The digital era has transformed how businesses operate, with online platforms becoming vital to customer access, marketing, and strategic direction.
The Rise of E-Commerce, Mobile Apps, and Digital Marketplaces
E-Commerce
E-commerce refers to the buying and selling of goods and services over the internet, a practice that has seen exponential growth in recent decades. It includes various models such as:
B2C (Business to Consumer): Retailers like Amazon and ASOS.
B2B (Business to Business): Wholesale platforms like Alibaba.
C2C (Consumer to Consumer): Peer-to-peer platforms like eBay and Depop.
The rise of e-commerce has been driven by several key developments:
Widespread internet access: High-speed broadband and mobile internet have made online shopping accessible to a broader population.
Secure payment systems: Integration of services like PayPal, Apple Pay, and verified payment gateways has reduced fears around online fraud.
Trust in delivery infrastructure: Logistics firms such as DPD, DHL, and Hermes have enabled reliable last-mile delivery.
E-commerce eliminates the constraints of physical location, allowing businesses to reach a global audience. For instance, a small craft shop in the UK can sell products to customers in the US, Asia, or Australia without needing physical stores.
Mobile Applications
The development of smartphones has made mobile apps an essential part of modern business strategy. These apps allow businesses to engage with consumers on a daily basis, offering:
Convenience: Shopping, booking, or managing services from the palm of one’s hand.
Real-time communication: Push notifications about sales, order updates, and promotions.
Personalisation: Based on previous browsing, location, and preferences.
For example:
Domino’s Pizza allows users to order in seconds and track their delivery via GPS.
Banking apps allow for immediate transfers, card controls, and budgeting tools.
Apps support brand loyalty by offering enhanced user experiences and encouraging repeat business.
Digital Marketplaces
Digital marketplaces are platforms where multiple sellers can offer goods or services. These marketplaces provide:
Increased exposure for small and medium-sized enterprises.
Customer trust, as platforms often handle payments, refunds, and sometimes even logistics.
Ease of comparison for buyers, which encourages competition.
Examples include:
Etsy for handmade products and niche crafts.
Amazon Marketplace, where third-party sellers list items alongside Amazon’s own.
Uber, a digital marketplace for transport services.
Marketplaces benefit from network effects – the more users (buyers and sellers), the more valuable the platform becomes. They often dominate sectors due to first-mover advantage and scalability.
Impact of the Online Shift on Business Functions
Consumer Access and Expectations
The shift online has significantly altered how consumers access businesses and what they expect in return. These changes include:
Anytime, anywhere access: Customers can shop at midnight or during lunch breaks, removing time and location barriers.
Wide product availability: Online catalogues are often larger than what can be stocked in-store.
Faster information retrieval: Product specifications, reviews, videos, and Q&A are readily available.
Greater transparency: Customers can see competitors’ prices, reviews, and delivery times before making a purchase.
With these developments, expectations have risen:
Fast delivery: Next-day or even same-day delivery is expected in many sectors.
User-friendly design: Websites and apps must be intuitive, responsive, and fast-loading.
Secure checkout: Customers expect encryption and trust badges to protect their data.
Customer support: Real-time assistance through chatbots or human agents has become the norm.
Failure to meet these expectations can result in cart abandonment, poor reviews, and loss of business.
Marketing and Logistics
Marketing
Online businesses operate in a data-rich environment, which has transformed marketing from broad campaigns to highly targeted strategies.
Key components include:
Pay-Per-Click (PPC) advertising: Businesses pay to appear on search engines or social media.
Social media marketing: Platforms like Instagram, TikTok, and Facebook allow businesses to reach and engage audiences directly.
Influencer partnerships: Collaborations with individuals who have niche or mass followings to promote products.
Retargeting: Ads are shown to users who visited a website but didn’t complete a purchase.
Email campaigns: Personalised messages based on user behaviour, such as abandoned basket reminders.
Data collected allows A/B testing – running two versions of an ad or page to see which performs better – and Customer Relationship Management (CRM) to segment and retain customers.
Logistics
Logistics has evolved in the online era to meet demand for efficiency and transparency:
Automated warehouses: Use of robotics and barcode scanning to speed up order picking and packing.
Real-time inventory systems: Stock levels update instantly to avoid overselling.
Courier integration: Systems that book, label, and track deliveries automatically.
Returns processing: Easy and free returns have become a competitive necessity.
Retailers such as ASOS and Zara rely heavily on logistics networks to fulfil customer promises.
Pricing and Competition
Pricing
Digital tools have made dynamic pricing a standard in many industries. Prices can now change based on:
Time of day
Customer location
Device used (mobile vs desktop)
Supply and demand conditions
Examples:
Uber uses surge pricing during busy times.
Airlines frequently adjust fares depending on demand and booking trends.
Other pricing implications include:
Increased price transparency: Comparison websites and search engines make it easy for consumers to find the lowest price.
Race to the bottom: Intense online competition can lead to pricing pressures and reduced margins.
To combat this, businesses often use bundling, loyalty programmes, or value-based pricing to differentiate.
Competition
Online business increases market saturation by removing geographical boundaries:
Global competitors can enter domestic markets with minimal investment.
Niche competitors can thrive by targeting specific customer groups.
Low switching costs mean consumers can easily move to competitors with better prices or services.
To stay competitive, firms invest in:
User experience and website design
Branding and storytelling
Customer service excellence
Exclusive products or personalisation
Strategic Business Responses to Online Growth
Investment in Digital Platforms
A key strategic response is to build or improve online platforms. This involves:
Designing responsive websites that function smoothly on desktops, tablets, and smartphones.
Developing mobile apps with advanced features such as wishlists, real-time tracking, or augmented reality previews.
Integrating analytics tools like Google Analytics or Mixpanel to track user behaviour.
Ensuring robust security with Secure Socket Layer (SSL) encryption and compliance with data protection laws like GDPR.
Businesses that invest effectively in these areas can increase:
Conversion rates
Average order values
Customer retention
Use of Data Analytics
Data analytics is central to strategic decision making online. It allows businesses to:
Profile customers: Using variables like age, location, purchase history, and device used.
Optimise website flows: Identifying bottlenecks in the user journey and removing friction.
Forecast demand: Anticipating busy periods or popular products to align stock and marketing.
Monitor marketing ROI: Assessing which channels and campaigns yield the best results.
Retailers like Tesco and Amazon use sophisticated recommendation engines to suggest products based on browsing history and purchase patterns.
In simple terms, businesses use data = better decisions = better profits.
Rethinking Store Formats
Physical stores still play a role, but their purpose is evolving. Businesses have adapted stores to complement online channels:
Experience stores: Focus on trying, tasting, or testing. Apple Stores are designed for this.
Click-and-collect hubs: Save on delivery costs and increase footfall in stores.
Showrooms: Display products that can be ordered online, reducing stock costs. IKEA and Made.com follow this model.
These changes reflect a shift from transactional spaces to brand-building environments.
Hybrid and Omnichannel Strategies
Omnichannel strategies are designed to create a seamless customer journey across multiple platforms.
Key components include:
Unified customer accounts: Track purchases and preferences whether shopping online or in-store.
Shared loyalty programmes: Points and offers apply across all channels.
Real-time stock visibility: Customers know where products are available instantly.
Consistent service: Whether via email, chat, phone, or in-store.
For example:
John Lewis offers online reservations, in-store pickup, and returns at any branch.
Argos integrated into Sainsbury’s stores to offer click-and-collect alongside grocery shopping.
This approach increases convenience, customer satisfaction, and brand loyalty.
Training and Workforce Adaptation
The shift to online requires staff to develop new skills. Businesses invest in:
Digital literacy: Training in website management, e-commerce tools, and customer databases.
Data analysis: Interpreting dashboards and understanding metrics like conversion rate or customer acquisition cost.
Social media engagement: Responding to customers on public platforms to manage reputation.
Cybersecurity awareness: Ensuring that all staff understand threats like phishing or data breaches.
New roles have emerged such as:
E-commerce managers
Digital marketing analysts
UX designers
App developers
Product and Service Innovation
Digital channels allow for faster, data-driven innovation. Key benefits include:
Rapid testing: Launch products in limited batches and monitor responses.
Subscription services: Regular deliveries (e.g. Dollar Shave Club) encourage repeat purchases.
User-generated input: Use reviews and feedback to refine products.
Virtual products: Digital downloads, NFTs, or online-only services.
For example:
Spotify uses data to create personalised playlists and test new features.
Beauty brands like Glossier adjust formulas and packaging based on direct customer feedback.
This agile approach helps businesses stay relevant and build stronger customer relationships.
FAQ
Online businesses collect personal data through website interactions, app usage, purchase history, and cookies. This data helps build customer profiles that enable businesses to personalise product recommendations, promotional emails, and targeted advertisements. For example, browsing behaviour can trigger reminders for abandoned baskets or suggest similar items. This level of personalisation increases engagement, raises conversion rates, and encourages repeat purchases. Data analytics also allow businesses to segment their audience, tailoring strategies to specific demographics or behaviour patterns for maximum impact.
Third-party logistics providers (3PLs) handle warehousing, inventory management, packaging, and delivery for online businesses. They are essential for companies lacking infrastructure to manage logistics in-house, especially small or medium-sized enterprises. 3PLs offer scalability, allowing businesses to expand without significant capital investment. They also improve efficiency by using established networks and technologies to manage fast, accurate delivery. This enables online businesses to focus on sales and marketing while maintaining competitive shipping times and high customer service standards.
With a growing percentage of e-commerce traffic coming from smartphones, mobile optimisation ensures websites and apps function smoothly on smaller screens. Poor mobile experiences—such as slow loading, confusing navigation, or difficult checkout processes—can cause users to abandon purchases. Responsive design, simplified layouts, fast-loading pages, and mobile-friendly payment options (like Apple Pay or Google Pay) are crucial. Businesses that invest in mobile optimisation benefit from higher engagement, increased sales, and better search engine rankings due to improved user experience.
Online reviews, ratings, and social media comments provide real-time insight into customer satisfaction and preferences. Positive feedback can reinforce successful product or service strategies, while negative reviews often highlight flaws in quality, delivery, or customer service. Businesses can use this data to make targeted improvements, adjust offerings, and train staff. Public responses to feedback also affect brand perception. Actively managing reviews and acting on insights shows transparency and responsiveness, both of which contribute to customer loyalty and long-term strategic planning.
Online businesses use predictive analytics, historical data, and real-time monitoring to forecast seasonal demand more accurately than traditional retailers. They adjust stock levels dynamically, increase server capacity to handle website traffic, and prepare marketing campaigns in advance. Online channels also allow for flexible pricing, flash sales, and personalised promotions that respond quickly to demand spikes. Additionally, businesses often partner with fulfilment centres or hire temporary staff to manage peak periods, ensuring order accuracy and delivery speed remain consistent.
Practice Questions
Analyse how the growth of e-commerce has affected business pricing strategies. (9 marks)
The growth of e-commerce has significantly influenced pricing strategies by increasing price transparency and competition. Consumers can now compare prices instantly, leading firms to adopt dynamic pricing where prices fluctuate based on demand, stock levels, and competitor activity. Businesses may use algorithms to adjust prices in real time, as seen with platforms like Amazon. Additionally, lower overheads online allow firms to offer more competitive prices. However, to avoid a race to the bottom, firms often use bundling, loyalty schemes, or offer exclusive products to add value. These adaptations ensure businesses maintain profit margins in an increasingly competitive environment.
Evaluate the impact of mobile applications on a business’s customer relationship management (CRM). (16 marks)
Mobile applications enhance CRM by enabling businesses to personalise communication, gather customer data, and provide convenient access to services. Features like push notifications, order tracking, and exclusive in-app discounts improve engagement and encourage loyalty. For example, Starbucks’ app rewards repeat purchases and collects behavioural data to tailor offers. This increases customer satisfaction and retention. However, app development and maintenance costs can be high, and poor user experience may harm the brand. Also, over-reliance on digital touchpoints may alienate less tech-savvy customers. Overall, when well-executed, apps can strengthen CRM by creating more direct, tailored, and responsive relationships with consumers.
