“Without a website customers would not believe that we are a real company in international markets” (Mathews and Healy, 2008).
As Mathews and Healy (2008) observe, a web presence is fundamental to all companies operating in a modern business environment whether physical, online, or a combination of the two.
“Click only” refer to those businesses which do not have a physical presence, only an online presence (Kotler and Armstrong, 2014, pp.525). Examples of this type of company include Amazon and eBay on a large scale but there are also many small and medium enterprises (SMEs) operating in this competitive “click only” market.
Growth in this sector started in the mid-1990’s with the dot com boom and while growth has invariably slowed, the market has now matured leaving a range of SMEs operating in the fully online sector (Kroll, Lee and Shams, 2010). While the delivery methods vary and there are of course unique challenges of operating in an online-only environment, the competitive nature of business differs little from competitiveness in an offline environment.
Consider an individual starting a business to sell used textbooks through an online portal. Zhao, Sundaresan, Shen and Yu (2013) describe the sale of second hand goods as a secondary market and warn that while there are a large number of businesses in the secondary market, many only sell items in very low volumes, struggling to compete. By starting a new business in this sector, the individual is entering an already crowded market, so one of the major factors influencing success of the new startup will be differentiating themselves from the major challengers in the sector (Bockstedt and Goh, 2011).
Operating in an online environment gives book retailers the ability to operate outside fixed geographic boundaries and take advantage of being able to sell to a much wider audience which would not be accessible through a brick and mortar business. Coupled with the cost savings achieved by removing overheads such as shop rental and utility bills (Phan, 2003), the prospect of operating wholly online is certainly an appealing one. For example, an online book retailer could potentially have a large stock available in a low-rent location near a good distribution network resulting in the ability to quickly and easily fulfil orders with minimal overheads. One such example is Play.com who famously exploited a tax loophole by basing their premises in the channel islands of the United Kingdom, where they did not have to pay high taxes meaning enhanced profits (O’Hare, 2011).
There is a danger that an online retailer can be seen as a faceless corporation without a physical presence, so it is also important they build trust. As Hayes (2012) observes, reducing the risk for consumers can go a long way to building trust online as well as personalising the experience to reduce the faceless image.
However, the biggest challenge of entering this crowded sector is the challenge of creating value for the customer to make it distinct enough from the largest businesses. Just like a traditional business, an online business needs to create value for a customer and this is what will give it strategic advantage and ultimately make it a success (Amit and Zott, 2001).
Amit, R. & Zott, C. (2001) ‘Value creation in E-business’, Strategic Management Journal, 22(6-7), pp. 493–520, Wiley. [Online]. Available from: http://onlinelibrary.wiley.com.ezproxy.liv.ac.uk/doi/10.1002/smj.187/pdf (Accessed: 2 March 2014).
Bockstedt, J. &Goh, K. (2011) ‘Seller Strategies for Differentiation in Highly Competitive Online Auction Markets’,Journal of Management Information Systems, 28(3), pp.235-268, EbscoHost. [Online]. Available from: http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?direct=true&db=iih&AN=70989255&site=ehost-live&scope=site (Accessed: 2 March 2014).
Hayes, M. (2012) 5 Strategies to Get Customers to Trust Your Ecommerce Store. [Online]. Available from: http://www.shopify.co.uk/blog/6327946-5-strategies-to-get-customers-to-trust-your-ecommerce-store (Accessed: 2 March 2014).
Kotler, P. & Armstrong, G. (2014) Principles of Marketing, 15th Edition. London: Pearson Education Ltd.
Kroll, C., Lee, D. & Shams, N. (2010) ‘The Dot-Com Boom and Bust in the Context of Regional and Sectoral Changes’, Industry and Innovation, 17(1), pp. 49-69, Taylor and Francis. [Online]. Available from: http://www.tandfonline.com.ezproxy.liv.ac.uk/doi/full/10.1080/13662710903573836 (Accessed: 2 March 2014).
Mathews, S. & Healy, M. (2008) ‘’From garage to global’: the internet and international market growth, an SME perspective’, International Journal of Internet Marketing and Advertising, 4(2), pp. 179-196. [Online]. Available from: http://eprints.qut.edu.au/8823/1/8823a.pdf (Accessed: 1 March 2014).
O’Hare, S. (2011) Offshore internet retailer Play.com sold to Japanese. [Online]. Available from: http://www.telegraph.co.uk/finance/personalfinance/expat-money/8778918/Offshore-internet-retailer-Play.com-sold-to-Japanese.html (Accessed: 2 March 2014).
Phan, D. (2003) ‘E-business development for competitive advantages: a case study’, Information & Management, 40(6), pp.581–590, ScienceDirect. [Online]. Available from: http://dx.doi.org/10.1016/S0378-7206(02)00089-7 (Accessed: 2 March 2014).
Zhao, Y., Sundaresan, N., Shen, Z. & Yu, P. (2013) ‘Anatomy of a Web-Scale Resale Market: A Data Mining Approach’, Proceedings of the 22nd international conference on World Wide Web, pp.1533-1544, ACM. [Online]. Available from: http://dl.acm.org.ezproxy.liv.ac.uk/citation.cfm?id=2488522 (Accessed: 2 March 2014).