...“Bricks-and-Mortar” vs. “Clicks-and-Mortar”: an Equilibrium Analysis Fernando Bernstein Jing-Sheng Song Xiaona Zheng The Fuqua School of Business The Fuqua School of Business Guanghua School of Management Duke University Duke University Peking University Durham, NC 27708 Durham, NC 27708 Beijing, China 100871 Forthcoming in European Journal of Operational Research The Internet has provided traditional retailers a new means with which to serve customers. Consequently, many “bricks-and-mortar” retailers have transformed to “clicks-and-mortar” by incorporating Internet sales. Examples of companies making such a transition include Best Buy, Wal-Mart, Barnes & Noble, etc. Despite the increasing prevalence of this practice, several fundamental questions remain: (1) Does it pay off to go online? (2) Which is the equilibrium industry structure? (3) What is the implication of this business model for consumers? We study these issues in an oligopoly setting and show that clicks-and-mortar arises as the equilibrium channel structure. However, we find that this equilibrium does not necessarily imply higher profits for the firms: in some cases, rather, it emerges as a strategic necessity. Consumers are generally better off with clicks-and-mortar retailers. If firms align with pure e-tailers to reach the online market, we show that a prisoner’s dilemma-type equilibrium may arise. Keywords: Supply chain management, Game theory, E-commerce, MNL model...
Words: 12524 - Pages: 51
...INTERNET VS STORE-BASED SHOPPING: THE GLOBAL MOVE TOWARDS OMNICHANNEL RETAILING Euromonitor International August 2014 INTERNET VS STORE -BASED SHOPPING: THE GLOBAL MOVE TOW ARDS OMNICHANNEL RETAILING Passport I LIST OF CONTENTS AND TABLES Executive Summary ..................................................................................................................... 1 Growth Drivers .......................................................................................................................... 1 Internet Retailing Trends .......................................................................................................... 2 Chart 1 Global Internet Sales by Category 2013....................................................... 2 Behaviour and Characteristics of Online Shoppers .................................................................. 3 Retailer Strategies .................................................................................................................... 4 Outlook ..................................................................................................................................... 6 Summary 1 Opportunities and Threats to Retailers ......................................................... 6 Introduction................................................................................................................................... 7 A New Way of Shopping ...................................................
Words: 44028 - Pages: 177
...Types of shops 2 History 2 Example of Ecommerce 2 Processes 3 Advantages 3 Disadvantages 3 Effects 4 Legal and ethical implications 4 Social implications 5 Economic considerations 5 Solutions 5 Conclusion 5 Bibliography 6 Internet as a threat to the high street Introduction Ever since its creation, the internet has developed drastically. One of its focal areas is internet shopping, which is vastly becoming more popular during the last few years, which led to the factor of increasing consumerism to a point almost beyond recognition. For those who have access to the internet, they are granted the privilege of a vast choice of not only physical but also digital products which have always been subject to availability in the high street. Types of shops Nowadays retail establishments can be fragmented into three classifications. Those constructed solely in physical retail shops, those assembled around the concept of both physical shops and online shopping, and also Ecommerce which is exclusively online shopping. History Before anyone was able to obtaining goods online there were only limited ways where people were able to purchase products. One of the methods was to go to the high street and inside the stores. Alternatively products were acquired by teleshopping, where you would call a number, usually advertised on TV, and give your credit card details. Nonetheless giving credit card details over the phone is very unsecure as other individuals could perhaps...
Words: 2147 - Pages: 9
...Online vs. Retail Shopping Online vs. Retail Shopping Once upon a time there was no such thing as the internet. Everything you needed and wanted had to be purchased in person. Now days you can sit in the comfort of your home, place of work, car, or even the local coffee shop and purchase most things through the internet. Is this the new frontier of shopping, or will there still be a place for a walk-in retail store. I have seen a lot of retail stores close and I am constantly wondering if it is because of on-line shopping. In the days before the internet any shopping you needed to do had to be accomplished by physically going out to the store that had the item you wanted. Fighting traffic, getting to the store early for the best sale, scrambling to get an item of limited quantity, these were the glory days for retail stores. These days you can purchase most anything you want or need without leaving the comfort of your home. Furniture, electronics, clothes, toys, and even groceries can all be purchased online and delivered right to your door. More and more people turn on their computers and shop for what they need instead of going out and braving the crowds in the retail stores. “Online retail sales aren’t growing at the torrid pace they once were, but they continue to grow steadily. Forrester Research put out a new five-year forecast today predicting that e-commerce sales in the U.S. will keep growing at a 10 percent compound annual growth rate through 2014....
Words: 742 - Pages: 3
...the opportunities and disadvantages of selling books over the Internet are summarized here: Factor Revenue Impact Increase Causes Convenience Large variety of books Customer-specific recommendations Distributor margins Downward price pressure Inability to browse Aggregation (major benefit is for low-volume books) No retail outlets, only warehouses No cashiers required Each customer order is picked and packed Higher outbound transportation costs Instant knowledge of customer preferences and tastes Track customer history (purchases) and make recommendations to the customer Decrease Inventory cost Facility costs Decrease Decrease Increase Transportation cost Increase Forecasting Customer Understanding Added Improved 2. The benefits of using the Internet for book sales are significantly larger now that books can be downloaded online. Amazon is able to ship some products over the Internet, saving the final shipping cost but changing the nature of its business. Amazon will be software intensive rather than book and warehouse intensive. 3. Other downloadable products are software and music. In both instances, Amazon increases the benefits of e-commerce if it either creates CDs or DVDs in response to customer orders or allows customers to download these products. For other products, like toys and hand tools, limited possibilities exist for postponement. The advantages of the Internet for Amazon in those product categories will continue to be smaller...
Words: 611 - Pages: 3
...than ever, traditional retailers are feeling more threatened by the worldwide web. The internet has created opportunities for people to shop with convenience and comfort which has not been possible in the past. Shopping online also has the added advantage of being able to compare products and prices at multiple sites with just a click. You are able to browse around the various online stores and find what you need. Payment method is often quite simple once you possess a credit card. Again with just a few clicks, payment is processed and transaction completed. Although shoppers today continue to flood the malls and department stores all over the world, online shopping has grown and continues to grow to new heights over the last decade and shows no sign of slowing down. Ever stop and wonder whether one day shopping for that special gift still dressed in your pajamas, while taking care of a husband, three children, and a cat with an overactive bladder at home was possible? Well thanks to twenty first century technology, anything’s virtually promising and shopping at home has become a part of everyday life as going to work or school. Compare online shopping with traditional shopping When it comes to the difference between the traditional shopping and online shopping, the former would definitely require more time while the latter would only take up minutes to go over hundreds of stores online. With online shopping, almost all time busters and long shopping days can be executed...
Words: 641 - Pages: 3
...responsible for omissions or errors. Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised. The PAs will add the report abstract here © Euromonitor International 1 THE SPORTSWEAR REVOLUTION: GLOBAL MARKET TRENDS AND FUTURE GROWTH OUTLOOK MAGDALENA KONDEJ – HEAD OF APPAREL RESEARCH 24TH JULY 2013 STATE OF THE INDUSTRY: THE HIGHLIGHTS DYNAMICS OF MAJOR SPORTSWEAR MARKETS EXPLORING HOT CATEGORIES AND INDUSTRY TRENDS EMERGENCE OF OMNI-CHANNEL – WHAT DOES IT MEAN FOR SPORTSWEAR BRANDS? THE SPORTSWEAR REVOLUTION: GLOBAL MARKET TRENDS AND FUTURE GROWTH OUTLOOK Setting the scene - sportswear vs other consumer goods industries $1728bn $2200bn $433bn $770bn $245bn Forecast % CAGR 2.7% 4.1% Sportswear 2.3% 3.0% Beauty and Personal Care 2.1% Consumer 4 Electronics © Euromonitor International Apparel and Footwear Packaged Food THE SPORTSWEAR REVOLUTION: GLOBAL MARKET TRENDS AND FUTURE GROWTH OUTLOOK Three-speed recovery of the global apparel and footwear market Apparel and Footwear Market Value Growth 2012 5.8% Global growth in 2012 US 2.2% © Euromonitor International EUROZONE -0.4% EMERGING AND DEVELOPING COUNTRIES 12.2% 5 THE SPORTSWEAR REVOLUTION: GLOBAL MARKET TRENDS AND FUTURE GROWTH OUTLOOK Sportswear outperforms across all years Market Value Growth 2007-2012 ...
Words: 1600 - Pages: 7
...Wal-Mart Vs. Amazon University of Phoenix ACC 291 Principles of Accounting II Wal-Mart vs. Amazon. Who do you think might win? Well, these are two of the nation’s largest retailers. Wal-Mart mainly sells in-store while all of Amazon’s sales happen online. So why could this competition between two of the largest retailers cause unethical practices and behavior in accounting? Wal-Mart is “considering using its own shoppers as delivery people, providing some kind of incentive to drop off online orders on their way home from the store.” (Heller, 2013) However, this has way too many unknown variables and implications such as taxes and accounting techniques. For example, how would you account for a loss of merchandise for a customer who instead of delivering the product on the way home decided to keep it for him or herself? What adjusting entries would have to be made and where? Wal-Mart could be tempted adopt unethical accounting practices to keep up with Amazon’s booming sales. Most of Amazon’s sales already come with free shipping. Wal-Mart offers free delivery to one of their locations where the customers pick up their merchandise, but not free shipping. Greed and opportunity might lead to either Wal-Mart or Amazon to get involved in unethical accounting practices. This is especially true if an accounting lie could give an edge over the competition. Ignorance in accounting cannot be used by either Wal-Mart or Amazon because these are two large corporations and they have...
Words: 593 - Pages: 3
...TRANDITIONAL VS ONLINE RETAILER MGMT310-1205B-01 Pamela Kruse January 13, 2013 Abstract: As we all know the internet has created many ways for companies to do business online. In this paper I will discuss the differences between traditional and online retailers. I will also discuss what advice I would give a traditional retailer to switch to an online retail organization. Traditional Retailer is called a building that is of brick and mortar store. This means that the customer will walk or drive to the store to do their shopping. A good location for these stores would be around a shopping center; this is a foot traffic place. The retailer will also advertise to attract more customers in that area as well. A traditional retailer will have to pay rent, heat, light, and of course insurance bills. The retail store will also have to keep merchandise in the stores for the customers to buy; this will need space and storage to where they will not run out of merchandise. The retail store in order to get customers to come and keep coming must have a good store front. That means neat appearance along with good advertisement that will invite the customer to come shop. Online retailer can reach people all over the world, but you will need to set up a good ecommerce site so people find you. This can be done by making sure promoting the website through links like shopping directories, and social network sites. Online retailers have lower overhead costs than traditional retailer....
Words: 1007 - Pages: 5
...Kudler Communications Leslie Laforest NTC/362 - Fundamentals of Networking February 25, 2013 Craig Urrizola Kudler Communications Kudler Fine Foods is a remarkable upscale food store that sells a variety of groceries to suit the customers every need from fresh vegetables, fine cheeses, and other specialty goods that other stores do not carry. Currently Kudler Fine Foods has three locations in which communicate using Wide Area Network called the T3 dedicated line, and all three locations will need an upgraded network to improve and ensure the best communication. Currently Kuddler Fine Foods uses a T3 dedicated line to connect all three stores, La Jolla Store and home office, Del Mar Store, and Encinitas Store, together. Dedicated network connection in essence is a dedicated line that works exactly like a leased line. It is always connected, and it always uses the same path for transmission. The network was built to also have Voice Over Internet Protocol and services. Currently within each store communication between point of sale terminals, printers, scanners, cash registers, phones, and the HP Blade Server is all Ethernet based. A 56k modem is also used in connecting the Ethernet Network to the Internet. The 56k modem is found to outdated and the speed in which Kudler Fine Foods needs it is not supplying. In using a dedicated line means, they are using circuits to connect. A dedicated circuit is digital line in which is composed of two parts:...
Words: 834 - Pages: 4
...Victoria’s Secret was started in the mid 70s by Roy Raymond, in San Francisco, CA. He wanted to create an atmosphere for men to feel comfortable buying lingerie for their wives. You could say the first customer target was men. After growing the business to four locations he was forced to sell it in 1982 to The Limited. By the early 90s, new management took over and focused on an older age group, thirty to forty year old women, as their target. Today there are over 1,000 stores nationwide and catalogs and the internet allow us to shop anyplace and anytime. Pink is Victoria’s Secret line started in 2004 and is targeted for the college-aged girls (Overview, n.d.). Victoria’s Secret and VS Pink’s demographic is women ages 18-44. The psychographic profile of Victoria’s Secret and Pink are that the stores offer a feeling of elegance and style the moment you walk into them. Women want to feel desired and the men want their girlfriends and wives to look like the models from the advertising. The stores provide a safe environment in which they can purchase items that make some embarrassed to buy in public. We have seen Victoria’s Secret change their target market already, changing focus from men to...
Words: 942 - Pages: 4
...Brick vs Click Business Managerial marketing BUS 620 Brick vs Click Business Abstract There are many avenues to go down when starting a business. The first decision to make is whether to have a web based operation or a brick and mortar business. This essay will explore and analyze the marketing implications for reaching market segments using both mediums to promote a web based business versus a brick and mortar business. In addition, some examples will be given of companies who have successfully established a space and/or place presence. The way you reach your customers will have the biggest impact on sales and that is the ultimate form of success, SALES. Brick and Mortar When starting a business the first step is to decide your approach to having a store front or a virtual store. Opening up a physical location where customers can come in and purchase the product or service being offered. Depending on the type of business or the product or service you are selling, by having a physical address there are a lot of advantages (Mullins, 2010). One of those advantages is that you can build a personal relationship with the repeat customers, and form a lasting trust worthy authority on the product or service you are attempting to sell. Despite the vastness of the World Wide Web and the perpetuation of inertia, people still like to window shop before they buy. Having certain products on display gives the customer the ability to touch and examine the product and this...
Words: 1130 - Pages: 5
...cannot be held responsible for omissions or errors. Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies‟ opinions, reader discretion is advised. Non-Store Retailing Internet Retailing Non-Grocery Retailers Electronics and Appliance Specialist Retailers Apple Inc, goes from strength to strength thanks to unparalleled consumer loyalty and brand equity, superlative store experiences, a strong portfolio of products and a customer service strategy that sets it apart from its rivals. Lacking strong leadership store sales have struggled - sales per store in 2013 were flat. Appointment of ex Burberry CEO as new VP of Retail and Online is expected to provide much needed boost to Apple retail operations – both in store and online. STRATEGIC EVALUATION COMPETITIVE POSITIONING GEOGRAPHIC STRATEGY AND OPPORTUNITY CHANNEL STRATEGY AND OPPORTUNITY BRAND AND PRIVATE LABEL STRATEGIES OPERATIONS RECOMMENDATIONS Apple Inc Headquarters : Regional Cupertino, California, USA Apple Inc, the consumer electronics giant, is also the operator of a substantial retail division. This includes 416 (and rising) stores in the US and 13 other markets,...
Words: 7904 - Pages: 32
...Bethlahmy, Paul Schottmiller Cisco Internet Business Solutions Group December 2011 Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 1 Executive Summary Many retailers are ―going global‖ to capture a larger share of the $1.4 trillion e-commerce market Leading-edge multichannel experiences are becoming the norm in highly developed markets around the globe To compete, retailers will need to understand customers’ needs and expectations in each market, and deliver highly advanced multichannel experiences Source: Cisco IBSG, 2011 Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 2 1 Global E-Commerce Background and Challenges Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 3 E-Commerce 2015: $1.4T, Still High Percentage in Developed, Non-U.S. Markets E-Commerce Spending (US$B) $1,600 Global e-commerce, including travel, will reach $1.36T by 2015—13.5% CAGR over six years This study focuses primarily on highly developed e-commerce and technology markets in Europe and Asia – Generally, high penetration of broadband and mobile, sophisticated delivery infrastructure – Example: U.K., Japan, France, and S. Korea will still represent almost 30% of the global e-commerce market in 2015 Internet Business Solutions Group 4 India ...
Words: 3098 - Pages: 13
...research findings appeared to portray a different picture. According to research findings, Starbucks was not always meeting customers’ expectations in terms of customer satisfaction. Planning to take corrective action in order to improve speed-of-service and thereby increasing customer satisfaction Day and her colleagues were evaluating whether investing an additional $40 million annually in the company’s 4500 stores was a profitable plan. Starbucks’s success is attributed to their successful focus on their brand strategy, which is to create an everyday experience around coffee. This strategy consists of three brand components namely offering high-quality coffee, establishing an intimate relationship with their customers and creating an atmosphere that makes customers feel that they are part of a community. Distribution plays a big role in their success and this statement is supported by the variety of third parties with whom they have built relationships in order to reach the diverse range of consumers, such as retail centres, office buildings (i.e., company-operated stores) and hotels, airlines (non-company-operated channels). Starbucks believes that employee satisfaction leads to customer satisfaction and therefore they empower their employees (i.e., partners) in different ways. As a result Starbucks’ employee satisfaction rate range between 80%-90% and they have one of the lowest employee turnover rates in the industry. This success has not come without its challenges, due to...
Words: 935 - Pages: 4
