A significant transition, witnessed by business executives towards the end of the past century was the excessive use of Information Technology, IT, used as a lever for achieving competitive advantage along with the emergence of the E-everything phenomenon. While some researches dismiss the relationship between information technology and competitive advantage, others see it as a recipe for success in today’s dynamic business world.
The internet sales industry has evolved tremendously in the past few years. Before we go in the details of management of business in the internet and the challenges and opportunities that come with it, we need to have a fair idea of Electronic Commerce or E commerce; a simple word whose meaning has been changed over the past 30 years and it has been turned into the buzz word for businesses today.
In essence Ecommerce is all about doing our business online, either as integration to your traditional way of doing business or setting up the entire business on the internet. One misconception that most people have about ecommerce and which needs to be cleared out is that E commerce not only includes online stores that one can shop from, but the term E commerce inculcates all activities that involve money whether its buying clothes over the internet or paying via credit cards or even paying your utility bills online.
In the early years of a large amount of electronic commerce was restricted to virtual items which included access to premium material on the internet. Due to technological innovation like electronic data interchange (EDI) and electronic inventory management systems etc, e commerce now involves transactions of physical items and today almost all major retailers or e tailors as they are called have online stores.
As compared to the past, these technological advancements have become an important part of our lives today, and all of us rely on online transactions in one way or the other. This increased ease and dependence has been translated into a boom in the internet sales industry, but one has to be careful as such online business although have a number of advantages, they also prone to vulnerability.
In a nut shell, by integrating E commerce with your business, you are with your customers 24 hours a day, 7 days a week, they can reach you without any day or traffic jam or any shopping crowds, and in turn you can get more business in a more easy way.
For businesses, it is important to fully capitalize on this new business venture enabled due to innovations like electronic fund transfer, internet marketing, electronic data interchange (EDI), online transaction processing, and digital signatures etc, and therefore it is important to understand the management of e business, its opportunities and its challenges. At the same time a future outlook is also important.
The internet sales industry management basically requires integration of business, technology, marketing and a good business model. Although previously we have emphasized the importance of information technology as a way of beating completion, most Net based business start ups have realized that it is not just information technology but the one backed by a good business model that serves as the major lever to gaining a global market share (Malhotra, 2000).
For example, as new entrants e-Toys and Amazon.com came as a threat to the long established brick and mortar companies like Toys “R” Us and Barnes and Nobel, by redefining their value equations (in supply chain and internal value chain) and representing a paradigm shift by rethinking the entire business model and flow of information between industries and organizations., while the brick and mortar companies trying to catch up faced serious challenges in integrating their virtual and physical business.
From the perspective of a business manger focusing on a specific internet sales industry can help us easily understand the current management, its flaws, the challenges that come with an online business and it can also help us devise some solutions for the future course of action.
Hence if we take into consideration the online apparel industry, a typical customer experience involves looking through the items listed, selecting them and adding to the online shopping cart for payment and expecting a delivery within the time range specified.
The importance of the internet sales industry can be gauged from the fact that in the US market alone, the online sales in the year 2007 were estimated to be around $260 billion with a growth rate of approximately 25%, while the apparel sector accounted for sales amounting to almost $ 24.2 Billion of that amount (Newbery, 2008)
One of the major management challenges for online retailers is effective and timely inventory management, which plays a very important role in providing a pleasant shopping experience to the customer and is a major sales driver. As a business manager, ones goal is to maximize sales and this very objective posses a dilemma in situations where a decision has to be made either to remove a product listing as soon as the inventory levels fall below a set threshold level or to keep the product posted assuming that the customers would be willing to wait a little longer for the delivery.
In cases when the product is a major hit or is in high demand the logic of extending customer waiting works if the information that the stock is currently unavailable is adequately communicated to the customer, in such cases when expectations are properly managed, back orders can increase sales and create satisfied customers. However, poor inventory management at this stage can cause delayed delivery and instead lead to unsatisfied customers and loss of future sales.
Hence we see that proper inventory management is the core of an online apparel store as pointed out by the vice president at Liz Claiborne Inc that online retails stores are faced with an additional challenge at inventory management as it requires to keep track not only of a particular product but also of each SKU, that is particular color or size, associated with it. The role of the business manager is to make sure a system is in place that tracks the availability and the back orders of each SKU to that appropriate delivery time can be communicated to the customer.
Another important aspect to generate online sales is to focus of search words specific to the brand name of the company or to the items one needs to sell, that is, it is the job of a manager to devise certain search strategies and online merchandising strategies. When deciding on the garment imagery, one needs to realize that consistency in apparel presentations adds to the quality of the product or the brand contrary to the popular belief that best photography for various illustrations is usually the most effective strategy.
As we have established, an online store is a more convenient and cheaper way to reach out to customers, once started it operates round the clock, 7 days a week, the overheads are lower as compared to an offline store with limited customer reach and the therefore of properly strategized, the return on investment (ROI) on an online store can be turned into a very lucrative venture.
The management of an internet sales industry today, not specific to any particular industry involves the following essential features, first is the server uptime, it is important for manager sot realize that an online sales are not possible if the server is down most of the time, the very first step involves making sure that web host is functional 99.9 % of the time.
One of the major customer concerns, which need to be addressed in order to gain their confidence in shopping from your store, to be elaborated in detail later, is regarding security of their private and financial information which is shared with the retailer at the time of transaction in terms of credit card numbers etc. for this purpose one needs to incorporate the Secure Socket Layer (SSL) which establishes encrypted communication with the client and ensures a secure transaction. Also for intensive or heavy traffic websites, software called MySQL is used which serves as a database to accommodate millions of entries.
An important criteria for success in the online business is customer satisfaction and customer support which includes the response time to a customer query or complaint, a manager needs to ensure that the database is sufficient enough to respond with immediate solutions without the need of customer staff assistance every time. The presence of a shopping cart is also essential as it allows customer to pick up multiple products and make a consolidated payment. It acts as a catalogue for the online store and the ordering process. Based on the nature of the business, one can use online or offline shopping carts for their stores. Since credit cards are the most preferred source of payment online, setting up of merchant accounts is also necessary which enables merchants to accept credit card payments by assigning a unique merchant ID number (Starting And Managing An Online Store, 2007).
Most of us ,especially women are aware of the fact that they do not have the need to buy the amount of clothing they usually, therefore online marketing and innovative designs to persuade the target market to continue shopping is an important element of the job description of a business manager. The key to an effective online marketing strategy is understanding how potential customers use the internet. One of the major reasons that online businesses don’t survive is not because of bad products, but because they put the cart before the horse (Internet Marketing Strategy, 2007), or in other words they start selling online without providing proper information to the target market and ultimately are unable to generate the amount of customer traffic critical to survive in this competitive industry. According to research as much as 92% of people surf online for information, this fact can be translated in the sense that most people don’t go online with the intention to buy and they certainly would not bump into your retail store to shop. People are on the internet in search for solutions so in order to turn them into your potential customers one has to provide them with viable solutions they are looking for and this should be the prime or the foremost task of a business manager, income generation through sales should always rank second.
Another major challenge for business managers, or online marketers is to direct the targeted customers towards your website, turning them from browsers into potential buyers, and this is achieved through search engines which serve as gateways to your store. When potentials customers type in certain keywords, in search of solutions to their problems, these search engines provides them with certain ranked websites based on their quality content, so therefore sales on the internet boils down to these critical numbers. An effective theme based website is therefore crucial for success and should be properly managed.
In case of an automotive industry, a website does not provide information to the customers, it plays a critical part in customer support during the purchase funnel, also known as the purchase process (Notté, 2008). It provides customers with tools to explore different features and models of the car so that they can narrow down their choices and make their purchase decision. According to an online survey by Capgemini’s Cars (2007-2008) almost two third of the respondents said that having web features available to compare different products and cost configurations makes them more inclined to purchase from a particular car manufactures. As the traditional marketing sources like television and print media are on the decline (Notté, 2008) it has become more important for managers to focus on effective online marketing strategies to serve as a competitive advantage for the organization.
Now that we have had a brief overview of the importance and management and some challenges of the online sales industry, supplementing it with examples as and when required we need to look at one of the major concern for most current or future customers when shopping online which is the issue of security and confidence in online purchases and organizations. As briefly touched upon earlier, the concept of security for online stores is very different from traditional stores as here we are not talking about physical security and therefore it serves as both a challenge and an opportunity (if effectively capitalized upon to serve an edge against competitors) for the business manager.
Providing a secure shopping experience to the customers is a very important commitment a business needs to communicate to the customer if it wants to generate large sales volume. With the advancement in information technology, IT, there are various ways in which an online transaction can be made safe which are important online business considerations but more importantly it is not high tech softwares that matter it is the customer confidence in your online store that should be an important concern for the business manager. According to a research conducted in August 2006 by TNS Research, as many as 875 of the total online shoppers have concerns regarding credit card fraud while 85% have concerns related to online identity theft.
In order to ensure the customer that you’re a reliable store and not a fraud working with someone else’s name, a SSL , an encryption protocol is used which ensures that during transaction a private tunnel is created to safely transmit credit card or any personal information. An SSL certificate is issued and can easily be identified by the customers by taking a look at the URL which would now have “https” instead of “http” to signify secure connection over the internet.
Although it may this activity may look insignificant, it is important for business managers to indulge in secure transactions as well communicate them to customers as it makes website visitors or potential customers trust your business as against the competitors in three ways, encryption of sensitive details, authentication of the business, the certificate owner and its verification by a certificate authority. It can have a major impact on sales if customers are ensured of a secure transaction as according to a TNS research conducted in 2006, more than 65% of customers only shop at websites they trust while 65% on the online shoppers , who did not trust the shopping cart have abandoned online shopping. Hence an SSL certificate serves as a recognizable trust mark for online business which ultimately increases e commerce sales.
Another important protocol implemented to secure customers against dishonest merchants (or vice versa) is Secure electronic Transaction or SET protocol which involves only partial sharing of information (so it is not misused) between the three parties involved in an online credit card transaction, merchant, customer and bank, all authenticated by digital signatures and sensitive information is not shared with the merchant (only with the bank) and not stored on the server. The purpose of this argument is not to get into technical details but n only to emphasize the importance or incorporating security in online transactions as managers must realize that the purpose of a website is not just disseminating product information to customers and expect sales, it is about building a relationship with the customer by incorporating their needs in the business and as we have seen secure transaction is an important customer need and that is why we have laid considerable emphasis on it.
Looking at the growth trends in the internet sales industry, there are tremendous opportunities for business managers to exploit coupled with tackling of various management challenges we have discussed above.
In terms of business management, in my opinion there is still a lot to explore to achieve efficiency and productivity in the internet sales industry. I put forward this view as a I believe that business on the internet is still evolving and although it has achieved high growth rates it is a shift from the business approach most employees, managers and customers are accustomed to. Hence, efforts still need to be put in place by manages to create a comfortable online business culture, efficient management systems, effective marketing strategies which will be possible by exploring new opportunities in an online business venture.
Evidence of robust future growth in this industry can be gauged by considering the latest information on online sales which were up by 13% following the thanksgiving weekend (Strong Online Sales Won’t Last, 2008). However caution needs to be exercised and external events such as the recent global recession is bound to slow down growth in this industry (as with other industries) and impede sales in coming months and that’s when business managers will be put to test.
References
Internet Marketing Strategy. (2007). Retrieved January 10, 2009, from http://www.1stinternetmarketingsolution.com/internet-marketing-strategy.htm
Malhotra, Y. (2000). Knowledge Management for E business Performance: Advancing Information Strategy to “Internet Time”. The Executive’s Journal , 5-16.
Newbery, M. (2008, February). Global market review of online apparel retailing – forecasts to 2014. Retrieved January 10, 2009, from http://www.just-style.com/store/product.aspx?id=66248
Notté, M. (2008, October 07). The automotive industry & Internet: trends & challenges. Retrieved January 10, 2009, from http://www.kaizen-analytics.com/2008/10/automotive-internet-trends-challenges.html
Starting And Managing An Online Store. (2007). Retrieved January 10, 2009, from http://www.1stinternetmarketingsolution.com/starting-managing-online-store.htm
Strong Online Sales Won’t Last. (2008, December 05). Retrieved January 10, 2009, from http://www.kikabink.com/news/tag/industry-pundits/
