Online Stores Offers Competitive Advantage
Comment by Sabina:
In an unstable economy such as our current economy every business must seek a competitive advantage. Our economy has suffered a recession in the last few years, many people have lost their jobs, families have lost their homes and disposable income has disappeared. All business must develop a strategic business plan to gain a competitive advantage, allowing them to stay in business and establish success. In this paper I will discuss how offering online services and online stores have a competitive advantage in the market.
Stores that are fully online can keep overhead cost low. Online businesses do not have to pay rent for space, and in many case they can keep cost lower without additional expenses. Store front business has many expenses such as electricity, insurance for the location and many other expenses. Online stores require fewer employees since the business is operated from a website. Since online stores can keep their cost low, they can then pass on the extra savings to the consumers giving them the competitive advantage.
Online stores offer a great competitive advantage to busy customers. Customers who do not have the time to go shopping or price shopping can go online and find the product they are looking for. Customers can gain information about the product, different brands available and find the best price. Customers can make their purchases online, and it will be shipped directly to their shipping address of choice. This is a great competitive advantage for busy customers, they get all the service they are looking for at the best price available. In 2007 when the economy was heading downward the companies that did the best in sales were the companies that utilized online sales strategies (Lindsay et. al., 2008). Analyst believes that consumers are looking for new web technologies and online retailing.
The growth of technology also affects businesses. Technology today is much more advanced than ten years ago. Consumers can gain information about products and services through a variety of mediums, most of which are not controlled by the manufactures, stores, retailers or businesses (Edelman, 2010). Consumers are gaining information from social media websites, from blogs, customer feedback websites and many other methods. Stores that operate online are attempting to reach customers on a level of higher technology. Consumers today are utilizing a high level of technology; therefore stores must utilize a high level of technology to meet the consumers as well. Stores that operate online are reaching out to consumers who utilize technology for shopping purposes.
Online stores have a great competitive advantage which is known as the ‘funnel metaphor’ (Edelman, 2010). Marketers utilize the funnel metaphor to describe what happens when a customer goes online to conduct product research. The consumer begins the search at a wide end of the funnel with many different brands in mind, and end the search at the narrow end of the funnel. Companies that operate online uses paid-media push marketing at specified strategic points in the funnel, to help guide the customers and influence their decision about purchasing their product. When companies operate online and inspire the customer to purchase their product, the customer is more likely to make that purchase online rather than find a store (Edelman, 2010).
Marketing cost is another reason for businesses to operate online. Most businesses spend a large percentage of their cost on marketing. Companies that operate online can utilize their website as a part of their marketing strategy and cut marketing cost (Edelman, 2010). The online shopping also ships the power from the retailers to the consumers, which is a great advantage for the consumers and provides the business with a competitive advantage (Mishra, 2009). Internet shopping fulfills several consumer needs; they can do price comparisons, product comparisons and even read customer reviews. Many customers feel that gaining information from other customers is more advantageous than relying on the sales person at the store.
Online stores utilize advanced technologies such as placing cookies on the consumer’s computer when they make a purchase. These cookies allow the online store to continue to market to the customer by sending them pop ups about products and sales (Yuan & Krishna, 2010). Consumers must provide their email address to get an email confirmation of purchase and this information is usually stored and kept for marketing purposes. This is a great competitive advantage for online stores.
In conclusion stores that operate online have a great competitive advantage. Stores that operate solely online can keep cost lower and pass the savings on to customers. Online stores utilize the funnel metaphor which helps to influence the decisions of customers. Online stores also meet the needs of customers who are looking for information with the use of technology and internet searches. Online stores shift the power from the retailers back to the customers, which is a great competitive advantage for online stores. More customers shop online because they are able to gather the information they need, compare products objectively without the influence of sales persons, do price comparison and make online purchases. In an economy where consumers are careful about their spending creating online stores is strategic marketing endeavor that will help the store create success.
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Mishra, S. (2009). A conceptual framework for creating customer value in e-retailing in India. South Asian Journal of Management. 16 (4) 127-147.
Yuan, H. & Krishna, A. (2010). Pricing of mall service in the presence of sales leakage. Journal of Retailing. 84 (1) 95-117