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3.9 The New Face of Retail Competition: Retailers Versus E-Tailers 89

• Delivery time. Order fulfillment in physical stores is usu- Shoppers are using apps on their mobile devices to com-
ally immediate for physical goods. However, online com- pare prices (see Motorola Solutions 2013; and for some of
panies are constantly reducing the time between purchase the apps used, see verizonwireless.com/news/article/
and consumption. Sometime in the future, delivery will be 2014/01/showrooming-trend.html). Customers in gen-
by drones (see Chapter 12 and the opening case to this eral prefer to “touch and feel” items before they purchase
chapter). In the meantime, e-tailers are developing effi- them online (see cnbc.com/id/100597529).
cient same-day delivery services, at least in the large met-
ropolitan areas. Additionally, in 2013 Amazon.com Global Competition
partnered with the U.S. Postal Service for Sunday deliv-
ery to Los Angeles and New York metropolitan areas, As of 2016, we are seeing an increase in online global compe-
with service to extend to other cities in 2014 (see usato- tition. For example, several Chinese companies are offering
day.com/story/tech/2013/11/11/amazon-Sunday- consumer electronic products at a discount when compared to
delivery- usps/3479055). Google Shopping Express (google. what you can get at Amazon.com. After acquiring Buy.com,
com/shopping/express) is a same-day delivery service in Japanese company Rakuten (rakuten.com) is competing in
the San Francisco and San Jose areas, challenging similar the U.S. market by offering their website in English.
services offered by Amazon.com and eBay (see Hsu
2014).
• Obviously the delivery time of digitizable products is Retailers Versus E-Tailers
very fast in e-tailing. This is an important factor since
prices and the quality of products sold online are getting Since the beginning of EC in the mid-1990s, it has become
to be similar in different stores, so delivery time becomes clear that in certain industries, e-tailing will hurt brick-and-
an important factor. mortar retailers. In Chapter 2, we introduced Blue Nile as an
• Distribution costs. Traditional retailers need to spend example of disrupting the jewelry industry. Stock brokerages
money to build (or rent) stores, have inventory, advertise, and travel agents also have become victims to pure-play
etc. On the other hand, e-tailers need to pay for packing competitors. Amazon.com initially concentrated on books,
and shipments, but their advertising costs and inventory eliminating bookstores such as Borders. Today, Amazon.
costs are lower. These costs vary, depending on the prod- com is competing with thousands of retailers, including
ucts, the geographical location, and more. The distribu- giants such as Walmart (see O’Connor 2013). Encyclopedia
tion costs can be an important factor in the competition. Britannica and many others no longer have printed editions.
• Tax differences. The advantage of online shopping is The initial line of defense for traditional retailers was to
diminishing as the trend is to levy a tax on out of state become a “click-and-brick,” namely adding an online distri-
online products. bution channel to their physical presence. This helped some
• Price. Not only do online vendors offer lower prices on department stores and specialty stores, but not all.
the same goods, but they also may create a price conflict
within click-and-mortar companies (see Section 3.10).
• Information available to buyers. While buyers cannot Examples of Click-and-Brick Retailers
physically examine goods they buy online, they can use
the Internet to obtain considerable information on what Most large retailers have already migrated to be click-and-
they plan to purchase. In general, this is not a major factor brick companies. Let us look at several examples:
in most transactions.
• Other influencing factors. Several other factors are Best Buy
important in the competition. For example, who the sell- Best Buy, like Walmart, Target, and others, added an online
ers are, who the buyers are, the distribution channels used, marketing channel. However, in contrast with GAP, Best
consumer satisfaction, level of consumer loyalty, and the Buy was not successful. One reason is that the company
relationship between the sellers’ online and off-line mar- operates large-scale stores. Consumers come to the stores,
keting channels are all important. Finally, the shopping examine the products and go home and order them online
trends clearly indicate that more people are shopping (“showrooming”) on Amazon.com because it is much
online and spending more money doing so (e.g., see cheaper. In summer 2012, Best Buy reduced its prices to
Moseti 2014). Younger people especially are turning to match those of Amazon.com. The result was that in August
the so-called “showrooming,” meaning that shoppers go 2012, Best Buy, which is one of the world’s largest electronic
to a physical store to examine goods and check prices. retailers, saw its profit going down 91% in one year. Thus,
Then they buy online at a lower price (see Isidore 2014). the company decided to close 50 of its stores, and also is