A Customer Loyalty Model for Online Retail in India

Introduction

The internet and digital technologies have brought about a disruptive change in the Indian retail landscape. Shopping channels which were non-existent a decade back have made a presence in the country since a couple of years. These channels known by various names such as e-tail, e-shop, web shop, virtual store etc. have given some serious competition to the established channels such as the brick and mortar stores. With increasing accessibility of internet in the country along with a rise in disposable incomes has made a positive influence on the growth of the online retailing in the country. A research finds that the usage of internet in India has gone up by 32% from October 2013 to October 2014(Internet in India, 2014). The research also finds that the internet users in urban cities has grown up by 29% in the same period and by 33% in the rural areas. Another research report states that the retail ecommerce sales have jumped up from $3.59 billion in 2013 to $5.3 billion in 2014 (an increase of 47.6%), and is expected to grow by 45.2% this year. However, the rosy rate of growth is tempered by the overall contribution to the retail sales. Online retail sales which account for 0.7% of total retail sales in 2014 is expected to contribute 0.9%. Online retailing is still on a growth stage in the country and more number of players are entering this space to take advantage of the unlocked opportunities.

The internet and digital technologies have created a level playing field for the online retail business in the country. As a prerequisite, an online retailer just requires to set up a web site with the required customizations at minimal cost, compared to the huge costs involved in setting up a physical store. The convergence of internet and retail has resulted in the emergence of a demanding and a discerning customer whose preferences are driven by the current situation, current needs and the occasion. The internet makes it possible for a buyer to check the offerings from multiple sellers in real-time, and the retailer who gives the best price for the same product is generally the winner. Thus internet has a huge influence on the consumer shopping decisions; it can result in an instantaneous change in shopping decision by a consumer. Price competition can result in loss of brand effectiveness and a downward pull on profitability for the retailer. How does then an online retailer differentiate its offerings? The answer is customer loyalty or e-loyalty. To sustain in this competitive environment, online firms have to consider e-loyalty in their strategic decisions, which is important for an online firm to stay profitable (Chang, Wang & Yang, 2009). Although it’s obvious that in an online setting, customer’s purchasing behavior is hard to predict and it doesn’t take time for a customer to switch to a rival, there are a category of customers who are loyal. An online retailer’s objective is to put out all the stops to create a lasting relationship with the loyal customers. Loyal customers can be ten times more worth than a regular customer, when it comes to their lifetime purchase (Anderson & Srinivasan, 2003). In this country where most of the online stores are couple of years in business, and still not reached the break-even point, it makes sense to direct resources towards the loyal customers whose transaction value is more than any new customers. Customer loyalty for online retailing, or e-loyalty, hinges on customer satisfaction or e-satisfaction, customer trust or e-trust and e-service quality. These customer metrics are imperative to create long-term relationships with the customers (Kim, Ferrin & Rao, 2009). In an online setting, the entire customer experience from the point where customer enters the website to the point where he is delivered the product determines the level of e-satisfaction. Customer’s trust or e-trust is even more crucial as the customer can just view the product, but couldn’t check the quality of the product before making the purchase. In the online retailing sector, customers demand good e-service quality to be satisfied. E-service quality can be defined as overall customer evaluations and judgments for the excellence and quality of e-service delivery in the online setting (Lee & Lin, 2005). E-satisfaction has antecedents, both online and offline. The online antecedents are e-trust and e-service quality. The offline antecedent of customer satisfaction is fulfilment. Fulfilment is all about customer receiving the product either from the store or through home delivery.