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. 

RELATED TERMS
  1. Showrooming

    Showrooming is the practice of examining merchandise or products ...
  2. Electronic Commerce (e-commerce)

    Electronic Commerce (e-commerce) is a business model that enables ...
  3. Online Banking

    Online banking is the performance of banking activities via the ...
  4. Point Of Sale - POS

    The place where sales are made. On a macro level, a point of ...
  5. Social Commerce

    A type of electronic commerce that employs social media to promote ...
  6. Walmart Effect

    The Walmart Effect is a term used to refer to the economic impact ...
Related Articles
  1. Investing

    Playing The Decline of Traditional Retailers (XRT, RTH)

    Play the decline of traditional retailers with a strategy that lowers built-in exposure to online sales.
  2. Investing

    Amazon Dominates Holidays As Online Sales Rise 11%

    Online commerce saw an 11% rise as compared to the previous year, while physical retail grew only 2.7%.
  3. Personal Finance

    Should You Buy Groceries Online?

    A look at this new way to shop and whether it will help you save or end up costing you money.
  4. Investing

    Macy's Store Closings May Pace Other Retailers (M)

    Macy's announcement to close 100 stores is likely to be followed by other brick-and-mortar retailers—moves investors likely would applaud.
  5. Investing

    Consumer Spending As A Market Indicator

    Learn how people buy retail as where they shop can be one of the best indicators for how to predict the coming months of retail economic activity.
  6. Personal Finance

    The Future of Retail Is Not Big Box Stores

    The future of shopping involves a lot more Internet and a lot less window shopping at the mall.
  7. Insights

    19 Retailers Are Shedding Stores So Far in 2017

    As consumers increasingly spend money on restaurants and travel, mall-based retailers feel the pinch.
  8. Investing

    Why Macy's, Nordstrom, Target May Rise on Holiday Sales

    With the holiday season just around the corner, a number of traditional retailers could get a boost.
  9. Why Chinese Luxury E-Tailer Secoo Just Tumbled

    Shares of China's largest standalone luxury e-tailer, Secoo (NASDAQ: SECO), plunged 15% on Wednesday, after much larger rival JD.com (NASDAQ: JD) revealed it was launching its own new luxury ...
RELATED FAQS
  1. How has electronic retailing (e-tailing) changed the consumer discretionary goods ...

    Learn how electronic retailing has changed the consumer discretionary goods sector. Even physical stores are forced to invest ... Read Answer >>
  2. What is the electronics sector?

    Learn more about the electronics sector and the challenges and opportunities presented to electronics companies by new and ... Read Answer >>
  3. Are there significant seasonal patterns in the electronics sector?

    Examine the consumer electronics sector and learn what typical seasonal sales patterns can be identified for this important ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center