactive television services, by using their remote control. Recent years have seen the development of a variety of selling techniques, including on-air auctions.

E-commerce is most closely associated with the internet, and has developed in tandem with the growth of the medium. Indeed, e-commerce initially became possible with the opening up of the internet to commercial users in the early 1990s. However, it wasn’t until the latter half of the decade that companies really began to exploit the internet’s commercial potential.

A number of start-up companies, such as Amazon and eBay, have exploited the power of the internet to emerge as retailing behemoths in their own right. However, e-commerce has largely been developed by established large retailers, which regard it as simply another sales channel. The gigantic grocery retailers that have expanded away from food and into a wide variety of other areas, such as clothing and electronic goods, have been particularly quick to appreciate its potential. The medium has also created opportunities for very small businesses. It is now possible to buy over the internet a wide range of specialized products that are not available in shopping malls. Thus, the internet has provided a lifeline for many small producers, and has allowed entrepreneurs to enter the retailing sector without the need to invest heavily in physical retail outlets.

E-commerce has proven so successful because it offers significant advantages to both consumers and retailers. Consumers can compare a vast array of retailers in a few minutes—something that it would be impossible to do physically. Online retailers often sell products and services at a significant discount to those offered by traditional outlets, and buying online is convenient: consumers can make their purchases from the comfort of their own home, and have them delivered to their door. Furthermore, online shopping appeals to the environmentally conscious. In March 2009, researchers at Heriot-Watt University in the United Kingdom revealed that online shopping is 24 times “greener” than taking the car to the shops, and seven times “greener” than taking the bus. The researchers compared the carbon footprint of a typical delivery from a local depot with average carbon footprints for shopping trips by car and bus, and found that home deliveries involved much lower levels of carbon emissions. In June 2009, a study by the Carnegie Mellon Green Design Institute in the United States found that shopping online can reduce “our environmental impact by as much as 66%.”

For businesses, the advantages of e-commerce lie mainly in the low cost of setting up and maintaining a business. Firms do not need to invest heavily in a physical presence, or in sales staff. However, they do have to organize payment systems, distribution, and returns.

Industry Suitability

Undoubtedly, some industries are more suited to e-commerce than others. This type of retailing is most applicable to goods that are fairly simple, commoditized, and do not require on-the-spot input from knowledgeable sales staff. Thus, grocery retailing is ideally suited to e-commerce, whereas consumers generally need to try on clothing before they make a purchase. Equally, the penetration of e-commerce may be high in some sectors of a given market, but low in others. In financial services, for example, purchasing of insurance or a loan, both highly commoditized products, is ideally suited to the internet. However, many people prefer to buy a sophisticated financial product, such as a pension, on a face-to-face basis, as they will almost certainly require advice before making their choice. Generally, it is difficult to make online sales of sophisticated goods and services that require a large amount of advice or input from the retailer.

Technological Advances

The growth of broadband internet connections around the globe has undoubtedly boosted online shopping, simply by dramatically speeding up the process of accessing websites, and buying goods. Broadband is at least ten times as fast as dial-up. Having access to broadband means that consumers are more likely to use the internet to purchase everyday items such as groceries. However, faster connection speeds also allow users to download music files, video clips, and movies, or to compete in online gaming, further boosting the potential revenues generated by e-commerce.

Traditionally, individuals and businesses have ordered goods or services online via computers, but the increasing availability of broadband on mobile phones has opened up another avenue for e-tailers. Certainly, e-tailers are now targeting the mobile phone. In April 2010, for example, the UK online grocery retailer Ocado launched an Android app, which allows the weekly shopping to be done on a mobile phone with voice command. Ocado is the United Kingdom’s first supermarket to develop an app for Google’s operating system, and allows users to search the virtual aisles by speaking into their handset.

Surprisingly, given that the United States is generally regarded as the most advanced economy in the world, its broadband penetration rates are relatively low, according to the Organization for Economic Cooperation and Development (OECD), which publishes data on the subject (see More Info). In June 2009, the Netherlands had the highest penetration rate for broadband, at 38.1 per 100 inhabitants, followed by Denmark with 37.0. It was followed by Norway (34.5), Switzerland (33.8), and South Korea (32.8). The United States was in 15th place, with a penetration rate of 26.7 per 100 inhabitants.

E-commerce is also making increasing inroads into areas where it was thought difficult to sell goods online. Historically, for example, it was thought difficult to sell clothes online because shoppers could not try on the goods. However, sites such as Asos, which targets 16 to 34-year-olds with outfits and accessories styled on those worn by celebrities, have shown that it is possible to successfully sell clothes online.

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