Investor's wiki

Electronic Retailing (E-tailing)

Electronic Retailing (E-tailing)

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 like warehouses, internet webpages, and product shipping centers.

Prominently, strong distribution channels are critical to electronic retailing as these are the avenues that move the product to the customer.

How Electronic Retailing (E-tailing) Works

Electronic retailing includes a broad range of companies and industries. However, there are similarities between most e-tailing companies that include an engaging website, online marketing strategy, efficient distribution of products or services, and customer data analytics.

Successful e-tailing requires strong branding. Websites must be engaging, easily navigable, and regularly updated to meet consumers' evolving demands. Products and services need to stand out from competitors' offerings and increase the value of consumers' lives. Likewise, a company's offerings must be competitively priced so consumers don't lean toward one business over another just for price reasons.

E-tailers need distribution networks that are quick and efficient. Consumers can hardly sit tight for long periods for the delivery of products or services. Transparency in business practices is likewise important, so consumers trust and remain faithful to a company.

There are numerous ways companies can earn revenue online. Of course, the primary income source is through the sales of their product to consumers or businesses. Both B2C and B2B companies can earn revenue by selling their services through a membership based model like Netflix (NFLX), which charges a month to month fee for access to media content.

Revenue can likewise be earned through online advertising. For example, Meta (META), formerly Facebook Inc., earns money basically from ads placed on its Facebook website by companies hoping to sell to the large numbers who are "on Facebook," regularly checking their pages.

Types of Electronic Retailing (E-tailing)

Business-to-Consumer (B2C) E-Tailing

Business-to-consumer retailing is the most common of all e-commerce companies and the most natural 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 keeping up with great customer relations.

Business-to-Business (B2B) E-tailing

Business-to-business retailing involves companies that sell to other companies. Such retailers include advisors, software developers, freelancers, and wholesalers. Wholesalers sell their products in bulk from their manufacturing plants to businesses. These businesses, thusly, sell those products to consumers. In other words, a B2B company, for example, a wholesaler could sell products to a B2C company.

Advantages and Disadvantages of Electronic Retailing (E-tailing)

E-tailing includes more than just e-commerce-just companies. More and more traditional brick-and-mortar stores are investing in e-tailing. Infrastructure costs are lower with electronic retailing versus operating brick-and-mortar stores.

Companies can move products faster and reach a larger customer base online than with traditional physical locations. E-tailing additionally permits companies to close unprofitable stores and keep up with the profitable ones.

Automated sales and checkout cut down on the need for staff and sales personnel. Additionally, websites cost less than physical stores to open, staff, and keep up with. E-tailing reduces advertising and marketing expenses as customers can track down the stores through search engines or social media. Data analytics is like gold 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 lift client engagement, which can lead to increased revenue.

However, there are disadvantages to running an e-tailing operation. Creating and keeping an e-tailing website, while less expensive than a traditional retail location, can be expensive. Infrastructure costs can be substantial in the event that warehouses and distribution centers need to be worked to store and ship the products. Additionally, adequate resources are necessary to handle online returns and customer disputes.

Likewise, 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; perusing is likewise more pleasurable in person, and lends to increased spending. Personalized customer service and interaction can likewise be an advantage to brick-and-mortar stores.

Real World Examples of E-Tailing

Amazon.com (AMZN) is the world's largest online retailer, giving consumer products and memberships through its website. Amazon's website shows the company generated more than $280 billion in revenue in 2019 while posting more than $11.6 billion in profit or net income. Other e-tailers that operate exclusively online and compete with Amazon include Overstock.com and JD.com.

Alibaba Group (BABA) is China's largest e-tailer, which operates an online commerce business all through China and internationally. Alibaba has adopted a business model that includes both B2C and B2B commerce, however it likewise connects Chinese exporters to companies around the world hoping 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.

Features

  • E-tailing can include business-to-business (B2B) and business-to-consumer (B2C) sales of products and services.
  • Amazon.com (AMZN) is by a long shot the largest online retailer giving consumer products and memberships through its website.
  • Electronic retailing is the sale of goods and services through the internet.
  • Numerous traditional brick-and-mortar stores are investing in e-tailing through their websites.