Letter of Transmittal

06th December, 2012 Nafish Sarwar Islam Department of Business Administration, East West University. Dhaka-1219.

Subject: Product Replacement and the losses of retailer in Online Shopping. Dear Sir, Here is the report that you have asked us to prepare for our course requirement of Industrial Management (MGTT321). I am encouraged and enthusiastic by collecting the details for the preparation of the report. I have gone through these queries several times and solve it out and as per as your instructions. Indisputably, I have learned a lot and have gained remarkable experience. I believe this report provides a complete and clear picture of the product replacement by the customer and the losses of retailer in Online Shopping. Definitely; I enjoyed a lot while working in this attractive topic and gave my level best effort to finish it within the deadline.

I sincerely hope that all my effort will be a success if you go through this paper. I am truly appreciating this term paper and please call upon me, if you do require my assistance during examines the paper.

Sincerely yours,

Md. Emran Hossain Niloy ID No. 2009-2-10-252

Executive Summary

This report is prepared as a mandatory requirement for Industrial Management (MGTT321) at East West University. The report is named online shopping: Replacement and the losses of retailer. In business loss analysis is important and vastly discussed topics for retailers. In business, a proper and adequate loss analysis makes positive effects on the valuation of a corporation, which ultimately maximizes the wealth of the corporation. For an appraisal of kind of loss analysis, I have gone through these queries several times and solve it out and as per as your instructions. Indisputably, I have learned a lot and have gained remarkable experience. For the blessing of internet online shopping, now a day is very much popular for the new generation as well we high status family. In general, higher levels of education, income, and occupation of the head of the household correspond to more favorable perceptions of shopping online. It is a form of electronic commerce whereby consumers directly buy goods or services from a seller over the Internet without an intermediary service

Where problems arise with purchaser purchase, then he/she may be entitled to a remedy such as a refund, replacement or repair. It might create some economical losses for the seller or retailer. The companies also give more concentration on the losses or the Replacement.

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INDEX
No.
1. What is Online shopping 2. What can buy through online 3. Why buy through online 4. What can buy through online 5. What are the Online customer rights 6. Why problems create 7. What are the losses retailers faces 8. Conclusion: 9. Reference

Topics

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Online shopping
Online shopping or online retailing is a form of electronic commerce whereby consumers directly buy goods or services from a seller over the Internet without an intermediary service. The process is called business-to-consumer (B2C) online shopping. When a business buys from another business it is called business-to-business (B2B) online shopping. An online shop, e-shop, e-store, Internet shop, web-shop, web-store, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or shopping center etc. The largest online retailing corporations are E-Bay and Amazon.com, but unfortunately both are US-based. Since the emergence of the World Wide Web, merchants have required to sell their products to people who surf the Internet. Shoppers can visit web stores from the comfort of their homes and shop as they sit in front of the computer.

Who is the buyer of online?

Online customers must have access to a computer and a method of payment. In general, higher levels of education, income, and occupation of the head of the household correspond to more favorable perceptions of shopping online. Also, increased exposure to technology increases the probability of developing favorable attitudes towards new shopping channels. In a December 2011 study Equation Research found that 87% of tablet users made an online transaction with their tablet device during the early holiday shopping season.

Why buy through online?

Many people choose to conduct shopping online because of the convenience. For example, when a person shops at a brick-and-mortar store, he/she has to drive to the store, find a parking place, and walk throughout the store until she locates the products she needs. After finding the items he/she wants to purchase, he/she may often need to stand in long lines at the cash register. One can purchase almost anything online, starting with groceries and greeting cards to cell phones and ringtones for the cell phones, everything can be purchased online. While most
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people still find it convenient to buy their groceries from the neighborhood shop, many people are purchasing rail and air tickets over the Internet. In addition, people and corporate as well, are also purchasing a variety of services through online. Globally, an increasing number of people are buying over the Internet because it is more convenient. This year, holiday shopping for Christmas and New Year is estimated to be over $20 billion.

What can buy through online?

Consumers buy a variety of items from online stores. In fact, people can purchase just about anything from companies that provide their products online. Such as Books, clothing, household appliances, toys, hardware, software, and health insurance are just some of the hundreds of products consumers can buy from an online store.

Online customer rights:

When making a purchase from online sellers have a number of basic rights. This includes the purchase price and any claims made in advertisements. When problems arise with purchaser purchase, then he/she may be entitled to a remedy such as a refund, replacement or repair. If he/she buys from an online seller based overseas, he/she may not have the same basic rights. He/she has the right to a repair, replacement or refund if his/her goods are faulty, unsafe, do not work or appear as they should. He/she has the right to a repair, compensation or refund, if the services you received are not right. Which remedy, and who gets to pick, depends on the problem. There may also be practical difficulties in obtaining a remedy from an overseas-based seller, so check the terms and conditions of the contract is important before he/she buys. Since 1 January 2011, online businesses performer must provide consumers with guarantees for most consumer goods and services they sell. Consumers have the right to ask for a repair, replacement or refund if the goods sold are Defective, Unsafe, Look unacceptable, and do not do what they are supposed to do. Consumers also have this right if goods you sold them do not fit the purpose you discussed

with them, match the description provided, match the sample or demonstration model provided, have the extra qualities or performance that you promised before the sale. Consumers have the right to ask for a replacement or refund if the services you sold were not delivered completely or with adequate care and skill, did not fit the purpose or give the results that you and the consumer had agreed to be not delivered within a reasonable time where there is no agreed date. These rights arise from the consumer guarantees under the Govt. Law that provide consumers with a right to seek remedies where there are problems with goods or services.

Why problems create?

A product that is unsafe, significantly different from the sample or description or image, doesnt do what buyer said it would, or what the consumer asked for and cant be easily fixed. Again a service that is substantially unfits for its common purpose and cant be fixed easily within a reasonable time, does not meet the specific purpose the consumer asked for and cant be fixed easily within a reasonable time or creates an unsafe situation.

What are the losses retailers faces?

If products are return within a specific time period (i.e. 3 to 30 days o period) to the online retailers then he/she is well thought-out to get rebate or cash back. It might create some economical losses for the seller. When judging how long after a purchase consumers are entitled to reject goods and seek a replacement or refund, seller or retailer need to consider the type of goods, how a consumer is likely to use the goods, the length of time for which it is reasonable for the goods to be used, the amount of use the goods could reasonably be expected to tolerate before the failure becomes noticeable. Some economical and business losses that the retailer face when customers return the product is illustrate bellow: Consequential loss: Consequential loss is the cost to retailer caused by a problem with goods or services. Compensation is usually for financial costs but can include other costs, such as lost time or productivity.
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Non return freight cost: It is the carrying cost for the retailer. When customer purchases any product by through online then he/she gets the right to dig up the product in their house. So those retailer deliveries the products to the customer address. Most of the time retailer bears this non returnable cost. This made a carrying cost to deliver the product for the retailer. When customer entre to get a remedy such as a refund then this cost become an extra change, because it is non returnable expenses for the retailer. To control this loss retailer increase product price. Extra Bank charge: Online Shopping transactions are fully depending on bank. Payments of the product are paid through the bank every time. For these every transaction Bank cut a charge. When problems arise with purchaser purchase, then the customer may be entitled to a remedy such as a refund, replacement or repair to the retailer. But before this bank already cut a charge for purchasing the product which is not returnable. It creates an extra charge for both purchaser and the retailer. Loosing Market reputation: Refund a product to the customer sometime misinterprets the stipulation. It may be the cause of loosing brand image as well as market share price. When customer returns the products then a question arise about the product quality. These types of loss are invisible and indirect but sometime it results for a big clash of market reputation directly. Desecrate Advertising expenses: Retailer made an advertisement to sell the product and also include or distribute these expenses to the product cost. When customer returns the product then the expenses not become perfectly fruitful. Again market reputation goes downward. So advertising expenses become an extra charge for the retailer which led to the loss or increasing the product price. Cost of Goods Sold: Return product increase the expenses of the production. It caused to increase cost of goods sold indirectly. When a product sold then COGS of that product include in income statement. But when it come back again then inventory increase and COGS increase. But on the other hand sell also decrease. As a result of low profit when retailer adjust COGS from revenue. It can consider as a loss for the retailer. Online charge: Online Shopping held and manage through internet. So there is a hidden charge including with the product price. But when the product comes back to the retailer then it (online charge) consider as a loss of sale as it is waste of expenses.
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High Inventory cost: Every company wants to minimize their inventory. They wish to make order in the lead time. In that case when some goods or products come back again then the inventory increase. As a result holding cost will increase. Again a good number of money stack in that term, as the product is not sale or sale but come back again. In business time is money. High inventory means high cost which is not good for company. Other indirect losses: Return of goods sometime result of customer loosing. There might be question about product quality. These types of loss are not direct but it is important to consider by the retailer.

Conclusion:
Return of goods or product is an unexpected situation for the retailer. It creates some direct and indirect loss for the retailer. To solve this problem retailer must be responsive about the product that they r sold. Retailers battle product return by customers every day Retailers constantly need to consider how to prevent loss. The consumer is the ultimate loser when a retailer loses profit and inventory to thieves, because the retailer must build that cost into the retail price of every product sold. Fend off internal and external losses. There are, however, many loss prevention aspects that can be discussed openly.

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Reference
http://www.accc.gov.au/content/index.phtml/itemId/1023609 http://www.accc.gov.au/content/index.phtml/itemId/1023615 http://www.retailloss.net/ http://en.wikipedia.org/wiki/Retail_loss_prevention

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