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

Retail sector includes all the shops that sell goods and services to the final consumers. Retailing is the last stage in the distribution process.

The retailers

Retailers are sales intermediaries or sellers those operate between manufacturers and consumers

Example of retail products

Cars to apparel, meal at restaurant, airline tickets/ hotel reservation, digitalproducts, books, magazine, newspapers, software, movie, education, banking, and theatre tickets.

ManufacturersIntermediaries:

Traditional, online or manufacturer itself

Consumers

Roles of cybermediaries

Connect millions of buyers and sellers

Integrate retail market to global levels

Price comparison web sites are growing

Primary beneficiaries in retail sector are (Laudon &Traver):

Established offline retailers with online presence (e.g., Staples, Wal-Mart).

First mover dot-com companies (e.g., Amazon, eBay).

LITERATURE REVIEW CONT…

2006 2007 2008 2009

7.2%10.9% 9.4%

-3.7%

22.7% 22.1%

12.4%

14.5%

Traditional retail growth Online retail growth

World internet penetration rate Traditional vs. Online global Retail growth

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

100

200

300

400

Online Retail

B2C Ecommerce

Year

Rev

enue

(bill

ions

)

Growth online retail sector vs. B2C commerce today

World internet penetration rate:

Highest - North America(78%)

Oceania/ Australia (60%)

Growth of Ecommerce vs. Online Retail

Benefits from ecommerce

Traditional vs. Online Retail Growth:

Growth of Online retail (14.5%)

Traditional retail growth (-3.7%)

LITERATURE REVIEW: IDR CYCLES (CONT…)

SuppliersProducer

s Distributers Retailers Consumers

Traditional retail channel: Govt. benefited

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)

SuppliersProducer

sDistributer Retailers Consumers

Re-intermediation: More jobs loss, more competitions, Govt. tax loss

SuppliersProducer

sDistributer Retailers Consumers

Cybermediary

Cybermediary

Cybermediary

LITERATURE REVIEW: FINDING CONT….

Catalogue

Traditional Store

Mobile

Online

shop

Buy ReturnSource:(IMAP, 2010)

Browse Buy

Multichannel Retailing Strategy

Purchasing from online or offline:

42% search online and purchase the products online

34% research online and then purchased the product at the store. 

21% research online, research at the store and then purchase later online

 12% research at the store first and then purchase the product online 

7% purchase the product at the store and research the product later online( Amazon web services, 2010).

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..)

Age group Frequency Valid percent

20-30 years 88 47.6

31-40 years 42 22.7

51- 60 years 15 8.1

41- 50 years 11 5.9

61 and above 10 5.4

Under 20 years

19 10.3

Total 185 100%

Missing System 1

Total 186

Table 1: Age group

Male, 53.2%

Female, 46.8%

Graph 1: Gender

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

Activities on the web ResponsesNumber (N) Percentage of

cases (%)

Read news 116 62.5Search Information 143 76.9Entertainments 111 60.0Buy Goods or services 84 45.2

Sell Goods or services 26 14.0

Other 34 18.3Total 514 276.3

Table 2:What consumers are doing on the web?

Table 3: How long consumers are spending time online every day?

Consumers online time spending per day

No. Of respondents Valid %

1 - 3 hours per day 92 49.5%

3 - 6 hours 42 22.6%

Less than 1 hour per day

24 12.9%

More than 9 hours 11 5.9%

6 - 9 hours 13 7.0%

Other 4 2.2%

Total 186 100%

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

Less than 1

hour per day

1-3 hours

per day

3-6 hours

per day

6-9 hours

per day

More than 9 hours

Other

Male 26 44 13 10 3 1

Fe-male

16 47 14 5 3 1

2.5

17.5

32.5

47.5

Graph 3: Online spending everyday as per gender

Num

bers

of

gend

ers

Online shopping Offline shopping0

5

10

15

20

25

30

35

40

29%

37%39.8%

18.9%18.8% 18.8%

1-2 tims a week Other Never shopping online

Graph 4: How frequently consumers are shopping from online or offline shops?

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 comparison with retailers as: Total

Traditional Online Both Other

Male 10 61 26 1 98Female 13 45 24 3 85Total 23 106 50 4 183

Table 6 Consumers feel easy to reach global market through retailers such as: Total

Traditional Online Both Other

Male 6 76 15 2 99Female 11 53 18 2 84Total 17 129 33 4 183Table 8 Consumers received lowest price

offered by retailers such as: Total

Traditional Online Both Other

Male 10 46 36 1 93Female 13 49 20 2 84Total 23 95 56 3 177

Table 7 Consumers feel comfortable payment with retailers such as: Total

Traditional Online Both Other

Male 38 16 44 0 98Female 41 20 24 1 86Total 79 36 68 1 184

From table 5Male 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 influencing consumers buy from online/offline shops

OnlineFrequency (%)

OfflineFrequency (%)

BothFrequency (%)

Total,Missing,Total

Airline tickets/reservations 127 (70.9%) 14 (7.8%) 38(21.2%) 179,7,186

Books

41 (24.3%) 80 (47.3%) 48 (28.4%) 169,17,186

Clothing/Accessories/Shoes 26 (14.6%) 93 (52.2%) 59 (33.1%) 178,8,186Videos / DVDs / Games/ Software

38 (22.5%) 69 (40.8%) 59 (34.9%) 169,17,186

Electronic Equipments 25 (14.8%) 80 (47.3%) 63 (37.3%) 169,17,186

Groceries 11(6.4%) 140 (81.9%) 18 (10.5%) 171,15,186

Health/beauty products / Jewellery

20 (11.6%) 107 (62.2%) 44 (25.6%) 172,14,186

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

Banking 71 (38.6%) 38 (20.7%) 65 (35.3%) 184,2,186

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 onlineIn retail banking, 38.6% prefer online banking, 35.3% prefer both online/offlineThe online shopping are significantly increasing in Airline tickets/hotel reservation and retail banking sector.

The following products/services consumers prefer to buy from traditional shops:

Books, Clothing/accessories/shoes, Video/DVD/Games/software, Groceries, Furniture, Education, real estate and insurance.

Consumers prefer to buy both ways(online/Offline)

But Online shopping is increasing significantly as shown in the table 11.

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 Yes7%

No43%

Other50%

Graph 9: Disintermediation Strategy Yes29%

No29%

Other43%

Graph 10: Reintermediation or Cybermediation Strategy

Effects of disintermediation Effects of re -intermediation or Cybermediation

Revenue Increased: 42.9%(6)Revenue decreased:21.4%(3)

Revenue Increased: 64.3%(9)Revenue decreased: 21.4%(3)

Sell Increased: 28.4%(4) Sell decreased: 7.1%(1)

Sell increased: 42.9%(6)Sell decreased: 00%

Increased cost: 00%Decreased cost: 28.6%(4)

Increased cost: 7.1%(1)Decreased cost: 28.6%(4)

Increased competition:21.4%(3)Decreased competition: 00%

Increased competition:35.7%(5)Decreased competition: 00%

Price decreased:14.3%(2)Price increased: 00%

Price decreased: 35.7%(5)Price increased: 00%

Government benefited: 00% Government not benefited : 14.3%(2)

Government benefited: 7.1%(1)Government not benefited: 14.3%(2)

Increased employment: 7.1%(1)Decreased employment:7.1%(1)

Increased employment:7.1%(1)Decreased employment:14.3%(2)

Other: 28.6%(4) Other: 7.1%(1)

Table 11: Effects of Disintermediation and Re-intermediation or Cybermediation ( Analysis)

SUMMARY OF RESEARCH FINDING FROM PRIMARY DATA

Most of the consumers are spending online every day 1-3 hours and the highest used search intermediary is Google (79%)

45.2% consumers search web for buying products and services.

TV is the highest influential media to influencing consumers for online shopping plus significantly influencing by iPhone/QR codes and online communities

Most consumers prefer to buy both ways (44%). But traditional shoppers (37%) and (29%) prefer to buy from online shop.

Reasons for online shopping are global reach, save time, Variety of products, price comparison and low price.

Most of the company have B2C business model, generate revenue for sell goods and aware about Cybermediary.

Most of the company’s weakness is High operating cost – space, tech, staffs plus lack of cross channel support.

Opportunities for using Cybermediaries are: more customers, lowering cost and global reach.

Threat for using Cybermediaries are consumers have different choices, more substitute products, price competition to provide lowering price.

Most of the company’s competitors are Brick and click and multichannel firms.

For selling products/ services in traditional way, governments are more benefited than selling products/services using Cybermediaries

From consumers’ side From Companies’ side

SUMMARY OF RESEARCH FINDING (CONTINUE)

Consumers’ purchasing behaviors in traditional way or using online shop depend on types of products/ services they are going to buy.

Most of the consumers prefer to buy airline tickets/hotel reservation and retail banking from online.

Limitations of buying from online shops: Sometimes consumers feel uneasy to use payment card, privacy of data and spamming. They like to touch and feel the products before buy.

o For cybermediation, more jobs will loss than disintermediation.

o Companies are making more revenues for using cybermediaries compare with disintermediation

Therefore, most of the company sells products/services in both traditional and using online shops.

Companies are trying to adopt multiple distribution channels or cross channels in current competitive market place.

From Consumers’ Side From Companies’ side

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 ?)