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This study will discuss the significance of online shopping to the local establishments in Palmerston North, a small provincial town in the north island of New Zealand. In addition, it will examine the attitude of the people residing in Palmerston North towards the new way of shopping namely e-retailing and its economical effects on local business and small retailers. This paper will also talk about the challenges that business owners and consumers are facing when engaging in the said type of shopping. Finally, this report will tackle the consequences of utilizing online platform in selling goods for local entities especially the small-medium enterprises.
Recently, a majority of people in New Zealand have chosen shopping as their activity of choice for relaxation (Agrawal, 2017). According to New Zealand Connected Consumer’s report, 66 percent of these people are leaning towards digital shopping and is likely to reach 83 percent by 2026 (Boyte, 2018). Technological advancements have made shopping more convenient and have enabled the customers to be more informed about their purchase. Nowadays, to purchase a product a customer would research online for the reviews of other users and compare different items to be able to choose the best one (Blyth, n.d.).
In a study by Zara in Sylvia Park, the largest shopping centre in Auckland city, they had discovered that less people were doing traditional shopping during the time the study was conducted than those who were engaged with online shopping. On the other hand, in a survey that was done this 2018, there was an increase of 4 percent in the population who would rather go to shops because of the problems the buyers encountered when they made a purchase with online stores (Winter, 2018). Although there was an increase of people going back to physical shops to buy goods, there are still a lot of people who would choose convenience above anything else.
In the survey of PriceSpy, they found that 28 percent of Kiwis were willing to spend more time and money in online stores while 15 percent would rather go to shops. The remaining 57 percent spends their time and resources in both e-retailing shops and traditional shops. Chris Wilkinson, a retail consultant, believed that the preferences for both form of shopping were based on the good relationship formed and the experience or convenience the customer felt while buying their products (Shaw, 2018).
The popularity of the e-retailing shops and social media platforms have opened opportunities for local enterprises to have an equal chance as the large scale businesses to advertise their range of products to their customers (Adams, 2016). Technological advancement is one of the main factors why online shopping was created. The use of internet to find and research items or goods has made it easier for the consuming public to get what they want easily without leaving the comfort of their home. (TackThis, n.d). In addition, most retailers online have attracted their buyers with a wider range of products and better promotions or deals which local retailers cannot deliver because of the high overhead cost of maintaining a brick and mortar store such as rent, labour and other expenses that makes the physical store’s product more expensive (Montaldo, Is Shopping Online Really Cheaper? 2018).
Online shops are accessible almost 24 hours a day so their sales are definitely higher than traditional shops who have fixed operating hours, thus, e-retailers can cater to local and global customers anytime of the day. Furthermore, online stores does not need to branch out or have another site to supply goods for other people in different areas, all they need to do is add another option or update their website to advertise for their products and increase their clients. (Chang, 2014). Local shops that are not engaged in selling their goods and services using the internet are mostly affected by the low turnout of clients visiting their store since people now are more interested browsing the internet to suit their preference. Even the regular customers are now purchasing products online because they find it more convenient and they have a wide range of merchandise to choose from different online shops (The Economist, 2017).
Kiwi shoppers are becoming smarter in purchasing products; they would usually spend extra time researching about the item, compare similar goods and find better deals for their purchase, based on New Zealand Connected Consumer report 60 percent of Kiwis were doing this practice before purchasing. Thus, it is predicted that if a local New Zealand shop will not be engaging in online selling, it will most likely have a decrease in its profit in the future (FMCG Business, 2018).
Challenges of online shopping to consumers and e-retailers Online shopping has benefited a lot of customers however, there are still some significant risks involved in this platform of retail specifically with the risk the integrity and safety of the transaction. Many are still in doubt of how secured the facilities for online payments are and the legitimacy of the stores online, in addition there are still some who would want to physically inspect and assess the goods that they will be buying to check for its quality which is impossible for online shopping (Kariyawasam, 2009).
Another drawback of purchasing using the internet is that the price published online and the payment options can often times be fixed unlike in traditional shops where negotiation can take place between the seller and the buyer. Lastly, in cases where there are problems occur such as items that are either damaged or incorrect, returning it would require more effort for the consumers because they need to send it back, inform the online shop of the problem and send all documents needed to have the item replace. Unlike in traditional shops where the clients are only require to bring the item back to the store and get the product replaced or refunded right away. (Montaldo, The Pros and Cons of Online Shopping, 2018).
On the other hand, the sellers are burdened with the tasks of making sure that their websites are updated and secured for possible attack of criminals who would use their business for fraud or deceive others. The site must also be user friendly so that customers would be encouraged to browse and buy their products. (Collins, 2018) Retailers are also burdened with the cost of returns which accounts for almost 8 percent of their total yearly sales thus, affecting their profit (Minter, 2017). In a survey that was conducted by UPS Pulse of the Online Shopper, 79 percent of customers said that it is important for online retailers to provide better services when it comes to return policies such as easy-to-return policy and no-question- asked policy. These kinds of policy can help build the retailers’ good reputation for having excellent customer service which can be beneficial in the future for the online shop since it can attract new customers that are particular with these kinds of services (Comstock, n.d.).
Consequence of starting an online business Starting a small online business is more convenient because of less government regulation unlike in putting up a regular physical store. E-retailing entails fewer paper works and the permit and rules are more lenient as compared to traditional shops (Green, 2017). Online selling eliminates some major expenses like rent and labour because it can be started at home and the owner can personally attend to the business to be able to have minimal overhead expenses while conducting the business (Agrawal, 2017). Furthermore it is more affordable to start an online business since it only requires the retailer to set up their own website or have a social media account like Facebook or Instagram to buy and sell goods and services rather than investing in a rented space for a small business stall which would use most of the starting capital.
However, relying on social media platforms does not guarantee a sale because these accounts are usually limited to personal networks and some of them may not be interested with the products being advertised so there might be a limitation to these ways of selling (Mokhtar, 2016). Customers are the bloodline of e-retailing business, so having a wide range of followers and satisfied buyers will definitely benefit the business. If people saw that the products have high rating from other users then the shop will be able to build a reputation thus, increasing sales because of the perception that the item is a quality product. (Shewan, 2018)
Online shopping has increased its popularity in New Zealand in the last decade. This is mainly because of the introduction of technological advancements that made online shopping possible. Many Kiwis are choosing to do their purchase online since they find it more convenient and offers a broader range of products to choose from, nonetheless, going to physical shops are still done by a number of people in this country. From the sources gathered, there was a noticeable absence of the age group being described as to who uses it more.
The effects of e-retailing to local businesses were both positive and negative to both the consumer and retailer. The positive effect is that it can help small retailers to advertise their product with little to no expense at all to a wide range of clients both local and global. Also retailers are able sell their product without time limitations since they can operate 24 hours unlike the physical stores. The downside is that it can cause local businesses to lose profit because more people are now participating in online shopping.
Although there are a lot of benefits in buying on online stores there are still risks involved like fraud and security breaches which online shoppers are being exposed to. Some items can also be physically damaged upon delivery or is not what the customer expects from their purchase that is why they usually return it to the shop which can cost more money for both the buyer and seller because of the shipping and other expenses that they will both be burdened with. It was suggested that having a better return policy can minimized customer dissatisfaction and increase customer loyalty. Setting up an online store requires less capital than that of the traditional shops would be spending, so it can benefit many people who would want to start a small e-retail business. This has also made it possible to have cheaper goods offered in different websites than in physical stores.
Finally, having a wide range of loyal customers is one of the most important factors in the success of an e-retailing shop. Building reputation by serving and providing quality products will ensure that the business will prosper and become successful.
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