Abstract:

 Information technology has had a profound impact on almost every aspect of our lives. One of the areas that have been affected by information technology is retailing. This has been due to the introduction of E-commerce.

Indeed E-commerce has had a great impact on the traditional retail businesses. The greatest impact is seen in the start up costs and general costs of running a business using e-commerce compared to those incurred by their brick and mortar counterparts. For some businesses, it has been found significantly cheaper to trade on the Internet than to actually do so in a physical store.

This paper, therefore sets out to find out what impact e-commerce has had on retailing and therefore make recommendations on what the traditional retailers can do in order to survive the competition posed by e-commerce

1.0.Definition of key terms

This chapter defines the major terms that have been commonly used in this paper.

1.1 Retailing

Retailing includes all processes that lead to buying and selling of products to satisfy consumers. A retailer must derive more than ½ of their sales from the ultimate consumer of the product to be classified a retailer; if it is less than half then it is a wholesaler

1.2 E-commerce

Phuket (2001, defines e-commerce as doing business via the Internet. This can be done by using web pages and email, offering current inventory information and processing real-time orders via the Web and accepting credit card payments via the Web.

The same article mentions that E-commerce involves the following: using Web pages to promote products or service, using the Internet to make it easy for customers to buy by providing full information and specifications, showing all pricing and details as well as showing current inventory where applicable. It further involves accepting orders in real-time and display resultant invoices, accepting payment on-line and finally providing confirmation of the transaction

1.2.1 E-commerce types

There are two main types of E-commerce. These are Business-to-Business (B2B) and Business to consumer (B2C).

1.2.1.1 Business to Consumer (B2C)

B2C commonly denotes, searching for product information, ordering products, paying for goods and services and providing online customer service

1.2.1.2 Business to Business (B2B)

According to Capron (1999), one of the fastest growing areas of e-commerce is B2B, which has provided businesses with an efficient means of communicating with their customers and suppliers. It involves the use of electronic Data interchange (EDI) that uses agreed formats or standards to send common business documents across public and private networks.

 2.0.E-commerce and retailing

 2.1 Introduction

 No body knows how big e-commerce will eventually become but in October 1997, Forrester research predicted that consumers will have spent more than £10 billion online by 2001. Indeed E-commerce has had a big impact on retailing.

 This chapter sets out to discuss the major areas on which e-commerce has had an impact on retailing. Some of the factors discussed include; start up costs, day to day costs of doing business, advertising, revenue, customer satisfaction, growth and processes.

 2.2 Start up Costs

 The costs of starting up a traditional business usually include the costs of constructing the business premises or costs of renting the business premises, impressive furnishings and displays to attract customers into the store, sales and administrative personnel.

On the other hand, according to Bali (2001), costs of starting up an e-commerce business mainly include, hardware and software costs. Hardware and software can be purchased from vendors such as IBM, Net Commerce, Open Markets, Broadvision, Pandesic. These costs can range from $ 4,995 (IBM) to $ 250,000+ (open Market). Capron (1999) adds that other costs include the costs of web design, development, web hosting and domain registration fees and maintenance of the site.

Fortunately, these costs are greatly reduced in the long run, because of the increased efficiency of carrying out operations. For example, e-commerce may greatly cut down on the costs of stationery, catalogues/brochures and manuals as all these can be availed electronically.

2.3 Day to Day costs of doing business

 The use of e-commerce has generally led to lower costs of doing business. This is due to the fact that overhead costs such as office rent, wages of office staff, office telephone charges, motor vehicle running costs, and advertising are reduced with the use of e-commerce.

This is because with e-commerce, the company will mainly need a warehouse to store the goods and a couple of computers to handle orders for goods. Operating Costs, expenditures which are necessary to conduct normal business such as, employee salaries, wages, and benefits, supplies and equipment maintenance are generally lower with e-commerce as compared to traditional retailers. This is because it requires less staff members and office equipment compared to traditional businesses in order to run well.

2.4 Advertising

 E-commerce has had a significant impact on the area of advertising for retailers. This impact has been seen on the advertisements costs, efficiency of advertising in terms of measuring results and reaching the targeted consumers. Below is a further discussion of these issues.

2.4.1 Costs of advertising

 According to Capron (1999), the introduction of e-commerce has made it very easy for customers to locate products. This is especially true where the customers have no prior knowledge of available manufacturers. They can use powerful Internet search engines to locate information, cheaply and in a very short time. This therefore means that once a company is listed on the Internet, it can be able to get customers without the need for extensive advertising, as they will locate the company using these search engines.

 2.5 Revenue

 E-commerce has had a tremendous impact on the revenue of retailers. Vargas (2000), noted that brick-and-mortar giants like Toys 'R' Us continue to struggle against Web-based retailers in this fiercely competitive category. In the year 2000, revenues of Amazon.com, SmarterKids.com, and eToys.com were much higher than the brick-and-mortar powerhouses such as KB Toys, Toys 'R' Us, Wal-Mart. Tom Rhinelander, senior analyst at Forrester, also adds that offline giants are still lagging behind their online counterparts. Even the recently defunct toysmart.com would have beaten out brick-and-mortar powerhouses like KB Toys and Toys 'R' Us.

E-commerce has allowed removed the boundaries for which retailers can market their goods. Indeed it is possible to order a suit from China and a pair of shoes in USA in just a few minutes, and at a minimum cost, something that is very difficult and expensive with the traditional retailers. More so, e-retailers have indeed incorporated individualized customer marketing that has gone along way in increasing their sales revenue.

2.6 Customer satisfaction

 A market research firm @plan Inc. (2000), found that in regard to four critical measures of customer satisfaction (lowest cost, convenience, comparison shopping capabilities and finding desired product), on line shoppers judged e-retailing superior to traditional shopping experiences. According to Mullins (1999), it is customer satisfaction that ultimately derives final purchase decisions. This means that the one to one contact offered by traditional retailers is no longer enough for some shoppers.

 A study carried out by the Boston Consulting Group (BCG) and Harris Interactive (2001), found that customers are more satisfied making retail purchases online than they are shopping at brick and mortar stores. For example, amazon.com scored 84 on a scale of 0-100, compared to an offline leader Costco’s that scored a 79. Amazon.com ranked first because of its popular features, including a wealth of customer reviews, personalized product recommendations and excellent customer service.

According to this study it was found that an increasing number of internet users find that e-commerce enables them to get timely and up to date information enabling them to make comparisons between products and best prices at a mouse click, and then have them delivered at home without having to go through the scuffle of the busy streets, as is the case for traditional retailing. More so, customers are able to submit their questions 24 hours a day and get quick responses from the online retailers. They are also able to track their orders on line, at any time that they wish to.

2.7 Growth

In traditional businesses, growth is supported through physical expansion, in addition to expanding production and warehouse capability, this means opening more stores, increasing advert and expanding other channels such as catalog distribution.

2.8 Processes

 In traditional stores, customer orders are often taken by an employee using paper forms and then entered on the computers to be processed into invoicing and billing statements.

 On the other hand, e-commerce enables the customer to generate orders using computer information and these are sent directly to the company. This process greatly reduces paper costs and time, more so, efficiency of the whole process is much better. This is because e-commerce enables a company to send order confirmations to customers immediately, as well as information regarding when the order will arrive and a tracking number that they can use to find out what's happening to the order.

3.0. Conclusions

 The long-term prospects for online retailing are strong. Demand for goods and services online will continue to grow if the online retailers are able to overcome the challenges discussed in chapter three. Indeed e-commerce has led to a lower start-up costs for businesses as well as general costs of doing business, providing the broadest reach with the least expense, reaching geographically dispersed customer bases on a modest budget, increasing the efficiency and effectiveness of advertising therefore leading to increased revenue.

However, it is important for some businesses to realize that there are some products that are sold better in a traditional store than on-line. These mainly include highly customized products like clothing where customers need to thoroughly inspect the clothing, try them on, check whether they like the fitting and so on.

 That is why there are more and more cases of businesses combining website and traditional store to serve their customers in a variety of ways, this is especially true after the several reports that numerous internet companies failed last year.

 4.0. Recommendations

 One of the biggest set back of electronic commerce is security of data. This means that it is of immense importance that tighter security solutions are developed to ease the fears of the masses. On the other hand it is difficult to determine if security concerns are actually real problems or if the worries are mainly from perceived problems that actually do not exist as this has been dealt with by data encapsulation.

4.1.1 Online retailers

 1. Despite the fact that it is very convenient to make purchases online, traditional stores have an edge in regard to ease of returning or exchanging products. In this particular area, the online stores have plenty of room for improvement.

 2. Online retailers should bear in mind that on line customers want to be able to find out more about a product than what you put on the screen the first time they see it. They want to be able to search for what they want without having to wade through screens of extraneous marketing information. They want a phone number on the site that they can find easily. They want to talk to someone who can answer their questions and, if necessary, order the product for them. They don't want a generic site with a shoppingcart, an e-mail address for customer service and a help desk staff that knows little more than they do.

4.2.2 Traditional retailers

 • Online shopping has got an edge on the traditional retailers because they provide sufficient information on products, the products are easy to find and it is very convenient. We therefore recommend that traditional retailers offer more information about the products that they have on offer and also try as much as possible to make shopping in a store convenient, reducing any kind of stressful environment on shoppers, for example, excessive customer attention and overcrowded shops.

• The reality is that, in today’s highly technological business world, it is inevitable that the need for e-commerce is high. We recommend that traditional businesses attempt to combine their old businesses with an element of e-commerce if they want to remain competitive on the market.

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