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E-commerce and Store Retailing: Introduction and Issues Charles Steinfield Professor and Chair Department of Telecommunication, Information Studies, &

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Presentation on theme: "E-commerce and Store Retailing: Introduction and Issues Charles Steinfield Professor and Chair Department of Telecommunication, Information Studies, &"— Presentation transcript:

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 Total Retail E-commerce % of total retail 20074.04 trillion127.7 billion3.16% 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? 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 Yes!

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 Apparel & Accessories Electronics & Appliances Books, Sporting Goods, Music, Video, etc. Food & Beverages 2006 Total Sales $226.6 Billion$126.5 Billion$95.7 Billion$535.5 Billion 2006 Internet- Derived Sales $13.8 Billion$19.3 Billion$12.4 Billion$2.5 Billion 2006 Internet Share of Sales 6.1%15.2%13.0%0.5% Internet Share of 1999 - 2006 Growth 19.6%32.7%46.0%N/A 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 Pre-PurchasePurchase Post-Purchase Physical Virtual Pre-PurchasePurchase Post-Purchase Physical Virtual Synergy Parallel

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?

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19 Current example of a strong click and mortar approach: Best Buy

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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 SectorNAICSNRevenue*Employees Auto dealers 441200362.7594 Furniture 44213864.2495 Electronics 443144359.21715 Building Supply 4441217374186 Health 446581,114.55937 Clothing 44897833.28465 Sports, Hobby, Books and Music 451140120.91143 Dept. Stores 452517,10851,157 Misc. 45329674.14196 * in USD millions

26 Content Analysis Categories phonesite lists phone number of business addresssite lists physical address of business mapssite provides store locator or map to store hourssites lists physical store hours of business historysite provides company background local linkssite contains links to other businesses in same city of store store infosite contains info about physical store specials, sales or events couponssite offers coupons redeemable in stores appointmentscustomers can make an appointment at physical store full purchasecustomer can complete a full transaction online inventorycustomer can search physical store inventory online pickupcustomer can order online and pickup at physical store order statuscustomer can look up details on online order status acct mgmtcustomer can manage accounts online gift registrycustomer can register items online for others to view and order returnscustomer can return online purchases to physical store

27 Proportion of Sites With Each Feature phone96% address96% maps71% history58% hours52% store info45% full purchase33% acct mgmt27% coupons25% order status21% inventory19% appointments15% returns8% local links7% gift registry7% pickup6% } Simple info } Real integration

28 Click and mortar applications not very sophisticated Simple Information phone, address, maps, history, hours, store info 70% Complex online/offline integration coupons, inventory, appointments, returns, local links, pickup 13% Online rather than offline focus full purchase, account management, order status, gift registry 22%

29 A simple click and mortar index ItemsMeanS.D. 10 items map/locator, hours, history, local links, store info, coupons, appointments, inventory, pickup, returns 3.061.7 note: since address and phone were universal, they were not included in the index

30 Differences by Sector SectorNAICSNC&M Mean Auto dealers 4412004.34 Furniture 4421382.79 Electronics 4431442.07 Building Supply 4441212.69 Health 446582.34 Clothing 448972.85 Sports, Hobby, Books and Music 4511403.10 Dept. Stores 452514.00 Misc. 453292.41

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

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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

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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


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