E-commerce and Store
Retailing: Introduction
and Issues
Charles Steinfield
Professor and Chair
Department of Telecommunication,
Information Studies, & Media
Michigan State University
E-commerce has come a long way!
Amazon.com
in 1995
Amazon today…
Tracking e-commerce growth
Source: U.S. Census Bureau: www.census.gov/estats
US e-commerce totals in 2007
2007
Total
Retail
E-commerce
% of total
retail
4.04 trillion
127.7 billion
3.16%
Summing quarterly estimates from last full year in Commerce’s most
recent e-stat report.
If e-commerce only 3% of total retail,
is it an important channel alternative?
Yes!
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Steady increase over past decade
Higher rate of growth than other retail
Underestimates overall influence
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One report: 92% research online before buying
Some product types heavily impacted
Comparing growth rates
e-commerce
total retail
Summing quarterly estimates from Commerce Dept. estats
Estimates and forecasts of ecommerce influences on purchases
Source: Forrester Research, via Shoplocal.com
Differential Impact by Type of
Product
Apparel &
Accessories
Electronics &
Appliances
Books,
Sporting
Goods, Music,
Video, etc.
Food &
Beverages
$226.6 Billion
$126.5 Billion
$95.7 Billion
$535.5 Billion
2006 InternetDerived 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
2006 Total
Sales
Source: Dougal M. Casey, Development Metrics Consulting
Early views on e-commerce

Emphasis on channel characteristics
predicted superiority of e-commerce over
traditional retail formats
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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.
Later view: complementarities
between on and offline channels
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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
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Did not pursue integrated multichannel strategies,
but rather a parallel e-commerce approach
Was this rational channel use?
Synergy vs. parallel strategy
for e-commerce
Synergy
Pre-Purchase
Purchase
Post-Purchase
Physical
Virtual
Parallel
Pre-Purchase
Physical
Virtual
Purchase
Post-Purchase
We started examining multichannel retailers - US and abroad
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Initial focus on high profile cases - firms in a
variety of sectors explicitly pursuing a
multichannel approach
Highlighting:
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Sources of synergy
Benefits
Management strategies
Sources of synergy
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Leverage complementary assets
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physical infrastructure
organizational infrastructure - business
operations
marketing and sales force
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people who know the product
common buyers and suppliers
Types of Benefits/Advantages
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Cost reductions
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Trust
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use of physical store for pickup and payment
community focus
emphasize brand name
Value adding services
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inventory reduction
labor: reduce cost of providing routine services
save on distribution costs
lower costs to advertise, promote specials
inventory expansion
“on-demand” production, build to order
mobile ordering and notification
Market extension
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serve new markets - home bound, new geographic area, new products
But had to proactively manage for
synergy - avoid channel conflict
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Goal aligning strategies
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Coordination and control strategies
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Creating consensus
Attention to indirect benefits
Focus on existing customer base and communities where firm
has physical presence
Improving channel interoperability
Incentive schemes that foster cooperation
Active cross-promotion between channels
Use of each channel’s strengths by specializing services
Expand capabilities
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Alliances
Affiliates
More recently
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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?
Current example of a strong “click
and mortar” approach: Best Buy
What about the general population of retail
firms? Are they effectively integrating online
and offline channels?
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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
Sample
Sector
NAICS
N
Revenue*
Employees
Auto dealers
441
200
362.7
594
Furniture
442
138
64.2
495
Electronics
443
144
359.2
1715
Building Supply
444
121
737
4186
Health
446
58
1,114.5
5937
Clothing
448
97
833.2
8465
Sports, Hobby, Books and Music
451
140
120.9
1143
Dept. Stores
452
51
7,108
51,157
Misc.
453
29
674.1
4196
* in USD millions
Content Analysis Categories
phone
site lists phone number of business
address
site lists physical address of business
maps
site provides store locator or map to store
hours
sites lists physical store hours of business
history
site provides company background
local links
site contains links to other businesses in same city of store
store info
site contains info about physical store specials, sales or events
coupons
site offers coupons redeemable in stores
appointments
customers can make an appointment at physical store
full purchase
customer can complete a full transaction online
inventory
customer can search physical store inventory online
pickup
customer can order online and pickup at physical store
order status
customer can look up details on online order status
acct mgmt
customer can manage accounts online
gift registry
customer can register items online for others to view and order
returns
customer can return online purchases to physical store
Proportion of Sites With Each Feature
phone
96%
address
96%
maps
71%
history
58%
hours
52%
store info
45%
full purchase
33%
acct mgmt
27%
coupons
25%
order status
21%
inventory
19%
appointments
15%
returns
8%
local links
7%
gift registry
7%
pickup
6%
}
Simple info
}
Real integration
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%
A simple click and mortar
index
10 items
Items
Mean
S.D.
map/locator, hours, history,
local links, store info, coupons, appointments,
inventory, pickup, returns
3.06
1.7
note: since address and phone were universal, they were not included in the index
Differences by Sector
Sector
NAICS
N
C&M Mean
Auto dealers
441
200
4.34
Furniture
442
138
2.79
Electronics
443
144
2.07
Building Supply
444
121
2.69
Health
446
58
2.34
Clothing
448
97
2.85
Sports, Hobby, Books and Music
451
140
3.10
Dept. Stores
452
51
4.00
Misc.
453
29
2.41
Going forward: click and mortar aided
by other players, technologies
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Shoplocal, other location based services
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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
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online social networks can be tied to location
harness peer influence
2D Bar Codes (QR codes)
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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
RFID store applications
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smart dressing rooms
smart shelves
checkout services
anti-theft
smart shopping carts
Revisiting topic of channel choice
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People are using multiple channels to shop
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Social influences becoming implicated in complex ways
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Recommender systems, reviews, social network sites
New technologies extending reach, blurring online and
offline boundaries
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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
Pervasive networks and mobile devices and applications
Critical choices by retailers – supply channel choices:
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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