Literature Review - Failure of Online Retailing Marketing

Literature Review - Failure of Online Retailing Marketing

This Literature Review Failure Online Retailing Marketing discuss about Online shopping and E-commerce website for retailing.

Chapter 2 Literature review

2.1 Research background

There have been numerous researches on the online retail store concept in view of developments in the online retail model, consumer buying behavior towards online retail segment and reasons which lead to failure of online retail. Present section would deal with the researches in the area of online retail segment so as to understand the existing research and their finding so as to enrich content for the present research framework.

Dejan (2006) explored the area of consumer behavior in online retail segment so as to understand consumer buying process in the online retail segment. A survey was conducted in order to understand the difference in the conventional buying behavior and online buying process. From the research it was found out that process of online buying is quite different from the conventional buying process as it involves data collection regarding product, price comparison and other details. Further online buying process is dependent on the online marketing tools to which consumers are exposed to such as the email marketing or other online marketing tool unlike traditional retail communication which normally propagates through mass media channels and through referrals as well.

Shun and Yunjie (2006) explored the area of online retail segment in order to understand the product categories which are most likely to be sold through online retail stores. Also research paper on the reasons for specific product categories to be more sold through online medium while some product categories are not so much popular through online medium. This research highlighted that product categories such as the books, software, electronic and music are among the top rated categories which are sold through online medium due to the simple reason that these product categories does not require personal inspection from the consumers.

A study conducted by Opazo et al, 2008 have explored the area of online retail stores in order to find out the consumer perception towards the online shopping medium as compared with the physical retail channel. Further the major objective of the research was to understand the factors which are of immense importance for the consumers in online retail segment. Primary data collected in order to understand consumer perception towards online retail segment has highlighted that trust, convenience and price are the three important factors which are attracts consumers into an online retail business.

A study conducted by Harris, 2009 regarding consumer experience in the online retail segment has highlighted that consumer experience in the online retail segment have touched all time high in year 2009. Customer experience improvement in the online retail segment has obtained success in terms of the lesser number of failures in transactions, interactive user interface and better shipping service provided by the online retail marketers for their targeted consumer behavior  segment. Further survey conducted in the research has noticed some of the major factors which resulted in the downturn for the online retail segment and some of the major reasons involved were economic slowdown, failure of transactions, lack of information security and complex return policies of the online retail stores which created negative sentiments for the consumers into the online retail segment.

Rishi, 2010 has conducted the research pertaining to the online retail segment in India focusing on the innovation into the retail domain with the development of more and more online retail channel distribution. A survey was conducted with the online retail traders in order to know the benefits which they are having through selling the goods with online retail medium in comparison to the sale made through physical retail channel. Research has found out that physical retailers have even created their online presence in order to cater wide customer segment, to save cost in terms of human resource and to avoid limitation of store size.

2.2 Online shopping

Online shopping is not the new phenomenon in current technology driven age and online shopping share many similarities with the traditional shopping behavior still there are vital differences between the online shopping trend and traditional shopping behavior. At one side online shopping behavior is exhibited by the customers who are quiet techno savvy and want to save efforts in form of time and interactive services (Zwass, 1998). While traditional shopping behavior is exhibited by the customers who are looking for quality products and comfortable shopping environment with high reliability.

Both traditional shopping trends and online shopping trends now a day trying to merge into each other as traditional retail marketers are providing high degree of convenience and time saving to the consumers through adoption of high end technology in the shopping malls (Sheth, 1983). While online marketers are trying to emerge the trend through virtual   reality where in presentation of products would improve significantly. Hence by providing the additional features through traditional and online retail category both the shopping trends are emerging into each other.

2.2.1 Internet shopping trend

Internet shopping offers a unique and comfortable shopping experience to the consumer who does not have much time to spend for their shopping. A recent literature in the field of internet shopping behavior reflects that internet shopping experience can be significantly affected by the type of products and services offered through internet shopping. There are three major factors which proves significant in order to create unique online booking shopping experience and these factors are technology, convenience and product & price.

Literature Review Failure Online Retailing Marketing

Technology is the driving factor for the increasing popularity of the online shopping trend around the world as technology creates the convenience for the shopper of online shopping in retail segment. Recently online retailers have recognized the importance of technology as the changing driver for the retail segment where in technology such as virtual reality and 3D can make significant improvement in the current age marketing tactics for the online retail segment (Anfuso, 2004). Technology has not only supported internet shopping in form of better product presentation but information security, product information and accessibility has been improved significantly which attracts the consumers towards online shopping trend. Technology is considered as the enabling factor for the online shopping trend in India and with increasing number of consumers using the internet online shopping consumers are also increasing day by day.

Another important factor related with the technology and pertaining to the emergence of online shopping trend in Indian retail segment is the introduction of information security parameters. Though there are several security concerns for the internet security while using the internet for providing financial details and it is one of the top most hurdles among the consumer segment in India to make usage of the online shopping into retail segment. Development of the global virtual team like technology into the online shopping arena has helped in order to evolve interactional shopping behavior where in consumers would be able to access more information about the products and services offered by the marketers.

Second factor which enables high number of customers to adopt online shopping is the convenience which customers get through online shopping as agreed by many researchers and consumers. Online shopping allows customers to make purchase at any time and from anywhere. With the advancement in the logistics services these products ordered by the consumers are delivered to them within very short span of time. Convenience for the customers can be in form of cost saving which they get by saving the transportation cost, in terms of time which they get by avoiding long queues and in terms of choice as they are not exposed to salesman pressure in the shopping malls. Further online marketers’ offers free replacement within stipulated time which is added convenience factor for the consumers (Zwass, 1998).

Major feature which online shopping allows these days to consumer is wide range of products which belongs to many brands and posses lots of variety which consumer demands these days. The wide ranges for the particular products are not available at the shopping malls or any other place and hence online shopping becomes the source of such wide range of assortments for the customers. Further online marketers offers complete information (technical and non technical) regarding products offered which are sometimes not even known to the salesman in the shopping malls (Black, 2005). By reducing the expenses in form of no physical presence online marketers are able to offer the products and services at much lesser cost in comparison to the traditional marketers in the shopping malls. Further these days online marketers have started the bidding process in order to provide customers lowest price and their desirable price for the particular product (Sheth, 1983).

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2.2.2 E-commerce website

E-commerce can be defined as the medium through which business organizations share business information, establish relationship with the consumers and carry out the transactions in order to recognize the revenue through their products and offerings. For example business information sharing process for an online retail book store can be through sharing of book database which can be done through email, shared database, web based forum and EDI etc. These sources for the retail marketers enable them sharing information system with their targeted consumer base based on which further relationship can be established (Olsen, 2003).

For business organization major motivation to get into online retail business is the low cost model which organization develops through ecommerce mode where there are no heavy expenses or cost to attract the customers as well. Further there were several problems existing for the online marketers in the marketplace which now a day have been completely resolved such as taxes, tariffs and currency rates etc. Considering both opportunities and challenges offered through e-commerce mode it is advantageous to adopt the ecommerce model for the business organization (Bulkely and Carlton, 2000).

There are three major components of an e-commerce website based on which entire ecommerce model works and these components are buyer, seller & buyer, ecommerce website and products & services. All the three components are vital to the entire model of ecommerce and there are specific expectations through the commerce stakeholders. Advantages offered through e-commerce for the Business Requirements can be categorized into four parts which are revenue expansion, cost reduction, time reduction and relationship enhancement (Maignan and Lukas, 1997). Cost reduction for the online business can be in the form of store rent and human resource cost reductions which are not the part of the online retail organization.

Revenue expansion for the organizations can be done as offering products with much lower cost in comparison to the physical distributor enhance the volume of online buyers. Further referral program offered by the online marketers involve multiple customers by increasing the overall revenue of the business as people can easily refer products and services used by them which can be done through viral marketing and offering discounts for the consumers who refer to others. customer Relationshipcan be enhanced by offering multiple products to the same customer or adding additional customers from a single customer which are the popular business models in online marketing businesses (Cassell and Bickmore, 2000).

Time reduction for the online business organization can be done in form of updating instant information about the products and services which takes time generally in case of the traditional stores. Also sharing wide information with the consumers is not possible in case of the traditional stores while online businesses offers wide information regarding products & services and they can even obtain consumer feedback on their products & service which is not the case with the traditional store retail outlets (Lee, 2001). This feedback system not only saves the time for the business organizations but the relationship with the customer also gets enhanced through more and more interaction process.

2.3 Online retail in India

Online retail trend is not a new concept in the Indian retail market but the emergence of the current online retail trends which are surrounded by the technology and latest consumer demands is quite a new concept. Basic philosophy behind the online retail strategy is low time and techno savvy consumer in the present age which does not put up so many efforts so as to adopt the traditional shopping behavior (Han, 1996). So online retail is present from long time into market but adoption of the online retail into the Indian markets is very low due to several factors such as the consumer traditional buying behavior, slow technology adoption in India and lack of online financial trasnaction security system in India.

In Indian retail markets many attempts have been done in order to penetrate the retail consumer markets with several product categories such as the fashion goods, foods & beverages, grocery and travel services etc. But till date only 1% of the entire retail market in India is dominated by the online retail activities while rest of the consumers have still adopted the conventional shopping methods and are habitual of buying through the shopping malls and other physical centers only. Comparing the present situation for the number of consumers using the online retail for their shopping behavior only 8 to 10 million people are making use of the online retail websites in order to order their goods while among rest most of the consumers are not even aware of the methods of online purchase. It is expected that by the end of year 2015 in India there would be total population of more than 40 million who would be making use of the online medium in order to accomplish their daily purchasing in place of using the conventional methods for the daily purchase items. Hence in coming time growth in online retail industry is expected at a huge pace.

2.4 Process of online retail

An online retail system is opposite to the brick and mortar system where in physical centre is established in order to distribute goods among the consumers. Online retail is a form of electronic commerce system where in consumers is directly interacting with the seller on the internet and can order goods without getting in physical touch with the goods. An online retail system for buying or selling of goods is called as the business to consumer as end users are directly involved in the process of buying in place of any middle man who would send it to the end consumers.

For the purpose of commercial usage e-commerce has started in year 1991 and subsequent to that there were several emerging technology in the field of electronic commerce in form of online banking, online pizza shops and online book shops such as the Amazon.com. Websites which created history with their online presence and revolutionalized the entire electronic commerce media was ebay.com and amazon.com were established in year 1995 with which a whole new era of electronic commerce started. With the success of these websites into the commerce field several marketers has started their online presence and it become important for the retail marketers to remain present on the online media so as to advertise and promote themselves among the target set of customers.

In order to become an online consumer for the retail industry it is important for the customer to have access to the internet and necessary information technology infrastructure in order to access the online website. Further looking at the consumer behavior it has been observed that the consumers with high education level, young level of age and high income level would like to make higher number of online purchase in comparison to the customer segment which does not corresponds to the mentioned demographic segment. Further at the web portals which are offering online retail services there are several facilities and features which help the consumers to make easy selection for them.

2.4.1 Website facilities and features

There are so many websites launched for electronic commerce in the online retail market but customers would like to make purchase through only selected websites as these websites have special facilities and features in terms of designing and web development. User interface is one of the most important factor to which consumers are attracted to and it shows friendliness & simplicity a particular website depicts for its consumers. In order to improve the user interface of the website usability test can be conducted which would provide areas of improvement where in marketers can enhance usability of the user interface.

Another feature which is provided by the current age online marketer is the 3D visual display which helps users to take a complete 3 dimensional view of the products ordered by them. Better display provided would help customers to make faster decision making by having a complete 360 degree view of the product. Shopping cart is provided in order to choose the products which are liked by the customer and customer can make purchase in future. Bidding is another major feature offered by the online marketers so that customers can make their desired bid at which customer want to buy a particular product. Newsletter and additional information is offered by the online marketers so that customer can obtain complete information regarding the product features and technicalities.

Customers are provided with the user identity and password by creating their account so that customer information can be tracked easily. Further through these accounts and with usage of social media customers can recommend the products and services to their friends & relatives for whom customers are being paid special gifts and discounts from the online marketers which initiate the viral marketing and proves quite successful in many of the online marketing products such as lifestyle industry and telecom industry.

2.4.2 Logistics and payment

Customer visit the website of the company in order to choose the desired product which would be selected and would be placed in the shopping cart provided by the online marketer. Customer can choose multiple products with the different quantities and these can be placed in the shopping cart for the present or future purchase as well. Once customer would checkout with the selected products into his cart bill would be generated and ordered goods would be shipped to the customer within given time frame. In case Retail Company is having sufficient stock goods would be delivered with 2-3 days of time but most of the time after customer order, company would place an order with vendor and same would be sent to the customer within 7 to 10 days of time.

Payment can be done by the customer by multiple ways such as cash on delivery, through credit/debit card, net banking and gift cards etc. Also several money exchange portals such as the PayPal can also be used in order to facilitate the international payments as well. Online retail companies now a day usage high degree of security in order to safeguard the financial transactions as several incidents have been reported in India regarding fraud of the online financial transactions due to which several customer hesitate while making online purchase.

2.4.3 Customer feedback and discussion forums

In order to enhance customer interaction online retail marketers enables the customer feedback so that feedback regarding products and services of the organization can be obtained from the customer who would help in order to improve the products and services of the organization.  In order to accumulate customers and create awareness among the customers discussion forums are made where in customers can discuss regarding products and services of the company and these discussion forums are moderated by the online marketers.

2.4.4 Online retailer marketing strategies

Marketing is the key activity which current age organizations focus as there is fierce competition in the market among several players in electronic commerce industry. In order to compete against their rivals in the industry online retailers are adopting several tools and techniques such as lowest pricing in the industry, quick delivery, wide variety range and attractive marketing communication techniques.

Marketing communication techniques adopted by the current age marketers are multi fold and at the same time numerous tools are used in order to develop an integrated marketing communication process. Most critical tool which is helping online marketers is the social media through which viral marketing and awareness is created by the organizations and it has become the source to address the target audience in masses. Other than social media online marketing tools such as the email marketing, e-banners and search engine optimization are being used.

2.5 Major online retail players in Indian market

Indian online marketing industry is having several players but entire online retail industry is dominated by few players which were established earlier and developed competitive technology in order to safeguard against the information security attacks. Ebay.com and Amazon.com has been proved the success story in the online retail industry and their dominance is also continued in the Indian market but their market share is quite low in the Indian markets as well.

Besides the big names very small online retailers who were established recently in the Indian markets have gained vital market share through their innovation in the online retail industry which includes online retail players such as the naptol.com, yebhi.com, indiatimesshopping.com and jabong.com. These small firms are being funded through venture capitalists and these firms leverage on the newly established viral marketing campaign where in major marketing strategy of the organization revolves around the referral system through their existing clients. Based on the industry domain several online marketers have established themselves and are running their business through web portals.

Further in the recent success stories in the online retail marketing in Indian retail sector some of the big names are flipkart.com which is the organization dealing in the books, electronic equipments, clothing’s and similar accessories. Another big name in the Indian retail industry is mymantra.com which is having a unique concept through providing multiple brand items in the single roof. Jabong.com is the fast evolving online retail store which is having its USP through low costing products and wide assortment which is not available with the competitors in the market. Redbus.com is another unique retail business concept developed into the travel industry and proves a success story with the unique concept of providing the bus tickets through online medium giving high convenience for the customers.

2.6 Benefits of online retail- value creation

Online retail model creates high value over the traditional brick and mortar model in terms of several factors which are of immense importance to the customer & marketers and can be given as below:

Value creation for customers

  • Convenience: Convenience is the prime factor which motivates customers to go for online shopping instead of the conventional shopping methods as customers can buy goods at any point of time and from anyplace with just a click. Major inconvenience faced by the consumers these days in the shopping malls is in terms of parking issue and long waiting queues for the billing of goods which can be avoided through online shopping process. Online shopping process provides convenience through easy to navigate store, easy buying process and very efficient logistics system which deliver goods within very short span of time.
  • Competitive pricing: Online stores provides you with the facility to compare price for the goods with several other market players and even several online store offer customers to make a desired bid for the goods and in case their bid is competitive, customers can avail the goods at bid price only which is not the case with the physical store. Further competitive pricing offered by the online store can be due to the reason that online store does not have fixed cost such as the physical retail counter and human resource cost. So online retail stores can gain higher margins and some part of the margins is given to customers in form of cost saving and thus online stores are quite competitive organizations in comparison to the physical stores in terms of the pricing.
  • Wide variety: Online stores these days comprise of goods with multiple brands and there is high variety contained by the online retail stores which can be ordered by the customers instantly. Due to high cost impact physical retail stores are not able to maintain such high variety for the goods due to which online retail stores are preferred by the customers in comparison to the physical retail stores.
  • No impulse buying: Sales person in the physical retail stores have been trained in order to create pressure on customers and to make the impulsive buying which is not the case with the online retail store where in customers are not being influenced through any sales pressure. Thus customers feel free while making purchase from online retail store and there is better decision making done.

Value creation for marketers

Online retail stores create value for the marketers as well which can be given through below mentioned factors:

  • Inventory efficiency: Online retail stores are able to offer wide range of assortments in comparison to the physical retail store and in much lower cost. There are no store size limitations for the online retail stores and direct tie up with the vendors for online retail stores help them to maintain nil or very low inventory with them and still they can offer customers a wide range of variety in each segment of product. Hence at one side retail outlets are able to lower down their cost by maintaining minimal inventory while at other hand they are able to offer much high number of assortments to their customers which are not possible with the physical retail stores.
  • Global marketplace: With the help of online retail stores, marketers would be able to enter into the global marketplace where in there are no physical boundaries for the business. Consumers around the globe can visit the website and can order their desired goods through the web store which is not the case for the physical retail store where in only a limited area can be catered by the retail store. Hence for online retail stores potential can be tapped into much wider area not only into a specific nation but around the globe where potential customers of the company are present.
  • Access to consumer review: With online retail stores it becomes very easy to access the consumer review with the simple feedback form or rating the products and services of the company post purchase. These feedback received from the customers would allow the company to make required changes in the products & services and to align overall marketing focus on the customer wants & desires which should be the real aim of the marketing strategies.
  • Savings in human resource cost: With online retail store initial investments made by the store owner is quite low and human resource cost can be completely saved. For physical retail store other than fixed cost major part of the cost is formed by human resource cost which is the major function for the operating cost and the same can be saved for the online retail store giving high efficiencies in the business. By saving the human resource cost not only the retail store saves human resource cost but the overall business risk for the business owner can be minimized.

2.7 Motivation of growth of online retail in India

In recent time online retail has evolved significantly in Indian markets, though penetration among overall consumers is not that much significant but the growth scenario has given positive sign for the future development in the online retail segment. Growth in Indian online retail segment is motivated through several factors which are the driving force behind success store for the online retail market in India and can be given as below:

  • Consumer demography: Among Indian retail consumers more than 48% of the buyers have age range from 17 years to 35 years which is basically due to high number of young population in India. These young consumers are not habitual of buying through traditional retail stores and due to lack of time this segment of customers would prefer buying through the online retail stores which has given motivation to the online retail stores in India. Further young population have access to the hand held or other communication device so that they can easily access to internet and accomplish their purchase.
  • Development in internet technology: Recently there have been several changes in the internet technology in India and due to which accessibility to the internet has increased to the common masses. This change in technology is basically due to the introduction of smart phones and emergence of 3G technology in India. Thus development of internet technology has helped the users to gain information regarding the online stores and product information which was the major issue earlier. Hence with further improve in the internet technology and development of the information security systems in India penetration towards the online retail store would be having better growth opportunities as well.
  • Development of financial markets: Financial markets have also gain high growth in the Indian markets with development into the paper money field through debit cards and credit cards. Initially there was very low penetration for the credit cards which lead to low motivation among consumers to make online purchase as credit cards is one of the most popular methods to make payment in the online purchases now a day. But now several credit card players have entered into the Indian markets and banks have also enhanced their focus towards the paper money distribution which leads to high access of credit card among the consumer segment which ultimately motivated the online shopping habits among the consumers in India.
  • Competitive pricing and ease of use: Another major factor which lead to growth of online retail in India and have attracted Indian consumer most is the competitive pricing and ease of usage. Indian middle class consumers are quite sensitive to pricing and online retail stores have given competitive pricing to the consumers in comparison to physical retail stores due to which consumers have been attracted towards the online retail stores. Working people do not have much time in order to complete their shopping hence online retail stores offer them high convenience as working people can make their order from home without any hassles.
  • Social buying behavior: With advancement in technology consumer buying behavior has also undergone vital change where in people observed market trend and buying behavior of their society. Further people would like to socialize through social media and buying has also become a part of the overall social media for the consumers. With social media playing vital role consumers would like to take suggestions and recommendations from their friends while making a purchase which can be made possible through online retail stores in comparison to the physical retail stores. This feature of online retail stores has motivated current age consumers to attract towards the online retail stores.
  • High number of online retail players: With very low initial cost being paid in order to start the online retail stores, several online retail players have entered into the online retail markets which have benefited the retail consumers as these retail players have different marketing strategies to attract the consumers. Another major reason for high number of retail players in the market is due to the reason that there is very low penetration among the online retail consumers which gives high opportunity for growth of online retail stores.

2.8 Reasons for failure of online retail framework in India

Online retail segment in India has not been successful in order to make a mark for itself in such a huge retail industry. Such low penetration of the online retail industry in India can be termed as the failure of online retail framework in Indian markets. Failure of online retail framework in Indian markets is inspired by several factors such as mentioned below:

  • Lack of information security: Information security systems developed in India are on their primary phase where in not much of information security systems have been developed which results into many instances of invasion into financial information. Due to lack of financial information security people in India are quite reluctant to share their financial information with the online retail stores which create hindrance in developing online sales model.
  • Lack of awareness among Indian consumer: Most of the Indian population resides in the villages and small towns where in internet technology and infrastructure does not have proper penetration. Due to lack of penetration for the internet technology people in these areas are not aware of the online retail stores and methods to make online purchase through these stores. A big consumer base resides at the location where due to lack of connectivity people are no able to make online purchases. Further online marketers have also not penetrated into such geographic location as there are no facilitating medium based on which marketers can attract these consumers to make online purchase through their portals.
  • Reluctance to continue traditional shopping: People in India have adopted the buying behavior to buy from small nearby shops where in they have good relation with the owner of the shop. Now consumers are reluctant to switch from these sellers due to personal relations as well which creates hindrance in adoption of the online retail in comparison to the physical retail stores.
  • Touch and feel effect: In order to make a purchase decision in several product categories it is important to have touched and feel of the product then only consumers would be completely satisfy with the product quality. With online retail store there is no touch and feel of the product due to which consumers are not able to satisfy themselves with the product quality and proper decision making can’t be done without actually checking the product by having touch and feel of the product.
  • Bad experience: In recent time Indian online retail segment has observed several bad experiences in terms of fraudulent financial transactions and bad service quality from the online retail marketers. These bad experiences in the online retail segment have created the negative marketing for the online retail store where in people are reluctant to associate with the web store due to these experiences.
  • Logistics issue: In India, shipping services are not up to the mark which creates several issues pertaining to shipping such as product loss, delay in shipping and high cost of shipping. Due to bad shipping services several time consumers have to face problems which create conflict between the consumer and online retailer and consumers are not ready to make online purchase in lieu of bad shipping experiences. In order to improve the shipping issue, online retailers’ needs to collaborate with the established shipping organizations and online retailers should bare the charges for the shipping cost.
  • Language barrier: India has a large population which is not even verse to read and speak English language. While most of the online retail marketers have designed their websites in English language only due to which it creates the problem of language barrier between the consumer and online retailers.
  • Lack of customization: The most important feature which is offered through physical retail marketers is the high level of customization in the products such as fashion clothing which is not available with the online retail marketers. Online retail store sells only standardized products as they do not have direct interaction with the consumers. Consumers expects and are habitual of customized products which can’t be served through online retail store hence consumers are not ready to adopt online retail stores due to lack of customization in offered goods.

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