The Impacts of Online Shopping on Traditional Retail Businesses - Literature review Example

The Impacts of Online Shopping on Traditional Retail Businesses Name: Lecturer: Course: Date: Table of Contents Table of Contents 2 Executive summary 3 Introduction 3 Benefits and disadvantage of online shopping to customers 4 The current consensus regarding online shopping 6 Factors that may have influenced the current feeling 7 Recommendations 8 Conclusion 8 References 9 Appendixes 10 Executive summary This report has examined the impact of online shopping on traditional retail businesses. The report takes note of the fact that online shopping has indeed gained prominence and thus impacting traditional retail businesses. One of the key impacts raised is the decline in sales in traditional retail businesses, while sales gained from online shopping continue to increase. The paper however recommends that despite such existing challenges, traditional retailers should adopt to change by integrating both the online business model and the direct sales model. Also, traditional retail stores should still expand their retail space with strategies such as developing show rooms where online shoppers can come and view their products. Introduction The emergence of online shopping has greatly revolutionized business transactions. Online shopping is defined as any kind of shopping that occurs through the internet where electronic methods are used to undertake purchases at visual stores/shops which are sites that are found on the internet (Sward, M 2008). In Australia, online shopping is becoming more prominent. The Australian Bureau of Statistics discloses that purchases made online surpassed the $7 billion mark in 2012-2013 (ABS, 2013). These estimates are higher than the ratings of previous years which amounted to $6.2 billion. The rapid growth of online shopping implies that there are implications on traditional retails stores. This report presents findings on the impacts of online shopping on retail businesses. Benefits and disadvantage of online shopping to customers There are numerous benefits of online shopping. Surveys conducted on various customers revealed that one of the benefits of online shopping is convenience. Customers stated that they can purchase services or products at any suitable time; this is because retailers working online accept orders twenty four hours a day. In traditional stores however, customers have to physically go to the stores during the usual business hours which is quite inconvenient. Another aspect of convince is that a person can instantly get online reviews for any particular product that they require. Women customer essentially found online shopping to be very useful based on the fact that they can easily get any product from groceries, to clothing’s, jewels household products, without much struggle (Appendix 1). Another benefit of online shopping is that consumers can purchase a variety of products within the global market. Online shopping provides a distinct benefit whereby shipping services are offered in order for the product to reach the consumer. Although shoppers have to make additional payments for shipment services, some customers did not mind the additional costs as long as they got the products they needed (Appendix 1) Response attained from many consumers also revealed that they preferred online shopping based on the fact that it assisted them to avoid crowds and the congestion that is associated to visiting retail stores. The shoppers stated the fact that visiting retail shops essentially during special events and festival is definitely a headache. Also, the crowds in stores were a nuisance forcing customers to do their shopping in a hurry. Other consumers also held the view that visiting retail stores is inconvenient due to the irritating and cranky people who visit stores. Getting parking space is another challenge of visiting retail stores. Consequently, many people increasingly prefer online shopping (Appendix 1) A study conducted by Sonehara (2008) on 998 online customers revealed that online shopping offered consumers both intrinsic and extrinsic benefits. Intrinsic benefits were in terms of fashion involvement, novelty and pleasure. Most consumers disclosed that online shopping gave them a fashion involvement experience. The extrinsic benefits were measured in terms of saving money and time. Most consumers stated that online shopping assisted them to save money. Despite of the many benefits accrued from online shopping there are disadvantages of online shopping. North et al, (2003) undertook a study to examine why certain consumers do not shop online. The study listed the reasons in table I below on the basis of gender. Table 1 Reasons for not Shopping Percentage of total customers who stated their reasons Male% Female% Too Difficult 21 26 Security Concerns 70 73 Unfamiliar Merchants 41 37 Lack of ‘’touch ‘’ 45 54 On the basis of this study, it is evident that customers were primarily concerned about the security aspect that is associated to online shopping where 73% of women and 70% of men were troubled about the security of online shopping. About half of the male participants and more than half of the women customers were concerned about the lack of “touch’’. Only a small percentage of customers stated that online shopping what difficult. The findings of the study by North et al, (2003) reveal that the main disadvantage of online shopping was the security concerns. Barnard and Wesson (2003) also support he fact the issue of security is a major disadvantage of online security. Customers are usually prepared to browse and visit a site and look at the products being offered. However, they do not have enough trust in the existing sites and also if the transactions will be genuine. The current consensus regarding online shopping Traditional retailers had various consensus views concerning online shopping. The first sentiment was that; while there has been a rapid growth in online shopping (Appendix 3), retail sales are progressively declining. Many retailers expressed the view that their sales have greatly decline in the recent years. One retailer operating a clothing store disclosed that the number of people coming into stores is not similar like it used to be in the previous years. As a result, there has been a significant decline in sales (Appendix 2). Traditional retailers also held the view that the business environment does not have a level playing field. This is because traditional retailers in Australia feel left behind, not because they have been overtaken by operations that are purely online such as The Iconic and Gray’s but rather other retail businesses such as Domino and Pizza Hut have also adopted online based business which is making them do better than the traditional retail stores (Dyer and Keane, 2013). Retailers also held the view although online shopping was gaining prominence; the risks associated to it are bound to greatly affect the customers, making consumers to revert to traditional retail shopping. Issues such as product information that is not compatible, getting perishable products late and security concerns such as whether the products will actually be delivered or the hacking of customer’s financial details are bound to cause challenges for consumers. Consequently, some traditional retails preferred to maintain their business model with the view that online shopping will finally bring numerous challenges to consumers thus making them to revert to their traditional methods of shopping. Kerner (2004) also supports the view that consumers are bound to revert to the traditional retail shopping due to the risks associated to online shopping. Many consumers do research for a product online however they purchase it offline by personally visiting stores where that can get their desired products. This trend is referred to as “cross channel shopping. Also not all products can be bought online, for instance when buying construction bricks one has to visit the store physically (Kau et al, 2003). Therefore it can be stated that although online shopping has impacted the sales of retail stores, not all businesses have been affected. Factors that may have influenced the current feeling A number of factors have influenced the existing sentiments concerning online shopping. Retailers who responded argued that online shopping led to a reduction of their sales due to the fact that the government has done nothing to create a level playing field for all business. For instance the government should establish regulations that ensure that all business have equal chances of gaining the market. In most cases online shopping has no restrictions yet many risks exist. The view that the risks associated to online shopping are bound to greatly affect the customers, which may make them revert to traditional retail store shopping was influenced by the notion that diverse consumers behavior exists which implies that traditional retailers can still compete in the market despite of the rapid expansion of online shopping. For instance, the manner in which consumers think and feel does influence their decision to purchase a product (Perner, 2010). Thus a sense of fear among consumers using online shopping due to security issues is bound to affect their purchase decisions. Recommendations This report recommends that traditional retail shops should to an extent adopt to change in the business. As argued by Fay and Lührmann, (2004) change is an inevitable aspect in the dynamic business environment and businesses have to learn to adopt to change by adopting measures that can enable them profit effectively from the market. Thus traditional retail shops can adopt two business models, by integrating both online business model and the direct sales model. Also traditional retail stores should still expand their retail space with strategies such as developing show rooms where online shoppers can come and view their products. Conclusion This report has presented various views concerning the impact of online shopping on traditional retail businesses. The key impact was the reduction of sales based on the fact that many people today find it convenient to shop online as opposed to visiting stores. Another impact outlined was that there is actually no level playing field in the market today since no restrictions are imposed by the government on online business transactions. Retailers however believe that customers are bound to revert to using traditional retail stores due to the existing risk concerns. In conclusion it is vital for traditional retailers to adapt to changes in the business environment. References Australian Bureau of Statistics 2013, Online retail trade estimates Barnard, L and Wesson, J 2003, Usability issues for Ecommerce : an Empirical Investigation, Proceedings of SAICSIT. Dyer, G and Keane,B 2013, The surprise take away message for domestic online retailers, Crikey. Fay , D and Lührmann, H 2004, Facing Up to the Constancy of Organizational Change, Psychology Press. Kerner, S 2004, Majority of US Consumers Research Online, Buy Offline, ClickZ Network: Kau, A, Ghose, S Tang, Y, 2003, Typology of online shoppers. Journal of Consumer, Marketing, 20(139), p156. Perner, L 2010, Consumer behavior: the psychology of marketing, Marshall School of Business. Sonehara, N , Atchariyachanvanich, K and Okada, H 2008 , "What are the Benefits of Continued Purchasing through the Internet? A Study of South Korean Consumers," Journal of Service Science and Management, Vol. 1 No. 1, 2008, pp. 101-110. Sward, M 2008, Factors influencing the choice to shop online: a psychological study in a South African context, University of Pretoria. North, J, Mostert, P and Du Plessis, .J, 2003, Cybershopping: concerns of the South African consumer, Journal of Family Ecology and Consumer Sciences, 31(58), 66. Appendixes Questioners for Customers This interview will just take 20 Minutes of your time Interview Details Date: 5/ 8/ 2014 Questions 1. When did you last shop Online? 2. How often do you do your shopping online a) Once a week b) Twice a week c) Once a month d) Severally in a month 2) What benefits do you gain from shopping online? Date: 6/ 8/ 2014 Questioners for Traditional Retail store Owners Questions 1) What is the current state of your business essentially with an increase in online shopping? 2) What are the impacts of online shopping to your business 3) Would you adopt the online business model Values of Internet commerce in Australia, 2003- 04 to 2009-2010 Read More