Business-to-consumer (B2C) e-commerce is the most visible face of online purchasing: much more prominent, if less profitable, than its big brother business-to-business (B2B).
Although B2B e-commerce accounts for more the overwhelming majority of all e-commerce — more than 90 percent in 1999, according to the U.S. Department of Commerce — more people recognize the name of e-tail giant Amazon.com than Covisint, the B2B e-marketplace backed by the major automakers.
Unfortunately, several myths and misperceptions still exist about B2C e-commerce, according to analysts. In this special report, the E-Commerce Times aims to dispel four such myths.
Myth No. 1: B2C Is Dead
Despite the ballyhooed deaths of several major e-tailers, including Pets.com, eToys and Webvan, e-tailing is not dead. In fact, even with the overall economic downturn, e-tailing continues to grow and prosper. For example, year-over-year e-commerce retail sales grew 24.7 percent when comparing the second quarter of 2000 to the second quarter of 2001, according to a Commerce Department report released this August.
And Forrester Research recently predicted that online holiday spending in the United States would reach US$11 billion this year, an increase of about 10 percent over the $10 million spent last year.
Forrester Research analyst Christopher Kelley acknowledged to the E-Commerce Times, however, that the growth was not as spectacular as the “100 percent growth we’ve seen in past years.” The analyst attributed the slowdown to e-commerce’s expanding customer base. As the number of existing customers grew, there were fewer new ones to recruit, resulting in lower growth rates.
Myth No. 2: E-tail Insecurity
Even though there have been several high-profile online security breaches in the past year, including the hacking of Egghead, Webcertificate.com and Creditcards.com, neither Kelley nor Gartner research director David Schehr believe security is a large concern for online shoppers.
Kelley said that although some non-shoppers are still concerned about the risks of buying online with a credit card, active online shoppers are not scared. Part of the reason, according to Kelley, is that the credit-card companies “pretty much guarantee” all online purchases and provide 100 percent coverage in the event that a consumer’s credit card is misused online.
Another reason consumers might not be afraid to shop online, according to Schehr, is that the mainstream press has not given as much coverage to online security breaches as tech publications have.
“I’d argue that what’s high profile in our world may not be high profile in the consumer’s world,” Schehr said.
E-tailers can do even more to allay consumers fears, according to Kelley, by making sure that privacy and security policies are easy for consumers to find and not buried several levels deep on a Web site.
Myth No. 3: E-tailing Is for All
In the early days of e-commerce, e-tailers rushed to offer everything from CDs to furniture for sale online. However, many of those e-tailers learned the hard way that consumers will not buy everything online.
“Not all goods are equally salable online,” Schehr said. He pointed out that items that sell the best online are those that consumers are already comfortable buying over the phone or through a catalog, such as CDs, books, flowers and gifts.
“Best Buy is more likely to sell media online than big screen TVs,” Schehr said.
Myth No. 4: No Big-Ticket Sales
At the same time, just because the Internet might not see many clicks for big-ticket items, like automobiles, does not mean that it is not a valuable channel in those categories.
Brick-and-click merchants selling big-ticket items, according to Kelley, need to view the Internet as “another arm of their showroom” and provide consumers with product and inventory information. Kelley said that a merchant’s Web site can be an “incredibly powerful tool” for driving offline sales, because a lot of consumers like to research products online before purchasing them offline.
Unfortunately, Kelley added, “product information is still sketchy at best” online, and a lot of retailer Web sites do not allow consumers to check the availability of an item at their local store.
Schehr said that brick-and-click retailers need to realize that “consumers are channel agnostic” and are likely to switch back and forth between channels, depending upon what serves them best for a particular purchase.
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One of the myths profoundly pushed is that products are less expensive on B2C sites.
I have found consistently the opposite.
An item on Ebay is on average 30% higher than the retail price here in Canada.
I laugh at the poor souls who bid $1100USD for a laptop that is 2 model years behind what is selling at the local stores for $1400CAD.
which at a currency conversion of 0.63 is only $882USD
When will competition start to bring down price?
In response to Barry, I would suggest people to visit more Canadian websites, which will encourage the B2C canadian industries. For example, videos and DVD are sold at the same price or at a lesser price (that is before the currency exchange) in Canada than in United States. For example, you find The Sopranos, 2nd season at 90 CAD in canadian sites (Amazon sells it around 75 USD).
In regards to the European perspective, maybe in Belgium you are not used to distance buying. However other European countries like in Switzerland, Germany have even stronger than US Direct mail and catalogs industries.
For smaller stores (not mega Amazon type sites), people are afraid to shop online.
Having developed numerous sites, we see that payment options like via telephone or mail are very popular. Other people often ask if they can buy the products offline.
“E-Tail” is not just big brand name stores, it is includes little 1 sku to medium 250+ sku sites too.
I’m writing from Belgium. From a European point of view I would add one more myth. B2C is not for tomorrow! B2C e-commerce adoption is very dependent on consumers’ mentality. Europeans are not as used as US consumers to distance buying. Penetration rates of catalog selling and so on are much lower. It’s gonna take a while before enough Internet users turn to online buying. How long? Not a clue about it.
I would think the most important thing that online merchants would need to know is the method of packaging the products and services in the right way.
For example, Amazon does not seems to be a heavy technology site. It is well packaged in the way that the consumer has the feeling that he is well-served at the shopping mall and completely different shopping experience.
I agree with Lori as B2C will still be around for a long time compares to B2B market. B2C is still profitable as long as the merchants have proper strategies in place and identifying the value-chained clearly.
The statement that mainstream hasn’t picked up on the all the hacks Merchants suffer is true. We try and keep these breaches between the Merchant, his aquiring bank, and the credit card associations. The sad fact is that there are about 90,000 vulnerablable IIS Merchants out there, according to the latest survey by Netcraft.
Merchants must shore up security…and the hacks will decrease.
Dan Clements
CardCops.com
I feel that e-commerce is a more tricky game full of gorilla marketing, performance based advertising and complete backend automation compared to branding TV ads, billboards and huge staffs of several hundred people to several thousand people. The small sites like eheaven.com that maintain low overhead and focus on controlled growth from profits will truly succeed.