Economics

The growth of the internet has given retailers a new forum to hawk their goods.  The time when retail stores were limited to physical stores in malls and agoras is long gone.  Now, consumers can make purchases on the go and online with simply the click of a button.  This has changed the retail landscape and made it imperative for any retailer who wants to expend his or her market to explore the Internet Concept of Supply and Demand vis--vis online merchandising.

1.Discuss the ways companies use the Internet to sell andor market merchandise.

The birth of the internet has allowed vendors to expand their stores into cyberspace.  The face of conventional shopping has been changed.  No longer is shopping limited to physical methods such as going to visit stores but it has now turned into cyber-shopping.  As of 2006 figures have shown the growth of online shopping in the United Kingdom alone to be estimated at 24 million UK consumers who spend on average 1513 each during the year.  With forecasts predicting that e-commerce will grow by 36 in 2006 amounting to 49 billion, There can no longer be any doubt that the internet is a major part of the retail landscape, and that it will dominate the retail agenda for the next several years, according to IMRG managing director Jo Tucker.  Companies have taken to the web to advertise and even sell their products, launching online stores and retail outlets for shoppers.

2.Explain the ways the Internet has expanded the available supply of goods.

There is an enormous variety of the goods and consumer items available through online shopping makes it more advantageous for some people to shop online as opposed to traditional shopping.  The enormous variety of items available for online shopping makes cyberspace the largest mall in the world.  A single search query on any internet browser will yield hundreds if not thousands of results.  Combine that with the relative ease by which a person can also research on the pros and cons of items and a wise shopper is created.  The variety on ebay, the largest online auction store in the world, is enough to fill the entire state of Texas.  All the choices that are available online and the price advantage that is offered and the convenience all make the internet the shopping haven for any shopper.

3.Explain if the use of the Internet tends to increase or decrease prices.

The internet is currently the largest market and offers shoppers the largest stores and vendors the largest markets.  With the total number of online stores pegged at nearly 1 billion, the competition for the money of online shoppers is fierce to the point that anyone who does a fairly diligent search online will be able to find items at prices lower than one can find through traditional shopping.  For retailers this is also a big cost in expenses as it negates the need for a physical store for marketing their items and also greatly reduces overhead costs allowing them to offer the goods at relatively lower prices.

4.State whether the retailer faces more competition online or in its retail stores.

With fewer barriers to entry such as capital expenditure for setting a shop and overhead operational expenses, an online shop will offer more competition than a retail store.  The fewer barriers to entry exist, the more competitors there will be in a market.  In this case, the fact that all that is needed is a website or an account with eBay or Amazon makes it more accessible and viable for competitors selling similar, if not identical items, online.

5.Explain the concepts behind supply and demand for your clients.

The market price of a good is determined by both the supply and demand for it. In 1890, English economist Alfred Marshall published his work, Principles of Economics, which was one of the earlier writings on how both supply and demand interacted to determine price. Today, the supply-demand model is one of the fundamental concepts of economics. The price level of a good essentially is determined by the point at which quantity supplied equals quantity demanded.

6.Address the issue of supply and demand toward expanding the online merchandise.

As previously mentioned, there is more supply than demand in online merchandise.  The reason for this is that while there certainly are a number of countries that have internet access for their citizens, not many countries are equipped with the software and infrastructure to take advantage of online shopping.  In several countries, the terms of payment and credit card access is quite limited so that while they may have access to the stores they are unable to make purchases.  Since the clientele is limited by these factors, there is an over supply because the sellers to not face the same constraints.

7.Give your client a recommendation as to whether or not to expand its online merchandise.

Depending on the target market and the goods sold, online merchandising is an alternative.  In the case of consumer goods, it is advisable to sell online only if the cost of shipping justifies the reduced operational expenses.  It will also depend on the target market because, as previously mentioned, there are barriers that prevent people from buying depending on their location.  The safest bet is to advertise the products online and piggy-back on existing online retail sites such as eBay in order to reduce expenses and maximize opportunities rather than setting up the infrastructure for hosting and operating an online retail store.