Thursday 18 November 2010

E-commerce - Reasons for going online and strategies


Electronic Commerce [e-commerce] refers to the conducting of business on the Internet. This includes buying or selling goods and services over the Internet. (Source: ). Now-a-days most of the businesses are attempting to go online to buy and sell goods and services in order to increase their business turnover. The speed at which e-commerce is being adopted by traditional businesses is remarkable. This is because of the rapidly increasing online shopping. In the U.S., Forrest reported that the year 2002 online shopping were up 50 % compared with the year before. And in the U.K., Interactive Media Group said that 2002 online shopping grew 19 times faster than traditional retailing venues. In fact, numerous experts predict that online shopping is likely to continue to outgrow brick and mortar sales for the foreseeable future because consumers are recognizing and exploiting the benefits of web shopping.

(Reynolds, 2003; pg 1)

This report is addressed to the management of ‘Fresco Gifts Centre’ to design a strategy for the purpose of launching a business online.


Fresco Gifts Centre is a business firm that is based in Kolkata, India. This business firm is involved in the buying and selling of gifts in the Eastern India. Its mission statement is " To mission is to become a recognized and leading retailer of gift items in the India." Currently it has six retail outlets in Eastern India but it plans to open another five outlets. It employs seventy employees and as of 31st march 2007, its turnover stood at around Rs. 60m (INR).

(Source: Appendix I)


Reduction in costs: One of the most important reasons for the business to go online is the ability to reduce costs. Firstly, the business can reduce transactional costs. Transactions that are carried out on the internet costs lower than the transactions that are carried out through traditional means. This is because the direct cost of sale can be reduced significantly. Secondly, online business has very low external costs. That is, the costs associated with opening, maintaining, and staffing actual physical stores are reduced. Thirdly, the costs associated with starting up an online business are very low. Therefore going online helps the business in reducing various costs significantly. This has led to a proliferation of individuals and firms attempting to use the Web for commercial purposes. (Vulkan, 2003; p 31)

Global Presence: When the Fresco Gifts Centre goes online it can reach people around the world, offering products to a global customer base. For the company, going online is quite simple way to expand the market reach beyond your geographic location and your current customer segments. Therefore it can increase its turnover significantly.

Generating Visibility: Another important reason for Fresco Gifts Centre to go online is to gain visibility. Generating visibility is substantial for every company. The better known your company is, the more people will be interested in doing business with the company. Internet allows the company to present itself at very low cost. (source:

Communication tool: The Internet is the ultimate communications tool - fast and cheap. The company can use it to communicate with suppliers, resellers, and of course, its customers. Sending mails physically can cost a lot to the company. But sending electronic mails is virtually free. Moreover it is a lot faster to communicate through e-mails.


Just in Time Inventory: When the company goes online it has the opportunity to bring the ‘Just in Time Inventory’ concept into the business as digital communication between factories, marketing and purchasing departments becomes possible. Therefore it is possible to cut down inventory to reduce the cost and adapt more dynamically to the wishes of the customers.


Larger catalogue: Fresco Gifts Centre can maintain a large catalogue online. This is because it don’t have any physical space constraints. Therefore it can put a large catalogue online to meet several tastes and preferences of customers. It can also reap the advantages of segmentation by putting sections such as kids, men, and women.

Improves Customer Relationship: By going online Fresco Gifts Centre can improve customer relations with the help of e-mail, Frequently Asked Questions (FAQs), forums, message boards, knowledge bases, etc. Integration of these features will also help the company to differ from its competitors and make its website recognizable.


Rapid Growth of volume of Online Customers : Another good reason of going online for Fresco Gifts Centre is the rapid growth of volume of customers who shop online. In the year 2002, 40-48 million adults went online to looking for local content. The average local user was college educated, makes good money, and likes shopping online. They are more likely to make purchases than non-users of local content, either online or offline.


Adoption of E- commerce by Competitors: Last but not the least is the adoption of e-commerce by competitors. Today most of the businesses are adopting e-commerce to reap the benefits of having online presence. Therefore, if Fresco Gifts Centre don’t adopt an online presence, sooner or later it will loose its customers to the competitors.


Fresco Gifts Centre must design a website that primarily works as an online store, that indulges in selling its products to the customers. Therefore it should be purely a revenue-based model. It may also attach some web pages that may serve the purpose of giving company information to the visitors.

The company may adopt the Shopping Cart model (also called Shopping Basket Model). This is assisted by Electronic Shopping Cart. That is, an electronic commerce tool that is the user-interface for the customer to shop at online stores. It allows users to place items in a "shopping basket", and the cart remembers these items for a predetermined length of time. Extra features such as different colour or size options, quantity of order, and matching item links can be found linked from the shopping cart. Once a shopper inputs his shipping address, taxes and shipping costs can also be tallied from within the shopping cart. For the merchant, the shopping cart also provides important information, which is often transparent to the shopper including a cart number to track the order. (Source:

It can also combine this model with Advertising –Supported Model. That is, it can sell some space on the websites for advertising to other companies.


The Revenue-based model has been advised as it increases the overall sales and profitability of the firm. Besides it also helps in the reduction of costs such as operating costs, transaction costs, external costs etc.

The adoption of the Shopping Cart Model can be justified by the fact that it is one of the most user friendly processes that gives several benefits to the customers.

This allows the shopper to add the item and then go back and find additional items they may want or need. There are other tools available to help a shopper find other interesting or corresponding items. This is a model idea because the shopper may find something else they want or need. The status of the product and the details of the delivery of the product and the status of the mode of payment reach the customer through the e-mail.


Besides, the site features can be as complex as desired to meet the marketing needs of the business.

The advantage of combining the Advertising- Supported Model is that it brings additional revenue to the organisation and may cover the cost of running the online store.


To design an e-commerce strategy for the Fresco Gifts Centre, it is critical to recognize to what the internet changes. Not every value proposition in traditional commerce can attract customers in e-commerce and not every traditional strategy is a viable source of increased profitability. Therefore the best strategy for the business firm would be not to ignore the fundamental properties of the internet and the behaviour of its users.

The organisation must develop strategies for e-commerce operations that are consistent with overall corporate strategy. The goals should include an increase in customer acquisition, enhanced channel optimisation, improved customer loyalty and retention and capturing value for the organisation.

The following four strategies should be adopted:

  1. Well positioned online brand
  2. Online-friendly offerings
  3. Reliable customer service
  4. Cross-channel coordination

(Epstein, 2004; pp 9-10)

  1. Well positioned online brand: The business firm should initiate e-commerce operations by transferring the brand name to the internet, using the company’s name as the domain name. The company then should advertise the website in various physical location and in all print publicity materials

  1. Online offerings: The Company must decide what products to offer on the websites. It can sell the same products that it does in the physical store. But the company should increase its range of products online as there are no physical space constraints and the company should take advantage of it.

  1. Reliable customer service: The website should have a link that can be used to by the customers to ask their queries and lodge complaints (if any) and the company should take care that those queries and complaints should be answered as soon as possible.


  1. Well positioned online brand: Acquiring Customers and Building Trust

When the Company uses its brand name as the domain name to the internet, the existing and potential customers can easily find the company’s website. A brand name will draw customers to the company’s website and can help assure customers about the quality of the offerings, the accuracy of the information, and the security of the web transactions on that site. The brand name can also promote customer loyalty.

  1. Online offerings: Product selection and Differentiation

The customers can have a wide range of products to choose from the website as there are no physical space constraints on the websites. Therefore the company can have gift products for a variety of customers, tastes and fashion. The company can also differentiate its products on the website on the basis of different ages, occasions, etc. Therefore the online offerings can be more friendly.

  1. Reliable Customer Service: Key to Success

The website should provide reliable customer service because it is the key to solidify relationship with the customers. The customers should feel that whatever happens the company will help the customers and solve their queries. Therefore the company should recognize the importance of reliable customer service and learn how to provide consistency throughout their customer interactions.



Therefore we conclude that in today’s world it is very important for every business to go online in order to retain its own customers and attract new customers. However it is very important for the company to take some precautions while implementing e-commerce strategies. Some major assessments must be made before the company formulates and implements an e-commerce strategy. It must evaluate the nature of the company’s offerings, traditional strategy and business models, and the geographical scope of the company. (Epstein, 2004; p 23)

Another primary concern is issues in e-business security. The Internet is very public, and many people hesitate to send sensitive data over the wires where it might be intercepted by nefarious third parties. But with so many organizations excited about the benefits of e-commerce, plenty of people are working on resolving the e-security issues. (Source: