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Unit 10: Cash Management

to a two-hour trip to the mall. Consumers prefer to save their precious time so that they can Notes
better utilize it.
Customer Interaction: The greatest benefit of online commerce is its ability to interact with the
customers. Such an interaction allows the retailers to reach the individual customers and react
appropriately to their responses. Interaction acts as a vital tool for mass customization. The
common examples include online marketing of books, flowers, software and education. This
has also led to greater satisfaction among the online buyers. According to a research agency,
81% of the buyers were found to be highly satisfied with their online purchases.
Mass Media: A supermarket is limited in its area of operation. It caters to a specific geographical
location such as a city and/or its suburbs. However, a web site is globally accessible leading to
a worldwide reach and an increased potential customer base.
Search Option: With web search capabilities (which need further development) it is easier to
find the particular types of goods required by a customer. The consumer decides what he wants
to buy rather than the retailer offering what he wants to sell. This ultimately translates into
consumer empowerment.
User Friendly: Customers can execute transactions via the same medium the information is
provided, so there is no disconnect between the desire to purchase and the ability to purchase.
(Payment schemes are still evolving and therefore this advantage is likely to become more
apparent in the future.)
Effective Price Discrimination: E-tailers can use price discrimination in an effective and efficient
manner. E-tailers can use previous transactions to identify the likelihood of products being
purchased at certain price points and use this information for price discrimination.
Customized Product Placement: E-tailers can change the online placement/display of a product
based on the previous transactions so to increase the visibility of goods that the user is more
likely to buy based on the previous encounter at the time purchase. This allows a contextual
design of placement to ensure conversion of a visit/hit to the web site into a sale.
Global Reach: Customers have a much wider choice at their fingertips (a variety of e-tail sites to
choose from etc.) In this way, the web creates a global market place that brings together multiple
consumers and retailers.

10.4.2 Disadvantages of E-tailing/Multi-channel Retailing

Most of the e-tailing ventures have not been as profitable as they were expected to be, the
primary reasons were:

1. Security issues: Security issues hold the centre stage when it comes to consumer concerns
while shopping through the online media. A lack of trust and privacy concerns prevents a
lot of consumers from making online purchases. Consumers are also concerned with the
use of their personal data provided during the online transactions.

2. Customer retention: In e-tailing, an increase in the customer retention by 5% leads to a
corresponding increase in profits by 25%. Most of the people buying on the Internet do so
out of curiosity and this makes a repeat purchase highly unlikely.

3. Unsuitable for certain product categories: In case of product categories that require
relatively higher customer involvement, the e-tailing route is found to be grossly
inadequate in providing sufficient information to the customers. Examples include retailing
of products like clothes, cosmetics etc. Most customers are comfortable buying books and
music on the Internet because the information required for making a purchase and the
customer involvement is low. However, in case of a blue Trouser, the customer may want

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