CHAPTER 5

Challenges to Digital Commerce

Improving the Digital Shopping Experience

Consumers have different shopping needs. Consumers also have different shopping options. Shopping with others or alone. Online searching, talking with employees, reading reviews. Large assortment of products, niche products, customized products. Digital, in store, catalog, mail order, television. To accommodate shopping needs, business offers consumers varying ways of shopping. However, retailers and consumers look at these channels differently. Retailers have a multichannel view, whereas consumers have an omnichannel view of the shopping experience.

Multichannel Marketing

The capability of offering the purchasing of products from more than one channel refers to multichannel marketing. Multichannel marketing allows for the enhancement of service for consumers to enrich their satisfaction (Wallace, Giese, and Johnson 2004), as well as value in offering them the ability to use different channels (Noble, Griffith, and Weinberger 2005). Brick and mortar allows for a social shopping experience, as well as tactility in purchasing. Catalogs and televisions afford the comfort of shopping at home. E-commerce has the benefits of shopping at home, as well as an interactive experience. M-commerce gives consumers the benefits of all channels, including anywhere, anytime shopping. Although the main purpose of both retailing online and offline is consumer purchasing, each has its own advantages and disadvantages. According to Christensen and Tedlow (2000), “the essential mission of retailing has always had four elements: getting the right product in the right place at the right price at the right time.” Established brand name, large customer base, distribution channel, and lower customer acquisition costs give physical retailers advantages, but these retailers also have large capital investments and limited hours within those physical structures (Enders and Jelassi 2000; White and Daniel 2004). The Internet, on the other hand, has low entry and establishment costs for sellers (Peterson, Balasubramanian, and Bronnenberg 1997). Online retailers are also afforded a wider audience reach, larger product selection, and unlimited operating hours but face a more difficult task in establishing a brand name and developing trust with potential customers (Enders and Jelassi 2000; White and Daniel 2004).

A study by Kaufman-Scarborough and Lindquist (2002) indicated that shoppers differed in their use of channels based on their perceptions of convenience, while others preferred the store setting and rejected other channels. Also suggested, disabled consumers who could not easily purchase at a brick-and-mortar store are good targets for online shopping. Lee and Tan (2003) suggested that retailers should focus on “less risk-averse consumers as their initial target” to help alleviate some of the perceived risks customers may feel in moving into online shopping. Noble, Griffith, and Weinberger (2005) looked at consumer channel utilization across several retail channels, instead of a select few, finding that there were underlying utilitarian values influencing consumer utilization across channels. For example, in adopting the Internet for apparel shopping, prior experience with in-home apparel shopping, as well as the Internet, predicted online apparel buying intention (Yoh et al. 2003). Montoya-Weiss, Voss, and Grewal (2003) suggested customer satisfaction with a service provider is determined by quality across channels, which could influence online channel usage. In addition, Zettelmeyer (2000) argued that firms could use pricing and communication information strategically on multiple channels in order to segment their customers and increase their market power.

Retailers looking at a multichannel strategy enhance the shopping experience for their customers by responding to customers in the channels that would garner the best shopping experience, highlighting the value of each channel and adapting each channel to its abilities (Mathwick, Malhotra, and Rigdon 2002). For example, bricks and mortar retailers emphasize their physical structures to enhance the tactile shopping experience, whereas e-commerce retailers accentuate information sharing, and m-commerce advantages of location and time specificity, as well as personalization.

Omnichannel Marketing

Consumers do not tie themselves to a specific channel. A consumer does not respond to the terms e-commerce or m-commerce. Consumers shop. Consumers want convenience. This expediency may mean overlapping channels. For example, a customer goes to a store and the particular item needed is not in stock, or at a higher price than the customer expects. Using a smartphone, the customer checks online inventory, compares prices, then purchases while on the phone. This customer is using several marketing channels for a single purchase. This type of shopping is omnichannel shopping as shown in Figure 5.1.

Figure 5.1 Omnichannel shopping experience

Omnichannel refers to the phenomenon of consumers identifying all retail channels as seamless, meaning an integration of all retail channels whether online or offline. Omnichannel offers a smooth transition from one channel to another to the point consumers do not notice a difference. Consumers interact in more than one marketing channel during a shopping experience. Over 60 percent of consumers use four or more channels per day (Experian Marketing Services 2014). Omnichannel commerce is seamless and moves along with the customer. Omnichannel marketing should be just as fluid. These channels can include, and not limited to, physical stores, websites, kiosks, catalogs, television shopping, social media, and mobile applications. The goal of businesses is to know the target—where the shopping experience will take place.

Integrating the Shopping Experience

Firms must also understand that the total shopping experience is based on the consumer’s decision-making process. The experience does not begin when the customer types in the URL, or walks into the store. Many important decisions are made by that point. The shopping experience starts at the point of want or need. Hunger decides on a hamburger. By the time someone walks into McDonald’s, the decision has been made. It is important to be a part of the entire decision-making process. The ability of that same person to peruse the menu on the desktop computer, preorder on their smartphone, and pick up at the drive-thru window makes the decision easier because of the expediency within each marketing channel.

Offering consumers the ability to commingle channels gives businesses the opportunity to expand the shopping experience as well as customer retention. Companies that have omnichannel programs achieve a 91 percent higher year-over-year increase in customer retention rate on average. These companies were also able to increase their customer lifetime value 3.4 percent (Cunnane 2013). However, in developing an omnichannel experience, companies must ensure that the channels reflect the preferences of the consumer.

Omnichannel shopping experiences for buyers is seamless, though many companies silo marketing channels. For example, after developing websites, many retailers kept operations between online and offline separate. However, customers did not. Customers would purchase online, and then return a product to the store. Store managers would not accept returned merchandise purchased online. After all, website merchandise and store merchandise were separate. Customers felt that since both carried the same name, online and offline were the same. Customers were left bewildered. There was no separation. If a store and a website had the same name—they were the same company. Many retailers have learned from this experience, now allowing consumers to buy online and pick up at the store.

For retailers, this multichannel approach to shopping comes with its own opportunities and challenges. There are several types of shoppers who are challenging to merchants:

• The research shopper—consumers who research a product in one channel and then purchase in another (Verhoef, Neslin, and Vroomen 2007).
• Free riders—consumers who are more likely to use shopping as a leisure activity (Bloch and Richins 1983) than for specific product information search.
• Browsers—consumers are more likely to use shopping as a leisure activity (Bloch and Richins 1983) than for specific product information search as in showrooming. Browsing allows shoppers the ability to collect information about products that they might be considering to purchase either immediately or in the future (Rowley 2001).
• Showroomers—a form of research shoppers that after an Internet search, evaluates products at the store, and then purchases online or at a competitive store, based on information derived from the store evaluation.

Showrooming refers to the use of the offline by consumers for product research in order to purchase either online or from a competitor at a lower price (Zimmerman 2012).

Big box store retailers, such as Best Buy, find that many consumers use store employees to learn more about products, and then buy them from other retailers online after investigating which products to purchase. Retailers have tried to offset this practice through price matching; however, matching price becomes a short-term fix for a larger problem. Mobile phone use by consumers has led to an increase in showrooming practices. Consumers use their mobile phones to research online pricing, or in the case of retail stockouts, contact other consumers for price and stock information at competing stores.

Showrooming is a challenge. While in the store, 59 percent of smartphone users checked online for discounts. However, over 90 percent checked a different retailer’s site for pricing information (Moth 2014). Retailers need an understanding of the dimensions of showrooming in order to develop marketing strategies that allow for the integration of all channels, while making sure that cannibalization is inhibited.

In each case, whether showrooming, research shopping, free riding, or browsing, retailers provide the costs of services without the benefit of obtaining revenue support (Burns 2010). Companies are now looking at different digital technologies to overcome these costs, and increase the value of the shopping experience for buyers.

Converging Offline, E-Commerce, and M-Commerce on the Path to Purchase

The decision-making process that leads to buying is considered the path to purchase. For many it begins with a want or need, ending with obtaining the product or service for fulfillment. To enrich the path to purchase, firms look to technology to boost omnichannel shopping experiences.

Retailers turned to kiosks to link in-store and mobile cross-channel marketing. Kiosks refer to in-store information stands, usually with an installed computer or display screen. There are mall kiosks used for product display and points of purchase. However, many retailers use these stands in-store for product information, bridal/baby registry information, and the store directory. By linking kiosks to websites, retailers offer product information and points of purchase, allowing for self-service enhancement and an atmosphere in which the customer is familiar. The problem with these stands is that the customer has to seek it out within the store. A kiosk store directory is useless if the kiosk cannot be located. The other challenge is for businesses in which the use of a kiosk is not justifiable in terms of cost or consumer experience.

Several businesses use in-store tablets to bridge the e-commerce/m-commerce gap. Armed with tablets, sales associates are becoming walking kiosks. “Can I help you” has taken on a whole new meaning as sales associates are able to look up product information, as well as become point-of-sale to check out customers anywhere in the store. Less expensive than conventional registers, tablet-based point of sale systems have increased (Evans 2013) and is convenient for customers. These systems mobilize the sales associates to give information to consumers at the decision point and reduce checkout lines—allowing for quick purchase decision making.

Integration of tablet use by customers on premise allows merchants to integrate the path to purchase into an omnichannel experience. Service merchants, such as hotels, cruise ships, and airlines, can offer concierge services through mobile devices for increased consumer convenience without sacrificing personalized service.

Express check-in/checkout, amenity requests, food orders, dining reservation requests, tour booking functions, and other services can be provided through tablet apps and websites while a consumer is on a business trip or pleasure vacation. Guests can provide trip information prior to a visit, then, according to guests needs, hotels and cruise ships can provide customized programs for each guest, airlines can provide specified meals, and all can provide individualized discounts and deals based on the customers’ itinerary to enhance the experience.

Consumer-friendly, easy to browse, and intuitive websites and applications enable the enhancement of the service experience (Evans 2014). Heeding the content is king mantra, the omnichannel experience should allow for ease of use, delighting the customer in every step of the experience. Every part of the experience should be laced with specific calls to action, giving customers routes along their path.

Enlightening the Digital Path to Purchase with Beacons

Most marketing executives agree that customer experience is an area in which companies need to develop. In focusing on customer experience improvement, 33 percent of marketers felt that making the experience personal and relevant was most important; however, 27 percent said this is also where companies need skill development (e-Marketer February 2015).

Firms understand that technology can help bridge the offline, e-commerce, and m-commerce gaps in the omnichannel experience. Using tablet computers, by sales associates and other front-line employees, aids in developing skills as well as the use of mobile technology to improve customer relationships. However, companies must learn those technologies acceptable to customers. Companies must remember—convenience.

The use of QR codes—quick response codes—was thought to bridge offline and online. However, QR codes are not convenient for consumers. QR codes are an offshoot of barcodes. QR codes are readable tags that contain data and are readable through a QR reader. QR codes can be placed in any location—within a store, advertisement, or packaging. QR codes can store website addresses, product information, or any information a consumer would need before purchase. Yet, in order to read the code, consumers must download the QR code reader. There are several steps involved in decoding: Taking a picture of the code, downloading the code into the reader, reading the information, or connecting to the website. Since there are several types of QR codes, consumers need several readers, making the codes inconvenient. Although marketers use QR codes, consumers have not caught on.

Other technologies have come to market to continue in convergence of the omnichannel pathways. Proximity marketing refers to technology that localizes information within a certain area. Through digital tagging, merchants can engage customers at specific locations with marketing promotions that are timely and relevant to the customer. Two types of proximity marketing—near field communications (NFC) and Bluetooth Low Energy (BLE) beacons—are merging offline and mobile for personalized buying experiences.

NFC allows for mobile payments in-store. NFC is a form of communication between two devices, usually a mobile phone, and a contactless payment system, and is used for contactless payments when the consumers’ mobile devices are equipped. NFC relies on a chip to link a customer’s mobile device with a retailer’s technology through electromagnetic radio fields within close proximity. Near field communication can establish a secure environment for transactions using encryption.

NFC can be used also with tags similar to RFID tags. Each works within radio frequency. NFC tags, like QR codes, are embedded into products, signage, and other areas where a customer frequents. Unlike QR codes, no readers are involved. The information is read directly from the consumer’s mobile, tablet, or smartphone when the device is in the area of the tag. Retailers can place NFC tags on or near products for extended advertising and information. Special offers, coupons, and discounts can aid in boosting sales through NFC when placed at strategic locations. The challenge of NFC concerns engagement as the devices of consumers must be enabled in a short distance range. In addition, NFC is slower than Bluetooth in terms of speed, but consumes less power.

BLE refers to the use of beacons that constantly transmit information for the exchange of data over distances up to 500 ft. The beacons can be placed anywhere in a mall, airport, store, stadium, restaurant, or any other place of business. The beacons transmit information to consumer devices that are in proximity, and can be battery-powered or have a fixed power source, which means beacons can be placed anywhere. Beacons can be placed in mannequins to give information on clothing. BLE in airport terminals can connect passengers for updated travel information.

Programming beacons allows retailers to send out personalized messages. Consumers can be informed concerning product information, sales, and quick checkout. However, consumers must have their Bluetooth available, turned on, and the information accepted.

Linking physical locations with mobile commerce also links the firm with the customer. Firms can connect with mobile devices in order to inform the consumer while in-store. Is electronic commerce bypassed? No. Beacon technology can track a shopper’s movements in the store, gathering information on how the consumer shops. Information concerning this journey enables merchants to understand the shopping experience—data that can be used to increase the consumer’s shopping experience both offline and online.