E-Commerce Strategy : Being Physical or Virtual?

Abstract: The developments of Electronic Commerce applications origins back to the early 1970s and were primarily used within the financial sector. As the potential of E-commerce was recognized its use also reached into other sectors. The trend according of intensively, in-creasing sales is persistent and areas such as music, books and tickets are predicted to have the largest increase. The purpose of this thesis is to investigate how traditional companies, as we call click-and-mortar corporations, perceive threats and opportunities of E-commerce. We will also investigate how pure internet firms, what we call Virtual corporations, view the same threats and opportunities of e-commerce. We will also try to find changes made by both of our research groups in different strategic directions. To obtain new data in the extremely fast changing e-commerce area, semi-structured quali-tative interviews with four respondents within a specific industry was conducted. What we can conclude after interviewing two click-and-mortar corporations and two vir-tual or “pure” internet corporations is that they take different strategic positions. Virtual 1 is closer to the market and Virtual 2, who is owned by a larger corporation, cannot act as fast but has a better financial support. Traditional 1’s position is closer to their core compe-tence such as more complex and tailor-made products and Traditional 2 seams to be more innovative and channel integrated. Regarding price differences, the theories states that online pricing is generally lower, which our empirical results confirm, with the anomaly of Traditional 1’s pricing. The theories also say that the price differences may cause conflicts for click-and-mortar corporations. These theories concurred with our empirical study where the interviewed click-and-mortar corporations did experience some channel con-flicts. Further neither of the traditional corporations considers competition from pure e-commerce as a major threat. The explanation given is due to different customer groups, more customized products and that competition is more about products, range and price. The pure e-commerce corporation does not consider traditional and click-and-mortar cor-porations as major threat. Competition comes more from the charter industry going online and also that competition is more about prices, product range and brand recognition. The Search Engine Optimization (SEO) and the use of price comparison pages are tools to meet competition. None of our four corporations has any plans on adding or reducing physical stores as opposed by the theories. The traditional corporations do feel competition or confusion between the sales channels and that it is important to communicate a deeper understanding of the positive synergy effects.