INTRODUCTION AND BACKGROUND
The growth and integration of information and communication technology are changing our society, economy and our lifestyle. The Internet as a main communication channel has provided the opportunity for e-commerce to expand worldwide. E-commerce is now considered as the future direction in which organizations and business should move. Expansion of the Internet has led to significant change in the methodology of manage business globally. The Internet is, probably, the most effective marketing tool in the modern world (Haig, 2001). It enables businesses to interact with their market on a higher level. Companies and consumers can find more about each other than ever before and create a sort of two-way relationship.
In 1991 the Internet became available for commercial use and it opened way for development of e-commerce. Since that date thousands of companies and organisations opened their own web sites. Originally, term e-commerce associated with Electronic Funds Transfer (EFT) and Electronic Data Interchange (EDI) which used for execution of commercial transactions electronically and gave an opportunity for companies to exchange business information. These technologies were available from the late 1970s and they allowed business companies and organisations to transfer commercial documentation electronically. In 1994 the Internet started to carry forward among the general public and became more popular. However, it took nearly four years to develop the security protocols and DSL which allowed fast access and permanent connection to the Internet. A large number of business companies presented their services in World Wide Web. After that the meaning of the word “e-commerce” was changed. Now it is defined as the process of purchasing goods and services through the Internet using secured connections and electronic payment systems.
Nowadays, e-commerce is a massive industry with endless online stores and online buyers. It has great deal of advantages over the “brick and mortar” stores and mail order catalogues. First of all, people have easy access to the Internet. They can see actual prices, make comparative study, select products with best prices and then to buy them without going anywhere. Moreover, online stores usually have better range of products and lower prices.
There many business models for e-commerce and they are developing rapidly. One of the latest developments is Relay Marketing. It is actually improvement of Just in Time inventory system, which applied to online retailing with taking advantage of Internet. Information is directly “relayed” to the supplier, which mean, that owner of the website or Relay do not actually need to have a stock. This is the main difference over the other e-commerce business models, although they all based on the same conception of purchasing products or services using Internet.
In a traditional e-commerce model the distributor is fully responsible for his product, including stock control, delivery, maintenance, advertisement etc. Good example of traditional e-commerce model is the brand which has own website and sells their products online in addition to traditional retail. Relay Marketing is a third-party that advertises Brand’s products, sells them online, links with supplier and gets the commission for handling the transaction (Goldschmidt, 2003). The advantages of this type of model are that it has the opportunity to turn higher profit margins, according to the fact that many of the overhead expenses associated with a physical retail space, such as warehouse, retail space, and labour, can be significantly mitigated. Relay marketing also allows for a retailer to reach customers worldwide, whilst still only maintaining one location for each and every customer.
There are two types of Relay Marketing: Pure relay and Affiliate relay. In pure relay model company purchases products only from one supplier. For example, big warehouse which supply traditional retailers, for addition can sell their products online through Relay Company without spending anything. Affiliate Relay does the same, except that they have more than one supplier. Online flower shop is good example. It is more convenient to have local suppliers in all cities rather than deliver flowers across all country.
At present the majority of all Relay Marketing business is B2C. However there are many opportunities to develop this e-commerce business model to B2B system.
In this paper relay marketing will be presented in more details as a perspective development of e-commerce. Advantages and disadvantages of this business model will be given and examples of some companies will be provided.
RELAY MARKETING
Relay marketing has become one of the most considerable alternatives to companies depending on e-commerce as a major marketing strategy. It has been called relay marketing due to the principle of relaying the sale to the supplier who is responsible for delivering the product directly to the customer, where the Relay company responsibility is to reach customers in a geographically scattered places and convince them to buy from its own website, as a consequence, the Relay company sends the sales order to the supplier who should deliver the product directly to the customer and get paid by the Relay company after making sure that the product has been effectively received on time by the customer, figure(1) illustrates the four stages through which the product passes before the supplier is paid. Hence, the Relay company takes percentage of the product sales value which has been sold through its website, this is also known as “pay for performance marketing”.
Why is the Relay marketing successful? (The win-win relationship)
To verify the relay marketing successfulness, assume that there is a company (supplier) who produces a large number of products, this company has to advertise its products through coloured printed catalogues, TV advertisement and, sometimes, radio advertisements, all of which are to get the buyer interested in the product and potentially buy through the internet, telephone or to come and buy in person, in this case the company is paying for the marketing aspects as well as for the marketing research which is needed to know what type and strategy of advertisement is the most suitable for a particular type of product. This company assumes that the profit associated with the mass of sales is vast enough to cover all the advertising expenditure, but what if it did not? Thus, this company is taking an immense risk all the time.
On the other hand, assume that another company (relay company) offered to advertise, motivate, and convince the customer to buy the supplier’s product through its website; hence, the business will inevitably flourish. However, the affiliate market will deduct an agreed percentage of every product value being sold through its website. The relay company will tolerate the cost of the product marketing; if the marketing strategy did not succeed the relay company would lose money, by contrast, if it did fine, the affiliate company would make an immense profit without any conditions or limitations to how much should it spend or earn.
All in all, in the traditional marketing approach the supplier is responsible for paying all the advertising expenditure hoping to sell enough products to cover these expenditures (high risk). However, in the relay marketing approach, the relay company is responsible for all the marketing expenditures to sell as many products as possible hoping to make a high profit without manufacturing or even seeing the product. Therefore, the supplier company is willing to pay commission to the relay company if his product is increasingly being sold, and the relay company is motivated to advertise and do efforts to sell the product knowing that it will gain a commission on every successful trade. This relationship is called the “win-win relationship”, where every side wins, gives the opportunity to relay marketing to flourish, remain and evolve over the time (Duffy, 2005).
Disadvantages associated with relay marketing.
As any other new innovation relay marketing strategy has some limitations affecting the relay company and the supplier company as well. For instance, when the customer orders a particular type of product through the relay company’s website he or she does not know who the supplier is, or whom responsibility is to deliver the product at time without any default. Therefore, if any fault happened to the product such as being bad quality or damaged during the transportation or even delayed during the delivery process, the customer would charge the responsibility upon the relay company, which could affect the credibility associated with its brand. Therefore, the relay company should be confident that the supplier will deliver the product in a well condition and at a desired time to the customer, all of which is very difficult to be assured with due to the fact that the relay company does not have any control on the delivery process and the only way to maintain the delivery efficiency is to deal with reputable suppliers in a particular field.
Furthermore, there are some disadvantages concerning the supplier company, such as its brand would remain anonymous since the customers receive the product under the relay (not the supplier) company name which makes the supplier’s brand less prevalent over the time.
TYPES OF RELAY MARKETING AND CASE STUDIES
Relay marketing consists of two types of marketing: pure relay marketing and affiliate relay marketing. Both of them are used in the e-commerce of Business-to-business (B2B) and Business-to-business (B2C) (Turban et al., 2006). The only difference between the two types of relay marketing is pure relay has one supplier to cater for all customers’ need, whereas affiliate relay has several suppliers which are distributed in different regions. That is to say, no matter how many suppliers they have, a relay company website is required for the deal of supply and demand.
There are numerous common points between pure relay and affiliate relay. Firstly, the relay company only provides the platform for suppliers to sell their goods. It means the company may not have stocks in their warehouse; therefore, they would not concern about the delivery of products. Secondly, the relay company has not responsibility for the quality of products. In addition, heavy reliance on the suppliers is not without risk when the relay company cannot control the quality and delivery of goods. Thirdly, clients buy these products because they trust the brand of the relay company, so if the goods has some problem with quality or not deliver on time, the relay company may lose their consumers. Definitely, the relay company undertakes these risks.
·
Pure Relay Marketing
Pure relay marketing not only has one supplier or manufacturer to supply the goods, but also needs a relay company website to present the goods. Some retailers may look for a reliable website to sale their products, if a great deal of inventory cannot be handled. In addition, when consumers interest in products online and make an order to the relay company via EDI, and then the company will pass the order to the supplier. After that, supplier will deliver these products to the customer directly and provide the services after sales (Laudon, 2002). The whole process is called as pure relay or direct relay.
Take Sainsbury’s for instance, the website sales fridges and washing machines which are not available for sale in the real supermarket. That means these goods are not in stock in Sainsbury’s. DRL takes charge of this sale service, one of the biggest retailers of appliance in the UK. As can be seen from the chart (figure 2), when clients place an order for washing machine from Sainsbury’s website, the order will via EDI pass to DRL as soon as possible. After the goods are rationed, DRL would deliver it to the customer directly.
As Roberts (2009) argues, DRL needs to manage relationship with Sainsbury’s for distributing goods. When the customer pays the bill, Sainsbury’s would charge a commission by selling trust. That is to say, even thought Sainsbury’s never see and touch these products, people still trust their reputation when collect the items. However, the supplier takes charge of the delivery and sale services; therefore Sainsbury’s has no responsibility for the quality of goods and the delivery problem. What is more, for the part of appliance, the benefit of Sainsbury’s is that the only one supplier is DRL, which can be reliant and easy to control would increase the diversity of products.
Affiliate Relay Marketing
Affiliate relay marketing is one of relay marketing model, in this model; the company has at least one supplier which can provides various products or services to their customers. The paper will use two companies to make people recognition how do use affiliate marketing model in business and will apply SWOT to analyze whether effective or not to apply affiliate marketing into FlyingFlowers and Allthingsgreen.net (Chaffey, 2007). Despite both companies are using affiliate marketing mode, however there still have a little different. Firstly, FlyingFlowers which is online flower shop, in order to make customer can receive the freshest flower, therefore FlyingFlowers suppliers are throughout the country. Compares with, their supplier does not need throughout the country as they sell green product which do not need to keep fresh.
FlyingFlowers is the one of example which applying the knowledge of affiliate marketing, as use this model in flower industry, they have local suppliers throughout the country. For example, if the buyer who lives in Bath, bought flowers on the website, then the Bath’s supplier would deliver flower to buyers home. (Figure 3).it could reduce huge time; therefore, it would make this company hold huge advantage in delivery fresh flower. FlyingFlowers was established in 1981 and grew up of offering services to holiday-maker that need high quality and low-cost flowers. There are more than 750,000 bouquets which are sent by FlyingFlowers around the United Kingdom in a year. FlyingFlowers has 25 years with flower industry and experts in the service of delivering flowers. Every bloom is checked before it delivering and ensures the quality is matching the standard of FlyingFlowers’s customers.
Strength
The most is that they are using affiliate to run the business. Therefore, they do not need space to save the stock and it is time saving because of the flash flowers are sent directly from local florist to local buyers.
FlyingFlowers provides plenty type of flowers and perfect gift for different occasions. Moreover, FlyingFlowers has number of delivery options such as sending by post, hand tied bouquets are delivered by specific courier or next day delivery for flower buyers to keep flowers fresh. In order to make sure all flowers keep in the beautiful condition during deliveries, flowers will be wrapped in a presentation box to ensure the condition of the flowers is good when recipients receive it.
Weakness
The obvious weakness is that their communication are more weak than traditional online shop, for example, if they want to launch new product ,they need to communicate all of local suppliers and make sure all supplier use the same type of flower, it usually spend numerous of time(Chaffey, 2007).
Due to customers can only see the pictures online instead of see real flowers in the flower shop, so customers can not smell the aroma of flowers. For example, some people would like to smell the flowers before they purchase, FlyingFlowers might loss the market because of this reason.
Opportunity
FlyingFlowers offers different hand tied bouquets and simply stems for different occasions such as Christmas, anniversary, congratulation, or romantic flowers. However, there is still having opportunity if customer need theme of flowers which is not included in the FlyingFlowers web site. Then, offering the customization service to the online shopper should be an opportunity for this web site. In details, FlyingFlowers should provide daily quote for specific one kind of flower and allow customer could choose what flowers they like and could be collected to become a bouquet.
Moreover, FlyingFlowers could do the database management for recording local purchasing behavior, which means that local florists could decrease the stock and ensure flowers are fresh. Some of the florists attend to flowers and put flowers in the refrigerator to ensure flowers in a good condition. However, if FlyingFlowers could collect the data from every purchasing event and do data analyze, then it is helpful for the local florist to reduce the stock and the electricity fee from the refrigerator.
Threat
Regarding the FlyingFlowers web site, due to some of bouquet is hand-made and delivered by the local florists. It is hard for FlyingFlowers to manage the quality of delivery service and also hand-made flowers. If a local florist made a mistake of sending wrong bouquet to customer which means that local florist might ruin the reputation of FlyingFlowers, and that customer will not order flowers from FlyingFlowers again.
Another example for using affiliate relay marketing model is Allthingsgreen.net which is providing eco-friendly people marketplace to buy green products , moreover, the products are classified five types as like recycled, natural, fair-trade, organic and eco-friendly or both and use different color mark in order to let customer to know their type of product. Meanwhile, the website offer Business to Business online platform for people who want to sell their green products online. Also this is company use basic affiliate relay marketing model, for example, customer use this website to order green products, and then supplier will send their product to customer(Figure 5). Despite the Allthingsgreen.net just built 5 years, however they had approximately 350,000 visitors who looking for green products last year and it still growing.
Strength
Due to the Allthingsgreen.net is one of relay marketing, therefore, the obvious strength is that allthingsgreen.net does not hold any stock and all of products delivery is from suppliers. Allthingsgreen.net can reduce a large number of cost which traditional e-commerce website need to pay as like rent storehouse or hire more employee.
Allthingsgreen.net use E-commerce trader memberships service that gives opportunity to people who can sell their green products online, it make the Allthingsgreen.net can provide plenty type of green product(food ,clothing, Energy saving products) to customer.
Weakness
The biggest weakness of green goods is that the price for green products is higher then normal product. For example, generally, two hundred ml milk sold by around 1 pound, however, the price for organic milk would be more than 2 pound. (Ecopreneurist.com). moreover, the Allthingsgreen.net website not provides a free platform to allow people sell products online. Suppliers have to pay minimum price 75 pound for three months and the Allthingsgreen.net also charge commission from suppliers when they successful finish a transaction. Suppliers will charge 15 percent for each deal. Therefore, it would reduce market competition of website as the Suppliers cannot reduce their products price.
Opportunity
Under green earth concept, rise of eco-awareness, more and more use green products in order to protect our plant and decrease environmental pollution. Some research point out around 30% would buy green products (Mckinsey.com, 2008). Therefore, green goods market is becoming strong. The Allthingsgreen.net also can cooperate with international supplier to expand their market share.
Threat
The major threat is quality control. As Allthingsgreen.net use affiliate relay marketing model, therefore the website has plenty of suppliers which provide its various products. Moreover, the Allthingsgreen.net is the website to sell green products, for this reason, it is difficult to control all of products quality and ensure all of products are eco-friendly goods. For example, if one of product is detected that is not green product by customer, it would damage the credit of website, moreover make the website to go bankrupt.