Written by: Stijn Dost
New balance of power in customer-retailer relationship?
One might recall how price comparison was done before the e-retailers opened their doors. All the information about a product and its price was gathered from the physical store and one was depended on the store-staff and supported elements to provide this information. Whereafter we would visit multiple other stores based on the assumption that these might sell the same product as well. However, it could even occur that a store did not even would carry the product. Finally, after spending the day in several stores it was time to consider which store offered the best deal for example based on price or service. This way of comparing prices almost vanished from our habitual existence when retailers started to ‘open the doors’ online and became e-retailers. Due to the internet, consumers now have access to a wealth of online market information regarding products and price (Bodur, Klein and Arora, 2015). This new resource channel of information could indicate that this new online market of e-retailers becomes more transparent for consumers. Some scholars even predicted this shift of power from businesses to consumers, which draws up a new form of customer-retailer relationship management (Labrecque et al., 2013). When taking this shift into consideration an interesting question that remains is how do e-retailers gain trust without even meeting their customers?
In what degree is customer loyalty existent with e-retailing?
The focus on customer loyalty for e-retailers can be argued to be of higher importance than for ‘brick and mortar’ retailers. The highly competitive environment of the online market and the continuous multiplication of online retailers can be a cause for this emphasis on e-retailer’s customer loyalty (Rafiq, Fulford and Lu, 2013).
It is undoubtedly easier to set up shop as an e-retailer in comparison to a physical store nowadays. Moreover, physical stores need to be within a certain ‘travel-radius’ of the customer in order to be create a relationship and built loyalty. This however does not apply to e-retailers; the customers of e-retailers do not have to be limited to this geographical-threshold since the products can be shipped all over the world. The previous points out that the market environment for physical retailers and e-retailers is different and should be approached distinctively when it comes to customer loyalty. Since in most case customers do not experience geographical boundaries with e-retailers it is as easy as a ‘mouse click’ to order a certain product from a competitor, which can even have its origin in a different country. This also supports the former statement that customer loyalty for e-retailers is indeed more challenging than for the physical retailers, because of the interchangeability of e-retailers (Rafiq, Fulford and Lu, 2013). Besides making the distinction between e-retailers and ‘brick and mortar’ stores there are also retailers who use both these channels which is commonly referred to as multichannel-retailing. An interesting example is the fashion retailer Tommy Hilfiger which is both active online as well as offline and found a solution to connect both channels when it comes to customer loyalty strategy. The Hilfiger Club is their loyalty program which offers personal discount codes, early access to the sale and more. In an attempt to connect their webshop with their physical stores Tommy Hilfiger partnered up with ID24, a Swedish manufacturer and supplier of interactive point-of-sale touchscreens. Tommy Hilfiger placed these touchscreens at the check-out however, they were mounted to face the customers instead of the store staff. The purpose of the point-of-sale touchscreens was to allow the customer login on their personal Hilfiger Club loyalty page like they would online from their computer, please click here for an impression (ID24, 2012). On these in-store touchscreens customers can see and use receipts, redeem discount codes from their email and even order out of stock products to be delivered in-store or at home (ID24, 2013). This solution aims to make The Hilfiger Club both online and in-store a loyalty program that does not require the customers to distinguish both channels, rather to combine them for a seamless loyalty solution. Tommy Hilfiger in an example on how customer loyalty can be integrated in both the offline and online channels however, an e-retailer without a physical store can even face bigger challenges.
As mentioned briefly before the ease of exchangeability when it comes to e-retailers from a consumer's perspective is a major problem for e-retailers. How do they prevent consumers from buying the product from a competitor who is just a mouse-click away? An interesting approach on what is important for e-retailers when it comes to customer loyalty is defined by fairness, trust and customer satisfaction (Nguyen and Nham, 2014). Where in this particular research these three factors are characterized as part of a domino effect. Where fairness is utilized to create some sort of roots which can serve as the foundation, to subsequently gain trust followed by customer satisfaction. All in all, these three factors together can be used by e-retailers as key components in order to create customer loyalty online (Nguyen and Nham, 2014). In this particular approach, fairness through the eye of the consumer can also be defined as reasonable pricing compared to competitors. A different insight can be gathered from the quality-satisfaction-loyalty (Q-S-L) approach which was widely discussed in the past regarding physical retailers, but now also gains ground when applied to e-retailing. Within this Q-S-L spectrum the quality of the offered product in combination with the service, accounts for a degree of satisfaction which eventually establishes a certain extent of loyalty. In addition, the quality offered can also be described as electronic service quality (e-SQ) and includes multiple dimensions for example: website efficiency (from initial visit to purchase), payment and delivery (Lin and Wang, 2015).
It is clear that a fair amount of recent research is done on customer loyalty for e-retailing with satisfaction being a significant part in the process of building a relationship between e-retailer and customer (Carlson, O’Cass and Ahrholdt, 2015). In specific, satisfaction can be described as the evaluation of the online purchase process from start to finish, which is similar with the physical retailers. However, the website is for the e-retailer what in fact the brick-and-mortar store is for the physical retailer. Thus should offer an efficient multidimensional experience for the customers to come to their website for the purchase. When this purchase process is perceived as satisfactory the likelier the chance that a customer will come back to the e-retailer, ergo customer loyalty.
Can social media aid in building a relationship between e-retailer and customer?
There already has been done substantial research on social media as part of building customer loyalty. Which for example concluded that communication technologies like social media networks can have positive effects on building customer loyalty (Noble and Phillips, 2004).
In the previous part it became clear that satisfaction was the way customers experience the website of the e-retailer as a multi-dimensional space. However, there could be another form of satisfaction at play when it comes to customer loyalty, vendor satisfaction. This covers the interaction that a customer will or can have with the actual vendor behind the website. Social networking sites (SNSs). It is however suggested that an e-retailers who uses for example a Facebook page to include both utilitarian as well as hedonistic value. The first can take form in being available to actually communicate directly with customers or provide additional information about products that are being sold on the e-retailer’s website. Whereas the hedonistic component can take shape in offering discount codes for the Facebook members of that page (Chang, Hsu and Lee, 2014). In addition, creating a community around this SNSs space by motivating customers to not only interact with the vender but also with each other can serve both the hedonic and utilitarian needs. This because the community can interact with each other on both an informative level by sharing ideas or participate in for example contests to win prizes. The international fashion retailer Zara utilizes Facebook in a successful way as a tool to communicate with their customers and give the customers a platform to interact with each other about fashion. Key indicators for maintaining increase repeat purchases and customer loyalty was in the case of Zara based on trust, customer satisfaction, quality/value and commitment (Gamboa and Gonçalves, 2014).
Satisfied, trustworthy and quality equals customer loyalty?
Not every research that has been done on this subject uses the exact same spectrum of components when it comes to customer loyalty for e-retailers. However, satisfaction, trust and value/quality seem to be the common demeanor in most of the research that is out there. It is essential for e-retailers to cover these key components in order to build a relationship with customers they do not even meet face to face, like with a physical store. This in specific means that the website of the e-retailer should be easy to use and efficient throughout the whole purchasing process, even until the delivery of the product. If this is done correctly there is a significant chance that customers will trust the e-retailer where after, the customer will assess if the product meets the expected quality. Finally, the customer will evaluate these two steps and if done accordingly this creates a satisfied customer who is likely to feel a sense of loyalty towards the website of the e-retailer. In addition, having a strong presence on a social networking site like Facebook can contribute to a strong relationship with customers. This based on providing both hedonic and utilitarian content that is exclusively available on this social media platform.
Reference list
Bodur, H., Klein, N. and Arora, N. (2015). Online Price Search: Impact of Price Comparison Sites on Offline Price Evaluations. Journal of Retailing, 91(1), pp.125-139.
Carlson, J., O’Cass, A. and Ahrholdt, D. (2015). Assessing customer's’ perceived value of the online channel of multichannel retailers: A two country examination. Journal of Retailing and Consumer Services, 27, pp.90-102.
Chang, C., Hsu, M. and Lee, Y. (2014). How can social networking sites help build customer loyalty? An empirical investigation. Total Quality Management & Business Excellence, 27(1-2), pp.111-123.
Gamboa, A. and Gonçalves, H. (2014). Customer loyalty through social networks: Lessons from Zara on Facebook. Business Horizons, 57(6), pp.709-717.
Labrecque, L., vor dem Esche, J., Mathwick, C., Novak, T. and Hofacker, C. (2013). Consumer Power: Evolution in the Digital Age. Journal of Interactive Marketing, 27(4), pp.257-269.
Lin, M. and Wang, W. (2015). Examining E-Commerce Customer Satisfaction and Loyalty: An Integrated Quality-Risk-Value Perspective. Journal of Organizational Computing and Electronic Commerce, 25(4), pp.379-40.1
Nguyen, T. and Nham, P. (2014). A Domino Effect from Fairness to Online Customer Loyalty. DLSU Business & Economics Review, 24(1), pp.84-95.
Noble, S. and Phillips, J. (2004). Relationship hindrance: why would consumers not want a relationship with a retailer? Journal of Retailing, 80(4), pp.289-303.
Rafiq, M., Fulford, H. and Lu, X. (2013). Building customer loyalty in online retailing: The role of relationship quality. Journal of Marketing Management, 29(3-4), pp.494-517.
ID24 (2013). Retail innovation story Tommy Hilfiger + ID24 2013 [pdf] Available at: http://www.id24.com/tommyhilfiger-id24-whitepaper.pdf [Accessed 11 February 2016]
ID24, (2012). ID24 Customer Club Tablet. [video] Available at: https://youtu.be/z1NFkidOdUo [Accessed 12 Feb. 2016].