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Business-to-consumer digital
marketing practice
Chapter at a glance
Main topics
● The consumer perspective: online consumer behaviour 596
● The retail perspective: online retailing 606
● Implications for e-retail marketing strategy 612
Case studies
Case study 11: ASOS reinvents fashion retail 614
Learning objectives
After reading this chapter, the reader should be able to:
● understand online consumer behaviour, and more specifically how consumer
profiles and online experiences shape and influence the extent to which
individuals are likely to engage with the digital marketplace
● explain the development of online retailing and describe various types of online
retailing activities and strategies
● begin to develop an understanding from a retailer’s perspective of the strategic
implications of trading online in consumer markets.
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Introduction
Digital marketing insight 11.1 The Smart Insights planning template for digital strategy
development
Planning questions
These overview questions review strategies to maximise efficiency and effectiveness
of the channel. Key questions to consider are:
Q1. Do we have visibility of actual and target performance for volume, quality and
value for our online visitors?
Q2. What is the right channel media mix of paid, owned and earned media
(inbound/content marketing) to meet our goals?
Q3. Have we maximised the efficiency of each channel? Which are the
priorities?
Q4. Which audiences are we targeting or not targeting through online media?
Q5. What are our core messages and offers to encourage use of online
channels?
Q6. Are we putting sufficient time into managing relationships with partners and
influencers?
Q7. How do we route traffic and manage customer journeys to maximise
effectiveness?
Q8. How do we best integrate ALL channels?
Q9. How do we leverage the viral/word-of-mouth effect from viral channels?
Q10. Are our social presences effective and are we measuring reputation?
Arguably, levels of consumer demand for online shopping and services determine the size
of e-retail markets and when or if a market saturation point will be reached for online
purchasing. Various influences, such as ease of access to the Internet, levels of competency
in use of the technology, perceived benefits of engaging in online shopping and various
demographic variables, have been identified as key factors likely to impact on whether an
individual shops online or not.
Online retailing, sometimes referred to as e-retailing , offers the consumer an experience
which is different from shopping in a physical store. Web-based stores can: be open contin-
uously around the clock; offer instantaneous and individually tailored promotions; use
dynamic pricing to enable real-time prices, which reflect current market demand; provide
recommendations and reviews from other site users. Indeed, many consumers, even if they
do not intend to buy online, turn to the Internet to find information about a product in
the early part of the purchase decision-making process. An example of an online brand,
which facilitates comparison of products and prices, is Kelkoo.com. The origins of the
name from the French phrase ‘Quel coût?’ can be interpreted as ‘At what price?’ or even
‘What a bargain’. As a result of the innovative characteristics of the online shopping envi-
ronment, the online consumer experience can become an elective and very goal-orientated
activity whereby consumers go to the Internet to seek the particular products and services
they wish to buy. Perea et al. (2004) suggest there are various factors, including ease of use,
enjoyment and individual consumer traits, which will determine whether an individual
will become an avid Internet shopper, an occasional shopper, or just a browser. The next
section explores who are the customers who shop online?
Age Age can affect levels of access to technology, computer literacy and, eventually, the
extent to which individuals use the Internet as part of their shopping routines
Education Education can affect how an individual uses the Internet, e.g. university students find it is
not only useful for shopping but indispensable to support their studies
Employment status Employment places time constraints on online shopping behaviour, i.e. when and where
individuals can access online shopping channels
Gender Originally, male consumers made more purchases and bought higher ticket items online
than females. But now this has changed; according to research by Comscore (2014)
women account for 57 per cent of online sales. This upwards growth trend is likely to
continue as typically, (in the UK) women are responsible for 83 per cent of purchases
(on- and offline) (Bignell, 2013)
Geography Location is an important consideration: where people live can affect the potential size
of the online market; Asia now has the largest number of Internet users, followed by
the European Union. Interestingly the USA no longer has the highest number of Internet
users. Also, shoppers living in remote locations are likely to do more online shopping than
those who live in or near a large conurbation
Household size Household size has the potential to affect the number of people involved in purchasing
decisions and the direction of influence. For example, research has shown that in Europe
children and teenagers can have a strong influence on purchasing based on their levels of
computing competency
Household type Household type has the potential to affect product and service requirements; major shifts
towards single-person households have led to a shift in purchasing patterns and times
of purchasing. Online, such households can create logistical difficulties when delivering
bulky and perishable goods. Interestingly over three-quarters of all households with
children have access to the Internet as opposed to just over half of households without
children
Income Income affects purchasing power and also influences whether individuals have access to
the Internet. In the UK, AB, C1, C2 socio-economic groups are significantly more likely to
have access to the Internet and to subsequently shop online than groupings D, E. Income
is positively related to a tendency to shop online
Mobility Mobility affects channel access; less mobile targets may be encouraged to shop online.
This also applies to macro-populations, which are poorly served by public and private
transport
Race and ethnicity Race and ethnicity affects access to technology and economic circumstances. In the US,
the number of African Americans with Internet access is increasing to over 50 per cent
but this sector of the population still lags behind the Caucasians and Hispanics. See Mini
case study 11.1 for further insight into the uptake of online shopping around the globe
consumers have desktop access to the Internet, there will be larger differences in access
to smartphone and tablet devices, particularly between different countries, and this will
constrain the experiences these enable the merchant to offer.
Mini case study 11.1 Online retail business is booming in Europe and BRIC nations
Consumers everywhere are ‘buying into’ the idea of shopping online. Online retailing has been growing at an
average of 18 per cent per annum globally since 2010 (Figure 11.1) (Cushman and Wakefield, 2013).
The Internet is a disruptive technological innovation and its impact on retailing has been profound and as a
result many businesses are changing the channels they use to sell their goods and services. In some parts of
the world, retailers have been quick off the mark in developing their own branded e-commerce stores, whereas
in other parts of the globe e-marketplaces dominate. The USA remains ahead of the rest of the globe, with
the highest proportion of online shoppers per head of population, but in Western Europe the United Kingdom,
Germany and the Netherlands are catching up fast. Retailers in these nations seized the Internet opportunity
early and have been engaging in online trade since the mid-1990s and now have well-developed branded retail
operations operating across many different retail categories, including food, fashion, health and beauty products.
In Russia, China, India and Brazil the Internet has not been seen as a viable channel to market until more recently
but these nations are now hot on the heels of the early adopting nations. China is currently the second largest
e-retail market on the globe, with India, Russia and Brazil experiencing increasing demand from online shoppers.
As online retailing develops it is fascinating to see how communities of businesses and their shoppers are shaping
the online shopping experience to suit their own needs. Read online to find out where online shopping is booming.
50% 4.5%
Internet sales Share of total sales
45% 4.0%
40%
3.5%
35%
3.0%
Annual Growth
30%
Market Share
2.5%
25%
2.0%
20%
1.5%
15%
1.0%
10%
5% 0.5%
0% 0.0%
2000 2002 2004 2006 2008 2010 2012
Figure 11.1 Annual growth in online retail sales against market share of all shopping
Source: Cushman and Wakefield (2013)
Netherlands the figure is just over £600 and in Sweden around £500 average per annum and in all of these
nations the prediction is for continuing rapid growth in the number of online shoppers. UK retailers have
been meeting the needs of the ever-demanding online consumers and are leading the way in online shop-
ping development. Many leading high-street brands operate highly sophisticated multichannel operations,
enabling them to offer shoppers a seamless way to shop at any time of the day; through a computer, a mobile
phone or by visiting a store. As there are more shoppers and more retailers offering more products online,
consumers are changing their shopping habits and making fewer visits to high street stores. The impact
of this shift in preference of where to shop is having far-reaching effects and the Retail Research Centre
suggests that by 2018 a fifth of all retail sales in the UK will take place online. This trend is likely to have a
significant effect on the shape of the physical High Street and more stores can be expected to disappear.
Russia
Russia is experiencing rapid growth in the number of Internet users, with more unique users online than
Germany, France and the UK. While online shopping is in its infancy there is rapidly growing demand for
Internet-based services. The economy in Russia has been making the transition from being a centrally
planned Soviet system to a more free market-orientated economy. Such major changes to the economy
have unique implications and opportunities for adoption and development of online retailing. New tech-
nology is adopted and structural challenges from the old regime are being overcome. There is a retail boom
taking place and the economic climate is generating opportunities for development both on- and offline.
Russian retailers are beginning to develop a vibrant emerging online economy and this has stimulated private
consumption online as a result of higher incomes, greater employment and better access to consumer credit.
Furthermore, Russians are increasingly becoming homeowners and this is also driving demand for house-
hold products and other consumer goods. Indeed, retail industry leaders have reported significant increases
in trade – e.g. Magnit (grocery market leader) (Figure 11.2) has seen the company grow by 35 per cent per
year – but there are some significant barriers for retailers wishing to expand online, among them access to
reliable logistics, reliable financial and payment services. Centres of retailer activity tend to be concentrated
in major cities such as Moscow and St Petersburg, leaving large areas of the country without access to any
substantive retail provision. Given the geographical spread of population in Russia, retail provision is either
highly concentrated or highly fragmented. However, this is not deterring online shoppers. The Russians are
developing their own unique approach to online retailing to overcome these barriers. Retail showrooms and
stores where shoppers can go to collect and pay for pre-ordered goods are becoming increasingly popular.
China
China is rapidly becoming the world’s most vibrant market for online shopping, with over $200 billion in sales
and an annual growth rate of 120 per cent. The key destination for online shoppers in China is digital market-
places like Taobao and 360buy.com rather than individual retail brand websites. Online shopping is changing
the economic landscape, with a shift away from an investment-orientated society towards one driven by
consumption. Internet retailing is affecting consumption patterns in small and mid-sized cities as well as the
largest conurbations and it is suggested that a key driver of the uptake of online shopping in more remote
parts of China is access to branded goods, which are otherwise unavailable. Apparel, household and educa-
tional products are the most popular online. Arguably, in China, online retailing is set to lead the development
of retail markets due to the complexities and geography of setting up a country-wide store-based operation.
Online is giving Chinese businesses access to a flexible, responsive and rapidly growing marketplace.
India
The retail sector in India is booming both on- and offline. India is a relative latecomer to the online shopping
revolution but it is predicted that online sales will grow by 50 per cent annually in the next few years. The
country is already the third largest nation of Internet users, with 120 million Internet users and the rapid uptake
of mobile commerce is predicted to increase the number of users to over 330 million by 2015. Social media
is helping to drive the development of online retailing. Increasingly wealthy populations of young Internet-
savvy customers are spending more time and money online and in doing so are influencing shopping trends.
Amongst the popular products online are books, consumer electronics, travel, financial services, apparel
and beauty care. Online shopping activity is concentrated in major urban conurbations with Mumbai being
the main centre followed by Delhi and Kolkata. A large proportion of the purchases are conducted in online
marketplaces. Snapdeal, launched in 2010 (Figure 11.3) has become India’s largest online marketplace.
Currently, the Internet accounts for a small proportion of India’s GDP but the predictions are that an Internet
boom is just around the corner for Internet retailers.
Brazil
Brazil is in the early stages of developing online retailing as more and more consumers gain access to
the Internet. However, retailers face difficulties with providing good-quality services, reducing delays in
deliveries and returns policies. Online retailing is mainly in the key urban centres. Nevertheless, young
Latin Americans are embracing mobile technology, and this is becoming a key driver in the development
of online shopping. Brazilian retailers will still have to overcome issues of security, and access to broad-
band and mobile infrastructure in more remote regions. Also there is still resistance to online shopping from
older generations who like to shop in the malls, where they enjoy the personal service offered by retailers
(O’Toole, 2013).
Attitudes
towards perceived
Shape outcomes of
online shopping
Influence
Beliefs
about the
Internet
Intentions
shop online
Form
Character Variables
Innovative, computer-
Online shopping
literate individual
experience
who is confident and
enjoys shopping
online and offline
Feedback
Consumers’ beliefs about a range of variables might ultimately shape their attitudes
towards the Internet and their purchasing intentions. Examples include:
In summary, classification and character variables have both been found to play an im-
portant role in predicting how consumers might behave over time, but it should be ac-
knowledged that only character variables will be significantly affected by online shopping
experiences (Doherty and Ellis-Chadwick, 2006, 2010). For example, the gender of a shop-
per may influence the extent to which they shop online but the gender of a shopper cannot
be changed as a result of an online shopping experience.
to understand how customer expectations have been raised. Some of the key areas where
customers have high expectations are:
● Delivery – the critical link between an online order and the delivery of the product is
often referred to as the final or last mile. The last mile, including product transpor-
tation, is frequently considered the most important element of the order fulfilment
process, i.e. 89 per cent of online shoppers rate on-time delivery high in importance
and 85 per cent of buyers who receive their order on time would shop at the Internet
merchant again. Thus, delivery-related issues have been shown to have a high level of
importance to online shoppers (Esper et al., 2003).
● Timeliness – the speed of digital communications has raised customer expectations in
terms of response times and they expect a speedy shopping experience. It is no longer
acceptable to take three or four days to respond to an online customer enquiry; an online
customer expects that the response will be instantaneous or at least within a couple of
hours. Additionally, they expect to be able to order goods and services at any time.
● Availability – the Internet creates a sales environment which is not restricted by space
constraints; therefore there is an increased expectation that not only will there be a wider range
of goods for sale online but also the goods will be readily available for immediate delivery.
● Convenience – it should be easier and quicker to compare prices online; there should be
easy access to a wide range of retailers without the inconvenience of having to travel to
a number of different locations.
● Customer service – customer value is the foremost driver of competitive advantage in the
Internet shopping environment and customer service can be measured by the consumer
in terms of price savings, service excellence, time savings and experiential values such as
entertainment, visual stimulation/reward, levels of interaction. At the start of Chapter 6
we read about the various dimensions of customer loyalty and how they can be trans-
lated into website features in Table 11.3. Digital marketing insight 11.2 looks at how
Shop Direct is dedicating resource to improving the online consumer experience.
Digital marketing insight 11.2 Shop Direct UX Lab helps understand consumer behaviour
The 20th anniversary of the first online purchase made by a consumer – a music CD
by Sting, titled Ten Summoner’s Tales (Spence, 2014) – was 11 August 2014. Two dec-
ades of online retailing have delivered many changes: one in four of us shop online, for
a wide range of products (see Figure 11.5).
At an increasing rate, we buy books, clothing, music and travel online, using a com-
puter, laptop or mobile device. Shop Direct is the first UK retailer to make a signifi-
cant investment (£100,000) into studying online shoppers. Its UX lab is an in-house
laboratory dedicated to looking into online users’ experiences using a sophisticated
research toolkit. The tools and techniques applied allow Shop Direct to see how con-
sumers shop websites. The lab provides a facility to observe how customers are mov-
ing around websites. It consists of two rooms: one for the shoppers and the viewing
room, which allows the retailers researchers to view online shopper behaviour through
one-way glass. Shop Direct is keen to know how to get closer to its customers who
use its websites: very.co.uk, Littlewoods.com and isme.com. The main aim of the lab is
to bring Shop Direct closer to its customers. Of particular importance are the journeys
which customers take when they visit the websites and then how they interact with the
products on sale (Shop Direct, 2014a). According to Jonathon Wall:
Having the UX lab on-site has acted as a catalyst for the acceleration of our testing
and experimentation programme. Since opening the lab earlier this year, we’ve dou-
bled the number of monthly lab studies that we undertake. We’ve also more than
doubled the number of split and multivariate tests running across our six transac-
tional websites every month, from 15 to 35 (Shop Direct, 2014b).
Books
Electronics
Tickets
Furniture
Other
0 20 40 60 80
Percentage
Highcharts
The UX lab has had a profound impact on Shop Direct. Sam Barton who is Head of the
IAB, is quoted as saying ‘we’re not looking at what our competitors are doing but at
what our customers are doing’. The UX lab is enabling Shop Direct to take the guess-
work out of online retailing and in doing so building websites which better serve their
customers (Figure 11.6).
It is important to understand that the increase in customer expectations can have quite
wide-reaching organisational implications. The gap between customer expectations of the
online offer and the actual performance can have a significant impact on online perfor-
mance. Now read Digital marketing insight 11.3, which explores the relationship between
experiences and online success. (Note that the similar E-SERVQUAL and WEBQUAL
frameworks are described towards the end of Chapter 7.)
In summary, consumer demand for online shopping continues to grow at a rapid rate.
As the Internet infrastructure expands and develops, more parts of the world are able to
There has been a great deal of academic research looking at the relationship between
quality and online success in consumer markets. Wolfinbarger and Gilly (2003) used
the idea that quality is related to customer satisfaction and retention and ultimately
customer loyalty. The study identified four dimensions of e-tailing and in doing so ena-
bled the development of a reliable scale for the measurement of online retail quality
called eTailQ. The four key dimensions identified by the study can help managers to
understand customer judgements of a company website and how customers shape
their attitudes based on their experiences of visiting, say, a retailer’s website. The four
dimensions in rank order of importance are:
1 Website design:
● easy navigation;
● appropriate levels of information;
● effective information search facility;
● straightforward ordering;
● appropriate personalisation;
● appropriate product selection.
2 Fulfilment/reliability:
● accurate display aimed at ensuring alignment between customer expectations
and realisation;
● delivery of the right product within promised time frame.
3 Customer service:
● responsiveness to enquiries;
● helpful;
● willing service;
● immediacy of response.
4 Privacy/security:
● secure payment facilities;
● secure and private personal information.
Customer judgement of the quality of the website visit is an important part of the cus-
tomer’s online experience and the outcome of the evaluation process could determine
whether the customer (a) is sufficiently satisfied to return and make another purchase,
(b) develops loyalty intentions and subsequently recommends a site to friends and
family and (c) develops a positive relationship with the brand.
You can see that customer concerns from 2003 are similar in many ways to today.
Consider which are different. We think that the most significant omissions in this
framework are the integration between online and offline presences (click to reserve);
integration with social commerce facilities (reviews and ratings); and social networks,
although the notion of ‘community’ is considered.
have access to the technology, which enables them to shop online. Political and economic
development is also playing a part in enabling certain parts of the world to take part in the
e-commerce revolution.
At an individual level more is now known about online consumer behaviour and for
retail managers and marketers the key to online success is developing better understanding
of the consumer’s profile and the consumer’s behaviour when online shopping. The web
analytics tools we described in Chapter 10 are powerful in reviewing consumer behaviour.
Online shoppers tend to have different profiles and characteristics to offline shoppers,
which shape their shopping intentions. Online shoppers still tend to be younger, wealthier,
better educated, have higher ‘computer literacy’ and more disposable income than the
offline shopper. It is also important when planning e-retail strategies to consider that as
the Internet becomes a more mainstream shopping channel there are likely to be a greater
range of cultural differences as wider sectors of the global populations have greater access
to online shopping channels. The next part of the chapter explores B2C markets from the
retailer’s perspective and looks at how organisations are developing the online shopping
provision.
This section explores online shopping from the retailer’s perspective. More specifically, it
considers the development of the online trading environment and online retailing activi-
ties, trading formats and strategies and the strategic implications of trading online in
consumer markets.
Digital marketing insight 11.4 Online retailers that have made their mark on the digital
high-street
Amazon, Apple, eBay and Tesco.com are high-profile companies that have made their
mark on the shape of the digital high street. But these are not the only companies that
have changed the way we shop online. Read about some other retailers that have
made their mark in online retailing.
pioneer in multichannel retailing. With the launch of the website customers could
now shop in-store, by phone and online. But perhaps the biggest contribution to
the development of online retailing is the service level agreement Next has with its
customers. Since 2001 Next has promised to deliver its customers’ orders the fol-
lowing day. Currently, if you place your order by 9pm, you will have the goods the
following day and over 3 million loyal customers do just that via the website. Next
has brought quality products and customer service agreements and constantly
seeks to raise the standards of its online offer.
Sources: Next plc (2013); The Catalogue Shop (2013a)
These four retailers have developed their own unique strategies to develop their online
presence. To put it into context and see how the rest of the online retail industry has
developed since 1995 in the UK, visit History of online retail (www.open.edu/openlearn/
money-management/management/business-studies/history-online-retail).
Source: Iceland (2013)
phase where the operational style is innovative, and then move through into a growth stage
as the business expands, into a maturity stage where the company begins to see greater
profitability and then finally into a decline stage, where the business is overtaken by more
innovative competitors offering different retail styles and operational formats.
Operational strategies
E-commerce sparked new thinking about how computer networks might facilitate and
increase trade in both business and consumer markets. In the retailer sector new opera-
tional strategies were devised which incorporated retail operations and Internet tech-
nology. To begin to understand the operational styles and strategies of online retailers it is
important to consider three main operational categories:
● Bricks-and-clicks retailers are generally long-established retailers operating from
bricks-and-mortar stores in, say, the high street and then the Internet is integrated into
their businesses either strategically or tactically as a marketing tool or a sales channel.
According to Dennis et al. (2004), online shoppers prefer shopping at websites operated
by established high-street retailers as they understand what a brand means in terms of
value and the physical part of the operation gives an increased sense of security.
● Clicks-and-mortar retailers tend to be virtual merchants and design their operating format
to accommodate consumer demands by trading online supported by a physical distribu-
tion infrastructure. Virtual channels have distinct advantages over traditional marketing
channels in that they potentially reduce barriers to entry. The location issue, considered
to be the key determinant of retail patronage (Finn and Louviere, 1990), is in the physical
sense reduced, along with the need for sizeable capital investment in stores. The best-known
virtual merchant using this format is Amazon.com, the world’s largest online bookstore.
● Pureplay retailers – ‘clicks-only’ or virtual retailers operate entirely online. In reality it
is almost impossible for a business to operate online without a point of access to the
Internet. Therefore, generally speaking, the term ‘pureplay’ refers to retailers who do not
have fixed-location stores and or own physical operational support systems, e.g. distri-
bution warehouses. While this category has produced some very innovative retailers, in
reality few retailers actually outsource all warehousing, picking, packing, shipping, returns
and replenishment requirement. Perhaps the key difference between these two companies
is that one sells products and the other services. In the case of services, the customer takes
themselves to the point of consumption rather than having goods delivered to their door.
As retailers develop their usage of the Internet for providing information, customer ser-
Retail channel vices and online sales it becomes a retail channel. This term was introduced by Doherty
Retailers’ use of the et al. (1999) to describe companies’ multi-purpose adoption of the Internet, using it as
Internet as both a
communication and a both a communication and transactional channel concurrently in business-to-consumer
transactional channel markets. Traditionally the term channel describes the flow of a product from source to
concurrently in business-
to-consumer markets. end user. This definition implies a passive unidirectional system whereby the manufacturer
or producer markets through a wholesaler or retailer to the consumer. This move may
also suggest a shift towards a bidirectional retailer–consumer relationship, in which more
power accrues to the customer (Hagel and Armstrong, 1997). As a result of the techno-
logical capacity, e-retailers are becoming increasingly creative with how they are using the
Internet and associated digital technologies to serve the needs of their customers. A high
proportion of customers are multichannel customers who combine research based on use
of a website with physical stores when making a purchase.
Furthermore, the steady growth of online retailing over the last two decades through the
applications of these three operational strategies and innovation in mobile technologies and
use of social media has influenced the way shoppers wish to connect to their preferred type
of shopping. Indeed, according to a report commissioned by eBay, connected consumers
are driving the development of retailing as ‘consumers want to be able to buy anytime and
anywhere’ (Guardian, 2015). What this means is that shoppers are interacting with retailers
across different channels. As a result it is important not just to operate with one of the three
main operation strategies described earlier but to develop a hybrid model which allows
shoppers to engage with the brand, products and services at every possible touchpoint in
their shopping journeys. This new operational strategy is called omni-channel retailing.
Omni-channel retailing
The way people shop is changing as a result of the interventions of digital technologies
and social media. The basic consumer decision-making model discussed in Chapter 3 has
become more complex and as a result the shopper’s path to purchase can mean that they
not only encounter all of the traditional (pre-Internet) purchasing cues but also a range of
new digitally enhanced cues. Figure 11.7 shows the potential touchpoints a shopper might
encounter prior to purchase (Fulgoni, 2014), where they might encounter cues which can
inform their purchase decisions.
To begin with, digital technology has impacted on consumer decision making by
providing a vast store of information which shoppers’ access to inform their purchase
choices. So a path-to-purchase typically begins with an entry in a search engine or a visit to
a retailer’s website. Digital search tools play a vital role as consumers say they help to save
time (Fulgoni, 2014). But digital marketers should not assume that consumers no longer
interact with the physical world as they are still likely to watch television and in doing
so encounter more traditional advertising. Equally, consumers are also likely to speak to
family and friends both on- and offline. Mobile devices facilitate interaction with actual
products in physical stores. Indeed, showrooming, where shoppers visit a store to touch
and feel actual products but then make their purchases online is becoming increasingly
popular. The motivation to buy online is largely driven by seeking lower prices (comScore,
2014). So physical retailers can no longer afford not to operate online as well as offline
because if they do they are likely to lose sales. Many physical retailers are beginning to
find ways to combat the potentially detrimental effects of showrooming. For example,
in November 2014 US department store retailer Macy’s, with over 850 physical stores,
introduced a smart phone app which enabled shoppers to search to find out whether a
particular item was in stock in a local Macy’s store. Macy’s claims that every dollar it
invests in search marketing drives $6 towards a store purchase (Rodriguez, 2014).
TV Print Media
Online
Brick and
Friends and Mortar
Family Stores
How do retailers survive in the omni-channel world? According to Fulgoni (2014), there
are three priorities retailers should address:
1 Eliminate silos and create seamless experiences for consumers all the way along the
path-to-purchase. Look for ways to bring together the on- and offline world and avoid
isolated marketing campaigns, which do not integrate. If there is any friction along the
journey a shopper is likely to defect to another supplier (e.g. if a retailer sells products
at different prices online to in-store);
2 Increase opportunities to digitally interact – by understanding more about their paths-
to purchase (e.g. provide incentives along the way through digital advertising and
mobile promotions).
3 Analyse and measure consumer behaviour at all touchpoints in order to develop deep
and insightful understanding in what is driving shoppers’ choices and purchase decisions.
For the retailer, the impact of an increasing number of consumers and businesses accepting
the Internet and other forms of digital media as a stable channel to market is an increase
in customer expectations, which creates competitive pressures and challenges. In part, this
has been caused by new market entrants that have established their market position by, say,
offering very wide and deep product choice, dynamic demand-driven pricing or instan-
taneous real-time purchase and delivery. The result is that retailers are required to adopt
a more dynamic and flexible approach to dealing with these raised expectations. Allegra
Strategies (2005) identified a number of performance gaps and Table 11.3 presents some of
the most significant gaps and the managerial implications.
For the e-retailers it is important to identify any performance gaps and develop strate-
gies which help to close them. For example, in the case of logistics, research has found that
utilising carriers (road haulage, air freight) that have higher levels of positive consumer
awareness with appropriate online strategies (i.e. offering a choice of carriers) can
contribute to the consumer’s willingness to buy and overall satisfaction with the online
buying experience. Therefore, development of strong awareness and brand image among
consumers can prove to be a beneficial strategy for both the e-retailer and the carrier, since
consumers have traditionally carried out the home delivery function themselves (i.e. shop-
ping in ‘bricks-and-mortar’ retail stores). Of course, this in itself raises the expectations
of the care taken by the delivery agent, which has the implication of having to introduce
better handling of goods as well as the speed with which the goods need to be delivered
(Esper et al., 2003). A further consideration is that the retailer and the chosen carrier need
to be able jointly to satisfy the consumer so that they may benefit from co-branding.
How the online consumer accesses retailers’ goods has given rise to various opera-
tional formats (discussed earlier in the chapter) and distribution strategies but this only
forms part of the retailer’s e-strategy. Nicholls and Watson (2005) discuss the importance
of creating e-value in order to develop profitable and long-term strategies and agree that
logistics and fulfilment is a core element of online value creation but at two other impor-
tant platforms: firm structure, and marketing and sales.
Firm structure can be used strategically depending on organisational capabilities and
technology infrastructure. Porter (2001) described the emergence of integration and the
potential impact on e-value chains. Integration can ensure faster decision making, more
flexibility and attract suitable e-management specialists and capital investment (Nicholls
and Watson, 2005). In the case of the UK grocery sector, larger retailers have adopted
different approaches towards structuring their online operations. (See Case study 11 for a
detailed discussion of how ASOS has reinvented fashion retailing online.)
Marketing and sales can be used in customer-centric value creation strategies in the
form of interactive marketing communications strategies (see Chapter 9 for a detailed
The disparity between brand The gap between Internet use and Companies need to develop websites
strength and website offer the lack of website development to meet consumer expectations
means there is still the potential to capture this behaviour
capture browse and buy behaviour A failure to do so will result in lost
sales as consumers browse and/or
buy elsewhere, i.e. the effect is both
‘on’ and ‘off’ line
The disparity between brand Retailer brand strength is frequently The first ‘dot-com’ wave was
strength offline and online not reflected online. This may concerned with establishing first-
dilute current brand perception and mover advantage. This second wave
leaves an opening for competitors is concerned with ‘bricks-and-mortar’
to establish a stronger online brand retailers establishing their brand
presence even if they are weaker strengths online, i.e. a ‘brand’ wave
‘offline’ Any lack of investment will deliver
mind share advantages to competitors
even if they have a lesser brand. In
this second wave it will be difficult to
recover a competitive position once
any brand advantage has been lost
A lack of alignment between the The most advanced entrants are The market is still at an early stage in
nature of the online competitive from overseas or national catalogue many retail categories. There remains
environment and the maturity of companies, the larger retailers (to a a potential competitive advantage for
consumer demand variable extent) and specialist niche a ‘bricks-and-mortar’ retailer to ‘grab
companies this window of opportunity’
Inertia in decision making There is a ‘battle for budgets’ within Barriers to customer contact need to
retailers, i.e. retrench and invest in be removed. Budgetary constraints
core business at the expense of are misaligned where the cost of doing
new channels nothing means lost opportunity at
Some retail cultures run counter best, and at worst lost competitive
to non-traditional means of ‘doing advantage
business’ The maturing outsourcing market may
unblock the cost–benefit perception
Source: Allegra Strategies (2005)
discussion) and revenue streams. Indeed, according to Dennis et al. (2004), there are four
revenue stream business models, which in turn are based on advertising, merchandising
and sales, transaction fees and subscriptions.
Strategic implications for retailers wishing to be successful online are far-reaching and
require a retailer to develop a carefully informed strategy, which is guided by a business
model that can satisfy corporate objectives through deriving value from corporate capabil-
ities while effectively meeting the expectations of the online consumer. The target market
and the product category can have a significant influence on success.
In conclusion, it is now widely acknowledged that there is a need for a company to
have a coherent e-retail strategy underpinned by a clear vision of how to create sustained
competitive advantage if a business is to gain the maximum benefits from operating online.
An online retailer’s strategy is likely to be affected by the category and operational strategy
it adopts, the type of products and services it sells and the market segments it chooses to
serve. Traditional offline retailers will need to defend their existing market share as new
entrants online are increasingly shaping the future of the Internet as a retail environment.
Retailers need to ensure that the value created by online retailing is additional rather than
a redistribution of profitability. It has been suggested that by removing the physical aspects
of the retail offer the Internet increases competition.
Case Study 11 ASOS leads the way with social media and reinvents fashion retailing online
More than just an online fashion for 20-somethings, endorsements in PR and promotional campaigns. ASOS
ASOS has pioneered social shopping. Currently one now sells over 50,000 branded and own-label clothing
of the most successful online fashion retailers founded products and offers a much wider product range than
in the UK, ASOS offers tens of thousands of branded its high street competitors. ASOS operates as a fast
and own-label fashion items to millions of 20-something fashion retailer, which has meant overcoming many
men and women around the globe. But when the com- challenges to get goods to the customers on time and
pany was first established in the year 2000 the outlook at the same time manage the high rate of returns. ASOS
for online businesses selling clothing was bleak. Boo has set up systems which enable product lines to be
.com – the online retailer heralded to change the way we replaced quickly. Operating at this level creates many
shop – was on the verge of collapse, the dot-com bub- challenges for ASOS, so, in order to deliver the promise
ble was about to burst and to make matters worse, the of fast designer-look fashion, and to constantly update
word on the digital high street was that no one is going product ranges, ASOS has established an ‘in-house’
to buy fashion items online anyway. design team in Europe, which creates catwalk lookalike
Nick Robertson and Quinten Griffiths, founders of As items that are produced close to the customers, which
Seen On Screen (ASOS), were obviously not deterred aids delivery, and helps the higher returns rate of oper-
by this gloomy outlook. Inspired by watching American ating online rather than in-store.
TV series Friends, Nick and Quinten set about building a
ASOS introduced an ‘independent designer section’,
website which could sell items that potential customers
which we established to provide a shop window to
had seen on television. Initially, ASOS sold copies of
new design talent, has been very successful, and
clothing worn by celebrities but soon the company
we plan to add an additional 30 designers to the 16
began developing its own brand. This focus enabled the
designers with whom we currently work.
company to start to build a reputation that was attrac-
The most significant development in 2008/9, how-
tive to young fashion shoppers.
ever, will be the launch of our branded clearance
In the past, it has been suggested that it is not
section, ASOSRed. eBay has proved that the Inter-
possible to develop a successful online fashion busi-
net can be a very efficient channel for clearing end-
ness but by 2004 ASOS had introduced its own-label
of-season and markdown stock. We also know from
women’s wear and in 2006 it was the first company in
research that eBay and other sites where this type of
the UK to launch online catwalk shows. By 2010 ASOS
stock is available are popular with our customers. We
began expanding into European markets and currently
firmly believe that by applying the ASOS presentation
the company has offices in Sydney, New York, France,
techniques to this end of season stock we will be able
Germany and Russia.
to enhance the image of the brands and the product
By 2011, ASOS had grown into the UK’s largest
and provide an overall better customer experience.
online fashion retailer and the ASOS Annual Report
The offer will initially consist of approximately 20
for 2011 proclaimed that ‘Asos was the third most
brands, expanding to around 50 brands within six
visited fashion website on the planet’, averaging 13
months.
million unique visitors a month with 5.3 million regis-
tered users and 3.2 million active customers (defined
as having shopped in the last 12 months). The main Online value proposition
site ( www.asos.com ) targets the original UK market, Product choice is at the core of the ASOS proposition:
but the company has grown: its share in other markets tens of thousands of branded and own-label products
including France (www.asos.fr), Germany (www.asos.de) available, with hundreds introduced each week. On
and the USA (www.us.asos.com). It has increased its pricing, ASOS is price competitive with its Price Promise
country delivery list to 196. (a price match offer): if you see a branded (non-ASOS)
The company’s competitive strategy aimed at devel- product cheaper on another website, the company
oping a unique market position by selling a specialist will match that price. ASOS describes its website as
range of products which have ‘the designer fashion ‘evolving constantly as we find better ways of presenting
look’. Nick Robertson, the company’s founder, started our products’. The essence of the brand communi-
selling branded clothing as seen in films and on televi- cated in its annual report is ‘restless innovation for our
sion. Not only did this enable the company the opportu- customers’. The main elements which ASOS aspires to
nity to create a market but it also benefited from celebrity are: ‘Inspire and power your fashion discovery’.
Partnerships
Promotional tie-ups and associations are very impor-
tant to ASOS. In June 2008 the company launched
a limited 100 design collaboration with the London
College of Fashion. A capsule collection of 100 one-off
pieces each sold on the ASOS website. The promo-
tion received media coverage, including two full-page
features in the national press. The collection sold out in
minutes.
Marketing communications
In 2011 the ASOS magazine had a circulation of
nearly 500,000. ASOS doesn’t publish details of online
marketing, although it does invest in Google AdWords.
Figure 11.8 ASOS brand wheel The company is now less reliant on affiliate marketing
which at one point contributed 30 per cent of revenue.
There is much discussion about the value of this. Nick
Other elements of the ‘brand wheel’ (see Figure 11.8) Robertson of ASOS said at the time of stopping the
are: programme (in an incident known in affiliate marketing
● External: The world’s best fashion, the best fashion circles as ‘Grubbygate’), ‘I’m not saying we couldn’t
experience, the service I want, inspire and engage me. do more in the online marketing space. Next year we’ll
● Internal: Passionate about people, continuous impro- reintroduce affiliate marketing, but as it should be. No
vement, fashion with integrity. silly commissions being paid to grubby little people in
grubby studios growing income at our expense, getting
In 2010 ASOS.com launched its marketplace platform,
in the way of genuine sales.’
which enables boutiques, vintage collectors, individuals
J e s s L u t h i , w h o p re v i o u s l y w o r k e d o n t h e
and designers – established or unknown – to trade from
programme, justified investment as follows:
their own virtual market stalls to customers across the
world. It differs from other online marketplaces like eBay Affiliate refers a new visitor (average order basket at
and Amazon in that each vendor can customise their the beginning £35.00) affiliates get £3.50 + network@
shop front and, for £50 each month, will have access £1.05 = total commission payable £4.55. So it’s cost
to an account manager at ASOS and some premium ASOS £4.55 for acquiring a new customer? Nope not
promotional spots on Marketplace. quite, let’s say a customer comes back and orders
a further (I will be very generous here) say three
ASOS service times within the cookie of (I can’t remember if it was
Working with their logistics partner Unipart, Asos says it 90 or 120, let’s say 120 days) let’s keep the basket
has been able to improve the speed and accuracy of deliv- at £35.00. This new customer has just cost ASOS
eries to customers. Today, 95 per cent of all orders placed £18.20 in total, after the cookie expires ASOS own
before 2.30 pm leave the warehouse the same day, even if the customer. If we take into account for overheads,
the customer has not opted for next day delivery. let’s say the customer cost ASOS, £20.20 (I have
This has had the effect of moving the standard added £2.00 for odds and ends). But the customer
delivery terms from 3–4 days to 1–2 days. In October has bought goods x 4 (goods have markups, they are
2008 new delivery options were introduced including not selling at cost) ASOS could not as long as I was
a named day service, including Saturday and both there tell me what the lifetime value of a customer
morning and afternoon delivery options. ASOS reported was, thing is they didn’t know then.
Ultimately, ASOS has developed a large target audi- for advertisers to know how well their campaigns are
ence for its products through the use of digital media performing (Mortimer, 2015). The main thing for the
and it is able to communicate new product ideas very ASOS team is being where their customers are and
effectively to keep customers interested. ASOS’s inno- being able to engage in the dialogue.
vative use of social media has enabled it to influence Sources: ASOS (2011, 2013); BBC (2013)
the way young shoppers interact with online fashion
retailers. Moreover, this is likely to be a massive
growth area and social shopping is likely to continue Questions
to reshape the way we shop for the foreseeable future. 1 Describe how ASOS applies the marketing mix
Always keen to be ahead of the competition, ASOS is online?
currently experimenting with Snapchat – the social app 2 Summarise the integrated communications strat-
for sharing photos – to see how this technology works egy used by ASOS?
with its customers. However, it is struggling to find 3 What risks do you anticipate as ASOS expands
an advertising model which works due to the lack of overseas?
data provided by Snapchat, which means it is difficult
Summary
1 This chapter has focussed on online retailing from two perspectives: the consumer and
the retailer. In doing so the chapter has raised questions about the different types of
customer that shop online and the various types of retail strategies used to create an
online presence.
2 Online consumer behaviour is influenced by a number of factors, which shape and
influence an individual’s intention to shop online and have important managerial
implications for retailers when developing target marketing strategies and looking for
market development opportunities.
3 The online customer profile is made up of two distinct sub-categories: classification
variables and character variables, which are ultimately used to interpret the meaning of
any online shopping experiences.
4 Online consumer behaviour is made up of a set of beliefs about the Internet that are
shaped from attitudes which influence an individual’s intention to shop online. Over
time an individual’s behaviour can be modified by positive and negative online shop-
ping experiences.
5 Websites that do not deliver a good online experience are unlikely to succeed. Online
retailers need to develop a sound understanding of who their customers are and how
best to deliver satisfaction via the Internet. In the future, more retailers may begin to
develop more strategically focussed websites, integrated into support systems.
6 Trading via the Internet challenges online retailers to pay close attention to the online
markets they want to serve and to understand that there are differences between on-
and offline customer expectations.
7 Website quality is important as it is a key determinant of customer satisfaction and
eventually customer loyalty.
8 Given current levels of growth in adoption from both consumers and retailers, the
Internet is developing into a well-established retail channel that provides an innovative
and interactive medium for communications and transactions between e-retail busi-
nesses and online consumers.
9 The Internet and web present opportunities for companies to adopt different online
retail formats to satisfy their customer needs, which may include a mix of Internet and
a Classify the target audience your friend represents using demographic, psycho-
graphic and profile variables.
b Map out the purchase journey your friend intends to take and identify the touch-
points where digital communications, mobile incentives and prompts could be
applied.
c Reflect on how different (or similar) your friend’s journey is to the classical
consumer decision making model.
Self-assessment exercises
1 Make a list of classification variables, which a retailer might use when trying to
identify an online target market for (a) high-tech training shoes, (b) organic beauty
products.
2 Explain the difference between ‘classification’ and ‘character’ variables.
3 Describe three different strategies an e-retailer might develop when creating an
online presence.
4 Describe the different types of formats an online retailer might follow.
5 From a resource-based view, explain the difference between ‘resources’ and
‘capabilities’.
Examination questions
1 It was once predicted that the Internet would replace high street stores and that
within ten years the majority of retail purchases would be made online. However,
while online shopping is continuing to grow year-on-year it still represents a small
part of the total retail spend. Explain why the early predictions have not been met
from the perspective of either the consumer or the retailer.
2 Tesco.com has established a position of being the world’s leading online grocer
with an estimated sales turnover of £401 million and profits up 37 per cent to £21
million (as at 21 September 2005). However, Iceland was the first UK retailer to of-
fer nationwide delivery of a range of groceries ordered via the web yet they have
ceased to offer this service. Discuss why Tesco.com has been able to establish
such a dominant market position.
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Chapter at a glance
Main topics
● Types of B2B organisational marketing and trading environments 625
● Using digital marketing to support customer acquisition in B2B marketing 627
● Options for online inter-organisational trading 633
● How digital technologies can support B2B marketing 639
● Digital marketing strategies 642
Case studies
Case study 12.1: Covisint – a typical history of a B2B marketplace? 637
Case study 12.2: B2B adoption of the Internet: Inspirational Cosmetics 645
Learning objectives
After reading this chapter, the reader should be able to:
● Explain the differences between online trading between business-to-business
and business-to-consumer organisations
● Understand strategic options for organisations seeking to improve their
performance in digital markets.
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