What is 'Electronic Retailing - E-tailing'

Electronic retailing is the sale of goods and services through the internet. Electronic retailing, or e-tailing, can include business-to-business (B2B) and business-to-consumer (B2C) sales of products and services, through subscriptions to website content, or through advertising. E-tailing requires businesses to tailor traditional business models to the internet and its users.

BREAKING DOWN 'Electronic Retailing - E-tailing'

Electronic retailing requires many product and service displays and specifications, giving shoppers a personal feel for the look and quality of the offerings without requiring them to be present in a store.

Characteristics of Successful Electronic Retailing

Successful e-tailing requires strong branding. Websites must be engaging, easily navigable and regularly updated to meet consumers' changing demands. Products and services need to stand out from competitors' offerings and add value to consumers' lives. In addition, a company's offerings must be competitively priced so consumers do not favor one business over another based on cost alone.

E-tailers need strong distribution efficiency so consumers are not waiting long periods of time for the products or services they purchase. Transparency in business practices is also important so consumers trust and stay loyal to a company. As consumers continue buying from the business, revenue increases.

Advantages of Electronic Retailing

E-tailing helps traditional brick-and-mortar stores reach more consumers worldwide and increase sales. Individual and startup e-tailers may be launched from a single room with one computer and expand rapidly rather than pay for an entire building with expensive overhead.

E-tailers may trace consumers' shopping behavior while gaining valuable insights into their spending habits, which may lead to increased revenue. In addition, customers shop from the comfort of their homes at any time rather than being physically present in the store during specific hours.

Many brick-and-mortar retailers have chosen to expand their offerings online because it saves cost. Automated sales and checkout cut down on the need for personnel and websites cost less than physical stores. It also reduces advertising and marketing expenses as customers can find the stores through search engines or social media. 

Disadvantages of Electronic Retailing

However, creating and maintaining an e-tailing website may be expensive. Infrastructure costs for order fulfillment, warehousing goods, dealing with returns and other issues add up quickly. Also, consumers may not trust a company that is not well-established and may not buy from it as frequently as a brick-and-mortar store.

In addition, e-tailing does not provide the emotional shopping experience encouraging consumer spending the way being physically present in stores does. E-tailing does not let consumers hold, smell, feel or try products or services for the sensory support of buying them. It also does not provide the personal service many consumers are accustomed to when shopping.

Consumers may be concerned about providing credit card information online and having their personal details jeopardized. Also, operating with an unproven business model increases the odds of an e-tailer failing. Consumers may have no recourse if the company becomes insolvent and cannot refund product or service payments as requested.

The Largest Players

Amazon is by far the largest online retailer with more than $94.7 billion in sales in 2016, giving it a massive piece of the pie. The U.S. Commerce Department estimates that consumers spent $394.9 billion online in 2016, a 15.6% increase from the previous year. 

Though strongly overshadowed by Amazon, traditional brick-and-mortar stores such as Apple and Wal-Mart were the next largest. Apple sold $16.8 billion in merchandise online and Wal-Mart sold $14.4 billion in the same year. Other e-tailers that operate exclusively online and compete with Amazon include Overstock.com, JD.com and Alibaba. 

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