Future Of E-Commerce Essay, Research Paper

1

The Future of E-Commerce

Future

2

THE FUTURE OF E-COMMERCE

There are varying opinions regarding the future of e-commerce. Despite the fact that online sales are growing exponentially, some analysts believe that e-commerce is heading for a fall. Laurie Windham justifies her belief that as time goes on, sales will decrease instead of increasing.

Windham believes that net consumers are very different than mall shoppers and catalog shoppers. Furthermore, she says that dot-coms are responsible for ruining their own chances to sell because they have spoiled customers to the point that consumers expect cheap prices and freebies and if they don’t get them, they just move on to another site. E-commerce, Windham says, is a fickle world with little, if any, customer loyalty (Fortune, 2000).

Windham found some interesting differences between online shoppers and traditional shoppers. For instance, 34 percent of online shoppers describe themselves as comparison shoppers but only 8 percent of traditional shoppers describe themselves as comparison shoppers. Another comparison is that only 1 percent of Web shoppers say they hate stores but 10 percent of traditional shoppers

say they hate stores (Fortune, 2000). Web shoppers are by and large comparison, price-sensitive consumers.

Future

3

Windham, who spent two years studying the consumers who purchase online, said that as nonusers begin to use the Web for purchasing, they will be less adventuresome than people already making purchases online. They will also be slightly older than the norm and they will be more fearful and cautious about privacy and security. In other words, as nonusers begin using the Web to shop, they will be a more conservative group than current users. It is probable they will also be less fickle and more loyal to brands/stores (Fortune, 2000).

Windham pointed out that there were numerous problems with people receiving exactly what they ordered online during last holiday season. Based on that, she suggested sales may be lower this year (Fortune, 2000). Surveys conducted after the last holiday season suggested online shoppers would continue shopping online. One survey, for instance, indicated that more than 90 percent of consumers reported that shopping online met or exceeded their expectations. Eighty percent said they would increase their online shopping in 2000 (Rutledge, 2000).

Studies found that consumer confidence in using the Internet for shopping reached very high levels, which were

due to a number of factors. Positive comments from family and friends were one of the factors that swayed more people to utilize this option. Better selections from online stores also made the experience more satisfying. Finally,

Future

4

secure credit card transactions played a major role in increasing sales (Rutledge, 2000).

Consumers were enticed to try shopping on the Internet by the massive marketing campaign last year for both dot-com stores and retail stores online. More than 70 percent of Net shoppers said they bought from e-commerce sites that offered free shipping. Another 54 percent said they were enticed by the discounts offered for their first online purchase. Forty percent used online coupons and 25 percent responded to the offer of free gifts for their online purchase (Rutledge, 2000).

The Direct Marketing Association projected that sales generated from catalogs and the Internet would double in the next four years, reaching $3.33 billion (Entrepreneur, 2000). A study by Jupiter Communications agreed saying that sales would increase this holiday season. This study reported that holiday shoppers would spend almost $12 billion in online purchases between November 1 and December 31 this year, which represents a 66 percent increase over the same time period last year. The increase between the 1998 and 1999 holiday seasons was 126 percent. There is a slowdown in the degree of growth but it is still a substantial increase (Kontzner, 2000)

The Gartner Group predicted a much larger growth this year. They projected sales of $19.5 billion. This group

also believed that dot-com stores and retail stores online

Future

5

would not spend as much money on advertising this year. Instead, they will spend resources on retaining customers (Kontzner, 2000).

As a number of dot-coms collapsed during this past year, many retailers felt a wave of relief but it was short-lived. The Web’s bite into retail store sales is about to become noticeable and hurtful. Business Week (2000) reported that there is a rule of thumb that says a 10 to 15 percent loss in sales vaporizes a store’s profits. In 2000, online sales of books alone will top 11 percent of all books sold. That is up from 8.5 percent in 1999. CDs and videos will more than double their sales from 1999 and that will bring them to 10 percent of the entire market. Computer hardware and software already totals more than 18 percent of the market (Business Week, 2000).

In order to combat this trend, some retailers are trying to lure consumers to their own online sites. They are also trying to use their Web sites to bring people into their stores. Since 94 percent of online buying is nothing but a shift from stores to a more convenient way of shopping, some of these strategies could work. Still, physical site retailers have begun to feel the effect of Net shopping. And, the fact is that sales on the Web are at least doubling every year (Business Week, 2000). The overhead is far less for dot-coms. They sell from a central warehouse and do not have to support thousands of stores

Future

6

around the country. This fact is so clear that AMB Property Corp., a real estate investment trust in San Francisco, sold $560 million worth of local shopping centers and invested the proceeds in warehouses close to urban centers. The expectation is that the demand will be greater for warehouse property than for mall property (Business Week, 2000).

Zona Research Corporation’s forecast is that Internet sales will soar in the next two years. The survey of Internet product buyers showed that the number of companies that use Internet-based selling will likely quadruple in the next two years, going from 44 percent from its current 10 percent. The reason for the dramatic increase is related to universal standards that will unite millions of businesses with billions of consumers (Menefee, 1998).

Zona looks that the electronic economy in terms of a series of three technology waves. The first wave was able to save companies money by publishing on the Internet and the second wave opened up online sales profit centers. It was the second wave that made e-commerce a component in commerce as a whole (Menefee, 1998). The third wave will “re-intermediate buyers and sellers” through the creation of places on the Internet where buyers and sellers meet to exchange goods and services and complete transactions completely on the Internet and to complete them securely. The third wave has a significant influence on how business

Future

7

is normally conducted. At some point, the third wave will be similar to a fax machine, or at least, the importance of a fax machine was a number of years ago. If you don’t have one, you won’t be able to conduct business (Menefee, 1998).

Bibliography

Future

8

REFERENCES

Entrepreneur. (2000, October). THE PERCENTAGE. Entrepreneur 28(10), p. 46

Fortune. (2000, October). Don’t Expect A Merry E-Christmas: Online buyers expect freebies, lack loyalty, and purchase on price, says an e-commerce pro. Shopping sites need to retrain them. Fortune 142(7), p. 259+

Hof, Robert D. (2000, July). Online Sales Still a Threat. — Forget the falling stock prices. Web sales are reaching a critical mass. Business Week, (3691), p. EB130.

Kontzner, Tony. (2000, September). Will Holidays Be Jolly Days? — E-retailers hope retaining customers will translate into profits. InternetWeek, p. 136.

Menefee, Craig. (1998, March). Internet-based selling to boom in next two years; Third technology wave to have heavy influence on how normal business conducted, study claims. Computing Canada 24, p. 11.

Rutledge, Keisha. (2000, February). On-line shopping a success despite holiday ditches. Discount Store News 39, p. 16.