Online Shopping

Why go to the store?

If you would have explained the principle of online shopping to someone 25 years ago, they would have probably looked at you the same way than if you would have said cars would fly in 25 years. The only difference: online shopping is now one of the most lucrative business field in the world with websites such as EBay, Amazon and Groupon, to only name a few.

Most of these companies, especially the first few, started from a simple idea to try and exploit a new area of the market that was never available before, to get people to shop from the comfort of their home.

The first item ever sold online was in 1994, when pizza hut sold a pepperoni and extra cheese pizza. [1] Today, you could buy your next house online, as well as the car to go in the driveway, all the furniture and the food to go in the kitchen. There are no limits to what can be purchased online.

Not only is online shopping made simple in comparison to visiting the traditional physical stores, many factors make the experience more enjoyable and efficient. The experience is much faster by doing all the shopping from anywhere with an internet connection, avoiding the trouble of driving to the stores and be stuck in the never ending cash register line ups. While being faster, it also gives consumer the opportunity to do price comparison between various sellers in only a few clicks of a mouse, ensuring you are getting the best quality item at an unbeatable price. As well, the fact that those sellers do not have to pay for fancy storefront and important square footage commercial space for demonstration, costs to the consumers are reduced. Last but not least, it gives the buyers choice from international market, without ever setting foot on an airplane. Products from Canada, United States, France or China are all available in the same place, the World Wide Web.

This process has been enjoyed for years now and is constantly gaining market shares over the traditional physical stores, but technological advancement make it even easier to access through smartphones that can pretty much provide a stress-free shopping experience from literally anywhere. Online shopping is a major trend that has emerged over the last years and keeps on getting more popular over the years.

How did it become so popular?

Many changes were at the origin of this trend, but the most important one has to be the technological factor. The arrival of internet was a major game changer for many sectors, but it was in no way meant to change the retail business. It is with ideas like the ones of Jeff Bezos for Amazon and Pierre Omidyar for EBay that this entire online shopping started. Even they did not realize how big of a trend they were starting. Omidyar simply wanted to start a few auctions to get rid of a few things and Bezos wanted to start selling some books as he saw a potential market there. Both those men are now billionaires, with enterprises that sell pretty much anything you could ever look for. This technological evolution did not only start the online retail business, but it also keeps on improving it, with mobile apps that appeared with the emergence of smart phones, another technology on its own, which coupled with internet can be a really powerful tool for online retailers.

Economic changes are also part of the evolution of online sales. By the time the recession of 2008 hit North America, online retailing was already well-established, but it was a good time for them to grow even more. Many families were in serious debts and were willing to look anywhere for a saving. Online stores, for various reasons which we will discuss later in this paper, are able to provide goods for a better price than physical stores. The economic conditions of the last few years therefore helped online retailers grow bigger.

The cultural factor was not important at the introduction of online shopping, but with the quick evolution of the trend, sites like EBay were introduced to consumer and selling groups around the world. It is now possible for a consumer in Regina, Saskatchewan to buy an authentic chinese tea set from China or a Didgeridoo from Australia. These kind of purchase before the advent of online shopping were either impossible due to travel limitations, or the items imported here were extremely expensive. With online shopping, there is no limitation to what kind of purchase a consumer wants to make, it is all available with a few clicks of a mouse. Therefore, the cultural interest played a partial role in the development of online shopping.

Politics is normally involved in traditional shopping, and online shopping is no exception. This trend was mostly unregulated at the beginning, but rules and policies were adjusted as the trend grew. Governments are now getting their shares of taxes and tariffs on imported goods, but it took some adjustments at first, and still today, governments are still imposing new regulations to ensure online shopping is done within certain guidelines, ensuring security of consumer and suppliers alike.

For example, Canadians shopping in the United States has always been a way to save some money. Now more than even before, Canadians are searching for deals over the border, not simply in traditional stores, but also online. Differences in prices between and can be quite impressive for example, or certain items might only be available to US residents. The other thing that play in this decision of where to buy will be the shipping costs, where shipping over the border is quite expensive. As a result, a new need came along, shipping PO Boxes in various locations near the border in the States for Canadians residing near the border. The main player in this market is Kinek at the moment, which sets shop in various retail stores as a simple desk for Canadians to have their purchases shipped to for a nominal fee.

This market was unregulated until a few months ago, where Kinek now require all their members to be registered through United States Postal Services (USPS) to be eligible to have material shipped into the United States as a Canadian resident. This market is still somewhat new and further policies should be expected from all governments.

New Business Models and their risks

The basics of online shopping make it easier for the consumers to buy more varied stuff faster, but what about all the possibilities for the suppliers. It all started with small websites, with little hopes of making it huge, like EBay for example. Pierre Omidyar simply started to put a few items for sale online, from his home. As it worked better than expected, he introduced the auction model into his online retail shop. We all know now how this idea grew into a billion dollar business model.

Jeff Bezos had a similar idea as he started building his idea for Amazon. He was simply looking at one to five items that could be sold easily online. He ended up using only one option: books. He wanted to be the seller of choice for books online. He accomplished that and much more, selling a variety of items.

Amazon was also the pioneer in another business model of the online shopping trend. They started by simply selling books, but later grew to be the first seller of e-books. It only took them a few years to grow this business, but once again, it was a gamble that worked well. Amazon was quickly able to surpass in total e-books sales, the total of actual book sales. No one would have ever been taught this was possible 10 years ago, but it is now reality because of online shopping. This new business model did not only create the e-book market, but also created a fierce battle for e-readers. This market started slowly, but today, many companies fight for market shares of e-reader, which have now developed into tablets. A trend started from online shopping has now created an all new product of his own, which are all sold online, as would request the consumers.

Another business that came out of online shopping is the online deal of the day system, which was first introduced by Groupon. This business model does not only include a substantial deal on a daily offer, it provides deals almost never seen before due to the power of collective bargaining. A company might not be willing to offer 50% to a consumer, but the online effect gives the chance to the consumers, collectively, to ask an organization to reduce the price (normally 50% with Groupon), provided that at least 500 transactions will occur for examples. This business model offers a great deal for the customers, but entails some serious risks for the business as we will discuss shortly.

The latest business model related to online shopping would not be possible without the smart phone technology. It is being developed by Groupon and it is called Groupon Now. Instead of providing a deal of the day online that will be available through a voucher over the next few months, it offers deals that are currently available, but only for a limited time. As a result, a restaurant that is having a really slow afternoon could go on Groupon Now and offer a 2 for 1 deal for the next 2 hours, or a special on wings and beer for today's happy hour for example.

These deals, due to their limited availability, provide the customers with only a short window of opportunity. It also does not provide the business with a lot of customers as people will not necessarily be available right at the moment to take advantage of those deals, therefore limiting the impact of the Groupon Now deals.

We can therefore see that many businesses were created as a response from this new trend of online shopping for everything, but it also had a positive effect on other businesses. Courier company, such as UPS and FedEx, saw their business expand quickly with the huge increase in package delivery from online shopping. All these goods that people used to pick up in store and bring home now have to be delivered to their doors. In 2012, between Thanksgiving and Christmas, FedEx delivered 280 million package, a 13% increase on the previous year's numbers, which was mostly attributed to online shopping. [2]

Specialized company in courier such as UPS and FedEx adapted really quickly, but public services like Canada Post were not able to adapt as quickly and suffered severe losses as they were not ready to adapt to such a quick drastic change from letters to packages. They are now rethinking the way they are doing business to adjust to the market, but they are already in major debts. Their new systems specifically addresses the needs of online shoppers that want their goods quickly, by offering a same-day delivery service in the evening, when customers are present, from certain retailers such as Wal-Mart and Indigo [3] Will they be able to adjust to this new trend, we cannot say, but they are trying to not let online shopping trend bring this public service organization to bankruptcy.

All of these various business models provide great deals for the customers and some great opportunities to some courier services, but some risks are also associated with this new trend of shopping for everything online.

Due to the fact that many online seller have no physical store, only warehouses in some cases, the cost of doing business are much smaller than physical store having to keep up their storefront attractive and to the flavor of the day, on top of having to carry some more inventory to satisfy demand immediately as customers come to procure the items.

Online stores, such as Amazon, do not even have to worry about the expenses of a warehouse as the online marketplaces warehouse the equipment on behalf of Amazon. The result is a significant reduction in cost in comparison to traditional stores. As a response, the traditional stores have two main options: reducing the price to match online prices and significantly reduce their profits, or keeping the original price and losing a number of sales.

The second option is normally the option chosen, with some stores using a mix of the two, by reducing the price a little bit to attract some customers who might not be used to online shopping and prefer paying a bit more in store, or are simply not familiar with online shopping. Either way, traditional stores are definitely losing significant profits and could end up going into bankruptcy in the long run.

The online business hurts traditional stores by lowering the price people are willing to pay, but new online shopping trend are making it even worse. Groupon, as discussed earlier, arranges for collective deals on any businesses. Smaller businesses see an opportunity to have a major influx of sales, but they don't necessarily see the risks attached to this phenomenon. Small business owners that did not do all the necessary research can get themselves in some serious situations with Groupon. For example, a little bakery in the UK set up a Groupon for a 75% deal on cupcakes. The problem was, they took on a task that they did not realize was so big. The deal was a success, selling 8,200 dozen cupcakes. The bakery had to hire extra staff and an outside agency to handle the orders. Total damage: a loss of $20,000; which almost brought the small business into bankruptcy. (

The other issue with Groupon is that customers get used to those amazing deals and are not willing to go back to those businesses and pay original prices. As a result, businesses get a major influx of consumers, bringing in little to no profits, while the consumers never come back when regular prices are in effect. This is an issue that once again could seriously impact the operations of a small business.

We can therefore see that there are a lot of risks from the business owners point of view, but what about the customers. Online shopping is now fairly popular with many shoppers, but not all customers are aware of the dangers of online shopping. It is a lot easier to roll a scam on a customer over the internet than lying directly to their faces in a traditional store. Customers can easily get scammed online if they are not well informed. A customer walking in a store will not pay if they do not have an item in hand, but many people would provide their credit card number for a specific purchase online, while never receiving anything. By the time they realize they have been scammed, it is normally too late to go back, and ultimately, lost their money. Online security systems exist , such as PayPal, but many new online shoppers are not aware of the risks.

Another risk to the customer is also related to Groupon. Users get their daily e-mails containing the deal of the day, see an amazing deal and decide to purchase. All deals on Groupon have an expiry date, which can easily be forgotten if a user is not being careful. If the time goes by, it will be the users fault, but this money is normally lost.

We can therefore see that there are some risks to both online customers and sellers, but most risks can be averted if proper researches are done before getting into online shopping. The only players that are at risk with no protection are the owner of traditional stores. Their profits will be reduced no matter what they do and they have no control over it. They are definitely the biggest loser of the online shopping trend.

How much bigger can online shopping become?

From the original pizza sold by Pizza Hut online in 1994, online shopping has spread to a lot of markets. EBay and Amazon paved the way for others, but online classified ads exploded with tools such as Kijiji and Craiglist, most restaurants now take online orders, clothing stores sell on the internet, car dealership have their entire car lot listed online, and the list goes on. It mostly started with goods, but the service market has now been fully integrated to online shopping with many booking systems now available online such as massages, haircut, car maintenance, etc.

When we think that all avenues have been explored, somebody like Andrew Mason launch a new system such as Groupon that introduced collective bargaining in the form of deal of the day. Imagination is really the limit when it comes to online shopping. Another option that has slowly started and that I think has potential to grow bigger is Tik Tok, a deal system similar to Groupon Now, but instead of having to go to an App on your phone to see the current deals, Tik Tok sends you text messages to inform you of deals near you. This concept has been developed in Vancouver, British Columbia, but it has the potential to grow big and is currently expanding in the United States in cities such as San Francisco, Los Angeles and Miami.

I think the online shopping is here to stay with the advent of technology, permitting new ideas to be created every day. Whenever you think that online shopping has reached its potential, be ready, a new innovation will come and surprise you.

[1] Webley, Kayla. Online Shopping, TIME, July 2010, retrieved 20 Sept 2013,,85...

[2] Associated Press,Federal Express expects high volume via online shopping for holidays, Oregon Live, October 2012, retrieved 23 Sept 2013,

[3] Canada Post pledges same-day delivery for online shoppers, CBC News, Sept 2013, retrieved 22 Sept 2013,

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