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
2007 4.04 trillion 127.7 billion 3.16%
Summing quarterly estimates from last full year in Commerce’s 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-Purchase Purchase Post-Purchase
Physical
Virtual
Pre-Purchase Purchase 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 channel’s 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?

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

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
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

26. 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

27. 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

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
Items Mean S.D.
10 items
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

30. 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

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

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

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