Online shopping is a
form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser. Consumers find a product
of interest by visiting the website of the retailer directly or by
searching among alternative vendors using a shopping
search engine, which displays the same product's availability and pricing at
different e-retailers. As of 2016, customers can shop online using a range of
different computers and devices, including desktop
computers, laptops, tablet computers and smartphones.
An
online shop evokes the physical analogy of buying products or services at a regular "bricks-and-mortar"retailer or shopping
center; the process is called business-to-consumer (B2C) online shopping. When
an online store is set up to enable businesses to buy from another businesses,
the process is called business-to-business (B2B) online shopping. A typical
online store enables the customer to browse the firm's range of products and
services, view photos or images of the products, along with information about
the product specifications, features and prices.
Online
stores typically enable shoppers to use "search" features to find
specific models, brands or items. Online customers must have access to the
Internet and a valid method of
payment in order to complete a
transaction, such as a credit
card, an Interac-enabled debit card, or a service such as PayPal. For physical products (e.g.,
paperback books or clothes), the e-tailer ships the products to the customer;
for digital products, such as digital
audio files of songs or software,
the e-tailer typically sends the file to the customer over the Internet. The
largest of these online retailing corporations are Alibaba, Amazon.com, and eBay.
Terminology
Alternative names for the activity are "e-tailing", a
shortened form of "electronic retail" or "e-shopping", a shortened form of
"electronic shopping". An online store may also be called an
e-web-store, e-shop, e-store, Internet shop, web-shop, web-store, online store,
online storefront and virtual store. Mobile commerce (or m-commerce) describes purchasing from an online
retailer's mobile device-optimized website or software application ("app"). These websites or apps are
designed to enable customers to browse through a companies' products and
services on tablet computers and smartphones.
History
The growth of the internet as a secure shopping channel has
developed since 1994, with the first sales of Sting album 'Ten Summoner's Tales'.[2] Wine, chocolates and flowers soon followed and were among the
pioneering retail categories which fueled the growth of online shopping.
Researchers found that having products that are appropriate for e-commerce was a key indicator of Internet success.[3] Many of these products did well as they are
generic products which shoppers didn't need to touch and feel in order to buy.
But also importantly in the early days there were few shoppers online and they
were from a narrow segment: affluent, male, 30+. Online shopping has come along
way since these early days and -in the UK- accounts for significant percents
(depending on product category as percentages can vary).
Growth in Online Shoppers
As the revenues from online sales continued to grow
significantly researchers identified different types of online shoppers, Rohm
& Swaninathan [4] identified four
categories and named them "convenience shoppers, variety seekers,
balanced buyers, and store-oriented shoppers". They focused on
shopping motivations and found that the variety of products available and the
perceived convenience of the buying online experience were significant
motivating factors. This was different for offline shoppers, who were more
motivated by time saving and recreational motives.
Digital High Street 2020[5]
Michael Aldrich, pioneer of online shopping in the 1980s.
English entrepreneur Michael Aldrich was a pioneer of online shopping in 1979. His
system connected a modified domestic TV to a real-time transaction processing
computer via a domestic telephone line. He believed that videotex, the modified domestic TV technology with a
simple menu-driven human–computer interface, was a 'new, universally
applicable, participative communication medium — the first since the
invention of the telephone.' This enabled 'closed' corporate information
systems to be opened to 'outside' correspondents not just for transaction
processing but also for e-messaging and information retrieval and
dissemination, later known as e-business.[6] His definition of the new mass communications
medium as 'participative' [interactive, many-to-many] was fundamentally
different from the traditional definitions of mass communication and mass media and a precursor to the social networking on the Internet 25 years later. In March 1980 he launched
Redifon's Office Revolution, which allowed consumers, customers, agents,
distributors, suppliers and service companies to be connected on-line to the
corporate systems and allow business transactions to be completed
electronically in real-time.[7] During the 1980s[8] he designed, manufactured, sold, installed, maintained and
supported many online shopping systems, using videotex technology.[9] These systems which also provided voice
response and handprint processing pre-date the Internet and the World Wide Web, the IBM PC, and Microsoft MS-DOS, and were
installed mainly in the UK by large corporations.
The first World Wide Web server and browser, created by Tim Berners-Lee in 1990, opened for commercial use in 1991.[10] Thereafter, subsequent technological
innovations emerged in 1994: online banking, the opening of an online pizza
shop by Pizza Hut,[10] Netscape's SSL v2 encryption standard for secure data transfer, and Intershop's first online shopping system. The first
secure retail transaction over the Web was either by NetMarket or Internet Shopping Network in 1994.[11] Immediately after, Amazon.com launched its online shopping site in 1995 and eBay was also
introduced in 1995.[10] Alibaba's sites Taobao and Tmall were launched in 2003 and 2008, respectively. Retailers are
increasingly selling goods and services prior to availability through "pretail" for testing, building, and managing
demand.[citation needed]
International statistics
Statistics show that in 2012, Asia-Pacific increased their
international sales over 30% giving them over $433 billion in revenue. That is
a $69 billion difference between the U.S. revenue of $364.66 billion. It is
estimated that Asia-Pacific will increase by another 30% in the year 2013
putting them ahead by more than one-third of all global ecommerce sales.[needs update] The largest online shopping day in the world is Singles Day, with sales just in Alibaba's sites at US$9.3 billion in 2014.[12][13]
Customers
Online customers must have access to the Internet and a valid method of payment in order to complete a transaction. Generally,
higher levels of education and personal income correspond to more favorable
perceptions of shopping online. Increased exposure to technology also increases
the probability of developing favorable attitudes towards new shopping
channels.[14] In a December 2011
study, Equation Research surveyed 1,500 online shoppers and found that 87% of
tablet owners made online transactions with their tablet devices during the
early Christmas shopping season.[15]
Product selection
Consumers find a product of interest by visiting the website of
the retailer directly or by searching among alternative vendors using a shopping search engine. Once a particular product has been found on
the website of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple
items and to adjust quantities, like filling a physical shopping cart or basket
in a conventional store. A "checkout" process follows (continuing the
physical-store analogy) in which payment and delivery information is collected,
if necessary. Some stores allow consumers to sign up for a permanent online
account so that some or all of this information only needs to be entered once.
The consumer often receives an e-mail confirmation once the transaction is
complete. Less sophisticated stores may rely on consumers to phone or e-mail
their orders (although full credit card numbers, expiry date, and Card Security Code,[16] or bank account and routing number should not be accepted by e-mail,
for reasons of security).
Payment
Online shoppers commonly use a credit card or a PayPal account in order to
make payments. However, some systems enable users to create accounts and pay by
alternative means, such as:
·
Billing to mobile phones and landlines[17][18]
·
Cash on delivery (C.O.D.)
·
Cheque/ Check
·
Debit card
·
Direct debit in some countries
·
Electronic money of various types
·
Gift cards
·
Postal money order
·
Wire transfer/delivery
on payment
·
Invoice, especially popular
in some markets/countries, such as Switzerland
·
Bitcoin or other cryptocurrencies
Some online shops will not accept international credit cards.
Some require both the purchaser's billing and shipping address to be in the
same country as the online shop's base of operation. Other online shops allow
customers from any country to send gifts anywhere. The financial part of a
transaction may be processed in real time (e.g. letting the consumer know their
credit card was declined before they log off), or may be done later as part of
the fulfillment process.
Product delivery
Once a payment has been accepted, the goods or services can be
delivered in the following ways. For physical items:
·
Shipping:
The product is shipped to a customer-designated address. Retail package delivery is typically done by the public postal system or a retail courier such as FedEx, UPS, DHL, or TNT.
·
Drop shipping:
The order is passed to the manufacturer or third-party distributor, who then
ships the item directly to the consumer, bypassing the retailer's physical
location to save time, money, and space.
·
In-store pick-up: The
customer selects a local store using a locator software and picks up the delivered product at the
selected location. This is the method often used in the bricks and clicks business model.
For digital items or tickets:
·
Downloading/Digital distribution:[19] The method often used for digital media products such as
software, music, movies, or images.
·
Printing out, provision of a
code for, or e-mailing of such items as admission tickets and scrip (e.g., gift certificates and coupons). The tickets, codes, or
coupons may be redeemed at the appropriate physical or online premises and
their content reviewed to verify their eligibility (e.g., assurances that the
right of admission or use is redeemed at the correct time and place, for the
correct dollar amount, and for the correct number of uses).
·
Will call,
COBO (in Care Of Box Office), or "at the door" pickup: The patron
picks up pre-purchased tickets for an event, such as a play, sporting event, or
concert, either just before the event or in advance. With the onset of the
Internet and e-commerce sites, which allow customers to buy tickets online, the
popularity of this service has increased.
Shopping cart systems
Simple shopping cart systems allow the off-line administration
of products and categories. The shop is then generated as HTML files and
graphics that can be uploaded to a webspace. The systems do not use an online
database. [20] A high-end solution
can be bought or rented as a stand-alone program or as an addition to an enterprise resource
planning program. It is usually
installed on the company's web server and may integrate into the existing supply chain so that ordering, payment, delivery,
accounting and warehousing can be automated to a large extent. Other solutions
allow the user to register and create an online shop on a portal that hosts multiple shops simultaneously from
one back office. Examples are Big Commerce, Shopify and FlickRocket. Open source shopping cart packages include advanced
platforms such as Interchange, and off-the-shelf solutions such as Magento, osCommerce, Shopgate, PrestaShop, and Zen Cart. Commercial systems can also be tailored so the shop does not
have to be created from scratch. By using an existing framework, software
modules for various functionalities required by a web shop can be adapted and
combined.[citation needed]
Design
Customers are attracted to online shopping not only because of
high levels of convenience, but also because of broader selections, competitive
pricing, and greater access to information.[21][22] Business organizations seek to offer online
shopping not only because it is of much lower cost compared to bricks and
mortar stores, but also because it offers access to a worldwide market,
increases customer value, and builds sustainable capabilities.[clarification needed][23]
Information load
Designers of online shops are concerned with the effects of
information load. Information load is a product of the spatial and temporal
arrangements of stimuli in the web store.[24] Compared with conventional retail shopping, the information
environment of virtual shopping is enhanced by providing additional product
information such as comparative products and services, as well as various
alternatives and attributes of each alternative, etc.[25] Two major dimensions of information load are
complexity and novelty.[26] Complexity refers to
the number of different elements or features of a site, often the result of
increased information diversity. Novelty involves the unexpected, suppressed,
new, or unfamiliar aspects of the site. The novelty dimension may keep consumers
exploring a shopping site, whereas the complexity dimension may induce impulse purchases.[25]
Consumer needs and expectations
According to the output of a research report by Western Michigan
University published in 2005, an
e-commerce website does not have to be good looking with listing on a lot of
search engines. It must build relationships with customers to make money. The
report also suggests that a website must leave a positive impression on the
customers, giving them a reason to come back.[27]
Dyn, an Internet performance management company conducted a survey
on more than 1400 consumers across 11 countries in North America, Europe, Middle-East and Asia and the results of the survey are as follows:
·
Online retailers must
improve the website speed
·
Online retailers must
ease consumers fear around security
These concerns majorly affect the decisions of almost two thirds
of the consumers.[28]
User interface
An automated online assistant, with potential to enhance user interface on
shopping sites.
The most important factors determining whether customers return
to a website are ease of use and the presence of user-friendly features.[29]Usability testing is important for finding problems and
improvements in a web site. Methods for evaluating usability include heuristic evaluation, cognitive walkthrough, and user testing. Each technique has its own characteristics
and emphasizes different aspects of the user experience.[29]
Market share
E-commerce business-to-consumer product sales totaled $142.5 billion,[30]representing about 8% of retail product sales
in the United States.[31] The $26 billion worth
of clothes sold online represented about 13% of the domestic market,[32] and with 72% of women looking online for
apparel, it has become one of the most popular cross-shopping (browsing in
person then buying online) categories.[33] Forrester Research estimates that the United States online retail
industry will be worth $279 billion in 2015.[34] The popularity of online shopping continues to
erode sales of conventional retailers. For example, Best Buy, the largest retailer of electronics in the
U.S. in August 2014 reported its tenth consecutive quarterly dip in sales,
citing an increasing shift by consumers to online shopping.[35] There were 242 million people shopping online
in China in 2012.[36] For developing
countries and low-income households in developed countries, adoption of
e-commerce in place of or in addition to conventional methods is limited by a
lack of affordable Internet access.
Advantages
Convenience
Online stores are usually available 24 hours a day, and many
consumers in Western countries have Internet access both at work and at home.
Other establishments such as Internet cafes, community centers and schools
provide internet access as well. In contrast, visiting a conventional retail
store requires travel or commuting and costs such as gas, parking, or bus
tickets, and must typically take place during business hours. In the event of a
problem with the item (e.g., the product was not what the consumer ordered or
the product was not satisfactory), consumers are concerned with the ease of
returning an item in exchange for the correct product or a refund. Consumers
may need to contact the retailer, visit the post office and pay return
shipping, and then wait for a replacement or refund. Some online companies have
more generous return policies to compensate for the traditional advantage of
physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and
does not charge a restocking fee, even for returns which are not the result of
merchant error. (Note: In the United Kingdom, online shops are prohibited from
charging a restocking fee if the consumer cancels their order in accordance
with the Consumer Protection (Distance Selling) Act 2000).[37]
Information and reviews
Online stores must describe products for sale with text, photos,
and multimedia files, whereas in a physical retail store, the actual product
and the manufacturer's packaging will be available for direct inspection (which
might involve a test drive, fitting, or other experimentation). Some online
stores provide or link to supplemental product information, such as
instructions, safety procedures, demonstrations, or manufacturer
specifications. Some provide background information, advice, or how-to guides
designed to help consumers decide which product to buy. Some stores even allow
customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products.
Reviews and even some blogs give customers the option of shopping for cheaper
purchases from all over the world without having to depend on local retailers.
In a conventional retail store, clerks are generally available to answer
questions. Some online stores have real-time chat features, but most rely on
e-mails or phone calls to handle customer questions. Even if an online store is
open 24 hours a day, seven days a week, the customer service team may only be available
during regular business hours.
Price and selection
One advantage of shopping online is being able to quickly seek
out deals for items or services provided by many different vendors (though some local search engines do exist to help consumers locate
products for sale in nearby stores). Search engines, online price comparison
services and discovery shopping engines can be used to look up sellers of a
particular product or service. Shipping costs (if applicable) reduce the price
advantage of online merchandise, though depending on the jurisdiction, a lack
of sales tax may compensate for this. Shipping a small
number of items, especially from another country, is much more expensive than
making the larger shipments bricks-and-mortar retailers order. Some retailers
(especially those selling small, high-value items like electronics) offer free
shipping on sufficiently large orders. Another major advantage for retailers is
the ability to rapidly switch suppliers and vendors without disrupting users'
shopping experience.
Disadvantages
Fraud and security concerns
Given the lack of ability to inspect merchandise before
purchase, consumers are at higher risk of fraud than face-to-face transactions.
When ordering merchandise online, the item may not work properly, it may have
defects, or it might not be the same item pictured in the online photo.
Merchants also risk fraudulent purchases if customers are using stolen credit
cards or fraudulent repudiation of the online purchase. However, merchants face
less risk from physical theft by using a warehouse instead of a retail
storefront. Secure Sockets Layer (SSL) encryption has generally solved
the problem of credit card numbers being intercepted in transit between the
consumer and the merchant. However, one must still trust the merchant (and
employees) not to use the credit card information subsequently for their own
purchases, and not to pass the information to others. Also, hackers might break
into a merchant's web site and steal names, addresses and credit card numbers,
although the Payment Card Industry Data Security Standard is intended to minimize the impact of such
breaches. Identity theft is still a concern for consumers. A number of high-profile
break-ins in the 2000s has prompted some U.S. states to require disclosure to
consumers when this happens. Computer security has thus become a major concern
for merchants and e-commerce service providers, who deploy countermeasures such
as firewalls and anti-virus software to protect their networks. Phishing is another danger, where consumers are fooled
into thinking they are dealing with a reputable retailer, when they have
actually been manipulated into feeding private information to a system operated
by a malicious party. Denial of service attacks are a minor risk for merchants,
as are server and network outages.
Quality seals can be placed on the Shop web page if it has
undergone an independent assessment and meets all requirements of the company
issuing the seal. The purpose of these seals is to increase the confidence of
online shoppers. However, the existence of many different seals, or seals
unfamiliar to consumers, may foil this effort to a certain extent.
A number of resources offer advice on how consumers can protect
themselves when using online retailer services. These include:
·
Sticking with
well-known stores, or attempting to find independent consumer reviews of their
experiences; also ensuring that there is comprehensive contact information on
the website before using the service, and noting if the retailer has enrolled
in industry oversight programs such as a trust mark or a trust seal.
·
Before buying from a
new company, evaluating the website by considering issues such as: the
professionalism and user-friendliness of the site; whether or not the company
lists a telephone number and/or street address along with e-contact information;
whether a fair and reasonable refund and return policy is clearly stated; and
whether there are hidden price inflators, such as excessive shipping and
handling charges.
·
Ensuring that the
retailer has an acceptable privacy policy posted. For example, note if the retailer does not explicitly
state that it will not share private information with others without consent.
·
Ensuring that the
vendor address is protected with SSL (see above) when entering credit card
information. If it does the address on the credit card information entry screen
will start with "HTTPS".
·
Using strong passwords which do not contain personal information such
as the user's name or birthdate. Another option is a "pass phrase,"
which might be something along the lines: "I shop 4 good a buy!!"
These are difficult to hack, since they do not consist of words found in a dictionary,
and provides a variety of upper, lower, and special characters. These passwords
can be site specific and may be easy to remember.
Although the benefits of online shopping are considerable, when
the process goes poorly it can create a thorny situation. A few problems that
shoppers potentially face include identity theft, faulty products, and the
accumulation of spyware. If users are
required to put in their credit card information and billing/shipping address
and the website is not secure, customer information can be accessible to anyone
who knows how to obtain it. Most large online corporations are inventing new
ways to make fraud more difficult.
However, criminals are constantly responding to these developments with new
ways to manipulate the system. Even though online retailers are making efforts
to protect consumer information, it is a constant fight to maintain the lead.
It is advisable to be aware of the most current technology and scams to protect
consumer identity and finances. Product delivery is also a main concern of
online shopping. Most companies offer shipping insurance in case the product is
lost or damaged. Some shipping companies will offer refunds or compensation for
the damage, but this is up to their discretion.
Lack of full cost disclosure
The lack of full cost disclosure may also be problematic. While
it may be easy to compare the base price of an item online, it may not be easy
to see the total cost up front. Additional fees such as shipping are often not
be visible until the final step in the checkout process. The problem is
especially evident with cross-border purchases, where the cost indicated at the
final checkout screen may not include additional fees that must be paid upon
delivery such as duties and brokerage. Some services such as the Canadian-based
Wishabi attempts to include estimates of these additional cost,[38] but nevertheless, the lack of general full
cost disclosure remains a concern.
Privacy
Privacy of personal information is a significant issue for some
consumers. Many consumers wish to avoid spam and telemarketing which could
result from supplying contact information to an online merchant. In response,
many merchants promise to not use consumer information for these purposes, Many
websites keep track of consumer shopping habits in order to suggest items and
other websites to view. Brick-and-mortar stores also collect consumer
information. Some ask for a shopper's address and phone number at checkout,
though consumers may refuse to provide it. Many larger stores use the address
information encoded on consumers' credit cards (often without their knowledge)
to add them to a catalog mailing list. This information is obviously not
accessible to the merchant when paying in cash or through a bank (money
transfer, in which case there is also proof of payment).
Product
suitability
Many successful purely virtual companies deal with digital products, (including information
storage, retrieval, and modification), music, movies, office supplies,
education, communication, software, photography, and financial transactions.
Other successful marketers use drop shipping or affiliate marketing techniques to facilitate transactions of
tangible goods without maintaining real inventory. Some non-digital products
have been more successful than others for online stores. Profitable items often
have a high value-to-weight ratio, they may involve embarrassing purchases,
they may typically go to people in remote locations, and they may have shut-ins
as their typical purchasers. Items which can fit in a standard mailbox—such as
music CDs, DVDs and books—are particularly suitable for a virtual marketer.
Products such as spare parts, both for consumer items like
washing machines and for industrial equipment like centrifugal pumps, also seem
good candidates for selling online. Retailers often need to order spare parts
specially, since they typically do not stock them at consumer outlets—in such
cases, e-commerce solutions in spares do not compete with retail stores, only
with other ordering systems. A factor for success in this niche can consist of
providing customers with exact, reliable information about which part number
their particular version of a product needs, for example by providing parts
lists keyed by serial number. Products less suitable for e-commerce include
products that have a low value-to-weight ratio, products that have a smell,
taste, or touch component, products that need trial fittings—most notably
clothing—and products where colour integrity appears important. Nonetheless,
some web sites have had success delivering groceries and clothing sold through
the internet is big business in the U.S.
Aggregation
High-volume websites, such as Yahoo!, Amazon.com,and eBay, offer hosting services for online stores
to all size retailers. These stores are presented within an integrated navigation
framework, sometimes known as virtual shopping malls or online marketplaces.
Impact of reviews on consumer
One of the great benefits of online shopping is the ability to
read product reviews, written either by experts or fellow online shoppers. The Nielsen Company conducted a survey in March 2010 and polled
more than 27,000 Internet users in 55 markets from the Asia-Pacific, Europe,
Middle East, North America, and South America to look at questions such as
"How do consumers shop online?", "What do they intend to
buy?", "How do they use various online shopping web pages?", and
the impact of social media and other factors that
come into play when consumers are trying to decide how to spend their money on
which product or service. According to the research,[39] reviews on electronics (57%) such as DVD
players, cellphones, or Play Stations, and so on, reviews on cars (45%), and
reviews on software (37%) play an important role in influencing consumers who
tend to make purchases online. Furthermore, 40% of online shoppers indicate
that they would not even buy electronics without consulting online reviews
first.
In addition to online reviews, peer recommendations on online
shopping pages or social media websites play a key role[40] for online shoppers when they are researching
future purchases.[41] 90% of all purchases
made are influenced by social media.[42] Each day, over two million buyers are shopping online for
jewelry.[43]
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