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THE IMPACT AND ROLE OF
CYBERMEDIARIES 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 cybermediaries
Retail sector includes all the shops that sell
                                                  Connect millions of buyers and sellers
goods and services to the final consumers.
Retailing is the last stage in the distribution   Integrate retail market to global levels
process.
The retailers                                    Price comparison web sites are growing

Retailers are sales intermediaries or sellers     Primary  beneficiaries in retail sector
those operate between manufacturers and
                                                  are (Laudon &Traver):
consumers
Example of retail products                        Established offline retailers with online
                                                  presence (e.g., Staples, Wal-Mart).
Cars to apparel, meal at restaurant, airline
tickets/ hotel reservation, digital                 First mover dot-com companies
products, books, magazine, newspapers, sof        (e.g., Amazon, eBay).
tware, movie, education, banking, and
theatre tickets.

                                      Intermediaries:
  Manufacturers                    Traditional, online or                  Consumers
                                    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
                                         today
Highest - North America(78%)
                                                             400

                                         Revenue(billions)
Oceania/ Australia (60%)                                    350
                                                             300
Growth of Ecommerce vs. Online Retail                       250
                                                             200                                              Online Retail
                                                             150
Benefits from ecommerce                                     100
                                                              50                                              B2C
Traditional vs. Online Retail Growth:                         0
                                                                                                              Ecommerce

Growth of Online retail (14.5%)
                                                                                     Year
Traditional retail growth (-3.7%)
LITERATURE REVIEW: IDR CYCLES (CONT…)
Traditional retail channel: Govt. benefited

 Suppliers        Producers          Distributers        Retailers       Consumers

Intermediation: 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      Consumers



Re-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: Gender
Age group            Frequency     Valid percent
20-30 years              88            47.6
31-40 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              5.4
Under 20 years          19             10.3
Total                  185            100%
Missing System           1
Total                  186


Result from Table 1 (Age group):

Most of the respondents (47.6%) were from age group 20-30 years

Least respondents were from age group 61 and above

Result from Graph 1( Gender):

46.8% respondents were female and 53.2% male
RESULTS ON CONSUMERS’ BUYING BEHAVIORS:
                       INTERNET USE
Table 2:What consumers are doing on the                  Table 3: How long consumers are spending
web?                                                     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 web
62.5% consumers red news
60.0% consumers are using web for entertainments
45.2% are buying goods and services from web
Results 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 online

Here 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 at
the same frequency
18.8% 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         Other
Male           10          61         26       1        98      Male      6            76        15       2       99
Female         13          45         24       3        85      Female    11           53        18       2       84
Total          23          106        50       4        183     Total     17           129       33       4       183

Table 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     Other
Male      38               16           44      0       98      Male        10          46       36       1        93
Female    41               20           24      1       86      Female      13          49       20       2        84
Total     79               36           68      1       184     Total       23          95       56       3        177


From table 5
Male consumers( 61 out of 106 respondents) feel easy to price comparison with online retailers than
female 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 through
online retailers than female( 53 out of 129 respondents).
 From Table 7:
 For payments, female consumers feel comfortable payment with traditional retailers than male and
male 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 female
respondents 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 following
online/offline shops                                                       Total        products/services
Airline tickets/reservations   127 (70.9%)   14 (7.8%)     38(21.2%)       179,7,186    consumers prefer to buy
Books                        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/accessor
Videos / DVDs / Games/       38 (22.5%)     69 (40.8%)     59 (34.9%)      169,17,186   ies/shoes, Video/DVD/Ga
Software                                                                                mes/software, Groceries, F
Electronic Equipments        25 (14.8%)     80 (47.3%)     63 (37.3%)      169,17,186
                                                                                        urniture, Education, real
Groceries                    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 buy
Jewellery                                                                               both ways(online/Offline)
Furniture                    13 (7.7%)      127 (75.6%)    27 (16.1%)      168,18,186

Education                    23 (13.7%)     94 (56.0%)     47 (28.0%)      168,18,186
                                                                                        But Online shopping is
                                                                                        increasing significantly as
Banking                      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%)      167,19,186

Insurance                    36 (21.4%)     91(54.2%)      40 (23.8%)      168,18,186


70.9% consumers are buying airline tickets and hotel reservation from online
In retail banking, 38.6% prefer online banking, 35.3% prefer both online/offline
The online shopping are significantly increasing in Airline tickets/hotel reservation and retail
banking 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 COMPANIES
Business Model:

92.9% respondents’ companies have B2C Business Model

14.3% have Intermediaries

7.1% companies are providing information, digital products and services via intermediaries

Concepts about Cybermediary

64% companies have enough knowledge on Cybermediaries

36% companies are not aware about it.

Revenue Model:

86% respondent companies are generating profits to sell their products

36% respondent companies are making profits to sell their services

21.4% respondent companies are generating their profits through transaction fees and Commissions
on sale products
RESULT: COMPANIES’ OPPORTUNITIES AND THREATS IN
      PRESENCE OF CYBERMEDIARIES IN RETAIL VALUE CHAIN

 Opportunities

50% companies have more customers using cybermediary
 43% companies can lowering their cost using Cybermediaries
29% companies have opportunities to global reach using cybermediaries
14.3% companies have opportunities for cross- selling, new service, saving transaction
cost due to cybermediaries
Threats
64% companies are facing threat as consumers have different choices and 36% said that
consumers are powerful
28.6% said that new entrant increased and increased competitions among the firms
21.4% said that new substitute products, channel conflicts and products and price
comparison have increased.
INTERMEDIARY ANALYSIS – USING IDR FRAMEWORK
Table 10: Levels of intermediation                Cost levels
                                        High        Medium           Low
Traditional 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 15

For traditional intermediation , 64% companies have high cost

For Cybermediation, cost level is medium for 57% companies, 36% have low cost

For Both intermediation, cost level is high for 50% companies and 43% have medium cost
PLAN FOR DISINTERMEDIATION AND CYBERMEDIATION
Graph 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 course
benefited to some companies and generates revenue but big threat for traditional intermediaries in
airlines and hotel industries plus threats for employment and governments. Some times online
spamming and payment security issues is the highest threats of companies, cybermediaries or online
shops 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 ?)

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The Impact and Role of Cybermediaries in Retailing:

  • 1. THE IMPACT AND ROLE OF CYBERMEDIARIES IN RETAILING: IMPLICATIONS FOR GLOBAL COMPETITION. Madhury Khatun MBA in International Business Auckland, New Zealand Date: October 26, 2011
  • 2. 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?
  • 3. 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.
  • 4. 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?
  • 5. LITERATURE REVIEW CONT…… Retail Sector and Retailing Roles of cybermediaries Retail sector includes all the shops that sell Connect millions of buyers and sellers goods and services to the final consumers. Retailing is the last stage in the distribution Integrate retail market to global levels process. The retailers Price comparison web sites are growing Retailers are sales intermediaries or sellers Primary beneficiaries in retail sector those operate between manufacturers and are (Laudon &Traver): consumers Example of retail products  Established offline retailers with online presence (e.g., Staples, Wal-Mart). Cars to apparel, meal at restaurant, airline tickets/ hotel reservation, digital  First mover dot-com companies products, books, magazine, newspapers, sof (e.g., Amazon, eBay). tware, movie, education, banking, and theatre tickets. Intermediaries: Manufacturers Traditional, online or Consumers manufacturer itself
  • 6. 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 today Highest - North America(78%) 400 Revenue(billions) Oceania/ Australia (60%) 350 300 Growth of Ecommerce vs. Online Retail 250 200 Online Retail 150 Benefits from ecommerce 100 50 B2C Traditional vs. Online Retail Growth: 0 Ecommerce Growth of Online retail (14.5%) Year Traditional retail growth (-3.7%)
  • 7. LITERATURE REVIEW: IDR CYCLES (CONT…) Traditional retail channel: Govt. benefited Suppliers Producers Distributers Retailers Consumers Intermediation: 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 Consumers Re-intermediation: More jobs loss, more competitions, Govt. tax loss Suppliers Producers Distributer Retailers Consumers Cybermediary Cybermediary Cybermediary
  • 8. 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
  • 9. 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).
  • 10. 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.
  • 11. 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.
  • 12. RESULTS ON CONSUMERS’ BUYING BEHAVIORS: DEMOGRAPHIC( CONT..) Table 1: Age group Graph 1: Gender Age group Frequency Valid percent 20-30 years 88 47.6 31-40 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 5.4 Under 20 years 19 10.3 Total 185 100% Missing System 1 Total 186 Result from Table 1 (Age group): Most of the respondents (47.6%) were from age group 20-30 years Least respondents were from age group 61 and above Result from Graph 1( Gender): 46.8% respondents were female and 53.2% male
  • 13. RESULTS ON CONSUMERS’ BUYING BEHAVIORS: INTERNET USE Table 2:What consumers are doing on the Table 3: How long consumers are spending web? 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 web 62.5% consumers red news 60.0% consumers are using web for entertainments 45.2% are buying goods and services from web Results 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
  • 14. 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 online Here 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 at the same frequency 18.8% consumers never shopping online  Other 39.8% are doing online shopping and 18.9% from traditional shop as per their requirements.
  • 15. 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 Other Male 10 61 26 1 98 Male 6 76 15 2 99 Female 13 45 24 3 85 Female 11 53 18 2 84 Total 23 106 50 4 183 Total 17 129 33 4 183 Table 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 Other Male 38 16 44 0 98 Male 10 46 36 1 93 Female 41 20 24 1 86 Female 13 49 20 2 84 Total 79 36 68 1 184 Total 23 95 56 3 177 From table 5 Male consumers( 61 out of 106 respondents) feel easy to price comparison with online retailers than female 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 through online retailers than female( 53 out of 129 respondents).  From Table 7:  For payments, female consumers feel comfortable payment with traditional retailers than male and male 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 female respondents always searching for lowest price offered by online retailers.
  • 16. 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 following online/offline shops Total products/services Airline tickets/reservations 127 (70.9%) 14 (7.8%) 38(21.2%) 179,7,186 consumers prefer to buy Books 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/accessor Videos / DVDs / Games/ 38 (22.5%) 69 (40.8%) 59 (34.9%) 169,17,186 ies/shoes, Video/DVD/Ga Software mes/software, Groceries, F Electronic Equipments 25 (14.8%) 80 (47.3%) 63 (37.3%) 169,17,186 urniture, Education, real Groceries 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 buy Jewellery both ways(online/Offline) Furniture 13 (7.7%) 127 (75.6%) 27 (16.1%) 168,18,186 Education 23 (13.7%) 94 (56.0%) 47 (28.0%) 168,18,186 But Online shopping is increasing significantly as Banking 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%) 167,19,186 Insurance 36 (21.4%) 91(54.2%) 40 (23.8%) 168,18,186 70.9% consumers are buying airline tickets and hotel reservation from online In retail banking, 38.6% prefer online banking, 35.3% prefer both online/offline The online shopping are significantly increasing in Airline tickets/hotel reservation and retail banking sector.
  • 17. 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.
  • 18. RESULTS FROM SURVEY/INTERVIEW ON COMPANIES Business Model: 92.9% respondents’ companies have B2C Business Model 14.3% have Intermediaries 7.1% companies are providing information, digital products and services via intermediaries Concepts about Cybermediary 64% companies have enough knowledge on Cybermediaries 36% companies are not aware about it. Revenue Model: 86% respondent companies are generating profits to sell their products 36% respondent companies are making profits to sell their services 21.4% respondent companies are generating their profits through transaction fees and Commissions on sale products
  • 19. RESULT: COMPANIES’ OPPORTUNITIES AND THREATS IN PRESENCE OF CYBERMEDIARIES IN RETAIL VALUE CHAIN  Opportunities 50% companies have more customers using cybermediary  43% companies can lowering their cost using Cybermediaries 29% companies have opportunities to global reach using cybermediaries 14.3% companies have opportunities for cross- selling, new service, saving transaction cost due to cybermediaries Threats 64% companies are facing threat as consumers have different choices and 36% said that consumers are powerful 28.6% said that new entrant increased and increased competitions among the firms 21.4% said that new substitute products, channel conflicts and products and price comparison have increased.
  • 20. INTERMEDIARY ANALYSIS – USING IDR FRAMEWORK Table 10: Levels of intermediation Cost levels High Medium Low Traditional 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 15 For traditional intermediation , 64% companies have high cost For Cybermediation, cost level is medium for 57% companies, 36% have low cost For Both intermediation, cost level is high for 50% companies and 43% have medium cost
  • 21. PLAN FOR DISINTERMEDIATION AND CYBERMEDIATION Graph 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)
  • 22. 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
  • 23. 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 course benefited to some companies and generates revenue but big threat for traditional intermediaries in airlines and hotel industries plus threats for employment and governments. Some times online spamming and payment security issues is the highest threats of companies, cybermediaries or online shops as distribution channels.
  • 24. 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.
  • 25. 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.
  • 26. 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
  • 27. 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 ?)