Impact of Web-Based E-Commerce on Channel Strategy in Retailing
By Ravi Sen, Ruth C. King, Mu Xia
International Journal of Electronic Commerce, Vol. 8, #3, pp. 103-130
Web-based channels are fast becoming an integral part of the channel strategy of traditional off-line retailers. This paper uses a game-theoretic approach to study the impact of Web-based e-commerce on retailers’ choices of distribution channel strategies. At present most firms adopt a multichannel strategy that includes both Web-based channels and pre-existing off-line channels. The analysis identifies this trend as equilibrium of the game resulting from competitive pressure by other retailers, but shows that it is not the only possible short-run outcome. Other possible outcomes are: All sellers continue to sell via traditional offline channels; some sellers adopt a coordinated dual-channel strategy (i.e. both online and offline) when faced with competition from Web-based entrants; offline sellers continue to sell via offline channels when faced with purely on-line competition. The conditions for these equilibriums depend on the proportion of buyers unlikely to buy online and their level of discomfort with online channels. Traditionally offline sellers can preempt competition from online channels by improving such features as convenience, personalized after sales service and trust. In doing so, they will also increase the factor of buyer discomfort associated with relatively new and unknown online channels.