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E-commerce and Store

Retailing: Introductionand Issues

Charles SteinfieldProfessor and Chair

Department of Telecommunication,

Information Studies, & Media

Michigan State University



E-commerce has come a long way!

Amaon!com

in "##$



Amazon today…



Tracking e-commerce growth

Source% U!S! Census ureau% '''!census!gov(estats



US e-commerce totals in "

Total

)etail*+commerce

of totalretail

-../ 0!.0 trillion "-/!/ 1illion 2!"3

Summing 4uarterly estimates from last full year in Commerce5s most

recent e+stat report!



I# e-commerce only $% o# total retail&

is it an im'ortant channel alternati(e)

Steady increase over past decade

6igher rate of gro'th than other retailUnderestimates overall influence 7ne report% #- research online 1efore 1uying

Some product types heavily impacted

8es9



*om'aring growth rates

e+commerce

total retail

Summing 4uarterly estimates from Commerce Dept! estats



Estimates and #orecasts o# e-

commerce in#luences on 'urchases

Source% :orrester )esearch, via Shoplocal!com



+i##erential Im'act ,y Ty'e o#

roduct

Apparel &Accessories

Electronics &Appliances

Books,Sporting

Goods, Music,Video, etc.

Food &Beverages

2006 otal

Sales

!226.6 Billion !"26.# Billion !$#.% Billion !##.# Billion

2006 'nternet(

)erived Sales

!".* Billion !"$. Billion !"2.+ Billion !2.# Billion

2006 'nternetSare o- Sales

6." "#.2 ".0 0.#

'nternet Sareo- "$$$ ( 2006Gro/t

"$.6 2.% +6.0 1A

Source% Dougal M! Casey, Development Metrics Consulting



Early (iews on e-commerce

*mphasis on channel characteristicspredicted superiority of e+commerce overtraditional retail formats -0;/ availa1ility <o'er 1ric= and mortar investment Automation + lo'er la1or costs Deeper selection, 'ithout inventory holding costs Pricing fle;i1ility + a1ility to respond to mar=et

demand more 4uic=ly >lo'er menu costs? Potential for almost infinite depth of information

etc!



.ater (iew: com'lementarities

,etween on and o##line channels

Traditional retailers could capitalie on

synergies 1et'een online and offline retailing

Started floc=ing online 1y end of "##.s, 1utmany tried to 1eat the dot coms at their o'n

game Did not pursue integrated multichannel strategies,

1ut rather a parallel e+commerce approach @as this rational channel use



Synergy (s/ 'arallel strategy

#or e-commerce

Pre+Purchase Purchase Post+Purchase

PhysicalBirtual

Pre+Purchase Purchase Post+Purchase

Physical

Birtual

Synergy

Parallel



0e started e1amining multi-

channel retailers - US and a,road

Initial focus on high profile cases + firms in a

variety of sectors e;plicitly pursuing a

multichannel approach

6ighlighting% Sources of synergy

enefits

Management strategies



Sources o# synergy

<everage complementary assets physical infrastructure

organiational infrastructure + 1usinessoperations

mar=eting and sales force

people 'ho =no' the product common 1uyers and suppliers



Ty'es o# 2ene#its3Ad(antages

Cost reductions inventory reduction la1or% reduce cost of providing routine services save on distri1ution costs

lo'er costs to advertise, promote specials Trust

use of physical store for pic=up and payment community focus emphasie 1rand name

Balue adding services inventory e;pansion on+demand production, 1uild to order mo1ile ordering and notification

Mar=et e;tension serve ne' mar=ets + home 1ound, ne' geographic area, ne' products



2ut had to 'roacti(ely manage #or

synergy - a(oid channel con#lict

Eoal aligning strategies Creating consensus

Attention to indirect 1enefits

:ocus on e;isting customer 1ase and communities 'here firm

has physical presence Coordination and control strategies Improving channel interopera1ility

Incentive schemes that foster cooperation

Active cross+promotion 1et'een channels

Use of each channel5s strengths 1y specialiing services

*;pand capa1ilities Alliances

Affiliates



4ore recently

Multichannel retailers appear to 1e catching

on 'ith shoppers + at least for larger chains

Strategies for integrating online and offlinegro'ing more sophisticated

Perhaps a ne' opportunity to study channel

choice





*urrent e1am'le o# a strong 5click

and mortar6 a''roach: 2est 2uy











0hat a,out the general 'o'ulation o# retail

#irms) Are they e##ecti(ely integrating online

and o##line channels)

Ac4uired sample of appro;! 2".. firms in #

retail sectors + spring of -..-

Searched for any form of 'e1 presence%

found "3F# >$0?

After cleaning, #/# active retail @e1 sites

found >2"!$?

*;amined 'e1 presence for evidence of clic=

and mortar strategy



Sam'le

Sector 7AI*S 7 Re(enue8 Em'loyees

Auto dealers 00" -.. 23-!/ $#0

:urniture 00- "2F 30!- 0#$

*lectronics 002 "00 2$#!- "/"$

uilding Supply 000 "-" /2/ 0"F3

6ealth 003 $F ",""0!$ $#2/

Clothing 00F #/ F22!- F03$

Sports, 6o11y, oo=s and Music 0$" "0. "-.!# ""02

Dept! Stores 0$- $" /,".F $","$/

Misc! 0$2 -# 3/0!" 0"#3

G in USD millions



*ontent Analysis *ategoriesphone site lists phone num1er of 1usiness

address site lists physical address of 1usiness

maps site provides store locator or map to store

hours sites lists physical store hours of 1usiness

history site provides company 1ac=ground

local lin=s site contains lin=s to other 1usinesses in same city of storestore info site contains info a1out physical store specials, sales or events

coupons site offers coupons redeema1le in stores

appointments customers can ma=e an appointment at physical store

full purchase customer can complete a full transaction online

inventory customer can search physical store inventory online

pic=up customer can order online and pic=up at physical store

order status customer can loo= up details on online order status

acct mgmt customer can manage accounts online

gift registry customer can register items online for others to vie' and order

returns customer can return online purchases to physical store



ro'ortion o# Sites 0ith Each 9eature

phone #3

address #3

maps /"

history $F

hours $-

store info 0$full purchase 22

acct mgmt -/

coupons -$

order status -"

inventory "#

appointments "$

returns F

local lin=s /

gift registry /

pic=up 3

}Simple info

})eal integration



*lick and mortar a''lications

not (ery so'histicated

Sim'le In#ormationphone, address, maps, history, hours, store

info

/.

*om'le1 online3o##line integrationcoupons, inventory, appointments, returns,

local lin=s, pic=up

"2

nline rather than o##line #ocusfull purchase, account management, order

status, gift registry--



A sim'le click and mortar

inde1

Items 4ean S/+/

". items

map(locator, hours, history,

local lin=s, store info, coupons, appointments,inventory, pic=up, returns

2!.3 "!/

note% since address and phone 'ere universal, they 'ere not included in the inde;



+i##erences ,y Sector

Sector 7AI*S 7 *;4 4ean

Auto dealers 00" -.. 0!20

:urniture 00- "2F -!/#

*lectronics 002 "00 -!./

uilding Supply 000 "-" -!3#

6ealth 003 $F -!20

Clothing 00F #/ -!F$

Sports, 6o11y, oo=s and Music 0$" "0. 2!".

Dept! Stores 0$- $" 0!..

Misc! 0$2 -# -!0"



<oing #orward: click and mortar aided

,y other 'layers& technologies

Shoplocal, other location 1ased services capture location from IP address, tailor offer

Mo1ile devices + EPS, 1ar code readers in

camera phones, comparison shopping apps! In+store technologies + smart carts, smart

shelves, ):ID

Social media online social net'or=s can 1e tied to location harness peer influence







+ 2ar *odes =>R codes?

<et 'indo' shoppers

connect to info, online

shopping

7r connect from ad in

paper, magaine, or

street poster

Call in to customer

service, tech support,or other line



R9I+ store a''lications

smart dressing rooms

smart shelves

chec=out services anti+theft

smart shopping carts







Re(isiting to'ic o# channel choice

People are using multiple channels to shop Hot a simple single channel choice have to loo= at sets of

interactions to e;plore use of several channels to complete a tas=

Heed to loo= at Joint channel synergies to e;plain choices

Social influences 1ecoming implicated in comple; 'ays

)ecommender systems, revie's, social net'or= sites He' technologies e;tending reach, 1lurring online and

offline 1oundaries Pervasive net'or=s and mo1ile devices and applications

Critical choices 1y retailers supply channel choices% 7r lose their customers

Heed to rethin= role of physical outlet design 'ith e+commerce in

mind

*mphasie online services, applications that continue to give

l i i h h i l l