E-Commerce and Marketing
Date of submission
Table of Contents
This report has three goals. One, it seeks to asses ways that ecommerce companies gain competitive advantage over physical stores. Secondly, the study has the intention of establishing how companies can promote online sales using social media. Thirdly, the report seeks to establish strategies adopted by ecommerce in gaining the customer’s trust. The report relies upon reliable media reports and academic journals in furthering its intentions. The report establishes that ecommerce affords the customer a desired level of convenience and variety. It is also found that social media allows the ecommerce communicate more effectively with its customers. Social media also makes it easier for the company to create lasting relationships with the customers. Ecommerce companies gain the customers’ trust by implementing stringent security measures over data centres. These companies also adopt secure payment systems. However, ecommerce companies are often accused of leaking customers’ confidential information. These companies also use data gathered in unscrupulous ways. These strategies lead to a loss of customers’ trust in ecommerce.
The application of the internet in everyday commerce is regarded as one of the most common and advantageous developments since the 1990s (Beldona, et al., 2011, p. 832). The use of the internet in the purchase and selling of merchandise and services has led to the emergence of multinational companies that have grown into prominence in just a few years. (Chang, et al., 2005, p. 546) The application of the internet in commerce has also gifted companies immense competitive advantages over rivals, largely owing to the fact that ecommerce allows companies to collect customer data and strategically organize their operations. As internet penetration rates continue to increase across the world, it is expected that electronic commerce (ecommerce) will also be on the rise. Recent years have illustrated that other applications of the internet, such as social media, can be of aid to ecommerce (Baird & Parasnis, 2011, p. 31). However, despite the fact that the internet has been used in conducting commerce for close to two decades now, it is yet to gain a similar strong hold that is associated with physical shopping. This is with particular regards to customers trusting the platform to deliver similar results as physical shopping. This has not been made easier by the numerous data leaks that have occurred at leading ecommerce websites, which almost always to the exposure of customer’s private information. The aim of this report is to assess how companies gain competitive advantages by utilizing ecommerce, analyse how companies can attract customers into buying products online, and analyse strategies that can be used in building customer trust in ecommerce.
Ecommerce websites have made it possible to offer a wide selection of products and services under one roof (Lee & Lin, 2005, p. 163). For example, it is possible to purchase cars from a site such as eBay. On the other hand, an ecommerce website such as Amazon offers anything from books, chemicals, children’s toys, fragrances, to heavy machinery and tools (Ashraf, et al., 2014, p. 71). In the traditional setting, the customer would have had to move from one an electronics shop to a hardware and bookshop in order to purchase these items. However, it is possible to purchase all that is needed in a household from one visit to an ecommerce website.
According to Kotha et al (2004), one of the main advantages offered by companies that offer online commerce is superior shopping experiences for the customer. This is based on the fact that the modern customer is often on the move (Hwang, et al., 2006, p. 12). The modern customer is best described as busy and has little time to visit physical stores in order to make the required purchases. Online commerce takes advantage of this modern trend by allowing the customer to shop even as he sits at home or at the office. Modern developments in data analysis have allowed ecommerce websites to make it even easier for the customer to shop by introduction a list of suggested products (McAfee, et al., 2012, p. 62). This list is based on the customer’s most recent purchases or scans of products. The main idea here is that ecommerce is a highly convenient way to shop from the customer’s perspective. The move towards social media has made it even easier for customers to communicate with their preferred companies at their convenience (Dellarocas, 2003).
According to Baird and Parasnis (2011), a key development in internet application is social media. According to research done by the two authors, a majority of companies recognize that social media does play a role in influencing the customer’s opinion about a product or service (Baird & Parasnis, 2011, p. 32). However, these companies are yet to find strategies of turning social media into a useful tool that generates sales and revenues. Baird and Parasnis (2011) argue that one way that social media can be used in increasing sales and revenues generated is by preserving it as a communication tool. It is argued that social media has turned company to customer communication on its head. In the traditional setting, companies would communicate to customers (Liu, et al., 2008, p. 820). However, social media allows for the generation of user content (Brogi, et al., 2013, p. 3). This change makes it difficult for the company to control conversations that occur online. An ecommerce website can attract customers by communicating with customers through social media (Xiang & Gretzel, 2010, p. 183). It has been illustrated that companies that create meaningful relationships with customers by utilising this approach to social media have higher sales and revenues (Baird & Parasnis, 2011, p. 36). This is as opposed to companies that adopt the traditional top-down approach when communicating with customers on social media websites. However, social media is riddled with the same trust problems that have affected online commerce since the launch of the first major ecommerce website (Zhang, 2013, p. 276).
One of the important details required in making a purchase from an ecommerce website is a large amount of confidential information. For example, the ecommerce provider will often require details of the customer’s residency in order to deliver the purchased goods to the right address (Cao, et al., 2014). Moreover, it is easy for the ecommerce website to pick up the user’s current location even when he wants goods delivered to another destination (De Souza & Preece., 2004, p. 581). Such information is besides the routine collection of financial data that would never have been divulged if payment was to be made in cash (Bukhari, et al., 2013, p. 626). This is not to mention that websites make it possible for the ecommerce company to collect a customers’ shopping habits. The customer divulges such information trusting that the ecommerce company will not apply it in harmful ways. However, this has not always been the case given the fact that there has been numerous data breaches that have led to the loss of highly confidential customers’ information (Lewis, 2011).
One way that companies gain the customer’s trust is by taking deliberate measures to protect the data centres holding such confidential information (Laforet & Xiaoyan, 2005, p. 673). For these companies, it is imperative that deliberate steps are taken in order to ensure that customers’ data remains confidential by preventing and detecting data leaks as early as possible (Kacen, et al., 2013, p. 18). Moreover, these ecommerce companies have developed secure methods that can be used in making payments and indicating place of residence where the goods are to be delivered. However, ecommerce companies continue collecting data from the customer’s computer, often without his knowledge or authorisation. This is through the use website cookies that store such information as search history and location of the person’s computer. Such information is collected under the pretext that it helps the company offer better services to the customer (Kacen, et al., 2013). However, it is possible that the information collected is used to build a customer’s profile based on his shopping habits. Such knowledge can then be used in marketing campaigns designed to suit the particular customer or group of customers (McDonald & Adam, 2003, p. 86). It as a result, customers often feel that data divulged to ecommerce companies has been used towards their disadvantage. As a result of the fact that ecommerce companies tend to use the information collected to their advantage the numerous data leaks that have occurred over the last decade, customers have grown increasingly cynical of the probability that their data is safe with these firms (Cao, et al., 2014, p. 385).
This report intended to achieve three goals. One, it sought to analyse how companies can obtain competitive advantage by adopting ecommerce. Secondly, the report sought to analyse how companies can apply social media in boosting online sales. Thirdly, the report had the goal of assessing strategies applied by companies in gaining the trust of customers making online purchases. The report finds that ecommerce gains competitive advantages over physical stores by affording the customer the desired convenience and wide selection of goods and services. It is also established that social media has revolutionised the way communication occurs between companies and their customers. The report establishes that companies that stand to gain the most from this communication medium are those that communicate adopt a different approach from the traditional top-down customer communication approach. Moreover, companies that use social media to create lasting relationships with the customer can hope to increase online sales. However, increased use of ecommerce exposes the customer to the loss of highly confidential information that can be used against him. Ecommerce companies have been preventing such a loss by adopting stringent security controls. They have also adopted secure payment systems that guard against loss of data. However, recent and recurrent data breaches continue to erode the customers’ trust that information provided in the course of ecommerce will be safe.
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