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3.2 E-Tailing Business Models 73

Our examination of each of these distribution channel cat- successful for large companies. A prime example is Best Buy
egories follows. (see Section 3.9).
A click-and-mortar retailer is a combination of both the
Direct Marketing by Mail-Order Companies traditional retailer and a webstore.
A brick-and-mortar retailer conducts business exclu-
In a broad sense, direct marketing describes marketing that sively in the physical world. In some cases, sellers also might
takes place without physical stores. Direct marketers take operate a traditional mail-order business.
orders directly from consumers, frequently bypassing tradi- In today’s digital economy, click-and-mortar retailers sell
tional intermediaries. Sellers can be retailers or manufacturers. via stores, through phone calls, over the Internet, and via
mobile devices. A firm that operates both physical stores and
Direct Sales by Manufacturers and Make-to-Order an online e-tail site is a click-and-mortar business selling in
a multichannel business model. Examples of retailers going
Many manufacturers are selling directly to customers. Dell, from brick-and-mortar only to brick-and-click are depart-
HP, and other computer manufacturers use this method. It is ment stores, such as Macy’s (macys.com) and Sears (sears.
usually combined with self-configuration of products (cus- com), as well as discount stores, such as Walmart (walmart.
tomized, build to order). The major success factor of this com) and Target (target.com). It also includes supermarkets
model is the ability to offer customized products at a reason- and all other types of retailing.
able cost.
Retailing in Online Malls
Virtual (Pure-Play) E-Tailers
There are two types of online malls: referring directories and
Virtual (pure-play) e-tailers are companies with direct malls with shared shopping services.
online sales that do not need physical stores. Amazon.com is
a prime example of this type of e-tailer. Virtual e-tailers have
the advantage of low fixed costs. However, one drawback can Referring Directories
be a lack of an efficient order fulfillment system. Virtual
e-tailers can be general purpose (such as Amazon.com or This type of virtual mall contains a directory organized by
Rakuten.com) or specialized e-tailers (such as Dogtoys.com). product type. Banner ads at the mall site advertise the prod-
General-purpose pure-play companies can be very large. ucts or vendors. When users click on the product and/or a
Amazon.com is one example. Another example is Rakuten specific store, they are transferred to the webstore of the
Ichiba, Japan’s largest online mall that offers more than 50 seller, where they can complete the transaction. Examples of
million products made by over 33,000 merchants. In May referring directories can be found at bedandbreakfast.com.
2010, the Japanese company acquired U.S.-based Buy.com The stores listed in a directory either own the directory col-
(which is now known as Rakuten.com Shopping). The com- lectively, or they pay a subscription fee or a commission to
bined company offers more than 90 million products made the organizing third party for maintaining the site and
by over 35,000 merchants worldwide. Thousands of other advertising their products. This type of e-tailing is a kind of
companies operate as pure-play e-tailers. Examples are affiliate marketing (see virtualshoppingmall.weebly.com/
Australian companies dealsdirect.com.au and asiabook- affiliate-referral-sites.html).
room.com.
Specialty e-tailers, such as CatToys.com (cattoys.com),
can operate in a very narrow market. Blue Nile is another Malls with Shared Services
example. Such specialized businesses would find it difficult
to survive in the physical world because they would not have In online malls with shared services, a consumer can find a
enough customers and could not hold a large variety of stock. product, order and pay for it, and arrange for shipment. The
hosting mall provides these services.
Click-and-Mortar Retailers and Multichanneling Ideally, the customer would like to go to different stores
in the same mall, use one shopping cart, and pay only once.
This is probably the most commonly used model of e-tailing This arrangement is possible, for example, in Yahoo! Small
competing with pure-play e-tailers. Examples are Walmart. Business (see smallbusiness.yahoo.com/ecommerce) and
com, Target.com, and thousands of other retailers that offer bing-shop.com. With the availability of e-commerce soft-
products and services online as an additional sales channel. ware and outsourced logistics services, the popularity of
This strategy is gaining momentum, but it is not always online malls is shrinking.