Principles of Retailing
This article focuses on the principles of retailing and how they relate to selling on the Internet. Although Business-to-Consumer electronic commerce captures the attention of the industry, Business-to-Business electronic commerce is the format that is predicted to reap most of e-business activity. Business-to-Business eCommerce has exploded. There is an exploration of eCommerce and how build a customer base on the Internet.
Keywords Business-to-Business Electronic Commerce; Business-to-Consumer Electronic Commerce; General Store; Internet marketing; Internet Retailing; Mail Order House; Site-centric Model; Symbiotic Marketing
Most individuals who study the field of marketing know the foundation of the concept. It is based on a marketing mix, which consists of four basic elements. These elements are product, price, promotion, and place. These elements are also known as the 4 P's of marketing. According to Golden & Zimmerman (1980), some retailers have expanded the retailer's marketing mix to include variables such as parking, delivery, store layout, displays, public relations, warehousing, transportation, telephone sales, credit extension, and guarantees.
Retailing is based on a transaction. In most cases, the customer will exchange money for goods and services, and the retailer will provide goods and services for dollars (Golden & Zimmerman, 1980). Therefore, one can refer to retailing as an interdependent system because both sides need each other in order to make a smooth transaction. In addition, customers rely on retailers for goods and services, and retailers rely on customers for profits. Up until the mid-1960s, marketing was considered the same as selling with the emphasis being on the seller versus the customer.
History of Retailing
Retailing has been a highly competitive field of business that has been around for a while. "Retailing is a major part of the United State's total distribution system; it is the last link in the system that markets and distributes products and services to consumers" (Golden & Zimmerman, 1980, p. 5). Butcher and McAnelly (1973) provided a timeline that traces the historical background of this field.
The General Store (Early 19th century)
The typical type of retail store in rural areas, small towns and villages. As the population became more urban in character, the demands for stores specializing in only one line or a few lines of merchandise increased. General stores carried a broad range of merchandise, but the goods included satisfied only the basic needs of the small local market.
The Specialty Store (1870s)
Was the most important type of store in the large towns and cities in the United States, and the stores only carried one or a few lines of closely related goods. Specialty store merchants promoted the cash system of selling, and offered goods at lower prices for cash.
The Department Store (After 1900)
Emerged in response to changing economic and social conditions. Specialty merchants were attempting to develop methods that would improve their competitive position. In the early 1900s there were over 8000 department store merchants in the United States. However, there were signs of decline by the 1930s.
The Mail-Order House (Latter 19th century)
Was a cross between a retail store and a wholesale warehouse that sold only by mail. Stores such as Sears and Montgomery Ward were successful in moving their products via the mail order catalogue.
The Chain Store (Began with the Great Atlantic & Pacific (A&P) Tea Company in 1859)
Was one of the most significant innovations in the development of retail institutions. Although data concerning the early growth of chain stores in the United States is limited, A&P had approximately 17,000 stores operation by 1929.
The Discount House (Early 1930s)
Modern retail stores that place emphasis on self service or operate with a minimum of sales clerks whenever self-service is not applicable. Tend to offer a wide variety of discounts without limited customer services. The philosophy of the stores is to sell nationally advertised or brand named merchandise at substantial discounts from conventional or list prices.
The Supermarket (First appeared in southern California around 1925)
Were primarily large, open-air, self-service stores with drive-in facilities. The first supermarkets were considered to be a device that independent retailers used to meet the competition of the chain store.
Today, we have ventured into the world of the web by selling and buying merchandise on the Internet from various sources around the world.
Although Business-to-Consumer electronic commerce captures the attention of the industry, Business-to-Business electronic commerce is the format that is predicted to reap most of e-business activity. Business-to-Business eCommerce has exploded. This market became a trillion-dollar market by 2003, and was expected to have a 90% compound annual growth rate (Sprague, 2000). According to Sprague (2000), “B2B e-commerce represents another revolution that is reshaping business relationships and is causing dramatic shifts in channel power as information and communication imbalances disappear" (p.1). B2B eCommerce provides purchasers and suppliers with value suggestions that can decrease transaction prices and advance the monetary worth gained through corporate relationships. Value propositions such as these are able to provide opportunities for new players to enter the process of facilitating buyer and supplier adoption of eCommerce capabilities.
Effects of eCommerce on Transaction Costs
One of the most important objectives of B2B eCommerce is to change the cost and benefits of transactions. Kaplan and Garicano (2001) developed a framework that describes how B2B eCommerce can change transaction costs. The model presented five ways that this could be done, and they are:
- Changes in the processes. B2B eCommerce can enhance effectiveness by limiting the prices associated with current company processes. Improvements may occur in two different ways. The first way is to lessen the cost of an activity that is currently occuring (i.e. catalog orders being taken online versus by telephone or fax). The second way is to use the Internet to recreate the current process (i.e. Autodaq establishes Internet auctions for used cars that voids the shipping costs that are usually required with regular auctions). Each process improvement effort should be measured and evaluated to ensure that there are cost savings. This effort can be assessed by documenting the time and costs involved in both the current process as well as the proposed process. The difference between the two is the savings from the process improvement.
- Changes in the nature of the marketplace. Use of the Internet can: Decrease a buyer's cost of searching for appropriate suppliers, offer enhanced information regarding product details to buyers, and supply more adequate research about buyers and sellers.
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