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Comparing Study of E- Retailing and Traditional

Retailing
&
Merits/ Demerits of E-Retailing

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Marketing on the Web; a Part of E-Commerce

Marketing on the web is a part of E-Commerce/E-Business or electronic
commerce.
E-Commerce has already revealed its potential across the world. In fact, it
has come to be described as the biggest development in the commerce since the
invention of money. Powered by the breakthroughs in IT and telecom, and the
rapid growth of Internet, E-Commerce is already changing the way people work,
buy and live.
E-Commerce involves the exchange of products, services, information and
payment through electronic medium of Computer/Networks. In the other words, e-
commerce means business done online.
E-Commerce results when a firm connects its business systems to its
customers, distributors, vendors and suppliers-via intranet, extranets and the
Internet/web.
E-Commerce is the umbrella term for the entire spectrum of activities such
as Electronic Data Interchange (EDI), electronic payment system, order
management, information exchange and other business applications, with
electronic/paperless documentations.

The Components of Web Marketing

Business to Business (B to B) and Business to Consumer (B to C) e-
commerce constitute marketing on the web. They correspond respectively to
 Marketing to Business Buyers.
 Marketing to Ultimate consumers.

The both of the components are equally important; a greater part of the
challenge of the web marketing lies in the second component. In fact, over the
long term, more of the opportunities too lie in this component.

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Benefits of Web Marketing

The web constitutes a reliable, readily accessible and inexpensive means of
bringing together buyers and sellers, large and small, right across the globe. With
web marketing, the market comes to the doorsteps of the consumer. Basically, web
marketing has all the plus points which Direct Marketing (DM) has. After all, it is
one of the Direct Marketing.
Benefits the Seller as well as the Consumer:
Web marketing confers significant benefits on the seller as well as the buyer.
It is a true win-win proposition.

Benefits the seller

 Access to all markets:
With the marketing, a marketer located in any part of the globe can compete
in the markets of the whole world. The web enables firms/marketers to free
themselves of the inherent limitations of their existing geographic mooring
location.
Opening a website is the equivalent of opening a marketing office, which
anyone in the world can access, readily and instantly. In the other words, it is
equivalent of opening branches everywhere in the world.

Enable even small firms attempt global marketing – Web marketing

enables even small firms to access the markets of the world. It makes it affordable
for them. With a website even a one-man enterprise – one that manufactures some
herbal shampoo in some remote place in India for example – can sell its products
and services anywhere in the world and at a low marketing cost.

 Scope for Unimpeded, Constraints-Free Growth:

With web marketing, a business can grow unimpeded by the various
constraints that normally delimit the growth under conventional marketing.
Limitations of showroom/retail shop space, warehouse space, sales staff and other
resource do not choke a business in the web marketing. Manufacturers/Marketers
can carry on their operations on the web with just one central warehouse and a
small team of staff.

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 Scope for enhancing Customer value and customer service:

Being an interactive medium and a platform for innovation, the web presents
great opportunities to the seller to enhance customer value.
Helps offer many services and products from a single stop – A web
marketers can offer a variety of services and products to the customers from a
single websites, a single stop on the net.
Also, depending on the actual needs of
Benefit to the seller –
the customer, he can deliver
Access to all markets. supplementary services to him. Even
where the services demanded are
Renders global marketing feasible for even small outside his involvement, he can still
firms.
serve the customer by providing him a
Helps unimpeded and constraints-free growth. path for getting to the agencies that are
in a position to provide those services.
Scope for enhancing customer value and He is able to do this because the web
customer service.
provides him a direct and interactive
o Helps offer many services and products access to the customer.
from a single stop.

o Helps target the customer individually. Helps target the customer

o Imparts speed to all responses; and the
speed becomes a source of customer
value.
Helps building ‘relationship’ with customers.
Helps reduce costs
o Business costs
o Marketing costs
o Channel costs
o Communication/promotion Costs
Enhances marketing productivity
Keeps sales people together electronically and
enable them work as a team in serving the
customers.
individually and customize the offer
– The web also helps the marketers
target the customer individually,
because of the facility of direct,
interactive and online communication
with them. The marketers can easily
gain all essential knowledge about the
consumers, wherever in the world they
may be located. He can also provide
from his side an uninterrupted flow of
information to the consumers. In mass
marketing, it is difficult to target the
customer so precisely. Targeting
customers individually helps to provide
tailor-made products and personalized
services to them.

Allow companies to functions like beehives Imparts speed to responses; and

speed becomes a customer value – In
Enables to adjust quickly to market condition.
modern times, speed has become a
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Flexibility in marketing communications too.

A mass medium as well as a personalized medium.

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major ingredient of successful marketing. For example, Speed in order processing,

sales/distribution and service has become important. So is speed in these and other
such aspect has become a major source of customer value and hence an important
source of competitive advantage to a marketer. The web helps achieve speed and
thereby helps enhance customer value.

 Helps Build ‘Relationship’ with customers:

Like other marketing methods, web marketing also helps build ‘relationship’
with customers. Being totally interactive and one-to-one marketing, web marketing
is more effective in this respect compared to other forms of Direct Marketing. With
the web marketing, the marketers can interactively elicit a lot of information about
the consumer. This helps him to offer customized products, customized services
and customized incentives. It also helps offer demos of specific products, which a
particular customer may want.

 Helps Reduce Costs:

Business/Transaction Costs – Since web marketing conducts business
processes and transactions through real time interactions using electronic media
and paperless technologies, it significantly reduces the cost of producing and
processing an invoice in web marketing is less than one-tenth of what it costs to
process it in conventional marketing. Moreover, as the web reduces the order
processing time as well as the cycle time of the various business processes, it
reduces total business costs. Using the web is the cheapest method of answering a
customer request.

Channel Costs – Channel costs, which are a significant part of marketing

costs, are reduced considerably when a product is marketed through the web. As
mentioned already, in web marketing one need not maintain a vast network of
showroom or employ an army of sales staff. This also reduces or ignores costs of
rent, insurance, utilities as well as sales personnel.

Communication/Promotion Costs – Communication/Promotion costs,

which are another major part of marketing costs, can also reduced in web
marketing such as enables gaining worldwide communication at a low unit cost.

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Savings in the marketing costs also come from faster movement of

inventory, quicker order execution and faster realization of money. Web marketing
also generates valuable sales leads at zero cost.

 Enhance Productivity of Sales People:

Web marketing also makes marketing/ sales people more efficient and
productive. Since basic transactions are taken care by
computer program, sales people are free to devote
their time for more meaningful tasks, leaving the
Management Education on the Net –
Macmillan India and IIM-C
mechanical transactions to the net.
Web marketing keeps the staff together
Publishing house, Macmillan electronically and enables them to work as a team in
India ltd, offers management
serving the customers, sharing ideas and information
development programs on the
Internet in collaboration with freely. This leads to higher productivity.
IIM-Calcutta.
This is the first exclusive online Allows Companies to operate like beehives –
executive execution education
The web allows information to be shared horizontally.
program in India.
The delivery of the program is Information need not travel up to the CEO’s office
digitized and is accessible and then back travel down to reach the others. In the
through a portal. conventional setup, an identified person will be in
The program is a separate entity
and not a part of other
charge of the information. Such a thing does not
management development apply in case of the Internet. Everyone has ready
courses offered by the institute. access to the information.
Executives across the world can
undergo management training
through this program.
The program has built-in-  Enables the Marketers Adjust o Market
Conditions Quickly:
flexibility. It could be comfortable
in a period ranging from week to Marketing on the web enables the marketers to
a month.
adjust fast to changing market conditions. They can
quickly know what the market want and offer it. For
example they can add products to their basket, Alter
prices, enlarge services and fine-tune their offering with greater speed.

 A Versatile Medium of Communication:

As a medium of communication, the web is a versatile tool indeed. It is the
equivalent of a combination of several media – newspaper, magazine,

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billboard, radio, telephone and TV. Second, Web marketing allows

flexibility in marketing communications; it allows the marketers to adjust
the size and other attributes of his medium – the websites – at short notice.
Conventional media, like print or broadcast, do not lend for such quick
adjustment. Moreover, with the web there is no upper limit on advertising
space, in contrast to other media.

Benefits the Consumer

For the consumer, convenience, scope for informed and competitive buying,
search advantage and wider options, customized and personalized products and
services, greater transparency, and greater bargaining power are the main benefits
of web marketing.

 Convenience:
First, sitting at home, the customer can purchase the products and services.
He can escape all the hassles
involved in conventional shopping,
which include a physical visit to the
shop. More importantly, he can
escape the frustration involved in Dell computers
going all the way to the shop just to Dell Computers sells its custom-made PCs
know that the product he was looking to the customers on the websites. The
for was not available there at all. consumer has to log onto the Internet, visit
Second, he can order his requirement the Dell website, select his specifications
at any time – day or night – and from and place the order, keying in his credit
wherever on the globe he is located. card number. Dell delivers the PC at the
Third, he can have a complete customer’s doorstep within a few days of
online interaction with the marketer; placing order. Interestingly, only after a
he can have an online demonstration consumer thus places an order on the web,
of the product; he can place an online does Dell commence the assembling of the
order; he can also pay online and customized PC. Now, Dell sells computers
worth $10 million in this fashion every day.
complete the whole purchase process
on the web. In short, he can shop
privately, conveniently and swiftly.

 Scope for Informed and

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Competitive Buying:
Scope for informed buying is the second major benefit from web marketing
for the consumer. The web offers him access to a great deal of information about
the products and services he is looking for.

Search advantage and wider options – In conventional shopping,

consumers stop with limited searches. They visit four or five outlets at best before
deciding on the brand to be bought. They conclude that the benefits of extended
search will be just incremental. And, the search is quiet tedious. With web
shopping, the situation is different; for high value purchase in particular, extended
search often proves highly beneficial. It throws up a large number of options and
the search is hassle free. There are softwares that create menu-driven dialogues,
which simplify the job of searching and finding the alternatives. In short, the web
provides great ‘search
advantages’ to the consumer.
Benefit to the Consumer –

Consumers can bargain Convenience.

on the net with a host of sellers
– Most importantly, because of Scope for informed and competitive buying.

the interactive nature of the web,

Search advantage and options.
the consumer can actually bargain
on the net with a host of sellers Consumer can actually bargain on the net with a host
and get the best price and terms. of sellers.
He can compare a multitude of
Can get ‘more for less’
brands – feature by feature – and
their prices, and secure the best Transparency
deal. Sophisticated search engines
on the web come to his help in Accuracy

this regard. Shifting of the power equation in favor of the

consumer.
Consumer can get ‘more for less’ – With web marketing, consumers can
get more value for their money. As a rule, web marketers make competitive offers
to the customers, voting for a policy of giving ‘more for less’ in value-price
equation. They do so largely because they know that in a borderless e-commerce
world, consumers are in a position to buy from anywhere, wherever they will bet
best price and value.

Transparency – Web marketing also provides for a very high degree of

transparency, which was hitherto unknown in business transactions. There is no
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suppression of information. By browsing through the web, buyers can become

aware of just about all sellers selling the particular product and their prices and
terms.

Accuracy of information – Accuracy of information regarding schemes,

discounts and validity guarantees are all available and this actually makes him
want to buy more.

 The Power Equation Shifts in Favor of the Customer:

In short, web marketing actually alters the power equation between the
marketer and the buyer, in favor of the latter. In conventional marketing,
marketers (retailers) concentrate more on supply side and take the consumer
for granted. They assume that the latter will take the trouble of coming to
their store as long as the
stores are well stocked.
Rediff- On-The-Net With the web marketing,
they can no longer go by
Rediff-On-The-Net is one major independent web
marketer/e-retailer in India. this assumption. They have
to woo the consumer.
Rediff-On-The-Net has launched a direct-to-home web
service covering a limited range of products, such as books, music
discs and cassettes. Buyers can log in, order the products and get
them delivered at their doors. Web Marketing:
Rediff-On-The-Net started as a web design company and Indian Scene
graduated rapidly into a full-fledged web-marketing firm.
Quite a few studies
By early 1999, the site had become the most popular Indian have been conducted on e-
website, with about 50 million hits a month. And by late 1999, the
number of hits had gone up to 80 million per month. commerce in India in
recent years. They include
It claims that their security systems are among the best in
the world, at par with the likes of Amazon.com it has tied up with IT the BCG-Nasscom Study,
majors like IBM and Intel for technology. the CII/MRB study and the
At Rediff, buyers can pay either through credit card or by VPP. PwC study.
Like all e-retailers, Rediff does not stock the products it
All estimates
sells. Instead, it has worked out tie-ups with book publishers and suggest that the scope is
music companies.
mostly for B2B e-
On receiving an order on the web, it gets the credit- commerce to begin with.
worthiness of the purchaser/music marketers and delivers them to
the customer through an express company. It has tied up with FedEx Firms will deal their
and Blue Dart for this purpose. supplier, channels and
Rediff has by now built a reasonably loyal band of surfers. It business buyers on the net.
has started moving on to the next step–to get the surfers to visit its In the other words,
sites consistently.
business processes such as
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supply chain management

It has found it necessary to offer something unique to the and distribution
surfers and make them visit the site frequently. As a starter, it
offered to the surfers’ popular movies such as Godzilla and Taal as management will pick up
an attraction. It plans to tie up with quite a few Indian moviemakers initially. Retailing to
so that it can show a number of popular and latest movies at its
sites and strengthen its online promotion. ultimate consumer on the
web, which poses greater
Rediff also offers special discounts to the online buyers
and entices them to purchases from this site. complexities and risks,
Rediff has gradually expanded the range of its offering on
may follow in due course.
the web. Online booking for movies at Mumbai theatres and online Service industries like
hotel reservation service are parts of this scheme. Rediff has tied
up with more than 200 hotels in the country for web reservations. insurance, banking,
financial services, travel,
information/communicatio
n, education and
entertainment may be the
pioneers here.
Regarding B2C, according to Boston Consulting Group (BCG)-
Nasscom survey, the volume of online transactions by individual consumers
is expected to touch Rs 3,000 crore in India by 2005.
Another study by IDC India shows that there will be 5 million Internet
users in India by 2003. This constitutes a critical mass for a thrust in web
marketing.

Problem Web Marketing faces in India

In India, web marketing faces a number of problems. For convenience of
discussion, we can divide them into four categories:
Legal/regulatory Problems
Infrastructural Problems
Commercial Problems
Other Problems

 Legal/regulatory Problems:
The first set of problems emanates from the absence of a legal and
regulatory framework for e-commerce.

E-documentation not yet legally admissible – E-commerce does away

with papers and uses electronic documentation for recording transactions. While
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most developed countries have embraced e-documentation as legal tender, in India

it is not yet legally admissible. Current India laws do not provide for digital
signatures, digital certification, electronic payment system and online filing of
statutory documentation. As of now, a physical signature is necessary for
approving of an online order. The absence of sanctity about the contracts that are
entered into electronically inhibits individuals/corporate like their forays into e-
commerce.
Web marketing also needs effective and trusted mechanism for privacy and
security. This has several dimensions such as confidentiality, authentication, non-
repudiation and certification. Web marketing provides for authentication, which
enables either party in a transaction to be satisfied with the identity of the other
party. Non-repudiation means the parties to the transaction cannot subsequently
deny their participation. The privacy and security mechanism depend upon
certification by a trusted third party, such as a government body. For the consumer,
security relating to credit card numbers and password protection is a big concern.
These aspects have their global as well as Indian dimensions. And, a framework is
also needed for dealing with cyber crimes.

Absence of taxation laws – Absence of appropriate taxation law covering e-

commerce is the other major problem in this category. In India, the government is
yet to come up with taxation laws for e-commerce system. It has to address itself to
questions such as how much tax should be charged and how it should collected.
Sharing the proceeding of taxation among countries, which is the larger issue in
this regard, also needs to be addressed.
In short, a lot of new legal enactments and amendment in existing
enactments, such as the Evidence Act and Excise and Custom Act, are required.
Amendments are needed in banking regulations too. Overall, the absence of legal
framework covering cyber transaction is a hurdle in the spread of web marketing.

 Infrastructural Problems:
As of date, India does not have the infrastructure needed for effective web
marketing. While individual firms may accept the limitations and make a
beginning, for web marketing to become a normal form of marketing in the
country, the infrastructural constraints must disappear.

Low density of telephone, PCs and Internet – In India, the telephone

density, PC population and density of Internet access are all too low to support
viable e-business. Currently, telephone density in India is just four per 100 persons.
Internet density is practically minuscule. And even the few who have access, face a
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difficulty in logging onto the Internet because of the poor quality of the last mile
connection.

Bandwidth limitation – The bandwidth available is not enough to meet the

user load. While those who use the Internet for downloading information or
sending e-mail may put up with
erratic lines, those who buy and sell
Problems Web Marketing faces in India –
products cannot afford to do so.
They require a foolproof system Legal/regulatory problems:
with zero downtime. The entry of o E-documentation is not yet legally admissible
private ISPs into the service has no
doubt made a difference; but it o Absence of an overall legal framework covering
cyber transaction and payment.
needs to be matched with increase
in bandwidth. Setting up of o Absence of taxation laws.
independent gateways by private Infrastructural problems:
ISPs can, of course, solve the
o Low density of telephone, PCs, and Internet
bandwidth problem to some extent. access.
However, given the high costs
involved, the nascent market, the o Bandwidth limitation
competition and the slow return,
o Networking limitation
many private ISPs may not be
prepared to venture into some o Infrastructural bottlenecks at the delivery end
gateway business. Commercial problems:

o Problem relating to the payment

Networking limitation –
The other barrier related to o Low density of credit cards
networks. Networking is most
o Inability to pay foreign suppliers online (in
essential for e-commerce. In India, foreign currency)
though many companies do have
Other problems
network of their own, they cannot
be shared with anyone else because o Confidence in the system is low

of India’s telecom policy, which has all along been favoring closed user networks.
o Problem of hacking

Infrastructural bottlenecks at the delivery end – Infrastructural

bottlenecks at the delivery end also hamper web marketing in the country. For
example, delivery of products is not easy. Indian roads and airways are unable to
support 24 hour- or 48 hours-delivery schemes that are common in countries like
the United States. Courier services/air express companies are also quite inadequate.

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 Commercial Problems:
Problem relating to payment – Payment problem is one of the significant
elements of commercial problems. Apart from the legal dimension discussed
earlier, there is a commercial dimension to the payment problem. The no.1 malady
is the low density of credit cards, debit cards and smart cards in India. Added to
this, in India, even those who have such cards cannot make online payment through
their cards to international sellers. The regulations in vogue constrain Indians in
transacting through credit cards with suppliers in foreign countries.

 Other Problems:
Confidence in the system is low – Another problem is that confidence in
the system on the part of potential users is still low. The absence of legal
framework already highlighted is one aspect. Corporate and household-consumers
alike seem to be still skeptical about the efficacy of the process. Surveys indicate
that even those who are considered as prospects for the system are not happy to
buy on the net; they feel that they cannot be sure of the quality of the products
bought or their timely delivery. Marketers on the web in India obviously have a
long way to go; they have to create the necessary confidence among the potential
customers and persuade them to see web marketing as a perfectly normal way of
doing business; they have to make them comfortable with the innovation.

Problem of hacking – The possibility of hackers misusing e-commerce is

another issue, though it is not peculiar to India. Luckily, of late, improved software
is providing the remedy to a good extent. Encryption is also being tried out to
ensure safety of data in transit. Yet, the problem is not fully resolved.

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