“Difference Between Retail &

E – Commerce”

A Seminar Report Submitted in Partial Fulfillment

Of the Requirement for the Award of

The Degree of

“Master of Business Administration”

Supervisor: Student Name:

Ms. Komal Sharma Nousheen

Assistant Professor Roll No: 2306000019

FACULTY OF COMMERCE & BUSINESS STUDIES

MOTHERHOOD UNIVERSITY, ROORKEE

DISTRICT HARIDWAR, UTTRAKHAND

 DECLARATION

I hereby declare that report entitled “Difference Between Retail & E-

Commerce”.“submitted to the office of the dean, faculty of management, Motherhood
University, is my original work done in the form of partial fulfillment of requirement for
the “Masters of Business Administration” under the supervision and guidance of Ms.
Komal sharma (maam) .

NOUSHEEN

ROLLNo.2306000019
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Ms. Komal Sharma
(maam) , who gave me the golden opportunity to do this wonderful project of business
studies on the “ Difference Between Retail & E-Commerce” , who also helped me in
completing my project. I came to know about so many new things I am really thankful to
them. Secondly I would also like to thank my parents and friends who helped me a lot in
finalizing this project within the limited time frame.

NOUSHEEN

Roll.no 2306000019
 TABLE OF CONTENT

S. NO. PARTICULAR PG.NO. REMARK

1. Introduction 1-2

1.1 What is retail & e-commerce 3

1.2 Different types of e-commerce 3

1.3 Difference between retail & e-commerce 3

2. Market projections: the end of the (shopping) 4-8

world as we know it?

3. E-commerce mechanics: a process 9-10

innovation in retailing.

3.1 The sourcing of products. 11

3.2 Stockholding, inventory and store 12

merchandising.

3.3 The marketing effort including branding. 13

3.4 Customer selection, picking and payment. 14

3.5 Distribution of goods by or to the consumer. 15-17

4. Issues for the ‘‘High Street’’: new challenges or 18-21

the same old threats?

5. Concluding remarks. 22-23

6. References. 24-27
 TABLE OF TABLES

Table No. Title Pg.No

1. Estimates of the UK market for e-commerce ($ million) 4

2. Projections of market growth (UK) 5

3. Reported problems with e-commerce (USA) 7

4. Characteristics of the new commerce 10

5. Rethinking the retail process 10

6. Retail vs e-tail hypothetical cost comparisons 17

 Introduction

E-Commerce is big money—certainly for consultants, if no one else! It is virtually

impossible to read a newspaper or trade magazine without being confronted with at least
one article on the success or failure of an ecommerce venture. Log onto the website of
any major consultancy firm such as KPMG or Ernst & Young and it is possible to
download the current edition of their latest e-commerce survey and to follow up with
their nominated e-commerce specialists. In the press, every championed success seems to
be matched by a highprofile failure. Tesco’s successful (store-based picking) on-line
shopping service and the transfer of its expertise to Safeway in the USA can be
contrasted with Somerfield’s closure of 24-7, Budgens withdrawal from the Internet and
the struggles of Peapod and other. Probably the best known e-commerce brand, Amazon,
has had financial difficulties and has laid off staff to cut costs, yet at the same time has
the capacity to take over Toys ‘‘R’’ Us problematic e-commerce operation. For every
VictoriasSecret.com there is a Boo.com. Whilst commentators may not agree on the
eventual shape or outcome of the ‘‘e-revolution’’ it is clear that the arrival of e-
commerce, in its many forms, has the capability to fundamentally alter the established
‘‘rules of the game’’ as far as the retail and distribution industry is concerned.

This paper focuses upon reviewing the impact of ecommerce upon fixed store locations.
It concentrates on the business to end-consumer (B2C) view of e-commerce, often
termed e-retailing, rather than the wider, more holistic, perspectives which would
incorporate the business-to-business (B2B) market or even broader conceptualisations of
‘new commerce’ (Dawson, 2001). It is, however, inappropriate to separate these
perspectives totally (as some commentators do), as e-commerce initiated changes in
networks, relationships and behaviour of upstream elements in the distribution channel
are integral to the downstream impacts most evident to the consumer. As distribution
channels move away from dyad-based transactional behaviours towards administered
vertical marketing systems (Dawson and Shaw, 1989), the emphasis on supply chain
management, and the integration of up- and down-stream activities increase. Various e-
commerce applications reinforce this relationship. Some limited discussion of aspects of
the B2B market is therefore included.

In a world dominated by jargon, we should remember that e-commerce is shorthand for

electronic commerce. What is being considered is process innovation, whereby
technology provides the capability for a reconfiguration of existing business and channel
relationships, and the scope for introductions of new operations. Dussart (2000) e.g.,
argues that the Internet will engender eight concomitant and interrelated ‘‘re-volutions’’
in the business world—defined as re-vamping management, re-storing control, re-
launching the economy, re-configuring offers, re-structuring markets, re-distributing
power, re-defining relationships and re-organising channels.

This process innovation arises from the ability of the Internet to provide electronic links
between dispersed sources of information, the enhanced collection and use of real-time
data, the replacement of inventory with information, and the changing of traditional tasks
and roles in the distribution channel. The UK Foresight Electronic Commerce Task
Force (2000) consultative report goes as far as to suggest that ‘‘the critical features of the
Internet, from a business perspective, are that it reduces almost to zero the marginal costs
of information, communication and distribution’’. This however has to be seen as an
over-statement. Whilst some marginal costs do become almost zero, there is no doubt
that other costs increase to take their place. Whilst it is product-dependent to some
extent, distribution costs do not necessarily approach zero in an Internet channel.
Brynjolfsson and Smith (2000) point out that the idea of ‘‘frictionless commerce’’ being
introduced by the Internet is really not accurate.

As with much of the Internet hype therefore, it is important to go back and re-think the
business and consumer processes that are being altered. In conceptual terms this process
innovation can be considered as the business scope redefinition stage of Venkatraman’s
(1994) model of technology use within business. It is process innovation which provides
the scope for new business models (see e.g., those given in the Foresight Electronic
Commerce Task Force (2000) report) and the potential for fundamental change in the
distribution system (Younger, 1998). This paper aims therefore to consider the impact of
the Internet on the retail structure through a reexamination of the processes of retailing. It
has to be emphasised that the approach taken here is to review the literature and
published evidence for trends and tendencies and to comment on the probable directions
of change. The paper is a review that does not introduce new evidence itself. It is
structured into four sections. First, to complete the introduction on e-commerce, some
market projections are considered and discussed. Secondly, the processes of retailing
affected by e-commerce are outlined and the balance of effects is considered. Thirdly,
the implications of the ‘‘new’’ methods on physical retailing and its use of land and
space are presented. Finally, some concluding remarks are provided
What is Retail & E-Commerce?

Retail is the process of selling consumer goods and services through different channels.
Retail businesses purchase products or services from manufacturers or wholesalers and
then sell them to customers at a markup. Retail businesses operate in multiple channels,
including physical stores, E-Commerce platforms, mobile apps, and social media.

E-commerce (electronic commerce) is the exchange of goods and services and the
transmission of funds and data over the internet. E-commerce relies on technology and
digital platforms, including websites, mobile apps and social media to make buying and
selling possible.

Different types of E-Commerce.

 Business-to-Business (B2B)
 Business-to-Consumer (B2C)
 Consumer-to-Consumer (C2C)
 Consumer-to-Business (C2B).
 Business-to-Administration (B2A)
 Consumer-to-Administration (C2A)

Difference between Retail & E-Commerce.

E-commerce refers to commercial transactions carried out through an electronic network
such as the internet.whereby businesses list their products on an online platform.
Consumers then view the product descriptions, prices, and images. Upon choosing a
product, the consumer can then check out and pay for the goods through an electronic
payment method. The goods are then delivered to the consumers’ location. On the other
hand, retail refers to the sale of goods in small quantities from a single point such as a
departmental store, supermarket, shop or mall in small quantities. Customers visit the
physical stores where they can touch products and also read product descriptions of items
on display before ordering, after which they purchase the product. While the future of
business lies in e-commerce, the retail industry remains an important aspect.
Market projections: the end of the (shopping) world as we know it?

As with most innovations that are in their introduction phase there is a plethora of views
of the long-term success (or failure) and impact of the innovation, many of which project
a highly optimistic future (e.g., Birch et al., 2000). Indeed, the short history of consumer
Internet purchasing is littered with spectacular overestimates of the rate of take-up by
consumers. To some extent we are observing the classic stages of the conflict– response
model outlined by Fink et al. (1971). The arrival of e-commerce causes at first shock,
and defensive retreat (denial, etc.), which is in turn followed by phases of
acknowledgement, and adaptation and change as the larger and more established traders
bring forward a more considered strategic response. This response often embraces
activities they previously derided (e.g., the convergent models reported in Chen and
Leteney (2000) and Enders and Jelassi (2000)). As Katros (2000, p. 75) puts it ‘‘Retailers
have worked through the stages of shock, denial, anger, grief and acceptance in coping
with the Internet, and are now rushing to identify and secure ways to protect their
customer relationship franchise’’. Projections of future impact vary widely. The report
produced by the Centre for Research on Innovation and Competition at UMIST for the
UK Foresight Panel provides projections for UK e-commerce, from widely respected
commentators (Table 1). These range from around d2 billion to d7 billion sales by 2003,
i.e., a rather substantial error margin. Updated estimates from a range of sources are
provided regularly at http://www.marketspace.org.uk and again confirm considerable
variations in estimates of sales and market size. Other figures on this website show
however, continued uptake of e-commerce technology in the UK.

Table 1:

Estimates of the UK market for e-commerce ($ million)

Table 2:

Projections of market growth (UK)

Most projections of market share are based on a sectoral analysis of impact. For the
USA, in a paper which outlines a number of key considerations in e-retailing, Stern
(1999) identifies high-, moderate- and low-impact sectors. The high-impact sectors (e-
retailing ARTICLE IN PRESS 276 S. Burt, L. Sparks / Journal of Retailing and
Consumer Services 10 (2003) 275–286 taking between 10% and 20% of the market)
include books, music, office products, toys, computers; the moderate impact sectors (3–
5%) include sports goods, clothing, home furnishings, and auto spares; and the limited
impact sectors (0–2%) are seen as DIY, grocery, shoes, furniture. Rosen and Howard
(2000), focusing on those products which ‘lend themselves’ to shopping by computer
take a similar approach. Other projections from Forrester for the USA in 2004 have the
highest penetration levels in computer software (50%) and computer hardware (40%),
followed by music (25%), books (16%) and video (15%), whilst food and beverages
(3%) furniture (5%) and tools and garden (5%) are the least affected. Projections for the
UK from Verdict (Table 2) suggest a similar split in impact amongst sectors, although
the UK grocery projection provided by Verdict is notably higher than that suggested for
the USA. This possibly reflects not only differences in market conditions and in the
structure of the grocery market between the two countries, but also different approaches
to fulfilment.

Academic papers which provide overviews of eretailing developments similarly tend to

follow a sector-by-sector framework for reporting (see e.g., Rowley, 1996; Pavitt, 1997;
Morganosky, 1997; Morganosky and Cude, 2000; Doherty et al., 1999; Hart et al., 2000;
Zott et al., 2000). Such sector-based projections are intuitively appealing. They fit with
traditional product-based segmentations of the market. Basic product characteristics such
as physical size, weight, perishability and fashionability allow some explanation for the
varied uptake and interest shown by specific retailers within sectors. There is also a clear
link to changing product characteristics and, in particular, r, the capacity for digitisation
and electronic capture and transmission. As with traditional store-based retailing,
however, sectoral projections disguise the range of approaches undertaken, and may
ultimately limit our understanding of the potential of e-retailing. In ‘‘bricks’’ retailing we
recognise a wide range of positioning options undertaken by operators based upon consumer
motivations and values. Yet to date in ‘‘clicks’’ retailing, the focus appears to remain primarily
upon macro-level evaluations based upon product sectors, although there is emerging work on
branding (e.g., Davis et al., 2000; Degeratu et al., 2000).

In assessing the future uptake of e-retailing, the acceptability of the concept to consumers, and
how they interact with this new retail medium is crucial. Eretailing requires a change in some of
the traditional shopping behaviour processes (e.g., information search, purchase method, product
possession). Some academic work has examined the motivations and reactions of consumers to
computer-mediated environments. In particular, the work of Hoffman and Novak (e.g., 1996,
1997, 2000a) provides a valuable insight into marketing and consuming interactions with
computers. Similarly, the work of Peterson et al. (1997) is a sensible examination of some of the
important issues. Reynolds (2000) provides a very useful critical appraisal of many aspects of e-
commerce, including consumer reaction. Brynjolfsson and Smith (2000) use a detailed
examination of pricing and purchasing in the book and CD markets to explore a number of key
consumer and market-related issues. Bakos (2001) similarly looks at the impacts of ‘‘digital
markets’’.

Although the work noted above explores the consumer shopping process, it is questionable,
however, how much of the process of retailing and the positioning of retailers has been fully
analysed. From the retail perspective a growing distinction is now being made based upon
shopping modes, with a line being drawn between, e.g., mundane/repetitive shopping and fun
shopping. Sparks and Findlay (2000) identify three different approaches, which they note are
commonly recognised in ‘‘traditional’’ retailing. First t ‘‘price driven’’ offers, with the focus on
price transparency and sourcing the lowest price for a product or service. A second option is
‘‘service delivery’’, which provides a breadth and depth of product/service options to satisfy the
desire for uniqueness or distinctiveness. Finally, ‘‘time saving’’ offers, perhaps better defined as
‘‘provisioning’’, where routine basic components of shopping could be home delivered. Further
prespective on e-retailing, as noted above, can be derived from the content of the role performed
within the shopping process, be it simply information gathering or purchasing and delivery.
There is also the recognition by some authors of the potential within e-retailing to create a unique
or value-added feature through the establishment of communities (e.g., Armstrong and Hagel,
1996; Kotha, 1998), although the depth and cohesiveness of these ‘‘communities’’ and the
demands placed upon their members is unclear.

However interpreted, ultimately the success of eretailing will depend upon consumer use
and acceptance. Those who play down the long-term impact or who emphasise possible
adverse social impacts, point to issues of access and potential social division (the
‘‘surfs’’ vs. the ‘‘serfs’’—see Scase (1999), Foresight Retail and Consumer Services
Panel (2000) or on an international basis, OECD (1999)). Early surveys in the UK
suggested that access was limited with the stereotypical Internet user being a degree level
educated, single male, aged between 22 and 30 years and in a professional employment
with a personal income of d40,000 plus. More recent surveys show that the gender divide
is less pronounced amongst younger groups and that certain older communities are
increasing their involvement. The standard innovation–adoption curve of early adopters,
laggards, etc. appears relevant. A crucial feature of these surveys are that they are usually
of PC-based Internet users. Whilst the PC is currently the prime source of access to the
Internet, domestic PC ownership levels remain fragmented, and in the future other access
points will dominate—particularly, interactive digital TV if the analogue signal is
switched off in the UK in 2006/2010. By 2010 access to the Internet could be almost
universal in the UK. The issue then becomes one not of physical access but of economic
access and ability and willingness to use the medium to shop. Delivery issues will also
need to be overcome. Similar concerns exist in the USA with an overlay of a racial
divide as well (Hoffman and Novak, 2000b).

Table 3:

Reported problems with e-commerce (USA)

Problem experience over the holiday period %

The media is quick to report any problems based upon the Internet shopping experience.
Table 3 provides a summary of common problems with on-line shopping experienced in
the USA and is typical of many such reactions. On a more strategic level, others
recognise a number of core challenges for e-retailing. Reynolds (1997) identifies four
major issues: the transferability of retail brands; the appropriateness and availability of
distribution networks; the market share practicalities of extending market reach; and
supplier relationships. He concludes ‘‘a truly profitable, transactional presence on the
Internet appears somewhat more problematic than many of its proponents would have
retailers believe’’. This is a theme he pursues in his more recent view of the market
(Reynolds, 2000). Other hurdles suggested by Stern (1999) include: an unproven
financial model; high merchandise return rates; establishing customer trust; distribution
costs; bounded rationality and the different cognitive process between fun and routine
purchases. Recent high-profile withdrawals from Internet selling have obviously
emphasised the problems in some commercial applications, but there are quite
longrunning success stories and new developments are still being launched.
E-commerce mechanics: a process innovation in retailing.

A common debate in assessing the impact of ecommerce is the extent to which it

complements existing fixed store retailing, as an alternative channel, or replaces existing
channels—the ‘‘clicks and bricks’’/ ‘‘clicks or bricks’’ scenarios prevalent in the jargon.
The outcome of this debate in the form of consumer purchases and spending diversion or
addition will, to large extent, determine the impact upon physical stores.

As stated earlier, the threat to established retail and distribution channels, systems and
behaviours arises because of the process innovation inherent in e-retailing. Dawson
(2001) points to ‘‘new commerce’’ as being comprised of an innovative force, laden with
information, enabling companies to speed up activities and increase their scope. Table 4
summarises what he defines as new commerce. The table illustrates clearly that
processes are altered both inside and outside the business and that companies can
differentially obtain advantages depending on their ability to effectively conduct their
activities in this new era. Conversely, a failure to operate in these ways could lead to
competitors moving ahead. Such are the potential impacts of the changes that there is
little choice but to embrace them.

As a process innovation e-commerce provides the capability to transform traditional

tasks and activities, and the associated costs, within the retail channel. The retail channel
is traditionally viewed as a series of tasks and flows (information, inventory, payment,
etc.) with specific actors taking responsibility for these. We suggest that any assessment
of e-commerce requires an exploration of how these activities, processes and ownership
may change. For example, disintermediation has been identified as a possible outcome as
channel members are displaced or removed as traditional activities transfer from one
channel member to another. Others have pointed to the ease of entry to the market as
allowing reintermediation in some channels, as more intermediaries set up as entry points
to provide services, goods or information. In some cases, new activities emerge, but as in
much channel change, many tasks and activities remain, although the process innovation
alters the ownership, costs, efficiency and practice of these functions. These potential
changes are, we argue, the key to understanding the impact of e-commerce upon fixed
stores.
Table 4:

Characteristics of the new commerce

E-commerce has a number of implications for the retail process and how and where the
tasks are performed. Here we consider the retail process as comprising the sourcing of
products; stockholding, inventory and store merchandising; the marketing effort
including branding; customer selection, picking and payment; and distribution of goods
by or to the consumer. Each of these is now discussed in turn (see Table 5)

Table 5:

Rethinking the retail process

The sourcing of products.

Retailers have always worked in partnership with selected suppliers in product sourcing
and the lessons learnt from key relationships have often been extended across the supply
chain for that retailer. The Internet has opened up the possibilities for retailers to share
such techniques with their suppliers and/or to force them to use business practices that
help the retailer. As such the ownership and management of the sourcing activities
changes. The most extensive retail example would be Wal-Mart’s Retail Link. Wal-Mart
defines this as:

Information and an array of products that allow a supplier to impact all aspects of their
business. By using the information available in Retail Link suppliers can plan, execute
and analyze their businesses—thus providing better service to our common customers.
Retail Link is a website that is accessible to any area within your company. Wal-Mart
requires all suppliers to participate in Retail Link because of the benefits it provides
(Wal-Mart Stores, Supplier Proposal Guide, p. 14).

The benefits would appear to be common systems and tools, supplier use of advanced
systems, faster and more reliable communications, and enhancement of planning,
forecasting and replenishment. In the UK we can see a number of retailers moving the
same way, most publicly Tesco with its Information Exchange. These closed
communities offer the advantages of simplification, automation and elimination of
problem areas. The sharing of information produces the scope to manage sourcing
activities more efficiently and cost effectively. Going beyond this single retailer
approach, however, two major global retail exchanges have recently been developed:
Global NetXchange initiated by Carrefour and Sears Roebuck (see
http://www.globalnetxchange.- com) and WorldWide Retail Exchange operated by a
large consortium of retailers (see http://www.worldwideretailexchange.org). These
exchanges are aiming to be globally integrated retail supply chain networks, leveraging
the Internet to seamlessly connect trading partners across extended retail supply chains,
and have recruited many leading retailers as members. Exchanges have the potential to
alter trading relations through the creation of open systems in which firms can form
short- or longterm relationships with one or many partners. Buyers and suppliers that
have previously had trouble reaching each other can connect. Suppliers can gain access
to more buyers. Buyers can participate easily and view items from multiple suppliers.
The electronic interface should lower transaction costs for both buyer and seller, and this
transparency will likely drive down prices as well.

Whilst exchanges are currently in their initial stages and are basically unproven, though
some auctions and purchasing have taken place, the potential to reduce cost and to
streamline supply is clear. Whether organisational issues that restrict potential activities
can be overcome is a bigger issue.

Stockholding, inventory and store merchandising.

Following on from the sourcing of products, it is possible to see a number of time and
cost benefits to retailers from changes brought about by the use of ecommerce and
Internet-based systems in stock allocation and inventory control. For years, this area has
been technically complex and amenable to computer-based solutions and current
developments extend this approach. There are potential gains in terms of the volume and
location of inventory held and opportunities to better use data to improve availability.
These issues may also encompass the ownership of inventory.

It is also important to appreciate that as in some physical retail stores, the product
displayed for sale may not be owned by the retailer, nor indeed may it be physically
available at the time of purchase. Whilst consumers may accept this in some ‘‘real’’
stores, will they perceive ‘‘virtual’’ stores in the same way? It is possible that one key
here is the consistency and reliability of fulfilment systems. Home delivery (if that is the
solution) requires a different inventory and distribution system, though as some are
showing (e.g., Tesco) there may be an opportunity to utilise existing assets. An ancillary
component of this area of stockholding and replenishment is that of changing needs for,
and from, physical space and retail property.

Rather differently perhaps, merchandising becomes a considerable issue with e-

commerce. How should virtual stores look? Can catalogues be replicated directly online,
or are there other, better ways to present the same products? There are many potential
opportunities and difficulties in virtual retailing product representation and information.
There may also be synergies, however (e.g., digital photography), between virtual
(computer), virtual (catalogue) and physical shop product presentations.

3.3. The marketing effort including branding.

One fundamental impact upon retail processes is that of customer access and the
marketing effort, in general. E-retailing and the virtual store provides a 24 h shopping
opportunity (making a potential nonsense of opening hours laws in the process—e.g.,
Tesco’s operation in England) and in theory widens the ‘‘store’’ catchment area from the
local to global level. Thus the traditional retail boundaries of ‘‘store reach’’ are changed
both temporally and geographically. Customer access issues then become the ability to
get ‘‘on-line’’ and the ability to pay rather than mobility, i.e., it is a more ‘‘pure’’
marketing requirement in that spatial (trading) issues become reduced in importance,
although access issues remain. Whilst the current debate surrounding the payment
process has concentrated upon security issues and consumer perceptions of on-line
payment risks, most now see this as a short-term barrier. In the longer term, and in
respect to social exclusion issues, access to a payment card is more likely to determine
usage rates. Whilst not minimising this social issue, it would appear that e-retailing does
provide a bigger potential market for companies, though one that has many more
potential competitors.

A second dimension of customer access is the access point itself. Most retailing occurs
through fixed stores, with existing operators having ‘‘sunk’’ investments in physical
fabric. The importance of ‘‘location, location, location’’ has been stressed in traditional
retailing. The physical location of a store is seen as a source of competitive advantage,
provides crucial entry barriers to competitors and is in most cases an expensive asset—
yet the use of these access points and their commercial value may require major
reassessment in an e-retailing context. We have already seen the power of e-commerce to
remove entry barriers through the appearance of eretailers such as Amazon, who have no
history (and legacy) of fixed store retailing. However, the brand power of existing
retailers should not be underestimated as a draw in the virtual world.

There are also changes that the Internet brings to the property market itself (Miller,
2000). There are changes in the demand for property and particular forms of property.
This encompasses both store and distribution facilities. As a recent report has stated, this
area is unclear at the moment, but it is likely that commercial risks in this area will
increase (BCSC, 2000).

In-store marketing activities (such as merchandising discussed earlier) are only one
dimension of the marketing effort. E-retailing again provides the scope for significant
changes in the way the retail marketing function is performed. Many commentators
argue that as there is an issue of consumer trust to be overcome when dealing with a
virtual (unseen, unfelt, unsmelt) retailer, brand building is crucial—yet a range of
alternative strategies also appear to be in place. Questions concerning the transferability
of a brand based upon a fixed store environment arise, and perhaps more importantly
over the maintenance and development of an on-line brand either in isolation or in
tandem with a store-based operation (Davis et al., 2000; Degeratu et al., 2000).

Other marketing issues revolve around micro-level activities. On the one hand the more
individualised data collection generated by these systems provides the opportunity for
more refined segmentation and targeting of activities. Yet on the other the established
mechanisms built around in-store ambience such as sight, smell, touch and human
contact (how many times are we told that retailing is a people business?) are lost. Whilst
some skills and activities may be easily transferred to the virtual shop it is clear that new
skills, systems and activities will be required to support the marketing activity. In some
cases, the activities will be required amongst computers and involving, e.g., intelligent
agents (e.g., Rowley, 2000).

It is possible that different marketing skills will be needed in a virtual store. Retailers are
concerned to get consumers to visit their physical stores and to extend, in many cases,
the time they spend in the store. Repeat visits and long stays are also desirable in the
virtual world. The techniques to improve the ‘‘stickiness’’ of virtual stores may,
however, have to be different to those in the real world (Zott et al., 2000). What is the
virtual equivalent of a cafe in a Borders bookshop or a ! creche in Safeway? However,
some techniques from the " virtual world may find their way into physical shops, as data
is better used to understand product cross-relationships.

Customer selection, picking and payment.

Once the customer has ‘‘reached’’ the virtual store, eretailing processes change
traditional selection and picking activities. The introduction of self-service saw cost
efficiency gains for retailers as the effort (and costs) of selection and physically picking
product, along with certain process associated with payment in some retail sectors, i.e.,
bag packing, were transferred from the retailer to customers. E-retailing separates more
clearly ‘‘order capture’’ (or selection) from ‘‘order fulfilment’’ and diverts physical tasks
and their associated costs back to the retailer. The costs of these tasks and the way they
are performed becomes an issue for the retailer, and indeed is one of the major cost
implications of the new business model. In addition, self-service allowing the customer
to select goods themselves, provided the opportunity for activities to ease selection,
make instant replacement or substitution decisions, increase choice and purchase
opportunities and created the scope for impulse lines and add-ons, all of which generated
additional sales. The way in which such opportunities are realised via e-retailing is
certainly different, and arguably less effective, although ‘‘l-click’’ type buying
operations are one-way forward to improving the situation from a retailers’ perspective.
As noted previously, the decision making of consumers in ‘‘real’’ and ‘‘virtual’’ stores
can not be assumed to be the same and thus will have to be researched very carefully.
Similarly, however, retailers may be able to adjust their activities to try to affect demand
in different ways. Brynjolfsson and Smith (2000) show how on-line prices were lower
but had a wider variation than equivalent product physical store prices, but that the
incremental change in prices on-line was much smaller than in physical stores. There
will be the development of new learning and possibly new skills in this regard.
ARTICLE IN PRESS S. Burt, L. Sparks / Journal of Retailing and Consumer Services 10
(2003) 275–286 281

Distribution of goods by or to the consumer.

The greatest debate in e-retailing, however, probably revolves around the fulfilment and
distribution processes. Supply chain developments have focused upon reducing
inventory within the channel and improving service levels. E-retailing again requires
existing processes and systems to be reassessed—will existing supply chain processes be
appropriate or will new ones be required? The role of intermediary institutions and
facilities are questioned, and from a total channel perspective the possibilities of
disintermediation, with consumers dealing directly with suppliers or, reintermediation
through new types of intermediary being developed, arise. Fundamental issues such as
where (manufacturer, depot or store) stock is held and in what volume arise. In grocery,
there is considerable debate over whether product should be held and picked in central
distribution centres or in stores. The scope for replication of tasks, inefficient stock levels
and reduced (or changed) labour efficiency exists. Split systems with some products
supplied direct from the manufacturer or depot and others from the store may be
appropriate, as may be shared consolidation centres for certain product groups and retail
sectors.

On the logistics front, many argue that e-retailing will raise customer delivery
expectations. The nature of the product (bulk, fragility, perishability, etc.) will play some
role in the delivery process, as will delivery scheduling issues. In most sectors the
logistics process and associated activities have moved towards fewer large consolidated
drops whether to a centralised depot or store. The in-built inefficiencies in terms of cost
and service levels of a large number of direct deliveries (to store) are recognised.
However, e-retailing would appear to reverse or add to this process, requiring a large
number of small drops (to the home). In reality these journeys currently take place but
the scheduling and cost of this activity is borne by the customer. In an eretailing system,
the management of this process (and possibly the cost) will now be passed on to the
retailer. Current business practice suggests that these activities can be outsourced and it
is argued that courier company skills rather than ‘‘pure’’ logistics skills will be required.
Systems adaptation may involve the creation of a pickup facility either at a store or at
some other point such as the workplace (e.g., Waitrose@work) that would allow order
consolidation and ensure that some of the logistics transportation cost is borne by the
customer.

This transference of activity from the consumer to the retailer has many problems and
remains the subject of much experimentation and concern. Different models are being
implemented by different businesses. No one approach may be right. The cost and
congestion implications are considerable as are the ability to meet (or not) expectations
of service quality (Retail Logistics Task Force, 2000; Foresight Retail and Consumer
Services Panel, 2000).

The five process issues discussed above provide a broad indication of how some
established business processes and the associated activities may change or at the very
least will require examination. Whilst all these processes and activities take place in
existing retail businesses in some form, the diversity of the sector means that some of the
‘‘new’’ processes, configurations, systems and skills may be in place. For example, mail
order operations will already have knowledge and experience of home delivery. For
others, however, a new way of operating and new networks and relationships may be
appropriate. The outcome of these activity and process changes are new business models
for retailing which could have significant impacts upon existing structures. With regard
to cost structures, Table 6 illustrates one attempt to highlight the cost structure
implications of e-retailing operations. Whilst the model appears simplistic it provides an
indication of the level of impact upon some crucial cost functions and emphasizes the
potentially difficult issues for many businesses.
We can summaries the discussion of the process issues above in the context of
activity/process, ownership, cost and efficiency (see Table5. It illustrates the changing
balance of activities that retailers have to perform. On the one hand there are potential
gains to be made from the enhancements in the supply chain, but these could be off-set
by cost implications arising at the consumer end of the channel. In the same way as the
development of vertical marketing channels had implications for ownership and
efficiency of established channel activities, so too e-commerce will alter the processes,
practices and costs.

Table 6:

Retail vs e-tail hypothetical cost comparisons

At a more detailed level the ability of individual retailers to meet these new process
challenges becomes key to understanding the future possibilities. It would seem that
retailers need two components of process change to be right to make e-commerce work
for them. First, they need to be able to leverage their scale to gain cost and/or time
efficiencies in supply. This would seem to give an advantage to big retailers or effective
small retailers or product specialist exchanges. When customers are prepared to pay the
full cost of delivery, this may not be a problem, but in other cases there will be a scale
advantage to supply. Secondly, they have to convince consumers of their viability and
effectiveness. Strong brand names or category killer depth appear to be the most
successful strategies in this regard, although quality of fulfilment will eventually drive
repeat buying. The conclusion from this is that e-commerce does not derail existing retail
structural change processes and may indeed exacerbate them. Whilst there will be some
new opportunities for smaller entrants, as there is now, the processes discussed here as
inherent to e-commerce or new commerce, benefit the larger companies in the sector.
Issues for the ‘‘High Street’’: new challenges or the same old threats?

As far as retail property and land use are concerned (see BCSC, 2000) the impact, to a
large degree, will depend upon the extent to which e-retailing is an
additional/complimentary channel or a replacement channel. After a relatively slow start
in some cases, many existing retailers have added e-retailing activities to their portfolio;
although they may now be requiring harder financial performance criteria. As with any
change in the retail landscape, developments in technology do not occur within a
vacuum. Other environmental pressures—demographic, social and lifestyle trends,
economic and political pressures and other commercial developments all influence the
future scope and use of eretailing. E-commerce and e-retailing cannot be divorced from
the wider contextual pressures shaping the retail sector. Technology, after all, is only an
enabler, which leads to process innovation, and as noted earlier the basic retail process
for most products remains essentially the same.

Sparks and Findlay (2000) developed three scenarios for the long-term future of
shopping and the subsequent impact upon urban and retail space for the Royal Institution
of Chartered Surveyors’ ‘‘20:20 Visions of the Future’’ project. These emphasised the
impact of e-commerce alongside other pressures on the retail environment. The resulting
scenarios were based primarily upon the role of technology and the desire for social
equality, and provide alternative views of the future of retailing. The ‘‘wired
wonderland’’ scenario, where technology is rapidly adopted by society at large, sees e-
retailing as a replacement channel and which leads to radical changes in shopping. In this
vision of the future e-retailing dominates and existing retail locations, such as the High
Street, will not be needed in their current form. As the authors comment ‘‘Their use will
have been removed and their purpose would no longer fundamentally exist. Other
locations would change their dominant use to reflect the make-up of the local area and
the purpose of the centre’’. The outcome is projected to be a downsized core, which
would be refocused upon retailtainment, and leisure activities, which would require
constant renovation and reinvention to remain attractive, with a demand for investment
in local facilities in residential areas providing an emergency and top-up function.

The ‘‘social security’’ scenario envisages the expansion of e-retailing as an additional

channel with current trends continuing particularly the leisure element of shopping.
Access to the Internet will increase but disparities will remain. The overall impact on the
urban environment is seen as close to neutral but not static— demand for town centre
uses will continue to change and differential growth of centres will ensue, with released
retail space taken up by leisure-related uses. Finally, the ‘‘compound calamity’’ scenario
is based upon growing social disparity between the haves and have-nots which is
reflected in retailing. Shopping provision and High Street offers polarise with some
allowed to decline. E-retailing remains the domain of the privileged. These scenarios
were deliberately proposed as extremes over a long 20-year time horizon. Others,
working on shorter time scales have developed alternative scenarios (BCSC, 2000) but
agree that change in retail property is inevitable.

Aside from the longer-term implications of the additional vs. replacement channel
debate, the immediate impact for town centres takes two obvious forms. First, the scope
of e-retailing to alter the purpose, use and ultimately demand, for existing retail facilities
with a consequent impact upon property values and rates; second, the implications for
transport networks and traffic flows.

It has been argued in the previous section that the mechanics of e-retailing change the
retail and distribution process and, in particular, the role and activities performed by
different elements of the channel. The business economics of ‘‘High Street’’ retailing are
based upon ease of access, complementary attraction, high footfall and a level of
transaction and sales density which supports a particular cost structure (currently one
with high property costs). The process innovation which is allowed by e-commerce
provides the capacity to theoretically compete with the benefits provided by the ‘‘High
Street’’ in respect of most of these characteristics. IIn such circumstances, the role
performed by the ‘‘shop’’ ARTICLE IN PRESS S. Burt, L. Sparks / Journal of Retailing
and Consumer Services 10 (2003) 275–286 283 will inevitably change. As Sparks and
Findlay (2000) comment ‘‘If all that a store provides is a location for a transaction, then
it would seem likely that there will be major effects (of e-retailing) if the issues of
pricing and home delivery can be solved’’. It is not difficult to envisage a changing role
with the fixed store acting as a display and marketing vehicle, providing theatre and
excitement to stimulate interest and with human contact and advice reassuring customers
in the selection stage of the shopping process. The final selection, ordering and
fulfilment may then take place through the virtual store. Such a switch in the role of the
store may have implications for the nature and type of property occupied and the price
that companies are willing (and able) to pay.
While the role of some stores may change, other outlets may not be needed. If one thinks
of retail sectors where a location for a transaction to take place is the only rationale for
possessing a physical asset, a number of quasi-retail sectors spring to mind. Banks and
financial services, travel agents, and estate agents all essentially retail ‘‘virtual’’ products
or services that are not purchased and physically taken away from the location. Outlets
associated with these activities would seem to be most at threat, as the core business can
be undertaken off-site.

The big question mark hanging over e-retailing, in all the literature, is that of fulfilment
and home delivery. The change that e-retailing implies in this element of the shopping
process will have implications for traffic management in and around towns and cities,
and may also provide further pressures for a change in ‘‘use’’ for retail locations. It may
possibly change the role of some stores/outlets from a selection and collection point to a
collection point only, although it is not hard to envision ‘‘emergency’’ or ‘‘impulse’’
purchases being available in some form (Foresight Retail Logistics Task Force, 2000).
The traditional product/merchandise way of viewing retailing is, as noted above, one that
has been readily applied to e-retailing. Those sectors perceived as being most at risk
(e.g., books and music) are amongst those which have been investing heavily in opening
large intown stores on British High Streets, so the direct or immediate threat to the High
Street is highly visible. However, as suggested earlier there is perhaps a need to move
away (yet again) from viewing retailing in comfortable frameworks based simply upon
location (town v in-town) and product/merchandise category. Whilst these characteristics
contribute to the structure and performance of the retail sector, the focus must remain on
how retailing responds to consumer shopping activity and how the shop or store fits into
the shopping process. This interpretation will provide the basis for understanding the e-
retailing threat and the potential response.

There are numerous authors, working in different fields, who recognise that shopping
activity is multifaceted, is need- or value-driven, and leads to different shopping motives
(e.g., Shields, 1992; Bowlby, 1993, 2000; Falk and Campbell, 1997; Miller, 1987, 1998;
Miller et al., 1998; Crewe, 2000). Categorisations such as essential shopping, purposive
shopping, leisure (fun) shopping, convenience shopping and experimental shopping have
been recognised and within single retail product markets a range of different formats and
locations have evolved to meet these needs (Dawson and Sparks, 1985). The logic is that
the response of fixed store retailing in the High Street must be to provide added value
unavailable in a virtual context, which meets particular shopping motive(s). Most
immediately this might be sought through emphasising the sociable aspects of shopping
usually attributed to the leisure (fun) motivated shopper, but also through ways of
supporting and supplementing purposive and experimental shopping. It is not a case of a
single position being adopted. Town centres, in particular, have the potential to position
themselves in a multiplicity of ways. Out-of-centre retailing may find this transformation
more difficult.
 Concluding remarks.

This paper has argued that whilst there is a great deal of uncertainty and a range of
conflicting views over the future of e-commerce and e-retailing and their impact upon
urban form and the town centre, assessments based upon product/merchandise sectors
limit an understanding of the future. E-commerce is a process innovation, therefore an
approach which explores the processes in retailing and how these differ between fixed
store and virtual store retailing provides a clearer view of the nature of the ‘‘threat’’ (or
opportunity) to existing retail locations and operations. Ultimately, the real benefits of e-
commerce arise from how tasks and activities are performed within the retail channel,
and how changes impact upon ownership, costs and efficiency.

The process evaluation undertaken here suggests that we are already witnessing the
harnessing of the Internet to enhance business efficiencies. This is particularly the case
for the world’s largest retailers and it can be argued that they have begun to leverage
their scale effectively in the first instance. If this provides them with cheaper product and
better supply adaptation, then there will be enormous pressures placed on existing
retailers. These competitive pressures may be the lasting legacy of ecommerce.
However, new business models and formats can be envisaged with retailers emerging
with an unrivalled product offer in niche opportunities. Such depth assortment may
provide a sustainable business if consumers can be convinced to trust these new
operators.

Either way, retail locations will need enhancement to attract consumers to patronise
them. The opportunities for electronic commerce are such that without reasons to ‘‘go
physical shopping’’ in a location, then they could become lonely places. Those able to
attract consumers on the other hand are likely to exhibit enhanced activity of all sorts. If
e-commerce helps make our town centres more interesting, exciting and dynamic places
(even if out of necessity to compete) for retailing and other activities then we may all be
better off. The increasingly standardised High Street of 20th century Britain may not
survive the early decades of the 21st century, but this may be to our advantage.

It is clear from this review that there is much potential to change business practices in
retail and its supply system. The dimensions of such changes are not clear however.
They will vary geographically, corporately and over time. It is essential therefore that as
well as conceptualising the potential dimensions of change, detailed research is
undertaken into actual change (including causality and dimensions) at all levels of the
retail channel. Such research will become increasingly important to understanding the
impact of process innovation.
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