The Impact and Role of Cybermediaries in Retailing: Implications for Global Competition.
THE IMPACT AND ROLE OFCYBERMEDIARIES IN RETAILING:IMPLICATIONS FOR GLOBAL COMPETITION. Madhury Khatun MBA in International Business Auckland, New Zealand Date: October 26, 2011
AREA OF RESEARCH & PROBLEM STATEMENT Area of Research Retailing Ecommerce Channel Intermediaries: Cybermediaries Traditional Intermediaries Ecommerce adopted firms Consumers buying behaviors, global retailing and change of company structure influenced by cybermediaries Problem Statements Cybermediaries integrate markets at the national to global levels Create opportunities and threats for firms, channel intermediaries and all their internal and external stakeholders Cybermediaries force to industry re-structuring and Creating IDR Cycles Influencing consumers buying behaviours To what extent are those cases?
PURPOSE AND SIGNIFICANCE OF THE RESEARCH Purpose of the Research To identify the roles and influences of Cybermediaries in global retailing. To analyze and understand the opportunities and threats of organizations and their internal and external stakeholders in presence Cybermediaries in retail market place To understand the affects of different organizations and their internal and external stakeholders in the presence of Cybermediaries in the retail market place. To understand and analyze the IDR Cycles and consumers buying behaviour influenced by Cybermediaries Significance of the research To demonstrate the current and future strategic directions for retail distribution channels which are benefits for the firms in retail sector. Companies can potentially use SWOT guidelines to perform strategic planning for a business venture in retail sector using different intermediaries To confirm are Cybermediaries a real threat for the firms, traditional intermediaries, and ecommerce adopted firms and their internal and external stakeholders. To confirm are cybermediaries influencing IDR Cycles and Consumers buying behaviors.
RESEARCH QUESTIONS Research Questions What are the roles of Cybermediaries and traditional intermediaries and e-commerce in the global retail business process? What are the threats and opportunities for firms in retail sector in the presence of Cybermediaries in retail distribution channels? What will be the cost to a company for intermediation, disintermediation, and re- intermediation through an IDR framework? Are Cybermediaries influencing consumers buying behaviours? Are Cybermediaries really a threat or potential revenue generators for firms in global retail sector?
LITERATURE REVIEW CONT……Retail Sector and Retailing Roles of cybermediariesRetail sector includes all the shops that sell Connect millions of buyers and sellersgoods and services to the final consumers.Retailing is the last stage in the distribution Integrate retail market to global levelsprocess.The retailers Price comparison web sites are growingRetailers are sales intermediaries or sellers Primary beneficiaries in retail sectorthose operate between manufacturers and are (Laudon &Traver):consumersExample of retail products Established offline retailers with online presence (e.g., Staples, Wal-Mart).Cars to apparel, meal at restaurant, airlinetickets/ hotel reservation, digital First mover dot-com companies (e.g.,products, books, magazine, newspapers, Amazon, eBay).software, movie, education, banking, andtheatre tickets. Intermediaries: Traditional, Manufacturers Consumers online or manufacturer itself
LITERATURE REVIEW CONT… World internet penetration rate Traditional vs. Online global Retail growth Online retail growth Traditional retail growth 22.7% 22.1% 12.4% 10.9% 14.5% 7.2% 9.4% -3.7% 2006 2007 2008 2009 World internet penetration rate: Growth online retail sector vs. B2C commerce todayHighest - North America(78%) 400 Revenue(billions)Oceania/ Australia (60%) 350 300Growth of Ecommerce vs. Online Retail 250 200 Online Retail 150Benefits from ecommerce 100 50 B2CTraditional vs. Online Retail Growth: 0 EcommerceGrowth of Online retail (14.5%) YearTraditional retail growth (-3.7%)
LITERATURE REVIEW: IDR CYCLES (CONT…)Traditional retail channel: Govt. benefited Suppliers Producers Distributers Retailers ConsumersIntermediation: Jobs loss, Govt. losses tax/ revenue ( Turban et.al, p.231) Suppliers Producers Wholesalers Retailers Consumers Cybermediaries(eBay, Amazon)Disintermediation: Jobs loss (Example: DELL, Wal-Mart) Suppliers Producers Distributer Retailers ConsumersRe-intermediation: More jobs loss, more competitions, Govt. tax loss Suppliers Producers Distributer Retailers Consumers Cybermediary Cybermediary Cybermediary
LITERATURE REVIEW: FINDING CONT…. Multichannel Retailing Strategy Purchasing from online or offline: Catalogue 42% search online and purchase the products online 34% research online and then purchased the Online Traditional product at the store. shop Store 21% research online, research at the store and then purchase later online Mobile 12% research at the store first and then purchase the product online 7% purchase the product at the store and Buy Return research the product later online( Amazon Source:(IMAP, 2010) web services, 2010). Browse Buy
LITERATURE REVIEW- FINDING Some factors influencing consumers buying from online shops are: Opportunity: Internet penetration, convenience shopping, low price, different selections of goods and services, save time, transparent prices (IMAP). Types of products/services and growing smaller to medium businesses and their online presence Quick growth of ecommerce B2C business sector and other multichannel applications. Multichannel Retailing Strategy is another significant factor for influencing consumers buying from online shops (IMAP). Threats Job losses due to intermediation, disintermediation and re-intermediation process from traditional retail shops(Jappone, 2011). Threat for traditional retailers (Melbourne IT, 2011). Payment Security threats ( Vinograd, Satter & Satherley, 2011) and (Chaffey). Power of consumers are high(Jappone, C. 2011). Increased conflicts between Cybermediaries and Traditional Intermediaries (Flach, 2011). Increased competition between cybermediaries (New York Post, 2011). Government loses sell tax (Robison).
RESEARCH METHODOLOGY CONT……. Secondary Data Collected during Literature Review from past and present published information, academic research paper, recent or historical research studies, company data, industry reports relevant to Retail Sector. Primary Data Collected from survey on consumers and companies in retail Industry Sampling Selection Framework For Consumers: Collected data from face to face from AIS ST HELENS, St. Lukes shopping mall, Kmart’s customers and staffs, University of Auckland, Public park, door to door, community events, sending survey web link email to community leaders ,LinkedIn professional social web group and friends. For company: Face to face, telephone, email attach with web link of survey questions to out side of Auckland ( Tauranga in New Zealand, Melbourne in Australia, Dhaka in Bangladesh). Respondent Organizations from Retail sector: Education, real-estate, construction and building products, Consumers electrical and electronics goods, Computer hardware and software service, Fast food, Furniture, Pharmaceutical company, Home entertainment/DVD/Video, Retail chain store, Retail stationary and book company, Quality shoes and Jewelry.
RESEARCH METHODOLOGY Targeted population and Sampling size:In this research, the author selected two groups of target populations and their sampling sizes are as follows:A. The consumers in Retail Industry Sampling Size: Selected sample size was 200. However, the author was able to collect 186 samples (74 respondents from online and 112 from face to face) by conducting survey using 37 questionnaires used Survey Statistical Online Software to get instant results (link: http://lnkd.in/txw9iU )B. The organizations in Retail Industry and the respondents were influential or well-informed executives . Sampling Size: Selected sample size was 15 and the author sent email and made telephone calls to 50 retail sector firms. However the author was able to conduct survey on 14 ( face to face , sending email with questions link) organizations in Retail Industry using structure open and close ended 36 questions used survey statistical online software ( link: http://www.mysurvey.tw/s/6p8q2tJs Data analysis Tools SPSS Software version 19 used for data input, Data analysis for cross tabulations, Mann – Whitney Test for Hypothesis Testing. Online My Survey Analytics Software for company data analysis plus consumers’ data analysis.
RESULTS ON CONSUMERS’ BUYING BEHAVIORS: DEMOGRAPHIC( CONT..) Table 1: Age group Graph 1: GenderAge group Frequency Valid percent20-30 years 88 47.631-40 years 42 22.7 Female,51- 60 years 15 8.1 46.8% Male,41- 50 years 11 5.9 53.2%61 and above 10 5.4Under 20 years 19 10.3Total 185 100%Missing System 1Total 186Result from Table 1 (Age group):Most of the respondents (47.6%) were from age group 20-30 yearsLeast respondents were from age group 61 and aboveResult from Graph 1( Gender):46.8% respondents were female and 53.2% male
RESULTS ON CONSUMERS’ BUYING BEHAVIORS: INTERNET USETable 2:What consumers are doing on the Table 3: How long consumers are spendingweb? time online every day?Activities on the web Responses Consumers online time No. Of respondents Valid % Number (N) Percentage of spending per day cases (%) 1 - 3 hours per day 92 49.5%Read news 116 62.5 3 - 6 hours 42 22.6%Search Information 143 76.9 Less than 1 hour per day 24 12.9%Entertainments 111 60.0 More than 9 hours 11 5.9%Buy Goods or services 84 45.2 6 - 9 hours 13 7.0%Sell Goods or services 26 14.0 Other 4 2.2%Other 34 18.3 Total 186 100%Total 514 276.3 Results from Table 2:76.9 % of consumers are search information on the web62.5% consumers red news60.0% consumers are using web for entertainments45.2% are buying goods and services from webResults from Table 3:Most of the consumers (49.5%) are spending average1-3 hours every day on internet 22.6% consumers are spending 3-6 hours and 5.9% are spending more than 9 hours
DATA ANALYSIS :CROSS TABULATION Graph 3: Online spending everyday as per Graph 4: How frequently consumers are gender shopping from online or offline shops? 50 Numbers of genders 40 39.8% 37% 30 40 29% 20 30 18.9% 10 18.8% 18.8% 0 20 Less 1-3 3-6 6-9 More than 1 hours hours hours than 9 Other hour per 10 per day per day per day hours day Male 26 44 13 10 3 1 0 Female 16 47 14 5 3 1 Online shopping Offline shopping 1-2 tims a week Other Never shopping onlineHere are two variables genders and their spending online(graph 3):Most of the consumers are spending 1-3 hours every day and highest is the female(47) than male(44)More male(10) are spending 3-6 hours per day than female(5)Here are two variables online and Offline shopping ( Graph 4):29% consumers are shopping from online 1-2 times a week and 37% are shopping from offline atthe same frequency18.8% consumers never shopping online Other 39.8% are doing online shopping and 18.9% from traditional shop as per their requirements.
DATA ANALYSIS: FACTORS INFLUENCING CONSUMERS ONLINE AND OFFLINE SHOPPING(CROSS TABULATION)Table 5 Consumers feel easy to price Table 6 Consumers feel easy to reach global comparison with retailers as: Total market through retailers such as: Total Traditional Online Both Other Traditional Online Both OtherMale 10 61 26 1 98 Male 6 76 15 2 99Female 13 45 24 3 85 Female 11 53 18 2 84Total 23 106 50 4 183 Total 17 129 33 4 183Table 7 Consumers feel comfortable payment with Table 8 Consumers received lowest price retailers such as: Total offered by retailers such as: Total Traditional Online Both Other Traditional Online Both OtherMale 38 16 44 0 98 Male 10 46 36 1 93Female 41 20 24 1 86 Female 13 49 20 2 84Total 79 36 68 1 184 Total 23 95 56 3 177From table 5Male consumers( 61 out of 106 respondents) feel easy to price comparison with online retailers thanfemale consumers( 45 out of 106 respondents). From Table 6:More male(76 out of 129 respondents) are buying and feel easy to reach global market throughonline retailers than female( 53 out of 129 respondents). From Table 7: For payments, female consumers feel comfortable payment with traditional retailers than male andmale feel comfortable both ways. But both gender feel uneasy to payment with online retailers.From Table 8:Both male and female consumers receiving lowest price offered by online shops but femalerespondents always searching for lowest price offered by online retailers.
TYPES OF PRODUCTS /SERVICES INFLUENCED CONSUMERS ONLINE AND OFFLINE SHOPPING( CROSS TABULATION)Table 9: Products and services Online Offline Both Total,influencing consumers buy from Frequency (%) Frequency (%) Frequency (%) Missing, The followingonline/offline shops Total products/servicesAirline tickets/reservations 127 (70.9%) 14 (7.8%) 38(21.2%) 179,7,186 consumers prefer to buyBooks 41 (24.3%) 80 (47.3%) 48 (28.4%) 169,17,186 from traditional shops:Clothing/Accessories/Shoes 26 (14.6%) 93 (52.2%) 59 (33.1%) 178,8,186 Books, Clothing/accessorVideos / DVDs / Games/ 38 (22.5%) 69 (40.8%) 59 (34.9%) 169,17,186 ies/shoes, Video/DVD/GaSoftware mes/software, Groceries, FElectronic Equipments 25 (14.8%) 80 (47.3%) 63 (37.3%) 169,17,186 urniture, Education, realGroceries 11(6.4%) 140 (81.9%) 18 (10.5%) 171,15,186 estate and insurance.Health/beauty products / 20 (11.6%) 107 (62.2%) 44 (25.6%) 172,14,186 Consumers prefer to buyJewellery both ways(online/Offline)Furniture 13 (7.7%) 127 (75.6%) 27 (16.1%) 168,18,186Education 23 (13.7%) 94 (56.0%) 47 (28.0%) 168,18,186 But Online shopping is increasing significantly asBanking 71 (38.6%) 38 (20.7%) 65 (35.3%) 184,2,186 shown in the table 11.Real estate 24 (14.4%) 92 (55.1%) 47 (28.1%) 167,19,186Insurance 36 (21.4%) 91(54.2%) 40 (23.8%) 168,18,18670.9% consumers are buying airline tickets and hotel reservation from onlineIn retail banking, 38.6% prefer online banking, 35.3% prefer both online/offlineThe online shopping are significantly increasing in Airline tickets/hotel reservation and retailbanking sector.
HYPOTHESIS TESTING: MANN – WHITNEY TEST The Mann-Whitney test: It is the non-parametric equivalent of the independent samples t-test. A non-parametric test (distribution-free) used to compare two independent groups of sampled data. Ho: There are no differences between male and female to buy airline tickets/reservation from online shop H1: There are some differences between male and female to buy airline tickets/ hotel reservation from online shop Significance level of p-value < 0.05 Reject the null hypothesis if p-value < 0.05. Finding P-value = 0.463 Decision: Since p-value = 0.46 > 0.05. Therefore, the author did not reject the null hypothesis. Conclusion: At the p-value = 0.46 level of significance, there is enough evidence to conclude that there is no difference between two gender classes for buy airline tickets/ hotel reservation from online shops.
RESULTS FROM SURVEY/INTERVIEW ON COMPANIESBusiness Model:92.9% respondents’ companies have B2C Business Model14.3% have Intermediaries7.1% companies are providing information, digital products and services via intermediariesConcepts about Cybermediary64% companies have enough knowledge on Cybermediaries36% companies are not aware about it.Revenue Model:86% respondent companies are generating profits to sell their products36% respondent companies are making profits to sell their services21.4% respondent companies are generating their profits through transaction fees and Commissionson sale products
RESULT: COMPANIES’ OPPORTUNITIES AND THREATS IN PRESENCE OF CYBERMEDIARIES IN RETAIL VALUE CHAIN Opportunities50% companies have more customers using cybermediary 43% companies can lowering their cost using Cybermediaries29% companies have opportunities to global reach using cybermediaries14.3% companies have opportunities for cross- selling, new service, saving transactioncost due to cybermediariesThreats64% companies are facing threat as consumers have different choices and 36% said thatconsumers are powerful28.6% said that new entrant increased and increased competitions among the firms21.4% said that new substitute products, channel conflicts and products and pricecomparison have increased.
INTERMEDIARY ANALYSIS – USING IDR FRAMEWORKTable 10: Levels of intermediation Cost levels High Medium LowTraditional Intermediation process 64.3% (9) 35.7% (5) 00%Online or Cybermediation process 7.1% (1) 57.1% (8) 35.7% (5)Both ( Traditional and web shop) 50% (7) 42.9% (6) 7.1% (1)Levels of intermediation and cost of company as shown in Table 15For traditional intermediation , 64% companies have high costFor Cybermediation, cost level is medium for 57% companies, 36% have low costFor Both intermediation, cost level is high for 50% companies and 43% have medium cost
PLAN FOR DISINTERMEDIATION AND CYBERMEDIATIONGraph 9: Disintermediation Strategy Graph 10: Reintermediation or Cybermediation Strategy No No 29% 43% Other 50% Other 43% Yes Yes 28% 7% Table 11: Effects of Disintermediation and Re-intermediation or Cybermediation ( Analysis) Effects of disintermediation Effects of re -intermediation or Cybermediation Revenue Increased: 42.9%(6) Revenue Increased: 64.3%(9) Revenue decreased:21.4%(3) Revenue decreased: 21.4%(3) Sell Increased: 28.4%(4) Sell increased: 42.9%(6) Sell decreased: 7.1%(1) Sell decreased: 00% Increased cost: 00% Increased cost: 7.1%(1) Decreased cost: 28.6%(4) Decreased cost: 28.6%(4) Increased competition:21.4%(3) Increased competition:35.7%(5) Decreased competition: 00% Decreased competition: 00% Price decreased:14.3%(2) Price decreased: 35.7%(5) Price increased: 00% Price increased: 00% Government benefited: 00% Government benefited: 7.1%(1) Government not benefited : 14.3%(2) Government not benefited: 14.3%(2) Increased employment: 7.1%(1) Increased employment:7.1%(1) Decreased employment:7.1%(1) Decreased employment:14.3%(2) Other: 28.6%(4) Other: 7.1%(1)
SUMMARY OF RESEARCH FINDING FROM PRIMARY DATA From consumers’ side From Companies’ side Most of the consumers are spending Most of the company have B2C business online every day 1-3 hours and the highest model, generate revenue for sell goods and used search intermediary is Google (79%) aware about Cybermediary. Most of the company’s weakness is High 45.2% consumers search web for buying operating cost – space, tech, staffs plus lack of products and services. cross channel support. TV is the highest influential media to Opportunities for using Cybermediaries are: influencing consumers for online shopping more customers, lowering cost and global plus significantly influencing by reach. iPhone/QR codes and online communities Threat for using Cybermediaries are consumers Most consumers prefer to buy both ways have different choices, more substitute (44%). But traditional shoppers (37%) and products, price competition to provide lowering price. (29%) prefer to buy from online shop. Most of the company’s competitors are Brick Reasons for online shopping are global and click and multichannel firms. reach, save time, Variety of products, price comparison and low price. For selling products/ services in traditional way, governments are more benefited than selling products/services using Cybermediaries
SUMMARY OF RESEARCH FINDING (CONTINUE) From Consumers’ Side From Companies’ side Consumers’ purchasing behaviors in o For cybermediation, more jobs will loss than traditional way or using online shop disintermediation. depend on types of products/ services they are going to buy. o Companies are making more revenues for using cybermediaries compare with Most of the consumers prefer to buy disintermediation airline tickets/hotel reservation and retail banking from online. Therefore, most of the company sells products/services in both traditional and using Limitations of buying from online shops: online shops. Sometimes consumers feel uneasy to use payment card, privacy of data and Companies are trying to adopt multiple spamming. They like to touch and feel distribution channels or cross channels in the products before buy. current competitive market place.Key findings from research: Cybermediary is good for global retailing, consumers and of coursebenefited to some companies and generates revenue but big threat for traditional intermediaries inairlines and hotel industries plus threats for employment and governments. Some times onlinespamming and payment security issues is the highest threats of companies, cybermediaries or onlineshops as distribution channels.
CONCLUSIONS – CONSUMERS’ SIDE The internet: Internet facility and time spending in online is increasing significantly and more people linked to email and online advertising. Other factors: Convenience shopping, easy for price comparison, save time, lowest price, easy to reach global market, products/ service qualities, variety of products/services. Limitations of buying from online shops: Security issues and privacy of data. Retail service sector :Secondary data(60% increased in online). From primary data, airline tickets/ hotel reservations (71%) and online banking (39%). Buying goods :From Primary and secondary data, Asian, Australian, and European prefer to buy products and services from overseas through online shops and100% Australian prefer it. Preference of shopping: From primary data analysis , consumers’ preference of shopping from both shops (44.3%). However, percentage of shopping preference from online (24%) and offline (28%) is not much difference which is similar to secondary data.
CONCLUSIONS ON COMPANY SIDES Opportunities : increasing more customers, entering new markets, lowering cost, increase cross selling or can use as multiple distribution channels. Threats: lowering price, increasing more substitute products/services, increasing more online companies, and significantly threat for traditional intermediaries plus security threats for all firms who are using online shops. Competitors: Brick and click, Click and click and multichannel firms. Cost of different intermediation process: Cybermediation ( Lowering cost offering products and services in a lower price to consumers. Cost is high( over 60%) for sell products and services in traditional way which was similar with secondary data. Multichannel Strategy: Most of the companies are looking for multichannel strategy for sell their products and services. Disintermediation and re-intermediation effects: For disintermediation, 43% company respondents said that their revenue increased but for using Cybermediaries or for re- intermediation, company respondents (64%) said that their revenue will further increase.
RECOMMENDATIONS Research and developments Need to develop research focused on consumers and different technologies which are influencing consumers’ buying behaviours and changing company channels structure. Management of IDR Cycles Frequency of IDR Cycles are increasing due to internet technology and growth of online intermediaries. Traditional intermediaries plus other companies can use multiple distribution channels to sell their products and services using cybermediaries for short or long term as per their needs. Strategy for disintermediation or re-intermediation Sometimes company itself plays an intermediary role for sell its products and services. Company can use cybermediaries for promotion products and services as a multiple channel. External Threats Management- Need sufficient support or commitment by senior management to address information security issues- Keeping up-to-date with changes in technology- Online security threats Management- Strategies for increase more opportunities for firms in competitive market place
RECOMMENDATIONS CONT….. Limitations of Research Time constraint, limited resources. Data collection and Sample size Difficulties to get personal information for conventional survey For companies, they are not ready to disclose their internal weakness. Retail sector population is too large therefore it is impossible to include every individual. Most of the company respondents tried to avoid tax related question. Data was missing from some particular questions from conventionally collected data as respondents were not much interested. Area of further research Need to investigate more effectiveness on IDR Cycle and deeply focused on roles of Cybermediaries in particular retail sector. To develop more precisely consumers’ buying behavior focused on country individually using some important variables such as current economic condition, culture etc. Need to investigate impact of economy due to online growth in retail sector. Any other reasons which influencing consumers buying from online shops? THANK YOU ( ANY QUESTIONS ?)