Table of Contents
Abstract
Online shopping became very popular these days with change in consumer habits from visiting retail stores to buy the products to buying those online. There are multiple advantages of shopping online, but there are few disadvantages too. This paper describes the benefits and disadvantages of online shopping from consumer perspective and the companies’ perspective. Along with those details, this paper provides some numbers around the pricing techniques that companies use for online and retail.
In-Store vs Online Shopping
The invention of new technologies has drastically changed the lives of people in multiple ways. The shopping experience is one of those. Internet era led to significant improvements to the conventional ways of business. This has both positive and negative effects for consumers as well as businesses. Conventional retail industry was hit with multiple challenges from the online retailers (Salomon & Koppelman, 1988). The flexibility that online shopping provides to consumers made multiple conventional retailers go bankrupt. That forced all the conventional retailers to search for alternatives to attract consumers to the retail stores.
Those conventional retailers that can afford to develop websites to support online shopping survived, but, definitely took a hit. Online retailers Amazon, eBay etc. attracted a lot of customers in multiple ways, who otherwise would have preferred visiting stores to do shopping. Huge conventional retail chains like Walmart are now shifting towards Online, to face the competition from pure online retailers. Though online shopping looks attractive, there are quite a few reasons for which customers still prefer physical stores, paper will have more details in the coming sections (Kauffman & Bergen, 2009). That is the reason for online retailers like Amazon to open physical stores.
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The top reasons behind the popularity of online shopping are the accessibility, easy to shop, time saving, price factor, wide catalog, ability to compare different offerings and specifics of the product at one place. Online shopping is very convenient and consumer can sit at home and buy the products anytime. There are multiple shipping methods available to choose from the options and one can choose the best applicable option depending up on the needs and wants. With the mobile applications available for each and every online retailer, it is just a few clicks away to place the order for the favorite product. The other amazing option which is available is the dash button. It was first made available by Amazon. All that user needs to do is to configure the dash button with the Amazon mobile application for particular product and that’s all. With a single click on the dash button a product will be ordered. This can be configured for the daily needs at home and office like water supply, groceries, printing needs, and what not.
The other major advantage is the ability to compare multiple available products in the catalog. This comparison can be with in the same website from an online retailer or between different online retailers. Also, the comparison can be between the same product from different manufacturers. There are multiple third-party websites available which will compare the price between different online retailers and helps the consumer choose the best possible option. Few best examples are Google Shopping, Nextag and PriceGrabber.
Online retailers do not have the costs that physical stores have like store rent, maintenance and staff to assist the customers. Though there are other costs to online retailers like website development and maintenance which a physical store does not have, those costs scale well when compared to multiple physical stores. Because of this difference online retailers will have a better profit margins when compared to conventional retailers, and thereby additional flexibility to offer better prices online (Ratchford & Shankar, 2003). This is another important factor that attracts customers to buy products online.
When it comes to disadvantages the first one will be lack of actual feel that we get when we visit the conventional store. It is the actual shopping experience that many of the customers are habituated from a very long time. Online shopping definitely saves a lot of time but the fun which will be there by shopping in the conventional store will not be there. Shopping at the stores are interactive and there will be special attention to the shoppers by staff, to understand better about the products. Stores are cool places for interaction with different other consumers and friends from the neighborhood. People discuss multiple things when they meet at stores starting from gossips to political issues. All this experience is missing in the online shopping. Online shopping does not provide the opportunity to closely examine the goods other than the images. If it is convenience product that a consumer buys in a regular basis, then close examination of the product is not necessary, but, if it is a product that a customer buy for the first-time online shopping is not a better option.
There are multiple ways that a customer can be cheated when shopping online. There are multiple fraud cases registered and people lose money for products which are imitations of the actual product. With the increase in advertising, people end up buying things just because they get attracted to those online offers. A product can be purchased and brought to home immediately from a conventional retailer, but, online shopping adds delay to receive the product. There might be additional shipping costs when buying online. The other factor is the membership fee associated with the online retailers. For example, Amazon prime membership. The return process for products purchased online will be tedious when compared to purchases at a physical store. Consumer has to read the terms and conditions carefully before an online purchase, otherwise one can end up paying return shipping and handling costs. Some of the products never make it to customer when shipped by retailer and customer has to lose money. These are the different pros and cons of online shopping from a consumer perspective.
When it comes to ups and downs in business viewpoint to compare the online and offline stores, the main contributor is the investment. There are huge capital investments to open a physical store such as renting a space, beautifying the store, employing the staff and inventory management. To open an online store, it is the cost for developing and maintaining a website. Scalability for online stores is easy when compared to physical stores. Variety of products can be listed in online stores and procured based on demand, but it is tougher to maintain a wide variety of products in a retail store because of the associated costs and space constraints. A product can be shipped to any location in a country when purchased online, which makes the online store available to huge number of customers when compared to the physical store.
Opening a physical store needs research limited to the neighborhood, whereas it is very tough and requires a lot of research to penetrate in to online business because of the saturation and competition. Not all the products are preferred to be purchased online by consumers, for example buying clothes is more convenient in a physical store when compared to an online store. Shipping and handling costs are the additional costs that an online store has to pay.
Online retailers have the advantage to collect data which helps to understand consumer behavior in a better way. This helps to design the website better and to provide smart offers online which increases the sales (Grewel, 2010).
Conclusion
To conclude, there are different categories of products that a consumer prefers to by online such as convenience products necessary on a regular basis and, products which does not need look and feel. But there are a wide range of products consumers from different demographic segments prefer to buy in-store. When it comes to business viewpoint, physical stores and online stores are equally important for a firm to be successful. There is necessity for every business to sell products through a variety of channels.
References
- Grewel. (2010). Strategic Online and Offline Retail Pricing: A Review and Research Agenda.
- Kauffman, & Bergen. (2009). Image effects and rational inattention in Internet-based selling. International Journal of Electronic Commerce, 13(4), 127-166.
- Ratchford, & Shankar. (2003). On the efficiency of internet markets for consumer goods. Journal of Public Policy & Marketing, 22(1), 4-16.
- Salomon, & Koppelman. (1988). A framework for studying teleshopping versus store shopping, Transportation Research Part A: General, 22 (4) 247–255.
