Chapter 2

Retailing on
the Internet

Section

Section

3-1

RetailingThen and Now

3-2

Retailing on the
The E-Tail Experience
Internet

Retailing on the Internet

Section 3-1
Why Its Important
To attract customers and win market share, retailers
develop new strategies to outdo their competitors.
Understanding how the retail business has
evolved since the 1800s will help you understand
how retailing and e-commerce became what they
are today.

Section 3-1

Retailing on the Internet

Section 3-1
Key Terms
retailers
wholesalers
e-tailing

Section 3-1

services retailers
non-store retailers

Retailing on the Internet

Retailing Before
E-Commerce
First and foremost,
retailers want your
business.

retailers
establishments that sell
goods and services to
the general public

The retailing process is

the final step in the
distribution of products.

Section 3-1

Retailing on the Internet

Retailing Before
E-Commerce
Wholesalers supply
retailers with products.

Section 3-1

wholesalers
businesses that sell
products to distributors
or retailers and not
usually to the end-user
or consumer

The History of Retailing

Retailing Timeline
consumers bought
directly from
craftsmen, farmers,
and local
manufacturers

direct-to-consumer
mail-order
Main Street
shopping

big-box retailers and

category killers

the first
retailers

general
stores

strip
malls

shopping
malls

1700s

1800s 1850s 1920s

1950s

1970s

Section 3-1

1980s
6

Retailing on the Internet

The History of Retailing

The most modern
innovation in retailing is
e-tailing.

e-tailing the buying and

selling of retail goods on
the Internet

E-tailing enables
consumers to choose from
an almost infinite variety of
products and purchase
them without leaving their
own homes.
Section 3-1

Retailing on the Internet

The History of Retailing

In the 1980s, big-box retailers such as Kmart,
Target, and Wal-Mart brought about a revolution in
retailing.
Big box retailers have special distribution systems
that keep operating costs and prices low.

Section 3-1

Retailing on the Internet

The History of Retailing

In the 1980s, category killers became common.
These large stores specialize in a particular type
of product, such as toys, hardware, books, or
sporting goods.
They are called category killers because, by
offering the lowest prices available, they are able
to kill their competition.
Section 3-1

Retailing Today
Major Categories of Retailers

specialty
stores

department
stores

services
retailers

Section 3-1

discount
stores

non-store
retailers

10

Retailing on the Internet

Retailing Today
Specialty stores, such as
., are stores that
specialize in specific kinds of products or
product lines and offer a wide assortment
within their given categories.

Section 3-1

11

Retailing on the Internet

Retailing Today
category of
department stores.
These stores offer a variety of products and
choices within each product line and a floor plan
that provides specialized departments.

Section 3-1

12

Retailing on the Internet

Retailing Today
Discount stores such as Wal-Mart offer very
low prices.
Some consumers prefer not to shop at discount
stores because they often drive many small,
local stores out of business, putting people out
of work.

Section 3-1

13

Retailing on the Internet

Retailing Today
Services retailers play
an important role in our
economy by providing
specialized skills and
expertise most consumers
lack and need.

services retailers
businesses that provide
services

Banks, dental care, and

Day Care are examples of
services retailers.
Section 3-1

14

Retailing on the Internet

Retailing Today
Non-store retailers are
able to lower costs by
selling directly to
consumers without the cost
of maintaining a storefront.
E-tailing is a form of
non-store retailing.

Section 3-1

non-store retailers
businesses that use
means other than
traditional storefronts to
sell their products, such
as infomercials,
catalogs, door-to-door
solicitation, trade shows,
and vending machines

15

Retailing on the Internet

Section 3-1
Review
1.

How were early retail stores less convenient

for shoppers than those of today?

2.

How do category killers kill their

competition?

3.

Why might some retail customers prefer not

to shop at discount stores?

Section 3-1

16

Retailing on the Internet

Section 3-2
Why Its Important
When you understand the complexities of running a
secure and reputable e-commerce site, you can
better plan your business and purchases.

Section 3-2

17

Retailing on the Internet

Section 3-2
Key Terms
hyperlink
Electronic Funds Transfer
smart card
eWallet

Section 3-2

e-cash
Secure Sockets Layer
digital certificates

18

Retailing on the Internet

The Nature of E-Tailing

Setting up and maintaining an online business
comes with a set of unique challenges.
To be a successful e-tailer, you have to create
an engaging e-tail experience and ensure the
security of information.

Section 3-2

19

Retailing on the Internet

Product Merchandising
Online merchandisers use
hyperlinks as
merchandising cues to
present their products and
motivate consumers.

Section 3-2

hyperlink also called a

hypertext link, or simply a
link; connects the current
Internet document with
another location in the
same document, another
document on the same
Web site, or another
document somewhere
else on the Web; a blue,
underlined font identifies
hypertext links
20

Product Merchandising
Hyperlinks
cross-sell hyperlink

Takes the user to an item associated with the

item the user is currently viewing.

upsell hyperlink

Refers the user to a similar but more upscale

and expensive item.

recommendation
hyperlink

Takes the user to a product that might interest

the user based on products the user has
purchased before.

promotion hyperlink
Section 3-2

Refers the user to a hot product or sales

item the site is currently offering.
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Retailing on the Internet

Product Merchandising
A company can offer photos, color change
interfaces, and video clips to enhance the
presentation of its products on its Web site.
When customers are able to see more details of
a product, they are more likely to buy.

Section 3-2

22

Retailing on the Internet

Setting Up an Online
Purchasing Process
Before you can sell goods to customers, you must
either have them available in stock or have the
ability to get them from a manufacturer quickly
once youve received orders.
The Web allows new forms of online collaboration
between retailers and their suppliers.

Section 3-2

23

Payment Options
Online Payment Options
credit cards

debit cards

Electronic Funds
Transfer (EFT)

smart cards

e-cash

Section 3-2

eWallets

e-checks

24

Retailing on the Internet

Payment Options
Consumers use credit cards to pay for
approximately 95 percent of all purchases on
the Internet.
When customers use debit cards for their
online purchases, they are authorizing the
withdrawal of money from their bank accounts.

Section 3-2

25

Retailing on the Internet

Payment Options
When you purchase a
product online using
Electronic Funds
Transfer (EFT), you can
pay for it by having money
transferred from your
checking account to the
checking account of the
seller.
Section 3-2

Electronic Funds
Transfer (EFT)
provides electronic
payments and collections
for online sales

26

Retailing on the Internet

Payment Options
A smart card can be used
to make financial
transactions over the
Internet.

smart card credit card

with an embedded
microchip, which is
loaded with data that can
be programmed for
various applications

More than a billion smart

cards are currently in use,
mostly in Europe.
Section 3-2

27

Retailing on the Internet

Payment Options
Much like a smart card, an
eWallet can be used to
make online purchases.

eWallet a software
application that stores a
customer's data for easy
retrieval during online
purchases

The eWallet utility encrypts

your personal information.

Section 3-2

28

Retailing on the Internet

Payment Options
E-cash provides rapid,
secure, and reliable realtime payment processing
worldwide.

e-cash a legal form

of computer-based
currency that allows for
the purchase of items by
credit card, check, or
money order

One of the global leaders

in online e-cash payments
is PayPal.
Section 3-2

29

Retailing on the Internet

Payment Options
E-checks, or electronic checks, provide a handy
way to get payment from customers who do not
own or use credit cards.

Section 3-2

30

Retailing on the Internet

Order Fulfillment and

Customer Service
Part of your customers e-tail experience consists
of receiving the goods they ordered quickly and
efficiently.
You need to consider how to warehouse your
products and what methods to use to deliver them.

Section 3-2

31

Retailing on the Internet

Security Issues and

Concerns
One issue that may keep customers from making
purchases on your Web site is security.
It is important to protect customers personal
information and have proof that you are a legitimate
business.

Section 3-2

32

Retailing on the Internet

Security Issues and

Concerns
Secure Sockets Layer
(SSL) encrypts customers
personal information,
keeping it safe from
hackers.

Section 3-2

Secure Sockets Layer

(SSL) helps encrypt and
protect the information
that customers enter into
Web pages when making
a purchase; this protocol
is built into most browsers
and is supported by most
Web servers

33

Retailing on the Internet

Security Issues and

Concerns
To help your customers
feel confident that you run a
reputable business, purchase
a digital certificate.

digital certificate
computer file used to
verify to customers that
a company is what it
claims to be

Digital certificates are issued

by a trusted third party.
Section 3-2

34

Retailing on the Internet

Advantages and
Disadvantages of E-Tailing
Advantages
A great Web site can attract new customers,
Customers can shop 24/7.
Disadvantages
Customers concerned about security may be
reluctant to release personal information.
Customers are not able to examine merchandise.
Section 3-2

35

Retailing on the Internet

Section 3-2
Review
1.

What is a cross-sell? What product might be cross-sold to a

customer purchasing a coffeemaker? Why?

2.

How could a company enhance the presentation of its

products on its Web site? How would this influence its
sales?

3.

Why might a Web sites sales suffer if it only permits

customers to pay using smart cards and EFTs?

4.
Section 3-2

How can a Web site assure customers of security?

36