Electronic Home Shopping: a review of evidence and expert opinion from the USA and UK

Gould, J and Silberzahn, P (1996) Electronic Home Shopping: a review of evidence and expert opinion from the USA and UK. Working Paper. London Business School Future Media Working Paper.

Abstract

Home shopping currently represents only about 4% of the total retail market for both the UK and the US. However, with the growth of new technologies such as twoway television and Webconnected computers, there is renewed interest in shopping from home. Unless the total retail market grows, and most analysts do not expect that it will, electronic based home shopping will erode profits from current retail forms. This study reviews the current published evidence on the future of electronic home shopping. Among the factors that limit use of the electronic home shopping today are: · The lack of sufficient bandwidth to efficiently deliver multimedia applications · The lack of consumer access from the home. Many households with computers do not have modems; those that have modems usually have older, slow speed ones · The range of goods and services offered today is not large, and there is relatively little advantage to ordering online · The absence of a (perceived) secure payment system for online transactions Most analysts predict that it will be five to ten years before there is a more complete infrastructure for electronic home shopping, or that sales from online transactions will begin to displace current forms of retailing. The SOHO market (small office/home office) may be one of the first to engage in online shopping, if it provides timesavings and convenience. There is also evidence that the sale of electronically delivered goods e.g. music, video, print, etc. will accelerate online. Although most retailers of durable goods find electronic home shopping to be a distant threat, it is a spectre that concerns them. These concerns include: · Customers who generate the largest profits for a store could defect to electronic home shopping first. Existing retail stores may find it unprofitable to maintain dual business operations one to support home shopping, and a second for instore sales. · Niche firms could emerge online and skim the most profitable items and the most profitable customers from retailers. · As the shape of retailing changes, manufacturers or distributors could sell to customers directly. · Consumers will use 'intelligent agents' to search across retailers, and locate information like the best price or wider selection . While it is unlikely that the development of electronic home will bring overnight change it raises fundamental issues about the future market role for consumers, producers, and retailers.