Page 90 - Introduction to Electronic Commerce and Social Commerce

3.1 Internet Marketing and B2C Electronic Retailing 69

com/amazon). For the “Amazing Amazon Story—Jeff 3.1 INTERNET MARKETING AND B2C
Bezos Full Speech,” watch the video (17:59 min) at youtube. ELECTRONIC RETAILING
com/watch?v=YlgkfOr_GLY.
Despite increased competition from thousands of e-tailers The Amazon.com case illustrates how commerce can be
in the online market, Amazon.com has been holding its place conducted on the Internet. Indeed, the amount and percent-
as the number one B2C e-tailer and money-making EC site in age of goods and services sold on the Internet is increasing
the world (some Chinese sites are getting closer to Amazon, rapidly, despite the failure of many dot-com companies.
but they are not competitors). Due to its order fulfillment sys- internetworldstats.com estimates that there are over 7.26
tem, Amazon.com can offer very low prices. Add this to high billion Internet users worldwide and over 357 million in
customer satisfaction and the selection of quality products, North America as of April 2016 (see internetworldstats.
one can understand why Amazon.com sells more than three com/stats.htm). Forrester Research estimates that U.S.
times the products compared to its nearest U.S. competitor. shoppers will spend $327 million online in 2016, a 62%
Amazon.com also offers several features for international increase over 2012 (reported by Rueter 2012). Experts fore-
customers, including over one million Japanese-language cast the global B2C to be over 1.5 trillion in 2018, especially
books. Amazon.com operates in 16 countries but it can ship due to the growth in China. Some think that as the number of
its products to other countries. Each country has a website in Internet users reaches saturation, the rate of increase of
its own language (for example, Amazon China amazon.cn). online shopping may slow down. However, this may not be
Amazon.com generated revenues of about $482 million in the case. In fact, the rise of social and mobile shopping seems
2015, with an operating income of over $107 billion (see to have accelerated the pace of B2C. In addition, the eco-
variety.com/2016/biz/news/amazon-clocks-107-billion- nomic downturn may increase online shopping as a means of
in- revenue-in-2015-1201691106). As of Q4 2015, the com- saving money (e.g., save on gas if you do not need to drive to
pany employs over 222,000 full-time and part-time a physical store). Finally, global B2C is still increasing rap-
employees. Amazon.com is considered as the “king of idly. Therefore, one of the challenges facing e-tailers is
e-tailers.” The company has been ranked by the U.S. National increasing the amount of money each person spends online.
Retail Federation, as the #1 fastest growing large retail orga- Companies have many benefits from selling their goods and
nization in the USA. For a comprehensive slide show about services online. Innovative marketing models and strategies
Amazon.com, see Stone (2013). and a better understanding of online consumer behavior are
Sources: Based on Stone (2013), Trefis (2015), and ama- critical success factors in B2C.
zon.com (accessed April 2016).

Overview of Electronic Retailing

A retailer is a sales intermediary between manufacturers and
LESSONS LEARNED FROM THE CASE customers. Even though many manufacturers sell directly to
consumers, they usually do so to supplement their major sales
The case of Amazon.com, the most recognized name through wholesalers and retailers. In the physical world,
of all e-tailers in the world, demonstrates the evolution retailing is done in stores (or factory outlets) that customers
of e-tailing, some of the problems encountered by must visit physically in order to make a purchase, although
e-tailers, and the solutions that a company can employ sometimes customers may order by phone. Companies that
to expand its business. It also is indicative of some key produce a large number of products for millions of customers,
trends in Internet retailing. For example, there is fierce such as Procter and Gamble, must use retailers for efficient
competition online. Amazon.com is successful because product distribution. However, even if a company sells rela-
of its size, innovations, personalization, order fulfill- tively few different types of products (e.g., Apple Computers),
ment, and customer service. The biggest online retailer it still might need retailers to reach a large number of custom-
is still growing and becoming more dominant. ers who are scattered in many locations.
E-tailing, as demonstrated by the Amazon.com case, Catalog (mail-order) sales offer companies the opportunity
continues its double- digit, year-over-year growth rate to reach more customers and give customers a chance to buy
despite the global economic downturn. This is, in part, from home. Catalog retailers do not need a physical store with
because sales are shifting away from physical stores. staff; online shopping has created the need for electronic cata-
In this chapter, we look at the delivery of both products logs. Retailing conducted over the Internet is called electronic
and services online to individual customers. We also retailing (e-tailing), and sellers who conduct retail business
discuss e-tailing successes and failures. online are called e-tailers, as illustrated in the opening case.
E-tailing can be conducted through catalogs that have fixed