essay on impact of online network marketing on retailing pricing.
Answers
Introduction
“The internet is becoming the town square for the global village of tomorrow.” That quote was attributed to Bill Gates, Cofounder of Microsoft. Tomorrow has come and according to an article on Reuter’s website, “Online retail sales in the United States could reach $248.7 billion by 2014, growing 60 percent from 2009
Advantages:
Similar to traditional business, online marketing presents many advantages and disadvantages. However, the advantages of online marketing significantly outweigh its disadvantages. Online marketing can expand the geographic reach of the company by accessing customers in markets where the company does not have a physical presence. In the ecommerce world, doing business around the globe, 7 days a week, 24 hours a day is a reality. (Hossein Bidgoli, 2002) Online Marketing or e-commerce creates the ability to sell virtually any product that can be sold in a traditional retail environment. Nights, weekends, holidays, and time zones are no barriers to e-commerce. Online marketing can also reach customers that for various reasons can not personally visit a traditional retail store. Another advantage of e-commerce is the ability to gather additional information about the customer via tools such as cookies, email, and online surveys. This information can be used to personalize marketing efforts in a way that can lead to higher trade volumes. E-commerce also provides increased flexibility for customers. Customers can make purchases without having to leave the comfort of their homes. The customer does not have to deal with the hassle of parking or the worry of losing contact with their small children presented by traditional retail methods. Shopping tasks can be accomplished from the safety of their homes with a few clicks of a mouse. Of course, increased sales are the first thing people thing about when they consider online market. Market research shows that online sales are trending up despite the current depressed retail market. . Revenue generated by online businesses and the online part of traditional retail businesses exceed $96 billion in 2006, up from $86 billion in 2004, according to the U.S. Census Bureau. An added advantage of online marketing is decreased cost. Traditional retail businesses have overhead costs that associated with online marketing. These include utilities, insurance, store lease, and labor. Lower overhead cost generally result in lower overall cost and increased revenue. Therefore, online expansion will give the company a globally presence at a relative low cost.
Disadvantages:
Online shopping is not attractive to all consumers. They cite the loss of social contact experienced when shopping with others. While many researchers do not see any fundamental differences between the traditional and online buying behavior, it is often argued that a new step has been added to the online buying process: the step of building trust or confidence. (Constantinides, 2004) Many consumers are concerned with the privacy and security issues associated with doing business online. Almost 95% of Web users have declined to provide personal information to Web sites at one time or another when asked. (Otto & Chung, 2000) Credit card fraud, unwanted solicitations, and use of their information for other than its intended purpose are a few of the reasons cited. The difficulty in attracting customers is another disadvantage to online marketing. That, coupled with increased competition due to the ease of comparative shopping greatly decreases the attractiveness of online marketing. Online consumers can quickly access information from other online businesses and make better decisions. In fact, some websites are designed solely for that purpose. Therefore, online pricing is very competitive. Additionally, online marketing does not afford the consumers the luxury of examining and getting a feel for the quality and fit of merchandise sold online and generally require the seller to have liberal return and refund policies. The lack of after sales service is another concern of online shoppers. Time also is a problem with online marketing in that consumers are not able to take immediate possession of their purchases and are faced with added expense for faster delivery
Conclusion
There are advantages and disadvantages to online marketing. While online marketing presents an opportunity for the company to expand its market nationally, even globally, online shopping is very competitive, as consumers have access to comparison shopping. In addition to reaching new markets, online marketing can also improve relationships with existing customers. To be successful, ecommerce websites must be properly designed so that it is easy to use, engages the customer, and provides a pleasant and trusting shopping experience.