7. Consumer's trust and loyalty in E-Commerce

Trust, loyalty - hay friends, what does it mean to you. What ever your answer may be, but these plays an important role in E-Commerce.

When people trust each other, they have confidence that each of them will keep their promises and support each other for repeat business, while this used to be the base for traditional transactions. But, after the introduction of E-Commerce it is observed that the customer loyalty has decreased because of customers ability to shop and switch to different vendors become easier, cheaper and faster. Then what about trust, loyalty in E-Commerce? We are not sure whether other parties will be fulfilling their promise.

That’s where company’s initiative comes into play to make consumers trust their products and services. Most companies/organisations try to gain trust by implementing Brand recognition and trust certificates and sales vendor’s evaluations offered by third parties.

Research suggests that consumers trust, loyalty and satisfaction are interlinked with each other. If we compare consumers trust, loyalty and satisfaction with internet’s E-Commerce it is found that these are influenced by beliefs about

Information quality – Depends on accuracy of content and format of the organisation.

System quality – Depends on navigation, ease of use and security of the website.

Service quality – Depends on responsiveness and assurance of the company’s products and services.

Big organisations like eBay, Google has managed to gain the trust of customers by there innovative methods and implementing some changes in their website like frequent update of content, information on company, provisions of having accounts and passwords and most importantly tight site security.

In addition companies like Argos, Tesco have found that loyal customers end up buying more when they have a website to shop from.

Reflective report

Customer loyalty I knew it was an important aspect of business but I never knew how much important before I attended this class. As per the discussions in the class companies like eBay managed to gain customer loyalty because it introduced the product which is sold by customer and purchased by customer where as Google able to gain customer loyalty by the expression of personalisation in its services.

In my personal experience companies which have loyal customers do not have much competition problems because loyal customers creates repetitive business and thus less expenses on marketing costs in return less production cost which yields low product cost which pleases customers and helps in repetitive business (form of continuous cycle).

Before I attended this class I never knew that it cost a lot to attract new customers in the form of marketing, discounts, warranties and clams rather than maintaining old customers. Due to this reason companies gives utmost importance in gaining customer loyalty and enhancing brand image.

6. Channel conflict

Hi friends, as we have seen in our earlier season about e-tailing now imagine traditional companies keeping their old ways of selling and introduced e-tailing what will be the result? Yes that's the topic of the day.

As increasing number of companies use internet to offer their products and services while keeping their traditional distribution channels. It is quite possible to encounter channel conflict. As traditional bricks and mortar companies enter online to enhance their sales and brand image. It is often observed that those companies suffer channel conflict because different channels compete with each other for same customer (As we have seen in our earlier session of e-tailing that multi channel shoppers change their channels frequently).

Channel conflict matrix

Channel conflict matrix helps traditional bricks and mortar companies to react towards possible conflict between their offline and online channels.

There are two main possible dimensions that determine how to deal with channel conflict.

• The destructive conflict between channels.
• The importance of existing channels that is threatened by the new channel.

As we can see from the channel conflict matrix diagram, the importance of existence channel and also we can judge the level of conflict risk which is very useful for taking decisions.

• If the risk of conflict is high and the importance of the threatened channel is also high. It is sensible to address the problem and find ways to reconcile the two channels like differentiating the two channels with different offerings.
• If the risk of conflict is high and the importance of the threatened channel is low. It is right to adapt the decline of that channel.
• If the risk of conflict is low and the importance of threatened channel is high then is required to let know employees that they will not get affected.
• If the risk of conflict is low and the importance of threatened channel is also low then it is right to ignore the problem.

Reflective report

I would consider channel conflict as any situation that upsets or draws back the traditional channel with the introduction of new channel (online).

Most of the British big retailers like Tesco, Argos and Asda and other big companies like john Lewis, M&S and so on has introduced their online business in order to generate additional revenue. These big companies know that internet will help to boost the sales but they haven’t forgotten the importance of their traditional channels that’s why even today Argos continues their online as well as stores and catalogue sales.

But it is also important to consider the sales and expenses of a particular channel while considering its importance because it is often happens in the business that revenue generated by one channel is converted into the expense of the other channel. This causes no additional benefit to the business and sometimes may lead to losses. In total it is important to maintain the balance between the different channels in order to run the business in harmony and as well gain profits.

5. Electronic Retailing/E-tailing

Friends, welcome back here we go again to continue our journey to the next level. Earlier we have seen impacts of E-Commerce and Market analysis in this session we are going to review Electronic retailing.

Before we start what is retailing?

A retailer is a sales intermediary, a seller who operates between manufacture and customers.

In simple terms retailing is done in stores. Companies that produce large number of products, such as P&G, Electrolux must use retailers in order to perform efficient distribution channel. In this retailing a catalogue sales has proved to be a very success in the past providing customers and companies a relief from the constraints of space and time.

A retailing which is done on internet/online is called e-tailing.

Electronic retiling/e-tailing

E-tailing makes it easier for manufactures to sell directly to the customers thus removing retailers (e.g. Dell) and it makes even easier for consumers because it gives a choice as well as reduces the price of a product.

As we have seen in our 2nd session (E-Business models) in same way e-tailing implies to all those models i.e. B2b, B2c, C2c and C2b and often it is diffcult to tell transactions between business whether it is B2b or B2c because some companies act as both manufactures and customers as well (eg. Dell, Amazon.com)

E-tailing ease of use and cheaper products has gained popularity among customers and business as well. Because of which e-tailing has resulted in the phenomenon of multi-channel shoppers, who switch channels from online to stores or vice visa. Now multi channel shoppers not only switch between channels but also between stores because of which it has been observed that stores catalogue sales has been decreasing every year. Multi channel shoppers are well – knowledge consumers and serving them requires very good levels of coordination between channels.

Products that sell well and acted as success for e-tailing industry are

• Guaranteed high brand recognition products (e.g. Dell, Sony)
• Digitized products (e.g. Software's, music)
• Relative inexpensive items (e.g. Office supplies, clothes)
• Frequently purchased items (e.g. Groceries)
• Commodities with standard specifications (e.g. Books, airline tickes)
• Packaged items that cannot be opened in stores (e.g. Chocolates, drugs)

Items that require physical quality check or perishable in nature (e.g. Milk, bread) don’t sale very well in e-tailing.

In total it can be said that even though it took a long time but many industries has entered e-tailing (e.g. john Lewis which became a successful online retail) and were successful and also it benefited consumers providing with cheaper products and wide variety of choice.

Reflective report

It is quite true that most of us take time to get adjust to new things or innovations no matter how good it is or beneficial because we are not sure of things that changes and want to wait and see what happens to it, this what has done by most of the bricks and motors’ companies in the past to get a sense of security.

Even big companies like john Lewis took time to enter online tested its website before the actual launch this explains the lack of trust in new things but now as most of the companies experienced the benefits of internet and e-tailing it can be said that it is going to be the future for most business.

4. Impacts of E-Commerce and Market analysis

Hi friends, as we have seen earlier websites play an important role in E- business due to which E- commerce has a major impact on products and its capabilities.

Impacts of E – commerce

The major impact of E- commerce is on manufacturing sector. E-commerce has changed the way manufactures manage their assembly lines, production patterns and as well as distribution channels.

Among these one of the major impacts of E-Commerce is the contribution to competitive advantage (by offering greater value in terms of price or services or benefits).

Competition in E-Commerce is very intense because online transactions enables

• Customers with lower search costs
• Speeding up comparisons
• Helps in customization and personalisation
• Good customer service
• Provides greater value for money in other words reduces costs.
• And most importantly reduces barriers to entry.

If we look at points mentioned above it forces the business to analysis the industry and markets to over come this new problems.

Market analysis

Different analysis tools like “Poter’s Competitive Analysis”, PESTEL Analysis, SWOT Analysis and Generic Strategy Options Matrix helps to identify different environments of business and gives a hint to cope with it.

POTERS FIVE FORCES - Poter’s five forces helps to analysis micro environment of a business in other words internal factors which are directly linked to business performance, they are

• Competitive rivalry – Helps to analysis the level of competition in a particular industry.
• Potential entrants – Helps to analysis the level and form of access to markets.
• Bargaining power of suppliers – Reveals the power of suppliers in an industry. As in case of E-Commerce it is quite moderate because suppliers and business are now easily able to reach each other.
• Bargaining power of buyers – Helps to understand the purchasing power of customers. Taking E-Commerce into account buyers has high power in market because it reduces the switching cost.
• Threat to substitutes – Explains the level/ratio at which new substitutes products are being introduced in the market.

PESTEL – PESTEL analysis helps to analyse the macro environment of business in simple term the external factors which indirectly effects the business and its potential performance, they are

• P – Political Factors includes government policies and stability of government
• E – Economic factors include inflation and economies GDP and GNP.
• S – Socio/cultural factors include cultural, regional and language barriers.
• T – Technological factors include impact of new technology and switching cost to new technology.
• E – Environmental factors include business impacts on environmental issues like climate change, global warming and etc.
• L – Legal factors include rules and legislations like data protection act.

The PESTEL helps business to concentrate on the effects that different factors can bring to business.

SWOT – SWOT Analysis concentrates on micro environment of business and it helps to understand strengths, weakness, opportunities and threats of a business.

By reviewing and analysing the internal and external factors of business environment it helps to draw a strategy options for value creation and one of the strategies proposed by poter's is “Generic Strategy”. This strategy builds on the type of value a firm creates (what) and on the broadness of its target market (where).

• Cost leadership – Lower cost and broader market
• Differentiation – Differentiation and broad market
• Cost focus – Lower cost and narrow market
• Differentiation focus – Differentiation and narrow market

The cost leadership strategy focuses on getting the lowest cost for its products to gain the market leading position, where as differentiation strategy focuses on providing more consumer benefits then competitors in order to become market leader. Low cost usually impairs the ability to provide above average levels of consumer benefits and high levels of quality usually entail high costs. But firms that try both a quality and costs leadership at the same time tend to end up in the middle, however firms like amazon.com and eBay had outperformed in their sectors in terms of price and quality.

Even when the firms had outperformed in their sectors by implementing the above strategies some factors likes new technology development, economies of scale and firm’s allocation of recourses can hinder its development and performance. But a firm can gain its position back either by entering into the new market or by concentrating on

• Reducing cost
• Raising awareness
• Creating new products and services

Reflective report

After learning the impacts of E-Commerce I realised how intense the competition is in online business. Now it is clear to me that why business use continuously the analysis tools such as poter’s five forces, pestel, swot and generic strategy. Firms use these tools not only to stay competitive but also to gain profits and develop its business.

In order to stay competitive most firms uses more than one analysis tools as no one tool gives a complete picture of the market like poter’s five forces is very good to analysis competitiveness in the market but lacks external factors where as pestel covers the external factors but fails to analysis internal factors and swot helps to analysis internal factors but misses external and competitiveness factors. I would consider starting the analysis with pestel as it gives good knowledge of external factors of business, and then to continue with poter’s helps to understand competitiveness and finish analysis with swot to know internal factors. But knowing the factors, it is not sufficient as we require a strategy to implement this knowledge at this stage poter’s generic strategy helps firms to focus and concentrate on one of its 4 basic approaches as mentioned above.

But how far we use and analysis tools there are always some changes and developments factors occurs because of globalisation and we fail to acquire the complete picture of market.

As a whole, all the business need to re-evaluate their business and markets in regular intervals as done by Deutsche Bank in order to survive and stay competitive to the continuous changes brought by internet/E-Commerce.

3. Website Design

Hi friends, welcome back to an another session of E – Business review, as we have seen the different types of websites and its relation to E- Business in our earlier session, now I am going to deal with the importance of websites and website design.

In this new era more and more people are doing business online or looking for information on Internet. Due to this reason - the website, its content and its design acts as a PR (public relations) on behalf of the company to increase the sales and generate extra revenue because of these reasons websites are given more and more importance to communicate with its potential customers.

As we all know there are hundreds and thousands of websites available online for similar products, due to this reason the customers/buying power of customers is very high and the websites do not get second chance to convince its customers as its possible in direct selling/traditional selling practice. The website which is not fast, user friendly and effective in its performance will naturally lose its customers which emphasise the importance of website design.

Website design

Firstly, before an organisation starts it website it needs to consider what kind of customers will look in to its website. What kind of information does a company wants to convey to its customers (like Aston martin website convey its elegance and simplicity where as Lamborghini website conveys its show-off nature and something hi-fi). Is the website effectively conveys companies objectives and purpose into the business.

While implementing the website design companies need to consider the Accessibility of website, it means does the website cause any

Visual impairments – Display of colours in such a way that it creates low visibility.

Hearing impairments - A hearing impairment or hearing loss is a full or partial decrease in the ability to detect or understand sounds.

Mobility impairments – Using a very high technology that users cannot access the content effectively.

Seizure disorders - Seizure disorders involve periodic disturbances of the brain's electrical activity, resulting in some degree of temporary brain dysfunction (happens with too much light flashing websites).

The companies also need to understand the effectiveness of latest technology in website design like the speed of downloading website, the errors in links and use of key words (also called “tags”) for search engines to identify websites.

Solutions for website design

By implementing simple solutions to the website design companies can increase the effectiveness of its website and improve its sales.

1. Using simple format for website design in other words user friendly.
2. Having a search tool in website for ease of access.
3. Building website in multi languages.
4. When using graphics in website “text only” option improves the accessibility.
5. Improving downloading speed (as most of customers hate to wait).Improving security system from hackers and spam (helps to gain trust and reliability).
6. Effective use of key words in website (increases the possibility to be found by search engines).
7. Last and most important making site available 24/7.

Reflective Report

Earlier I used to judge the websites by its graphics and colour, but now my way of looking at websites has changed totally with the knowledge and experience gained during my website analysis report. Now I look at websites more critically and tries to gather - what information does the firms websites is trying to convey. Apart from all these, I even appreciate the amount of expertise that goes into designing the website.

It is clear for me that when I go for introducing my own companies website I will look into all the aspects which makes a good and reliable website, but the most important aspect is looking at website from consumers point of view and minimizing the defects in website. In order to reduce defects in a website continuous testing plays an important role and often the success or failure depends on it.

Most of the companies use these tools, in order to achieve success but it failures to consider consumer needs or anticipation for its products or services. Thus in total, it can be said that a company will be most likely to be successful which considers all aspects of website design, evaluates its products and services from consumers prospective and implements good market segmentation strategies.

Thus designing the website for right products, right markets and for right consumers is not a joke.

2. Classification of websites and E-Business Models

Hi, friends welcome to our next session of E-Business. In this session we will look how E-Business has changed the traditional industries, classification of websites and its relation with different E-Business models.

with the introduction of internet in 1990’s and it’s gaining popularity and convince the E – Business, it has changed the perspective of commerce and different industrial patterns of doing business.

E - Business has has forced many industries to expand their services to web world to survive the competition and earn additional profits like transportation industry expanding its payment services online for ease of access. Hospitality industry introduced booking and reservation systems online for convince of customers. Automotive industry introduced a new aspect of customization of cars online which helped them to increase sales and Entertainment industry came up with new approach of virtual life which is - A person can see him self in virtual world with the help of website called second life.

Classification of websites

Because of different purpose and uses of websites, we started to classify and categorize websites like

Informative website: This sort of websites mainly provides information about business and its products and services.

Interactive website: It contains all the features of informative website with additional features like it is more interactive and includes features like e-newsletters, customer discussion forums, online surveys and etc.

Transactional website: This website main aim is to sell products and services, but also it contains the features of informative and interactive websites to promote sales.

Collaborative website: This website main purpose is to allow business partners to collaborate (doing business between different firms).

E – Business Models

B2c Business to customer like Dell, Amazon.co.uk.

C2c Customer to customer like eBay, qxl.com

B2b Business to business like netbilling, Dell.

C2b Consumer to business like priceline.com

As we have there are different E – Business models, the usage of different type of website also depends on the business and the firms like Dell uses a combination of transactional and collaborative website where as eBay is the combination of interactive and transactional website.

In short, the usage of website and its features depends on the firms business and its intention to create a brand image.

Reflective Report

Now I have realised how tremendous the impact of internet had on business it can be said as an evaluation in history of business it changed the perception of people shown the new possibilities and new ways of doing business, now even I am trying my chance of doing business online with the help of eBay.

Now I have started to distinguish between different types of websites and able to understand much better why the websites has differences between them. Even it helped me to understand which type of website to use for different E-Business models.

Overall it was a very good experience to know how the different business has adopted the evolutionary change in technology which will guide me to take successful steps in my future E-Business and learning E-Business models will help me to decide which model to follow for my future E-Business.

1. Introduction

Hi friends, before we start our journey into the world of E- Business and E- Commerce lets start with the basics, what is E- Business and E- Commerce?

• E - Commerce - The process of buying and selling or exchange of products and services or information exchange through computer network (digitally).

• E- Business - E- Business is the broader version of E-Commerce which deals with not only products and services or buying and selling but also customer service, collaborating with business partners, training through E-Learning and conducting electronic transactions with a computer network.

Reflective Report

Earlier in the past I had some doubts about business and commerce and difference between them but now it is quite clear to me with the help of this definition.

I never imagined that commerce is the aspect/branch of business but its clear to me that E – business is not just buying and selling of goods but also other related activities like customer service which helps the process of E-commerce to be effective.

In short, E-business is the use of the Internet and other networks and information technologies to support electronic commerce, enterprise communications and collaboration, and Web-enabled business processes both within a networked enterprise, and with its customers and business partners.