Online shopping is the process whereby consumers directly buy goods or services from a seller in real-time, without an intermediary service, over the Internet. If an intermediary service is present the process is called electronic commerce. An online shop, eshop, e-store, internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall. The process is called Business-to-Consumer (B2C) online shopping. When a business buys from another business it is called Business-to-Business (B2B) online shopping. Both B2C and B2B online shopping are forms of e-commerce.

History

In 1990 Tim Berners-Lee created the first World Wide Web server and browser.^[1] It opened for commercial use in 1991. In 1994 other advances took place, such as online banking and the opening of an online pizza shop by Pizza Hut.^[1] During that same year, Netscape introduced SSL encryption of data transferred online, which has become essential for secure online shopping. Also in 1994 the German company Intershop introduced its first online shopping system. In 1995 Amazon launched its online shopping site, and in 1996 eBay appeared.^[1]

Customers

In recent years, online shopping has become popular; however, it still caters to the middle and upper class. In order to shop online, one must be able to have access to a computer, a bank account and a debit card. Shopping has evolved with the growth of technology. According to research found in the Journal of Electronic Commerce, if one focuses on the demographic characteristics of the in-home shopper, in general, the higher the level of education, income, and occupation of the head of the household, the more favourable the perception of non-store shopping., Enrique.(2005) The Impact of Internet User Shopping Patterns and Demographics on Consumer Mobile Buying Behaviour. Journal of Electronic Commerce Research, An influential factor in consumer attitude towards non-store shopping is exposure to technology, since it has been demonstrated that increased exposure to technology increases the probability of developing favourable attitudes towards new shopping channels.^[2]

Online shopping widened the target audience to men and women of the middle class. At first, the main users of online shopping were young men with a high level of income and a university education. This profile is changing. For example, in USA in the early years of Internet there were very few women users, but by 2001 women were 52.8% of the online population.

Logistics

Consumers find a product of interest by visiting the website of the retailer directly, or do a search across many different vendors using a shopping search engine.

Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, by analogy with filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders (though credit card numbers are not accepted by e-mail, for security reasons).

Payment

Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

• Billing to mobile phones and landlines^[3][4]
• Cash on delivery (C.O.D., offered by very few online stores)
• Check
• Debit card
• Direct debit in some countries
• Electronic money of various types
• Gift cards
• Postal money order
• Wire transfer/delivery on payment

Some sites will not accept international credit cards, some require both the purchaser's billing address and shipping address to be in the same country in which site does its business, and still other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.

Product delivery

Once a payment has been accepted the goods or services can be delivered in the following ways.

• Downloading: This is the method often used for digital media products such as software, music, movies, or images.
• Drop shipping: The order is passed to the manufacturer or third-party distributor, who ships the item directly to the consumer, bypassing the retailer's physical location to save time, money, and space.
• In-store pickup: The customer orders online, finds a local store using locator software and picks the product up at the closest store. This is the method often used in the bricks and clicks business model.
• Printing out, provision of a code for, or emailing of such items as admission tickets and scrip (e.g., gift certificates and coupons). The tickets, codes, or coupons may be redeemed at the appropriate physical or online premises and their content reviewed to verify their eligility (e.g., assurances that the right of admission or use is redeemed at the correct time and place, for the correct dollar amount, and for the correct number of uses).
• Shipping: The product is shipped to the customer's address or that of a customer-designated third party.
• Will call, COBO (in Care Of Box Office), or "at the door" pickup: The patron picks up pre-purchased tickets for an event, such as a play, sporting event, or concert, either just before the event or in advance. With the onset of the Internet and e-commerce sites, which allow customers to buy tickets online, the popularity of this service has increased.

Shopping cart systems

• Simple systems allow the offline administration of products and categories. The shop is then generated as HTML files and graphics that can be uploaded to a webspace. These systems do not use an online database.
• A high end solution can be bought or rented as a standalone program or as an addition to an enterprise resource planning program. It is usually installed on the company's own webserver and may integrate into the existing supply chain so that ordering, payment, delivery, accounting and warehousing can be automated to a large extent.
• Other solutions allow the user to register and create an online shop on a portal that hosts multiple shops at the same time.
• Open source shopping cart packages include advanced platforms such as Interchange, and off the shelf solutions as Avactis, Satchmo, osCommerce, Magento, Zen Cart, VirtueMart, Batavi, PrestaShop and OpenCart.
• Commercial systems can also be tailored to one's needs so the shop does not have to be created from scratch. By using a pre-existing framework, software modules for various functionalities required by a web shop can be adapted and combined.

Online Shopping

Like many online auction websites, many websites allow small businesses to create and maintain an online shops (ecommerce online shopping carts), without the complexity that involved in purchasing and developing an expensive stand alone ecommerce software solutions.

Design

Why does electronic shopping exist? For customers it is not only because of the high level of convenience, but also because of the broader selection; competitive pricing and greater access to information.^[5][6] For organizations it increases their customer value and the building of sustainable capabilities, next to the increased profits.^[7]

Information load

Designers of online shops should consider the effects of information load. Mehrabian and Russel (1974) introduced the concept of information rate (load) as the complex spatial and temporal arrangements of stimuli within a setting.^[8] The notion of information load is directly related to concerns about whether consumers can be given too much information in virtual shopping environments. Compared with conventional retail shopping, computer shopping enriches the information environment of virtual shopping by providing additional product information, such as comparative products and services, as well as various alternatives and attributes of each alternative, etc.^[9]

Two major sub-dimensions have been identified for information load: complexity and novelty.^[10] Complexity refers to the number of different elements or features of a site, which can be the result of increased information diversity. Novelty involves the unexpected, suppressing, new, or unfamiliar aspects of the site. A research by Huang (2000) showed that the novelty dimension kept consumers exploring the shopping sites, whereas the complexity dimension has the potential to induce impulse purchases.^[9]

Consumer expectations

The main idea of online shopping is not just in having a good looking website that could be listed in a lot of search engines or the art behind the site.^[11] It also is not only just about disseminating information, because it is also about building relationships and making money.^[11] Mostly, organizations try to adopt techniques of online shopping without understanding these techniques and/or without a sound business model.^[11] Rather than supporting the organization's culture and brand name, the website should satisfy consumer's expectations.^[11] A majority of consumers choose online shopping for a faster and more efficient shopping experience. Many researchers notify that the uniqueness of the web has dissolved and the need for the design, which will be user centered, is very important.^[11] Companies should always remember that there are certain things, such as understanding the customer's wants and needs, living up to promises, never go out of style, because they give reason to come back.^[11] And the reason will stay if consumers always get what they expect. McDonaldization theory can be used in terms of online shopping, because online shopping is becoming more and more popular and a website that wants to gain more shoppers will use four major principles of McDonaldization: efficiency, calculability, predictability and control.

Organizations, which want people to shop more online for them, should consume extensive amounts of time and money to define, design, develop, test, implement, and maintain the website.^[11] Also if a company wants their website to be popular among online shoppers it should leave the user with a positive impression about the organization, so consumers can get an impression that the company cares about them.^[11] The organization that wants to be accepted in online shopping needs to remember, that it is easier to lose a customer then to gain one.^[11] Lots of researchers state that even when a site was "top-rated", it would go nowhere if the organization failed to live up to common etiquette, such as returning e-mails in a timely fashion, notifying customers of problems, being honest, and being good stewards of the customers' data.^[11] Organizations that want to keep their customers or gain new ones should try to get rid of all mistakes and be more appealing to be more desirable for online shoppers. And this is why many designers of webshops consider research outcomes concerning consumer expectations. Research conducted by Elliot and Fowell (2000) revealed satisfactory and unsatisfactory customer experiences.^[12]

User interface

It is important to take the country and customers into account. For example, in Japan privacy is very important and emotional involvement is more important on a pension's site than on a shopping site.^[7] Next to that, there is a difference in experience: experienced users focus more on the variables that directly influence the task, while novice users are focusing more on understanding the information.^[13]

There are several techniques for the inspection of the usability. The ones used in the research of Chen & Macredie (2005) are Heuristic evaluation, cognitive walk through and the user testing. Every technique has its own (dis-)advantages and it is therefore important to check per situation which technique is appropriate.^[14]

When the customers went to the online shop, a couple of factors determine whether they will return to the site. The most important factors are the ease of use and the presence of user-friendly features.^[14]

The System Itself

The Shopping Cart system works like the name suggests. Firstly, the customer must choose the product desired from the source. Once this step is done, an option to add the product to the cart will be given, this step will assure that the item you desire will be bought. Once the customer has finished browsing for other potential purchases and has decided that the product he chose previously is the one that he wants to buy, the user must then follow the steps provided by the website in order to fulfill the transaction (normally requires an active account and/or registration method). Lastly, the order will then be sent to the desired address at a predicted date, which may alter depending on the speed of the process.

Market share

E-commerce B2C product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country. The $18.3 billion worth of clothes sold online represented about 10% of the domestic market.^[15] Forrester Research estimates that the United States online retail industry will be worth $279 billion in 2015. ^[16]

For developing countries and low-income households in developed countries, adoption of e-commerce in place of or in addition to conventional methods is limited by a lack of affordable Internet access.

Advantages

Convenience

Online stores are usually available 24 hours a day, and many consumers have Internet access both at work and at home. Other establishments such as internet cafes and schools provide access as well. A visit to a conventional retail store requires travel and must take place during business hours.

In the event of a problem with the item – it is not what the consumer ordered, or it is not what they expected – consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund. Some online companies have more generous return policies to compensate for the traditional advantage of physical stores. For example, the online shoe retailer Zappos.com includes labels for free return shipping, and does not charge a restocking fee, even for returns which are not the result of merchant error. (Note: In the United Kingdom, online shops are prohibited from charging a restocking fee if the consumer cancels their order in accordance with the Consumer Protection (Distance Selling) Act 2000.^[17])

Information and reviews

Online stores must describe products for sale with text, photos, and multimedia files, whereas in a physical retail store, the actual product and the manufacturer's packaging will be available for direct inspection (which might involve a test drive, fitting, or other experimentation).

Some online stores provide or link to supplemental product information, such as instructions, safety procedures, demonstrations, or manufacturer specifications. Some provide background information, advice, or how-to guides designed to help consumers decide which product to buy.

Some stores even allow customers to comment or rate their items. There are also dedicated review sites that host user reviews for different products.

In a conventional retail store, clerks are generally available to answer questions. Some online stores have real-time chat features, but most rely on e-mail or phone calls to handle customer questions.

Price and selection

One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines, online price comparison services and discovery shopping engines can be used to look up sellers of a particular product or service.

Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.

Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.

Another major advantage for retailers is the ability to rapidly switch suppliers and vendors without disrupting users' shopping experience.

Disadvantages

Fraud and security concerns

Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.

Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.

Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party. Denial of service attacks are a minor risk for merchants, as are server and network outages.

Quality seals can be placed on the Shop web page if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent. A number of resources offer advice on how consumers can protect themselves when using online retailer services. These include:

• Sticking with known stores, or attempting to find independent consumer reviews of their experiences; also ensuring that there is comprehensive contact information on the website before using the service, and noting if the retailer has enrolled in industry oversight programs such as trust mark or trust seal.
• Before buying from a new company, evaluate the website by considering issues such as: the professionalism and user-friendliness of the site; whether or not the company lists a telephone number and/or street address along with e-contact information; whether a fair and reasonable refund and return policy is clearly stated; and whether there are hidden price inflators, such as excessive shipping and handling charges.
• Ensuring that the retailer has an acceptable privacy policy posted. For example note if the retailer does not explicitly state that it will not share private information with others without consent.
• Ensuring that the vendor address is protected with SSL (see above) when entering credit card information. If it does the address on the credit card information entry screen will start with "HTTPS".
• Using strong passwords, without personal information. Another option is a "pass phrase," which might be something along the lines: "I shop 4 good a buy!!" These are difficult to hack, and provides a variety of upper, lower, and special characters and could be site specific and easy to remember.

Although the benefits of online shopping are considerable, when the process goes poorly it can create a thorny situation. A few problems that shoppers potentially face include identity theft, faulty products, and the accumulation of spyware. Whenever you purchase a product, you are going to be required to put in your credit card information and billing/shipping address. If the website is not secure a customers information can be accessible to anyone who knows how to obtain it. Most large online corporations are inventing new ways to make fraud more difficult, however, the criminals are constantly responding to these developments with new ways to manipulate the system. Even though these efforts are making it easier to protect yourself online, it is a constant fight to maintain the lead. It is advisable to be aware of the most current technology and scams out there to fully protect yourself and your finances.[20]. One of the hardest areas to deal with in online shopping is the delivery of the products. Most companies offer shipping insurance in case the product is lost or damaged; however, if the buyer opts not to purchase insurance on their products, they are generally out of luck. Some shipping companies will offer refunds or compensation for the damage, but it is up to their discretion if this will happen. It is important to realize that once the product leaves the hands of the seller, they have no responsibility (provided the product is what the buyer ordered and is in the specified condition).[20].

Lack of full cost disclosure

The lack of full disclosure with regards to the total cost of purchase is one of the concerns of online shopping. While it may be easy to compare the base price of an item online, it may not be easy to see the total cost up front as additional fees such as shipping are often not be visible until the final step in the checkout process. The problem is especially evident with cross-border purchases, where the cost indicated at the final checkout screen may not include additional fees that must be paid upon delivery such as duties and brokerage. Some services such as the Canadian based Wishabi attempts to include estimates of these additional cost,^[18] but nevertheless, the lack of general full cost disclosure remains a concern.

Privacy

Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.

Many websites keep track of consumers shopping habits in order to suggest items and other websites to view. Brick-and-mortar stores also collect consumer information. Some ask for address and phone number at checkout, though consumers may refuse to provide it. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.

Product suitability

Many successful purely virtual companies deal with digital products, (including information storage, retrieval, and modification), music, movies, office supplies, education, communication, software, photography, and financial transactions. Other successful marketers use Drop shipping or affiliate marketing techniques to facilitate transactions of tangible goods without maintaining real inventory.

Some non-digital products have been more successful than others for online stores. Profitable items often have a high value-to-weight ratio, they may involve embarrassing purchases, they may typically go to people in remote locations, and they may have shut-ins as their typical purchasers. Items which can fit in a standard mailbox — such as music CDs, DVDs and books — are particularly suitable for a virtual marketer.

Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets—in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.

Products less suitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings — most notably clothing — and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S. Also, the recycling program Cheapcycle sells goods over the internet, but avoids the low value-to-weight ratio problem by creating different groups for various regions, so that shipping costs remain low.

Aggregation

High-volume websites, such as Yahoo!, Amazon.com and eBay, offer hosting services for online stores to all size retailers. These stores are presented within an integrated navigation framework. Collections of online stores are sometimes known as virtual shopping malls or online marketplaces.

Become.com is a product price comparison service and discovery shopping search engine with a mission to help shoppers make ideal buying decisions. Dulance was a price engine that specialized in searching for hard-to-find products often sold by small independent online retailers ("The Long Tail"). Mysupermarket aggregates inventory from the UK's four leading online groceries for shoppers to compare supermarket prices.

Many companies that don't have internal resources or expertise (such as do-it-yourself-ers) work with a web development firm to handle all or some of the facets of the online shopping set-up, including integration of the e-commerce platform and hosting. Full service digital companies can design, develop and set-up ecommerce sites so that they're up and running with existing merchant accounts or new ones."

The impact of others’ review on consumer behaviour

One of the great benefits of online shopping is the ability to read others’ reviews, which could be from experts or simply fellow shoppers on one product and service.

The Nielsen Company conducted a survey in March 2010 and polled more than 27,000 Internet users in 55 markets from the Asia-Pacific, Europe, Middle East, North America and South America to look at questions such as “How do consumers shop online?”, “What do they intend to buy?”, “How do they use various online shopping web pages?”, and the impact of social media and other factors that come into play when consumers are trying to decide how to spend their money on which product or service.

According to that research^[19], reviews on electronics (57%) such as DVD players, cell phones or PlayStations and so on, reviews on cars (45%), and reviews on software (37%) play an important role and have influence on consumers who tend to make purchases and buy online.

In addition to online reviews, peer recommendations on the online shopping pages or social media play a key role for online shoppers while researching future purchases of electronics, cars and travel or concert bookings. On the other hand, according to the same research^[19], 40% of online shoppers indicate that they would not even buy electronics without consulting online reviews first.

Online reviews play a fundamental role on consumers who want to buy some kind of product, but the biggest effect is seen for electronics, cars and software.