Ecommerce and Store Retailing: Introduction and Issues

1
E-commerce and Store Retailing Introduction and
Issues

• Charles Steinfield
• Professor and Chair
• Department of Telecommunication,
• Information Studies, Media
• Michigan State University

2
E-commerce has come a long way!
Amazon.com in 1995
3
Amazon today
4
Tracking e-commerce growth
Source U.S. Census Bureau www.census.gov/estats
5
US e-commerce totals in 2007
Summing quarterly estimates from last full year
in Commerces most recent e-stat report.
6
If e-commerce only 3 of total retail, is it an
important channel alternative?
Yes!

• Steady increase over past decade
• Higher rate of growth than other retail
• Underestimates overall influence
• One report 92 research online before buying
• Some product types heavily impacted

7
Comparing growth rates
e-commerce
total retail
Summing quarterly estimates from Commerce Dept.
estats
8
Estimates and forecasts of e-commerce influences
on purchases
Source Forrester Research, via Shoplocal.com
9
Differential Impact by Type of Product
Source Dougal M. Casey, Development Metrics
Consulting
10
Early views on e-commerce

• Emphasis on channel characteristics predicted
  superiority of e-commerce over traditional retail
  formats
• 24x7 availability
• Lower brick and mortar investment
• Automation - lower labor costs
• Deeper selection, without inventory holding costs
• Pricing flexibility - ability to respond to
  market demand more quickly (lower menu costs)
• Potential for almost infinite depth of
  information
• etc.

11
Later view complementarities between on and
offline channels

• Traditional retailers could capitalize on
  synergies between online and offline retailing
• Started flocking online by end of 1990s, but many
  tried to beat the dot coms at their own game
• Did not pursue integrated multichannel
  strategies, but rather a parallel e-commerce
  approach
• Was this rational channel use?

12
Synergy vs. parallel strategy for e-commerce
Synergy
Pre-Purchase
Purchase
Post-Purchase
Physical
Virtual
Parallel
Pre-Purchase
Purchase
Post-Purchase
Physical
Virtual
13
We started examining multi-channel retailers - US
and abroad

• Initial focus on high profile cases - firms in a
  variety of sectors explicitly pursuing a
  multichannel approach
• Highlighting
• Sources of synergy
• Benefits
• Management strategies

14
Sources of synergy

• Leverage complementary assets
• physical infrastructure
• organizational infrastructure - business
  operations
• marketing and sales force
• people who know the product
• common buyers and suppliers

15
Types of Benefits/Advantages

• Cost reductions
• inventory reduction
• labor reduce cost of providing routine services
• save on distribution costs
• lower costs to advertise, promote specials
• Trust
• use of physical store for pickup and payment
• community focus
• emphasize brand name
• Value adding services
• inventory expansion
• on-demand production, build to order
• mobile ordering and notification
• Market extension
• serve new markets - home bound, new geographic
  area, new products

16
But had to proactively manage for synergy - avoid
channel conflict

• Goal aligning strategies
• Creating consensus
• Attention to indirect benefits
• Focus on existing customer base and communities
  where firm has physical presence
• Coordination and control strategies
• Improving channel interoperability
• Incentive schemes that foster cooperation
• Active cross-promotion between channels
• Use of each channels strengths by specializing
  services
• Expand capabilities
• Alliances
• Affiliates

17
More recently

• Multichannel retailers appear to be catching on
  with shoppers - at least for larger chains
• Strategies for integrating online and offline
  growing more sophisticated
• Perhaps a new opportunity to study channel choice?

18
(No Transcript)
19
Current example of a strong click and mortar
approach Best Buy
20
(No Transcript)
21
(No Transcript)
22
(No Transcript)
23
(No Transcript)
24
What about the general population of retail
firms? Are they effectively integrating online
and offline channels?

• Acquired sample of approx. 3100 firms in 9 retail
  sectors - spring of 2002
• Searched for any form of web presence found 1689
  (54)
• After cleaning, 979 active retail Web sites found
  (31.5)
• Examined web presence for evidence of click and
  mortar strategy

25
Sample
in USD millions
26
Content Analysis Categories
27
Proportion of Sites With Each Feature

Simple info

Real integration
28
Click and mortar applications not very
sophisticated
29
A simple click and mortar index
note since address and phone were universal,
they were not included in the index
30
Differences by Sector
31
Going forward click and mortar aided by other
players, technologies

• Shoplocal, other location based services
• capture location from IP address, tailor offer
• Mobile devices - GPS, bar code readers in camera
  phones, comparison shopping apps.
• In-store technologies - smart carts, smart
  shelves, RFID
• Social media
• online social networks can be tied to location
• harness peer influence

32
(No Transcript)
33
(No Transcript)
34
2D Bar Codes (QR codes)

• Let window shoppers connect to info, online
  shopping
• Or connect from ad in paper, magazine, or street
  poster
• Call in to customer service, tech support, or
  other line

35
RFID store applications

• smart dressing rooms
• smart shelves
• checkout services
• anti-theft
• smart shopping carts

36
(No Transcript)
37
(No Transcript)
38
Revisiting topic of channel choice

• People are using multiple channels to shop
• Not a simple single channel choice have to look
  at sets of interactions to explore use of several
  channels to complete a task
• Need to look at joint channel synergies to
  explain choices
• Social influences becoming implicated in complex
  ways
• Recommender systems, reviews, social network
  sites
• New technologies extending reach, blurring online
  and offline boundaries
• Pervasive networks and mobile devices and
  applications
• Critical choices by retailers supply channel
  choices
• Or lose their customers
• Need to rethink role of physical outlet design
  with e-commerce in mind
• Emphasize online services, applications that
  continue to give people a reason to visit the
  physical outlet