Introduction

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Electronic retailing (e-tailing) has been around for years, fundamentally impacting the structure of traditional retailing business (Rao, 1999, Turban et al., 2002). The stock price and market capitalization of pure e-tailers has skyrocketed till 1999 owing to its extraordinary market growth (Schultz and Zaman, 2001). So traditional retailers are obliged to jump into the opportunity of e-tailing business by opening an online retailing site as an additional channel. Although the hybrid of online and offline channels within a company supplement each other, there also exist conflicts between the two. When the channel conflict is severe, some companies like Egghead.com gave up the traditional channels, exclusively depending on the online channel, which turned out a failure. Barnes & Noble has spinned off the e-tailing business as BarnesandNoble.com. In this manner, there was a minor migration to pure e-tailing (Sandoval, 1999). However, the major trend is the traditional retailers's shift to hybrid channels, because the growth opportunity of e-tailing is too big to neglect and also because the cash-cow of traditional business should not be given up too hastily (Kane, 1999; Maruca, 1999; Scheppler, 2001). Nevertheless, 75 out of 187 listed retailers in the U.S. stock market, which we have studied in this research, still have not opened the online channel.

Let us formally define the three business models in retail business:

  • Pure Click or Pure e-Tailer is a pure online retailer without physical stores. Some pure e-tailers may have some promotional physical stores, but let us categorize this kind of company to pure e-tailers in this study.

  • Click and Mortar (C&M) is a traditional retailer(s) with an additional online channel.

  • Brick and Mortar (B&M) is a traditional retailer(s) without an online channel.

Our concern is a comparative analysis on the dynamic performance of these business models with a view of stage theory (Lee, 2000; Lee et al., 2000). We would like to know where the status of pure e-tailers is, and what the impacts of adding online stores to traditional physical stores are. For this study, we evaluate the performance of three business models at three points of time: June 1999 (denoted T1999), June 2000 (T2000), and June 2001(T2001).

As a reference stage theory model, we propose the Firm Value Determinants Model which uses regression models to measure the impact of revenue and income on firm value. Assumption of the model is that in the early stage of innovation, by adopting e-tail channels, the e-tailers can grow their revenue very fast at the cost of negative income. After the shakeout, the failed companies will disappear, be acquired or merged, and the average income of survivors will be improved reaching zero. The revenue of surviving companies will grow while gaining income. However, as the stage gets matured, the income will become the primary concern more than the revenue growth. Based on this assumption, we propose four stages of e-tailing business: exploration, breakeven, growth, and maturity. To identify the stages, we adopt a regression model that selects the primary factors-revenue and/or income-which determine the firm values.

With this stage model, we evaluate the stages of three business models for T1999–T2001. However, the fluctuation of traditional business in annual revenue growth and income is a fact of business life. So evaluating stages of traditional business purely based on revenue and income fluctuation is not adequate. Since we need to know the stock prices of the companies, we have selected the e-tailers and retailers listed in the U.S. stock markets (NYSE, NASDAQ, and AMEX). The U.S. stock markets are selected because the U.S. market has the largest number of companies than any other country.

In the second section, we review the stage theories in the literature and propose the stage theory for e-tailers and the regression model that can compute the stage. We then explain the implications of stages in the e-tailing and retailing business, and describe the measurement of factors and data collection. The next section explores the behaviors of revenue, income, and market capitalization during the study period. We then propose the regression models that can estimate the impact of revenue and income on firm value. The next section derives the stages of e-tailers, B&M, and C&M for T1999–T2001. The paper concludes with the discussion about limitations.



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Advanced Topics in Global Information Management (Vol. 3)
Trust in Knowledge Management and Systems in Organizations
ISBN: 1591402204
EAN: 2147483647
Year: 2003
Pages: 207

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