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What Is Electronic Retailing (E-tailing)?
Electronic retailing (E-tailing) is the sale of goods and services through the internet. E-tailing can include business-to-business (B2B) and business-to-consumer (B2C) sales of products and services.
E-tailing requires companies to tailor their business models to capture internet sales, which can include building out distribution channels such as warehouses, internet webpages, and product shipping centers. Amazon and Alibaba are two notable examples. Strong distribution channels are critical to electronic retailing as these are the avenues that move the product to the customer.
E-tailing produces reduced costs and expanded access for consumers, but it lacks sensory experience.
Key Takeaways
- Electronic retailing (e-tailing) involves selling goods and services online, encompassing both B2B and B2C transactions.
- Strong distribution channels and engaging websites are critical components of successful e-tailing.
- Many traditional brick-and-mortar stores are expanding into e-tailing to reduce costs and reach a wider audience.
- E-tailing offers lower operational costs but lacks the sensory experiences of physical stores, which can influence consumer buying decisions.
- Amazon and Alibaba are leading examples of global e-tailers, showcasing the potential revenue and reach of online retail.
Understanding the Mechanics of E-Tailing
Electronic retailing spans various companies, but most share features like engaging websites, online marketing strategy, effective distribution, and customer data analytics.
Successful e-tailing relies on strong branding. Websites need to be engaging, easy to navigate, and updated regularly to meet changing consumer demands. Products and services must stand out and add value to consumers. Companies also need to price competitively to avoid losing customers on price.
E-tailers need prompt, efficient distribution networks, as consumers expect timely deliveries. Business transparency is key for earning consumer trust and loyalty.
Companies can earn online revenue in many ways, with the main source being product sales to consumers or businesses. Both B2C and B2B companies can earn revenue by selling their services through a subscription-based model such as Netflix (NFLX), which charges a monthly fee for access to media content.
Revenue can also be earned through online advertising. For example, Meta (META), formerly Facebook Inc., earns money mainly from ads placed on its Facebook website by companies looking to sell to the millions who are “on Facebook,” regularly checking their pages.
Exploring the Different Types of E-Tailing
Business-to-Consumer (B2C) E-Tailing
Business-to-consumer retailing is the most common of all e-commerce companies and the most familiar to most Internet users. This group of retailers includes companies selling finished goods or products to consumers online directly through their websites. The products could be shipped and delivered from the company’s warehouse or directly from the manufacturer. One of the primary requirements of a successful B2C retailer is maintaining good customer relations.
Business-to-Business (B2B) E-tailing
Business-to-business retailing involves companies that sell to other companies. Such retailers include consultants, software developers, freelancers, and wholesalers. Wholesalers sell their products in bulk from their manufacturing plants to businesses. These businesses, in turn, sell those products to consumers. In other words, a B2B company, such as a wholesaler might sell products to a B2C company.
Weighing the Pros and Cons of E-Tailing
E-tailing is not limited to e-commerce companies; traditional stores are increasingly investing in it. E-tailing has lower infrastructure costs compared to operating physical stores.
Companies can move products faster and reach a larger customer base online than with traditional physical locations. E-tailing also allows companies to close unprofitable stores and maintain the profitable ones.
Automated checkouts reduce staffing needs, and websites are cheaper to open and maintain than stores. E-tailing reduces advertising and marketing expenses as customers can find the stores through search engines or social media. Data analytics is invaluable for e-tailers.
Consumer shopping behavior can be tracked to determine spending habits, page views, and length of engagement with a product, service, or website page. Effective data analytics can decrease lost sales and boost client engagement, which can lead to increased revenue.
There are disadvantages to running an e-tailing operation, though. Creating and maintaining an e-tailing website, while less expensive than a traditional retail location, can be expensive. Infrastructure costs can be substantial if warehouses and distribution centers need to be built to store and ship the products. Also, adequate resources are necessary to handle online returns and customer disputes.
Also, e-tailing does not provide the immersive, emotional experience that physical stores can offer. E-tailing does not give the consumer a chance to smell, feel, or try on products before purchasing them—sensory experiences that often result in a decision to buy; browsing is also more pleasurable in person, and lends to increased spending. Personalized customer service and interaction can also be an advantage to brick-and-mortar stores.
Real-World E-Tailing Success Stories
Amazon.com (AMZN) is the world’s largest online retailer, offering various products and subscriptions. In 2019, it earned over $280 billion in revenue and more than $11.6 billion in profit. Overstock.com and JD.com are other e-tailers that compete with Amazon.
Alibaba Group (BABA) is China’s largest e-tailer, which operates an online commerce business throughout China and internationally. Alibaba has adopted a business model that not only includes both B2C and B2B commerce, but it also connects Chinese exporters to companies around the world looking to buy their products. The company’s rural Taobao program helps rural consumers and companies in China sell agricultural products to those living in urban areas. For the fiscal year 2020, Alibaba generated nearly $72 billion in annual revenue while posting just under $19.8 billion in profit.
The Bottom Line
E-tailing, or electronic retailing, involves the sale of goods and services over the internet, catering to both B2B and B2C transactions. Many traditional brick-and-mortar stores are transitioning online, investing in e-tailing to reach a broader audience and enhance profitability. Amazon.com and Alibaba Group are prominent players in the e-tailing space, showcasing different strategies and business models suited to global and regional markets.
E-tailing provides cost efficiencies through reduced infrastructure needs, leverage of online marketing, and powerful data analytics to drive sales and customer engagement. But it faces obstacles despite its advantages, such as high initial setup investments, managing logistics, and the absence of physical sensory experiences for consumers.
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