Exploring the alignment of e-commerce business model of Chinese electronic retailer and customer acceptability — Suning Commerce Group

Introduction

Tthe purpose of this research is to exploring the alignment of e-commerce business model of Chinese electronic retailer and customer acceptability. The company specifically selected to study is ‘Suning Commerce Group’.

Chesher and Kaura (2014) described that electronic commerce (ecommerce) has reshaped the business practices and has influenced the interaction of businesses with people. The adoption and change in the business strategies are critical to ensure that business remained competitive in the marketplace and deliver product and service in a way, which meet the need of people.

E-commerce has helped the business and companies to reduce cost, increase a speed of transaction as well as reshape marketing and sales strategies. The e-commerce helped the companies to increase the efficiency of the process as retaining competitiveness in the market (Hacklin and Wallnofer, 2015).

In the context of retailers’ adoption of e-commerce platform, the complex challenges involve cultivation of opportunities through deploying right ebusiness model. The strategic fit between companies’ ebusiness strategy and customer acceptability is critical to overcoming barriers and rip the e-commerce benefit (Xie et al., 2014).

Research Context

Internet customers are different when compared with traditional offline customers. In an e-commerce context, customers control and initiate the contracts and consumer behaviour in online shopping is active rather tradition passive approach. Customer acceptability and knowledge develop the response to visiting the website based on information product and service information and complete transaction. E-commerce involves electronically facilitated the transaction of the business with customers (Lacka, Chan and Yip, 2014).

McElheran (2015) added that the use of the e-commerce to conduct business has gained influenced in recent years and it represents the large portion of the business and practices. To maximise the benefit from e-commerce for the company, it is important that strategy, development and implementation of e-commerce solution deliver distinct benefits to customers and maximise customer value. The competitive landscape for electronic retailers in terms of sales and business growth but adoption and acceptability is important.

E-commerce context

Chinese E-commerce context

Canzer (2015) elaborated that the social and cultural differences in Chinese markets make it distinct from western market. E-commerce adoption by the Chinese companies requires social, cultural and economic adaptability. The adoption of the e-commerce is required trust, acceptability has kept the e-commerce adoption, and consumer-spending e-commerce has played the significant role to sustain sales of the company.

Liu et al (2016) added that online business model selection is based on maximising business opportunities, reducing cost, improve product availability and after sale support. Therefore, the purpose of this research is to evaluate how e-commerce in Chinese context delivers maximum benefits for business. The strategic fit between company mission, e-commerce strategy and customer acceptability is important in the Chinese context.

The focus of the research is on Chinese E-commerce Company ‘Suning.com’ to evaluate how company has achieved success through e-commerce business model.

Research Aim and Objectives

The aim of the research is to investigate how e-commerce business model of Suning to determine the success and acceptability of the e-commerce in the Chinese market. The purpose is investigating that how a company has position its e-commerce business model in the Chinese electronic consumer market and acceptability by the consumer (Fang et al., 2015).

The specific company selected to study is Suning, which is the electronic consumer product retailer. The research will examine the applicability of the e-commerce business model in the Chinese context and their effectiveness for the companies and acceptability by the Chinese customers. The research question is

How Sunning.com has achieved the alignment of e-commerce business model and customer acceptability”

The specific research objectives are

  • To explore e-commerce business model of the Sunning.com and applicability of alternative model
  • To analyse environmental challenges Sunning.com is facing and integration into e-commerce strategy of company
  • To evaluate how existing e-commerce business model enable Sunning.com to meet Chinese customer need and adaptability in Chinese environmental context

Literature Review

E-commerce Concept and Online Business

Fang et al (2014) described that e-commerce involves the buying and selling of goods over the internet and it further elaborated as an exchange of information over the internet. In the recent era, e-commerce has involved a continuous flow of information before and after completion of the online transaction, which is facilitated using the technology. Consequently, e-commerce includes the integration of company processes and activities to buy and sell products as well as the exchange of information and fund over the internet.

The drivers which motivate the companies to adopt the e-commerce is either cost and efficiency improvement such as reduce cost related to sales and distribution and increase speed of information exchange with customer or the competitiveness drivers which improves product range, increase market share as well as meet the demand of the customers (Barnes & Hunt, 2015).

E-commerce has resulted in the emergence of online retailing and companies sale product and services online. Companies initially develop the website to present the product and information, which later integrated into full e-commerce website based on the preference and needs of the customers.

Online retailers are able to offer a wide range of product and services because no floor space or availability constraint is attached. The low operational and capital cost favour online business to effective meet customer needs and enhance customer satisfaction (Lacka, Chan and Yip, 2014).

E-commerce development in China

E-commerce has significantly contributed towards the competitive landscape in China retail market and economy has managed to shift towards consumer driven through providing direct access to consumer by online business. Despite the slow revolution in E-commerce in China, the five years plan of Chinese government (2010-2014) has resulted in heavy investment in e-commerce growth. The online shopping has become symbol of lifestyle and local platforms as well as social media has re-shaped Chinese consumer purchase behaviour (Turban et al., 2015).

McElheran (2015) added that in 2015, 40% of total retail sales in China were based on online purchases. It is estimated that online sales in China will exceed 670 million by 2023. For example, Alibaba sales through e-commerce were greater than EBay, Amazon combined, and in 2016, Alibaba surpassed the sales of Wal-Mart.

value of e-commerce transaction

Business-To-Consumer (B2C)

E-commerce for B2C segment involves all online transaction and applies to companies that sell product and services to consumer through internet. The challenges to B2C commerce are tariff to website and efforts to convert visit into sales. B2C conversion involves navigation, checkout and marketing. The success factors of B2C involve developing effective e-commerce platform, integration, real-time transactions, collaborations and robust IT infrastructure (Canzer, 2014).

Hacklin and Wallnofer (2016) explained that the success factors of B2C platform involves platform development, independence, run-time protection, unified intra and extranet along internet, software’s, enterprise IT resources, functional user interference as well as robust security model. The security issues involve confidentiality, integrity and availability.

B2C business model

Suning.com – B2C

Suning commerce group has recently launched (suning.com) to sell and market its products using the ecommerce. Company have 1600 stores in more than 700 cities of the mainland china and Hong Kong. The wide range of product sold by the company include home appliance, consumer electronic products, cosmetic as well as content product and service. Company operate franchise retail shop of the electronic appliances and wide range of electronic and household consumer products. The recent launch has helped the company to expand and reach the customer through ecommerce (Suning, 2015).

B2C– E-commerce business model

Barnes and Hunt (2015) described that the combination of the range of factors such as operations, technology, and ideology affected upon the selection of the e-commerce business model. The selection of the appropriate model is a vital source of competitive advantage and growth for the company.

Storefront model

The storefront is a most popular model to offer product and services to the customer. This combines the transaction processing, security, information storage and online payment to enable the sale of the company product. The storefront is managed through online catalogue and company sell products. The highly used technology used for the storefront model is based on the shopping cart technology (Shaw et al., 2015).

 Auction model

Turban et al (2015) discussed that the auction-based e-commerce model is famous and it is estimated that it involves a large number of user perform the transaction based on such sites. The eBay is a most popular example for this kind of auction site. These sites manage the personal information of user and buyer and seller can interact. The price is determined through bidding and buyer bid for the product. However, these models are complex and large and require a large team to manage such e-commerce site.

Portal Model

The portal offers the products at one place and the customer can explore through a wide range of items at one place. Alibaba.com is a famous example of portal and successfully operating in china. The portals are useful to link the user with retailers and companies use it to share information. The structure and deployment of the portal vary according to the product and need of the user (Weill and Vitale, 2016).

Dynamic Pricing model

The dynamic pricing model is used by the companies to market and price the product. The dynamic price model has enabled the user to search and select the deal for the desired product and compare it, retailers. This allowed the user to buy the product with lower price as well as a retailer can offer a competitive price. Companies use single or more than a business model to offer their products and services to the customers (Veit et al., 2014).

E-commerce evaluation system

E-commerce evaluation system

Environment factor — Chinese context

Schiffman et al (2016) explained that the attitude of the consumer varies significantly in the online shopping and market environment is a major determinant. The consumption preferences, cultural impact, as well as demand variables, effect the online shopping environment. The factors, which affect the attitude and perception of the online customer, are the transaction and information security, price of the product, the speed of the network, overall shopping experience provided and quality of the vendors has been studied as important determinants of the customer shopping over the internet.

Political Factors

The political factors determine the impact of the government decision and action on the business situation and environment. For example, a government might pass new legislation, which affect the online right and duties of the retailers, or regulatory requirement, which affect the operations and processes of the company.

In China, government has strong control and influence on the online operations of business. The political actions have direct effect on the business and have long-term implications. The excessive monitoring and control of internet activities has forced companies to comply with government regulation (Nejati, Nejati and Shafaei, 2016).

Economic factors

The economic variables examine the impact of the economic situation in the country. This is useful to determine the economic trends, income, taxation and seasonality issues related to sales of the business. For online, it is useful to determine the ability of the people have gadgets and consequently, the amount of money they are likely to spend for online shopping. In China, per capita of Chinese customer, $3,685 has made disposal income   but plastic money is less popular than cash. (Nejati, Nejati and Shafaei, 2008)

Social factors

The social factors are useful to analyse and evaluate the lifestyle and demographic of the people. The social patterns are useful and relevant to online to business because it helps to understand the people attitude and perception towards the online shopping as well as reaction to specific activities of the company. The social system in China is distinct with strong family structure and consumer decisions are influenced by reference group (Hacklin and Wallnofer, 2015).

Technology Factors

Colla and Lapoule (2012) clarified that the technology factors are important in the today era of the globalisation and it is useful to understand the technology development and adoption in the specific country. For example, it highlights variables such as replacement of technology, the maturity of technology as well as consumer use of technology to buy products over the internet. The technology is an aspect for the company who is planning to offer to the product in the online environment. The rise of smartphone has revolution m-commerce in China and more customer adopting online transaction (Hacklin and Wallnofer, 2014)

Research Methodology

Choice of methodology – Exploratory research

Johnson, Onwuegbuzie and Turner (2014) described that the research method plays an important role in the success of the research. Exploratory research is useful to analyse the situation and develop knowledge when there is no prior knowledge is available. The exploratory research is useful to answer what situation. Moreover, descriptive research is useful to examine the event and scenario. It is useful to find answer from the where and when situation.

Explanatory research is useful to answer variables such as how a when situation and it allows to understand the causes and effect of the variables based on their relationship. In this study, descriptive research will be used to examine the scenario. It would allow understanding the situation from the information from different perspective (Mukherji and Albon, 2015).

Justification of choice

For this study, exploratory research will be used to explore alignment of e-commerce business model of sunning and customer acceptability. This would allow developing strong understanding of e-commerce business development and implementation in China. Exploratory study is useful to develop initial understanding of problem and provide foundation for further research.

Research Approach – Inductive reasoning

The inductive approach allows the researcher to collect a large amount of data relevant to interest area. A large amount of data allows the researcher to look for a pattern and develop a theory that is useful to explain the patterns. Therefore, in the light of inductive approach researcher moves from data to theory whereas in deductive approach research starts with social theory and then tests its implication with data. The deductive approach allows analysing the past literature and developing hypothesis whereas inductive approach allows the observational framework to theoretical framework (Teddlie and Tashakkori, 2015).

Rational for research approach

In this study, inductive approach would be used, as it would allow developing an understanding from the data and leading to develop knowledge to describe the alignment of e-commerce business model of Chinese electronic retailers and customer acceptability. The primary data collected would allow the generalisation of data and proposed framework, which provide better understanding of the environment factors for selection of appropriate e-commerce platform to alignment with market and achieve customer satisfaction.

Research Design and strategy

Smith, Flowers and Larkin (2016) explained that the design of the research is an important phase to understand how data will be collected and explored to answer the research question. The advantage of conducting the qualitative research is that it is useful to develop an understanding of the event and consequently allow developing a hypothesis from the description of the event. Furthermore, quantitative research is used to confirm the hypothesis and based on the rigid structure. The qualitative approach is useful understand and interpret a large amount of data whereas quantitative approach allows to examine large sample of the population.

Benefit of mix methodology for this study

This study will use the mixed methodology to examine the alignment of e-commerce business model of Chinese electronic retailers and customer acceptability. The qualitative approach will be used to explore and examine the e-commerce strategies and practices through conducting interview with e-commerce manager of the company whereas quantitative data will be used to explore the customer attitude and acceptability through a questionnaire. The triangulation approach would allow increasing the reliability and validity of the research (Mukherji and Albon, 2016).

Research strategy – Descriptive case study

Maxwell (2012) elaborated that the research strategy used for this study is based on the case study approach, which would allow conducting an in-depth analysis of the situation, and offers the flexibility of exploring information from the wider perspective. Moreover, it would allow generalizing the information, interpret and summarize the results.

A studied approach offers the flexibility to collect, analyse, evaluate data from various sources, and understanding the relationship among the variables through generalizing the finding. The application of the case study allows collecting the data in natural context with affecting or controlling the situation and therefore, the event is examined in a real-life situation (Pawar, 2015).

Suitability of case study approach

The relevance of the case study for this study is that it would offer the flexibility to analyse the result from the companies and user perspective and generalize these result. The triangulation would allow increasing the reliability and validity of the research. The use of the mixed methodology would allow increasing the reliability and outcome of research. The qualitative approach will be used to conduct the primary through conducting the interview of the e-commerce manager as well as quantitative approach would allow to understand the customer preference and adoption of the online shopping though a survey. Case study would allow integrating, generalised the data to presented results, and propose framework (Yin, 2013).

Data Collection

Qualitative data

The primary data collected for this research will be based on conducting the interview of the e-commerce manager of the company. The qualitative approach will ensure the information is collected and analysed in greater depth. The sample size is limited to the single user because of time and size of the research. An interview offers an opportunity to conduct a direct conversation between two people. The format of the interview for this research will be a semi-structure interview (Flick, 2014).

The interview with IT manager has agreed through personal contact. However, to protect confidentiality no personal information will be collected. Moreover, competitive data related to IT operation will be collected and IT manager can refuse to answer any question to protect confidentiality of processes.

Population Description

Sample sizeSampling
IT Manager1

Nonprobability

Quantitative data

Gillham (2014) highlighted that the attitude and perception of the customer will be explored using the quantitative approach, as this would allow exploring the acceptability level of the customer. The questionnaire will be conducted using the sample of 50 customers based on the random sampling.

The survey will be based on the open-end and closed questions and customers selected will be asked who are intended to make online purchase and their preference for online shopping. The integration of the data using the case study approach would allow exploring the company practices and customer perception. The customer will be approached using the social media platform ‘Renren, Manzuo and Douban’ (Brace, 2013).

Population DescriptionSample sizeSampling
Online Customer intended to make online purchase50Random

Practicalities

The research conduct will be design in such way that practically, it is feasible and manage in the defined time as well as research can complete the research. The research will avoid the data collection process, which is practically not possible such as conducting senior management interviews or reaching confidentiality information about the company.

Additionally, the objective of the research draws conclusion and finding which could practically help the companies to deploy their e-commerce platforms and deliver product and services, which meet need and expectation of the customers. The data analysed and results will be produced in such manners, which help the companies to develop insight about the e-commerce success in the china and increase the acceptability of e-commerce among the Chinese customers (MacKenzie, et al., 2016).

Ethical aspects

The increasing participation in research raises the concern about the relationship of the respondent with the researcher. The interaction of the researcher and respondent affect the relationship between them and i.e. it is important the privacy and confidentiality of the respondent must be preserved all time.

In this research, the privacy and confidentiality of the respondent will be managed in a strict manner. There will no personal information collected about the respondent as well as before the start of survey respondents will be asked to provide consent about their participation in the research. Moreover, no information about the company, which might affect the competitive position or consider confidential data, will be collected. After completion of research interviews and survey will be destroyed in safe manner (Babbie, 2015).

 

 

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