Summary ROM
MOST IMPORTANT FOR EXAM: FINDINGS, REASONING BEHIND HYPOTHESIS
Week 46, lecture 1
Ratchford et al., 2022, Online and Offline Retailing: What We Know and Directions For
Future Research, Journal of Retailing, 98, 152-177.
This article shows the most important findings that are done for online and offline retailing.
Framework used for this literature review is shown in the figure.
Relationship between online and offline retail channels
Advantage offline: service of personal inspection and immediate delivery.
Advantage online: eliminate travel time and are able to provide a larger assortment for low cost.
Key findings:
- Lower search and distribution costs gives online retailers an advantage.
, - Competition between online and offline retailers is less intense when 1 channel has a
clear advantage:
- Products with important sensory (smell, feel etc.) attributes
- For perishable products (meat, fish, dairy etc.)
- Niche products
- When consumers seek instant gratification
- For customers whose tastes are less likely to be met offline
- For markets where offline options are limited.
- Synergies between online and offline, why omnichannel marketing is the norm
1. Service integration between online and offline is beneficial: increases perception
of service quality, perception of lower risk, and increased purchase intention for
online store without harming offline store.
2. Many consumers still prefer to shop offline
3. Offline stores offer different services than online. Opening offline
showrooms/stores may increase sales positively.
- Market-level outcomes
- One major outcome is the transition from online/offline only channels to
multichannel & omnichannel retailing because of these synergies.
Multichannel strategies: Operation both online and offline
Omnichannel strategies: Adopting coordinated strategies across online and offline channels.
→ These coordinated strategies occur across all phases of the purchase process.
Impact of E-commerce on consumer behaviour
- Search costs are generally lower online, but consumers still don’t search only online, and
price dispersion (difference) online and offline are similar.
- Consumers prefer offline search for items requiring personal inspection (trying on
clothes, testing a product).
→ Pop-up and zero inventory stores improve the customer experience
- Normative models of search don’t describe actual online search well (generally a model
of price search) where consumers behave optimally.
Usually, consumers are assumed to follow one of two search patterns:
1. Sequential search, in which consumers stop searching when the expected gain from
examining an additional alternative is less than the cost of doing so; or
2. Simultaneous search, in which consumers choose a fixed number of items to search a
priori, and the number of alternatives to examine is chosen to maximise the difference
between utility and search costs. (cheapest product)
- Valence of reviews (amount of positive reviews compared to negative) has a higher
effect on sales than review volume & predicts sales better.
, - Retailers need to attend to online reviews and may benefit from responding to negative
ones.
Impact of Big Data on retailing
The internet enabled retailers to:
- Track consumer behaviour
- Segmentation based on shipping costs or cross channel data
- Field experiments online: measuring advertising and pricing effects
- Targeting through multiple stages of purchase process
Attribution model: allocate budget a different way on different touchpoints
Conservative ← vs. → Growth oriented
Perceptual maps (Map that show how a consumer feels about a brand) can now be created
based on online communication, reviews, purchase history, and can be used for
product/marketing mix decisions.
Impact of digitization on retail outcomes
Organisations of industries have changed because of digitization:
- Offering of music, videos, movies, books, newspapers in digital format had a big effect
on offline retail (now digital delivery).
- Digitization also caused fostered piracy
- More difficult for information good suppliers to get compensated
Impact of ecommerce on concentration of sales
Absolute long tail: measures changes in number of available products
Relative long tail: measures share of sales taken above/below a percentile rank
It is easier for online retails to have very large assortments
However, it is not sure if this leads to long tail, and decreased sales concentration (distribution
of products).
, Impact of E-commerce and platforms on pricing
- Order of alternatives of products affects transaction prices
- If you list on price low-to-high, on Ebay, you get a reduced transaction price
compared to listing on product characteristics.
- Prices for similar products from online auctions tend to be lower.
- Free shipping lead to higher sales, but may encourage more product returns
Management of product returns across online and offline channels
- Lenient return (full price returns) (money leniency and time leniency) policies have a
positive effect on consumer value perception, cost fairness perception and
willingness-to-pay.
- Lenient policies affect purchasing more than returns.
- Product returns up to a threshold are positively related to customers' future value to the
firm.
- Opening showroom/physical stores reduces return rates of online shopping.
