RETAILINGRetailing in the E-Market: Overview and Issues

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

Ecommerce across the World…

US e-commerce totals in 2012

TotalRetail

E-commerce % of total retail

2012 4.36 trillion 223.2billion 5.12%

If e-commerce only 5% 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!

Comparing growth rates

e-commerce

total retail

Summing quarterly estimates from Commerce Dept. estats

Estimates and forecasts of e-commerce influences on purchases

Source: Forrester Research, via Shoplocal.com

Differential Impact by Type of ProductApparel &

AccessoriesElectronics & 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

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.

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

Synergy vs. parallel strategy for e-commerce

Pre-Purchase Purchase Post-Purchase

Physical

Virtual

Pre-Purchase Purchase Post-Purchase

Physical

Virtual

Synergy

Parallel

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

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• mobile ordering and notification

• Market extension• serve new markets - home bound, new geographic area, new products

But had to proactively manage for synergy - avoid channel conflict• Goal aligning strategies• Coordination and control strategies

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

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

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 technology: smart card, smart shelf, RFID• Social media

• online social networks can be tied to location• harness peer influence

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

RFID store applications• smart dressing rooms• smart shelves (wireless

inventory control system) • anti-theft• smart shopping carts

How do Retailers Compete in the Online Market Place?

• Site design: easy to navigate, easy to use• Trust• Privacy