Pureplays – ‘clicks-only’ or virtual retailers are organisations that operate entirely
online. In reality it is almost impossible for a business to operate online without a
point of access to the Internet. Therefore, generally speaking, the term ‘pureplay’
refers to retailers that do not have fixed-location stores (e.g. www
broader definition creates confusion with the term ‘clicks and mortar’. Perhaps the
most feasible explanation for the lack of commonly understood e-terminology is the
immaturity of Internet business in general.) A variation of this category are digital
retailers that sell products in digitised form (Dennis et al., 2004).
Intermediaries – who link Internet technology and the retail supplier with the con-
sumer. Such organisations perform the mediating task in the world of e-commerce
between producers, suppliers and consumers by using consumer data, which is care-
fully analysed and used to target marketing campaigns. Some firms function as
infomediaries (information intermediaries) assisting buyers and/or sellers to understand
a given market. Established businesses might lack the resources, in terms of both staff
and technological infrastructure, to operate their web activities internally. This creates
an opportunity for the intermediary to step in and provide web solutions and they
could eventually replace established retail businesses. The growth in importance of
intermediaries has led to the use of the term ‘reintermediation’ (see Chapter 1).
A good example of an online retail format intermediary is Respond.com
). This company uses the Internet and the web to connect buyers
and sellers by e-mail. The buyer fills in an online form giving details of the product he
or she wants, together with its price. This form is then sent as an e-mail to the sup-
plier who may be able to service the enquiry. Respond.com then sends e-mails to the
consumer, providing him or her with the offer.
Manufacturers of consumer goods – also see the Internet as an opportunity to regain
some of their power lost to the retailers in the past by the shortening of distribution
channels. The process of disintermediation works by the manufacturer excluding the
retailer altogether and marketing directly to the customer, thus shortening the value
chain and/or the supply chain by trading electronically and shifting the balance of
power closer to the end-consumer. Early examples of disintermediation originated
within the banking industry, when it was noticed that information technology and
industry regulation had reduced the need for retail banks as intermediaries.
Any one of these formats could become the archetypal e-retailer and could thus affect
the future growth of the online retail market as a retail environment. Potentially, if vir-
tual merchants (brick and clicks, pureplays, intermediaries) prove to be highly
successful, established retailers operating from a fixed-location store could find them-
selves increasingly being replaced by new Internet-based retail formats (Van Tassel and
Weitz, 1997). The implications are considerable, as Internet shopping is beginning to
fundamentally alter the way that consumers shop and thus revolutionise the retail envi-
ronment, transforming the local high street into a global virtual high street. New entrants
may benefit from financial freedom to develop an organisation suited to supporting the
logistical demands of the new format (thus addressing the ‘last mile’ problems faced by
established retailers). Established retailers can create competitive advantages from brand
equity and high levels of customer service – effectively preventing new entrants from
establishing a foothold in highly competitive retail markets. However, if established
retailers continue to dominate retail supply and develop their current integrated
approach to retailing through the use of technologies such as EPOS (electronic point of
sale), EFTPOS (electronic funds transfer at point of sale) and loyalty cards, bringing them
closer to the customer, then the Internet could be used to support these operations. In
this scenario, revolution is less likely to occur. The next section considers which retail
channel and the types of activities offered by e-retailers.
CHAPTER 10 · BUSINESS-TO-CONSUMER INTERNET MARKETING
Electronic malls (e-malls) follow the format of fixed-location malls in the physical world, grouping together
an assortment of retailers in one virtual destination on the Internet. However, unlike their real-world coun-
terpart, this conventional approach to developing an online mall has had limited success as it offered few
advantages to potential customers who could view the product assortment of retailers located anywhere
in the world from their workstations and laptops without the need to travel, and so the advantages for the
consumer of retailers being grouped together in one destination were lost. Additionally, control of the e-
retailers by the management of the virtual mall is rather more complicated than in the physical world mall.
The online landlord has to build trusting relationships with the e-tenants and they in return must provide
reliable services (Dennis et al., 2004), a trust which is sometimes difficult to establish as individual retailers
were not willing to participate in an online mall that facilitated comparison shopping.
In Europe, Blackwell’s Bookshop and Victoria Wine were among the first retailers to give consumers
the opportunity to buy online via the Internet. Both of these companies were the original core tenants in
one of the first e-malls to serve UK online customers Barclay’s electronic mall, called ‘BarclaySquare,’
was not particularly successful as the virtual landlord offered limited advantages to its core tenants over
operating their own destination web sites. However, there are many creative ways that e-retailers are
coming together in a virtual world.
These are a gateway to many web sites. There are many examples of portal sites on the web which
adopt web-based solutions to the ‘mall’ concept and in doing so serve an array of different purposes:
Froogle.co.uk – directs online customers to product information in two ways. First, it uses product
information submitted electronically by merchants who take advantage of this free service. Second,
as Google’s spidering software crawls the Internet, Froogle automatically identifies web pages that
offer products for sale. Froogle’s search results are automatically generated by ranking software.
Google does not accept payment for inclusion of products in these search results. Nor do they offer
to place a merchant site higher in the results if they are an advertiser or offer to pay for that placement
EBay.co.uk – auction site which brings together individuals around the globe who wish to trade with one
another. Although not a conventional e-retailer eBay’s success in the second-hand goods and collectors’
markets cannot be ignored as more and more shoppers buy from within the eBay trading environment.
Amazon.co.uk – a multiple category retailer which is not strictly a portal or a mall but the company
has brought together, through its affiliate scheme, the product portfolios of thousands of companies in
order to create a virtual shopping destination (Dennis et al., 2004), which serves the needs of millions
of online shoppers.
Kelkoo.com – a shopping search engine which helps online cutomers to find products and services
online. A search will produce a results page which facilitates price comparison and purchasing.
Mysimon.com – a comparison shopping service on the Internet for products and services. The site
searches thousands of online merchants and millions of products to provide online customers with
lists so they can compare selections before making a purchase.
Software programs that can help online shoppers search for and compare specific products across mul-
tiple web sites; also called bots or intelligent agents.
E-malls have been a means to enable retailers to explore the potential of the web in a ready-made
electronic trading environment. However, the key advantages of the real world shopping mall do not
easily translate to the Internet and as a result e-malls tend to serve highly specialised markets.
Notwithstanding this the core concept of a mall, bringing together goods and services from many suppli-
ers to facilitate customer convenience, has been used creatively by some of the world’s leading online
Mini Case Study 10.3
E-retailing: the virtual channel
This section looks at how the Internet is being used as a channel to market, examining
the activities retailers are engaging with online with customers. Retail channel is a term
introduced by Doherty et al. (1999) to describe companies’ multi-purpose adoption of
the Internet, using it as both a communication and transactional channel concurrently
in business-to-consumer markets. Traditionally the term channel describes the flow of a
product from source to end-user. This definition implies a passive unidirectional system
whereby the manufacturer or producer markets through a wholesaler or retailer to the
consumer. Recent developments in information technology are changing this orienta-
tion by enabling retailers to focus their marketing efforts on managing customers more
effectively (Mulhern, 1997). Therefore, the Internet brings the customer even closer to
the retailers via a new combined marketing and distribution channel, in effect an inter-
active retail channel. This move may also suggest a shift towards a bidirectional
retailer–consumer relationship, in which more power accrues to the customer (Hagel
and Armstrong, 1997). As a result of the technological capacity e-retailers are becoming
increasingly creative with how they are using the Internet and associated digital tech-
nologies to serve the needs of their online customers.
As we have seen, businesses trading in consumer markets can choose to serve their cus-
tomers via different combinations of physical and digital channels. Whatever online
format a business chooses, decisions will also be taken about the actual function of any
Internet- and web-based activities. These will primarily fall into one of two categories:
information functions or interactive functions.
Web sites provide retailers with an important opportunity to give customers informa-
tion. Many companies see the web as a means of expanding customer services through
offering their customers wider ranges of information than is possible in-store. One of the
greatest advantages of the web according to UK retailers is its ability to facilitate the dis-
persion of low-cost information. Retailers have been proactive about providing
information on their web sites, and offer a wider range of different types of information:
Product information includes product descriptions and prices, promotional informa-
tion and web advertisements, colour swatches and graphical images.
Financial information includes company reports, annual statements and investor infor-
mation. The depth of coverage can vary considerably, as can the extent of accessibility.
Company information includes such items as history of the company, store location
information, details of employees and company incentive schemes.
Press releases appear in various forms. Some companies use press releases as part of
their consumer promotions whereas others include such information in their corpo-
rate web sites aimed at enhancing the overall profile of the brand(s) (see how Ben and
Jerry’s are using the web, Figure 10.4).
Recruitment information – companies have recruitment features providing potential
applicants with job details.
A shopping centre or
mall is usually a
managed facility. In
the physical world, the
management will aim
to include in the mall
stores that sell a
of merchandise and
include a variety of
smaller and larger
stores. The core tenants
or ‘anchor stores’, as
they are often called,
are the dominant large-
scale store operators
that are expected to
draw customers to the
Retailers’ use of the
Internet as both a
communication and a
Interactive use of the Internet involves more than simply the provision of promotional
information. It includes activities such as ordering of catalogues, promotional literature
and ‘free gifts’ and encouraging customers to provide market research data as well as
sales ordering and payment transactions. Interactive ways of using the Internet and the
CHAPTER 10 · BUSINESS-TO-CONSUMER INTERNET MARKETING
October 17, 2005 09:15 AM US Eastern Timezone
Ben & Jerry’s Sows Fresh Campaign to Help Small-Scale Family Farms; New Ad Aims to Support and
Raise Awareness of the Plight of Smaller Family Farms
The most immediate step consumers can take is to send a personalized letter to their representatives
urging support for the Milk Income Loss Contract (MILC). This program, which helps dairy farmers
survive during lean times, expired on September 30, 2005. Ben & Jerry’s and the National Farmers
Union have embarked on this collaborative effort to extend the MILC program and are urging both
producers and consumers to help send this message to Congress.
‘These ads aren’t about selling ice cream,’ said Walt Freese, Ben & Jerry’s CEO. ‘We’re trying to
initiate public dialogue about the fact that small and mid-size family farms are in danger of
disappearing. We think Ben & Jerry’s consumers care about this issue as much as we do, so we’re
using our marketing dollars to encourage them to tell Congress that smaller family farms are important
to a diverse food supply.’
The company has launched a number of initiatives over the years to support small to mid-size family
farms and sustainable practices in the dairy sector, specifically the Vermont Dairy Stewardship Alliance,
the Vermont Dairy Farm Sustainability Project and the Caring Dairy Program in Europe, all of which focus
on sustainable agriculture and the support of small-scale farms.
Source: Adapted from www.benjerry.com/our_company/press_center/press/
Figure 10.4 Ben and Jerry’s use the web to support the cause of small and medium-
sized farmers in North America.
Marketing communications tool – the Internet is frequently used as an advertising channel.
Traditional advertising channels such as broadcasting and print media enable a one-to-
many dialogue based on communications theory (Schramm, 1955) between senders and
receivers. The communication process is normally constrained by time, namely the
speed of response of participants, but communication can become ‘conversations at
electronic speeds’ if conducted via interactive services such as the Internet (Fill, 1999).
Direct communication – as an interactive channel for direct communication and data
exchange the Internet enables focused targeting and segmentation opportunities for
more closely monitoring consumer behaviour. E-mail provides a direct non-intrusive
means of communication between firm and customer.
Online communities – are also developing on the web and facilitating interaction
between individuals and companies. Car manufactures such as Citroen and
Volkswagen support many enthusiasts’ sites in order to reinforce the emotional bonds
between the product and the consumer via the web.
Marketing research tool – the Internet’s interactivity facilitates the collection of con-
sumer data, providing the opportunity to gather personal information from online
consumers while they browse through web sites, complete online questionnaires and
respond to e-mails.
Sales channel – the selling of goods and services online can take several different
forms: the order is placed online while the delivery and payment are made through
real-world channels; online ordering where the delivery of goods is required in the
real world and the payment facility has options online or offline; the total process,
namely the order, payment and delivery of the product occurs via the Internet.
In summary, businesses may choose to utilise the Internet and the web in a number of
different ways to communicate and interact with their online consumers. The particular
methods that they adopt to build an online brand may vary, from just providing infor-
mation to online transactions including ordering and payment for goods and services.
Issues relating to how e-retailers are using information and interactive content to build
online brands is discussed in more detail in Case Study 10.
Who are the e-retailers and what are they selling?
According to Doherty et al. (1999, 2003), there are a number of characteristics of a busi-
ness that are likely to determine the extent to which retailers have adopted the Internet,
the online format they might choose and the products they sell. The characteristics
include the following.
Small and medium-sized retailers are increasingly adopting the Internet as a channel to
market (see Chapter 11). The advantages include access to a wider market previously inac-
cessible and low-cost advertising, but the disadvantages include medium-term financial risk
and scalability. Small-scale operations may be able to handle the picking and logistics due
to the small numbers involved but problems will arise when expansion is considered and
the need to sustain a larger operation becomes apparent. Indeed, it is large retailers (across
Europe) that have been quick to incorporate the Internet into their retail offer. Examples
are: in France, Carrefour (www
), in Italy, Benetton (www
), and in
Austria, Magnet online (www
). However, the web offer varies considerably –
increasingly some retailers offer their entire range of goods and services via the Internet
while others present selected ranges of information content only.
The particular products and services offered to consumers can affect a business’s usage of
the Internet (see Mini Case Study 10.4). Products and services may be in a tangible or
intangible form, each of which has associated advantages and disadvantages. Delivery is
an issue for sellers of physical goods as is the Internet’s inability to let customers experi-
ence the tactile qualities of a product prior to making a purchasing decision. Indeed,
product category has had a profound effect on the success rate of certain online busi-
nesses. For instance, in Europe, the top product categories account for over 75% of the
sales and these categories include books, music, DVD (movies), groceries, clothing games
and software (Dennis et al., 2004). Whilst some of these products do not require exten-
sive product descriptions, high-fashion items present difficulties and often there is a
high return rate for clothing sold online. Digital products do not encounter the logistical
difficulties associated with physical goods but encounter problems with pricing and con-
trol of copyright as a digitised product can be copied, as can music products. Ticket and
online booking services (e.g. e-bookers.com
) are enjoying comparative
success online as they offer secure online transaction facilities.
Accommodating demands for new levels of service in global electronic marketplaces
could reinforce the critical significance of logistical infrastructures in determining online
success (see Chapter 11). Logistical infrastructure might even determine the next genera-
tion of market leaders as its effective management provides an opportunity to create
competitive advantage (Fernie and Sparks, 1998). From a retail perspective it is important
to consider how the Internet is incorporated into retail activities in order to determine
the importance of logistics (see Activity 10.3). If the Internet’s primary role is as a promo-
tional tool rather than a retail channel to market there is obviously less emphasis on the
logistical infrastructure. Establishing a new logistical infrastructure to service the needs of
Internet customers is proving to be a barrier to its immediate development as a retail
channel. Established mail-order and direct marketing operators (e.g. Great Universal’s
) are taking advantage of the Internet channel, due to their not
being store-based and having established direct distribution systems.
If companies lack internal capacity they could decide to employ a third party to manage
their online access, outsourcing some or all of their Internet operations (Abdel-Malek
et al, 2005). From an operational perspective, fixed-location retailers might involve a
third-party distribution company to bridge the gap between the customer order and
delivery to the customer.
CHAPTER 10 · BUSINESS-TO-CONSUMER INTERNET MARKETING
The last mile problem
Consumers are becoming increasingly aware of the Internet as a channel to market. As
established brand names move part or all of their offer online, customers are regularly turning
to the web to make their purchasing decisions. They are not only reviewing product
information and reviews but also are now ready to buy online as a mainstream way of
shopping rather than as just a novelty experience. As a result the home delivery market is
growing. Paradoxically, this success is causing logistical problems, which threaten the future
success of online business-to-consumer trade. The problem is how to get the goods the
This section has discussed the choices a retailer wishing to operate online might con-
sider and how some established characteristics of a business might affect decisions of
which format to adopt for current and future online operations.
last mile. A UK government Foresight (2001) report gives estimates that by 2005 home delivery
will be worth £34.5 billion. However, they also predict: ‘As customer demand [for remote
purchasing] increases, the likelihood of their being at home to receive their purchases
decreases’ (Foresight, 2001).
There have been a number of possible solutions to the delivery problem, including unattended
delivery points in the form of secure purpose-built boxes or collection points at a local store
where customers could collect their goods when convenient, but none have been particularly
well received by the consumers. Whatever the solution at the customer end there are wider
implications; at the company level they must resolve warehousing and distribution and the
cost associated with providing a service which involves many deliveries of small quantities; at
a societal level any increase in the number of small vans required to deliver online orders as in
the case of online grocery retailer tesco.com is likely to cause further local traffic congestion.
1 List five physical products that you or one of your neighbours might purchase via the
Internet and require delivering to your home. Try to choose products from different
categories, e.g. an item of clothing, fresh food, furniture, drink and computer equipment.
2 State the times of day you are available at home to receive delivery of these goods.
3 Describe the difficulties that an online retailer attempting to deliver the goods to you might
4 Suggest a solution for the last mile problem that will encourage consumers to increase the
amount of goods they purchase via the Internet.
According to Verdict (2005) almost 10% of books sold in the UK are now bought over the Internet, with
close to 11% of CDs and DVDs now bought online. Furthermore, white goods are becoming increasingly
popular to buy online, with Internet sales now accounting for 6.6% of the market and online shopping
continues to grow. UK retailers are expecting online shopping to rise by between 23% and 40% for
Christmas 2005. Independent Media in Retail Group, a body that represents online stores, estimates that
this will be overall 9% of retail sales at Christmas, as consumers increasingly order from home to avoid
trudging around the shops. The winners in the online product categories are electrical goods. IMRG
estimates that 20% of electrical goods will be sold online at Christmas compared to zero five years ago.
The reason is thought to be that electrical goods are bought by brand name and model number, with little
differentiation between stores other than price. Major high-street chains such as Dixons, Argos and
Comet, which operate e-retail sites, are forced to keep prices low if they want to compete online with
e-retail specialists such as Dabs, Empire Direct and Dell, which have no shops to support and therefore
can often undercut their high-street rivals. However, online specialists, whilst developing their market
share are struggling to sustain levels of profitability because although the volume of sales continues to
rise, prices of new technologies such as digital cameras and flat-screen televisions are falling. At this
point high-street retailers are able to fight back by offering greater levels of customer service, peace of
mind through being well-known brand names and greater levels of after-sales support.
Source: Adapted from Butler (2005)
Mini Case Study 10.4
Online goods for sale in the UK
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