Retailer E-business Adoption: A Decision-Making Framework

This paper synthesises the abundance of e-retailing literature to develop a Retailer Internet Adoption Framework that informs retail managers in their decision in the appropriate level of e-business adoption. Using a multiple case study of horticultural ‘greenlife’ retailers, the explanatory power of the proposed framework was examined. Findings suggest that the framework may be an appropriate method to assess specific retail industry sectors to identify key drivers in e-retailing adoption. Future research directions are identified. Introduction and Purpose Despite the abundance of internet retailing literature, it has been argued that current ecommerce research is exploratory in nature and atheoretical (Cowles et al. 2002; Zinkhan 2005). Some claim that the existing literature is often confusing for retail managers when considering e-business implementation. Much of the literature is general and treats e-retailing as a homogeneous phenomenon, regardless of whether the theories discussed are applicable to the individual retail sectors in which particular firms operate (Lee and Jordan 2005). In reality, e-retailing management issues are heterogenous in nature, specific to each firm and their industry. A similar methodological approach was recommended by Porter (2001) for examining the effects of the internet on individual industries and companies. Cowles et al. (2002) argued that a holistic e-retailing decision-making framework was needed to guide managers in retailing businesses. Accordingly, our research aims to synthesise the internet retailing literature to develop a prescriptive decision-making framework that can be applied to individual retail industries. The explanatory power of the proposed framework – and this methodological approach – will be assessed through a multiple case study of horticultural garden centres in Australia. With many retailing sectors being dominated by small and medium size enterprises, this framework will inform retail managers in their decisions about adopting e-business initiatives. The manager (often the owner operator) does not need advice on how to set up, or compete with another Amazon or eBay, rather they need guidance in making the best decisions in their own context. E-retailing is defined as an internet-mediated environment to transact or communicate with end consumers. E-retailing differs from non-store marketing channels in its use of internet mediated environments (Fenech and O'Cass, 2001). Literature Review This research posits that the important dimensions of e-retailing literature can be organised into four areas of environmental context, organisational dimensions, mediating variables and e-business adoption levels. The schematic relationship of these dimensions is depicted in Figure 1, Retailer Internet Adoption Framework. Figure 1 Retailer Internet Adoption Framework Environmental context Environmental influences Competition Target market Organisational dimensions Competitive strategy Tactical strategy or marketing mix Organisational characteristics Decision maker’s attributes, experiences and perceptions Mediating variables Environment Retailer attributes Product suitability Customer dimensions E-business adoption levels No adoption Homepage Catalogue-ware Transactional Transformational The environmental context in which the firm operates is largely beyond the direct control of the retail manger and encompasses market influences, competition and target market. Environmental context recognises that, as firms operate and transact within an industry, the industry influences the firm’s operations (Raymond, 2001). Environmental influences include the economy, relative cost and availability of technology, and legislative requirements. Research in online competitive environments identifies the potential for a reduction in entry barriers (vanHooft and Stegwee, 2001), increased buyer bargaining power (Sinha, 2000) and reduced switching costs (Carr, 2003; Starr, 2003). Significant works have been dedicated to the identification, segmentation and selection of suitable target markets through combinations of demographic (Joines et al. 2003; Monsuwe et al. 2004), behavioural (Bellman et al., 1999; Monsuwe et al., 2004) and psychographic (Fenech and O'Cass 2001) characteristics. Organisational dimensions are controlled by the retailer manager and include competitive and tactical strategy, a firm’s characteristics, and the decision maker’s attributes, experiences and perceptions. Competitive strategy has been examined in terms of generic approaches (Damanpour, 2001; Pant and Ravichandran, 2001), target marketing (Doherty and EllisChadwick, 2003), customer relationship management (Calkins et al., 2000) and tactical approaches (Leonard and Cronan, 2003; Vijayasarathy, 2002). Effects of a firm’s characteristics are examined using criteria of availability of resources (Laroche et al., 2005), infrastructure (Bontis and Castro, 2000) and in-house knowledge (Dennis et al., 2002). Research in decision maker’s influence includes attributes, experiences and perceptions in the adoption of new technologies (Raymond, 2001). Mediating variables are elements that influence the level of e-business adoption. Research identifying environmental constraints includes cost-effective technology (Carr, 2003), the reliance on internet performance (Lankford and Johnson, 2000), control of intellectual property (Lee and Low, 2004) and legislative control mechanisms (Koch and Cebula, 2002). Retailer attributes mediate e-business adoption through areas such as the potential for channel conflict (Schoenbachler and Gordon, 2002), high customer acquisition costs (Hoffman and Novak, 2000; Vanscoy, 2000), difficulty in reproducing store ‘atmospherics’ (Vijayasarathy, 2002), the customer interface (Ranaweera et al., 2005) and the reduction in personal selling opportunities (Burton, 2002). Product mediating variables have been well researched and include product suitability (Phau and Poon, 2000), search versus experience goods (Poon and Joseph, 2000), the impact of digital components (Koch and Cebula, 2002) and intangibility of the product (Laroche et al., 2005), effects of commoditisation (Beverland and Lindgreen, 2003), and the challenge of maintaining financial viability through increased delivery costs (Starr, 2003). Customer mediating variables have been identified as the size of the online market (Burton, 2002), trust and risk issues (Ribbink et al., 2004; Teo and Yu, 2005), preconditioned shopping behaviours (Tanskanen et al., 2002), hedonic and utilitarian shopping motivations (Karayanni, 2003; Koufaris, 2002), internet channel suitability for targeted customers (Bellman et al., 1999; Monsuwe et al., 2004) and the delay in the order fulfilment cycle (Parsons, 2002). E-business adoption level is the dependent variable and is a continuum from no business adoption to complete virtual offering. For the purposes of assessing a firm’s e-business adoption, five levels are proposed in line with the recommendations of Goodman (2000, 2004) as: no adoption; homepage; catalogue-ware; transactional; and transformational initiatives. It is acknowledged that some firms may not neatly fit into a level as they adopt a unique blend of e-business initiatives. However, the proposed levels of adoption give insight and ability to categorise e-business initiatives for the purpose of distinguishing the variations between retailers. The Retailer Internet Adoption Framework in Figure 1 schematically represents the major streams of e-retailing literature and their dimensions. Whilst the environmental context and organisational dimensions are represented as separate boxes, their interaction and inseparability are demonstrated by the double-headed arrows. Investigation of these constructs should be undertaken using a systems perspective as the components exhibit interdependent relationships within retailers’ increasingly dynamic and complex business world. Methodology A qualitative multiple case study was selected as an appropriate method to provide support for the Retailer Internet Adoption Framework. The case study methodology is a widely-accepted model for examining studies in social systems such as management paradigms (Yin, 2003). The case study followed the protocols recommended by Yin (2003) where several sources of data were systematically collected and analysed to identify patterns and constructs within the phenomenon. The reliability and validity limitations of the case study methodology were minimised through systematic collection of data, triangulated data sources, and particularising of findings to the cases under investigation. Following the recommendations by Porter (2001), a single industry was analysed. The horticultural garden centre industry in Sydney was selected as it offers a relatively homogeneous group of SME “greenlife” retailers in terms of size, management structure, product offering and geographic area. Cases (n=20) were purposively selected based upon their demonstrated use of varying levels of e-business adoption. Individual cases were examined using key informant insights through semi-structured interviews (Cowles et al. 2002), spatial and aspatial retail site analysis and website analysis following the 7Cs model (Mohammed et al., 2004; Rayport and Jaworski, 2004). All data was transcribed and analysed using QSR NVivo according to recommendations by Richards (1999) and Bazeley and Richards (2000). QSR NVivo takes a formal approach to qualitative data analysis (Hussey and Hussey, 1997). Emergent themes and commonalities were identified both within and across cases. Evidence, patterns and constructs provided the basis to confirm or disconfirm the theoretical propositions identified in the literature and schematically proposed in the Retail Internet Adoption Framework. Findings A common theme emerged that the e-business adoption level was not dependent on the hedonic or utilitarian shopping motivations of customers or the proximity to their existing target markets. Adoption was motivated (in order of frequency of reported occurrence) by the opportunity for new business, requests from customers and the potential to service new markets beyond their traditional catchment area. With the exception of one manager, all respondents felt that their website (at whatever level) was a good investment. However, several conceded that they should have invested more in its development. Interestingly, few respondents were able to accurately measure the financial contribution of the website to their businesses. The benefits were (in order of frequency of reported occurrence): good response rate; expanding geographical area served; allowing customers to preview the stock before ordering or visiting the store; as an effective promotional device; facilitating self-service; lowering over-head costs; and reinforcing their brand image within the market. In contrast a number of disadvantages were identified as: maintenance requirements; unrealistic expectations of clients; the need to develop in-house technical capabilities; a reduction in impulse sales; and the inability for customers to inspect stock prior to purchase. Respondents identified the important attributes of a website (in order of frequency of reported occurrence) as: information and content rich; a wide range of products; speed in downloading pages; appealing look and feel of the website; having lower prices on the website than instore; and reassuring customers on security issues such as credit cards and privacy of personal information. Five cases reported plans for the future development of their websites to meet specific demographic needs of emerging target markets. Four cases chose not to adopt an online presence because of the likely maintenance requirements, the perception that the website did not meet client expectations and in consideration that a positive return on investment is unlikely. Few respondents were able to distinguish their online customers from their traditional customers. Of those managers who could identify them, the customers were described as a mix of one or more of the following characteristics: tertiary educated; those unable to physically visit the store; those with some horticultural experience; professionally employed; utilitarian shoppers; and those who shop online despite living in the store’s catchment area. Discussion Respondents provided data that supported the notion of interdependence of the environmental context and organisational dimensions in their decision to adopt e-business initiatives. The strategy to target new markets (Doherty and Ellis-Chadwick, 2003) was the most commonly reported reason for e-business initiatives, followed by the need to meet customer demand (Dennis et al., 2002). Less reported rationales were its use as a promotional device (Beverland and Lindgreen, 2003) and for reducing overhead costs (Damanpour, 2001; Koch and Cebula 2002). The mediating variables of e-business were also evidenced in the data. Whilst exact website customer characteristic were difficult to accurately identify, the findings were consistent with the literature (Chen and Chang, 2003; Doherty and Ellis-Chadwick, 2003; Goldsmith, 2001; Joines et al., 2003; Koufaris, 2002; Monsuwe et al., 2004) : professional, tertiary educated, utilitarian, and convenience shoppers. In addition, inherent difficulties of pre-purchase inspection (Burton, 2002) and the reduction of impulse sales (Fenech and O'Cass, 2001) were reported by several respondents. The data revealed several nuances that are particular to the garden centre retailing sector when managers are considering the appropriate level of e-business adoption. However, it is suggested that these nuances would be different for other retail sectors. Conclusion and Future DirectionsDeveloped from the synthesis of the e-retailing literature, the Retailer Internet AdoptionFramework provides a generic structure to analyse specific retail sectors and inform managersin their decision in the appropriate level of adoption. This research follows therecommendation of Porter (2001) in analysing a single homogeneous industry and its players.It was evident in the analysis that the key issues in the decision to adopt e-business are bothindustry and individual firm dependent. Therefore, the application of the Retailer InternetAdoption Framework offers managers an appropriate method to simplify and make sense ofcomplex issues pertinent to specific industries. Future research in the application of theframework to other retail sectors would provide further support for the explanatory power ofthe framework. In addition, quantitative studies would provide validation of the nuancesidentified to each industry sector under investigation. ReferencesBellman, Steven, Gerald L Lohse, and Eric J Johnson (1999), "Predictors of Online BuyingBehaviour," Communications of the ACM, 42 (12), 32. Beverland, Michael and Adam Lindgreen (2003), "AdultShop.com: establishing legitimacywith the 'virgin' consumer," Marketing Intelligence & Planning, 21 (6), 379-91. Bontis, Nick and Akemi De Castro (2000), "The First World Congress on Management ofElectronic Commerce: review and commentary," Internet Research: Electronic NetworkingApplications and Policy, 10 (5), 365-74. Burton, Suzan (2002), "Where are all the shoppers? E-tailing Lessons for the Asia Pacific,"Quarterly Journal of Electronic Commerce, 3 (4), 331-42. Calkins, John D, Michael J Farello, and Chrsitianaa Smith Shi (2000), "From retailing to e-tailing," The McKinsey Quarterly, Winter, 140. Carr, Nicholas G (2003), "IT Doesn't Matter," HBR at Large, May, 41-49. Chen, Su-Jane and Tung-Zong Chang (2003), "A descriptive model of online shoppingprocess: some empirical results," International Journal of Service Industry Management, 14(5), 556-69. Cowles, Deborah L, Pamela Kiecker, and Michael W Little (2002), "Using key informantinsights as a foundation for e-tailing theory," Journal of Business Research, 55 (8), 629-36. Damanpour, Faramartz (2001), "E-business E-commerce Evolution: Perspective andStrategy," Managerial Finance, 27 (7). Dennis, Charles, Lisa Harris, and Balraj Sandhu (2002), "From bricks to clicks: understandingthe e-consumer," Qualitative Market Research: An International Journal, 5 (4), 281-90. Doherty, Neil F and Fiona E Ellis-Chadwick (2003), "The Relationship between retailers'targeting and e-commerce Strategies: an empirical analysis," Internet Research: ElectronicNetworking Applications and Policy, 13 (3), 170-72. Fenech, Tino and Aron O'Cass (2001), "Internet users' adoption of Web retailing: user andproduct dimensions," The Journal of Product & Brand Management, 10 (6), 361-81. Goldsmith, Ronald E (2001), "Using the Domain Specific Innovativeness Scale to identifyinnovative Internet consumers," Internet Research: Electronic Networking Applications andPolicy, 11 (2), 149-58. Goodman, S (2000), "Online to go global," Australian and New Zealand Wine IndustryJournal Special Edition, 3. Goodman, S (2004), "A proposed activity and outcome framework for marketing in the neweconomy." Internet Business Review, 1. Hoffman, Donna L and Thomas P Novak (2000), "How to acquire customers on the web,"Harvard Business Review, 78 (3), 179. Hussey, Jill and Roger Hussey (1997), Business Research. London: MacMillian Press Ltd. Joines, Jessica L, Clifford W Scherer, and Dietram A Scheufele (2003), "Exploringmotivations for consumer Web use and their implications for e-commerce," Journal ofConsumer Marketing, 20 (2), 90-108. Karayanni, Despina A (2003), "Web-shoppers and non-shoppers: compatibility, relativeadvantage and demographics," European Business Review, 15 (3), 141-52. Koch, James V and Richard J Cebula (2002), "Price, quality, and service on the Internet:Sense and nonsense," Contemporary Economic Policy, 20 (1), 25(13). Koufaris, Marios (2002), "Applying the Technology Acceptance Model and flow theory toonline customer behaviour," Information Systems Research, 13 (2), 250(20). Lankford, William M and Jack E Johnson (2000), "EDI via the Internet," InformationManagement & Computer Security, 8 (1), 27-30. Laroche, Michel, Zhiyong Yang, Gordon H G McDougall, and Jasmin Bergeron (2005),"Internet versus brick-and-mortar retailers: An investigation into intangibility and itsconsequences," Journal of Retailing, 81 (4), 251-67. Lee, Geoffrey and Ernest Jordan (2005), "Online retailing industry analysis: A caseinvestigation," in 10th Annual Conference of Asia-Pacific Decision Sciences Institute. Taipei:Asia-Pacific Decision Sciences Institute. Lee, Geoffrey and David R Low (2004), "Internet pirates: Generational attitudes towardsIntellectual Property Online," in Australian and New Zealand Marketing AcademyConference. Wellington. Leonard, Lori N K and Timothy Paul Cronan (2003), "Website retailing: electronic supplychain replenishment," Journal of End User Computing, 15 (3), 45(11). Mohammed, Rafi A, Robert J Fisher, Bernard J Jaworski, and Gordon J Paddison (2004),Internet Marketing: Building Advantage in a Networked Economy (2nd ed.). New York: TheMcGraw-Hill Companies, Inc. Monsuwe, Tonita Perea, Benedict G C Dellaert, and Ko deRuyter (2004), "What drivesconsumers to shop online?," International Journal of Service Industry Management, 15 (1),102-21. Pant, Somendra and T Ravichandran (2001), "A framework for information systems planningfor e-business," Logistics Information Management, 14 (1/2), 85-99. Parsons, Andrew G (2002), "Non-functional motives for online shoppers: why we click,"Journal of Consumer Marketing, 19 (5), 380-92. Phau, Ian and Sui Meng Poon (2000), "Factors Influencing the Types of Products andServices Purchased over the Internet," Internet Research: Electronic Networking Applicationsand Policy, 10 (2), 102-13. Poon, Simpson and Matthew Joseph (2000), "Product characteristics and the Internetcommerce benefit among small business," The Journal of Product & Brand Management, 9(1), 21-34. Porter, Michael E (2001), "Strategy and the Internet," Harvard Business Review, 79 (3),63(16). Ranaweera, Chatura, Gordon McDougall, and Harvir Bansal (2005), "A model of onlinecustomer behavior during the initial transaction: Moderating effects of customercharacteristics," Marketing Theory, 5 (1), 51-74. Raymond, Louis (2001), "Determinants of Web Site Implementation in Small Business,"Internet Research: Electronic Networking Applications and Policy, 11 (5), 411-24. Rayport, Jeffrey F and Bernard J Jaworski (2004), Introduction to E-Commerce. New York:McGraw-Hill. Ribbink, Dina, Allard C R vanRiel, Veronica Liljander, and Sandra Streukens (2004),"Comfort your online customer: quality, trust and loyalty on the internet," Managing ServiceQuality, 14 (6), 446. Schoenbachler, Denise D and Geoffrey L Gordon (2002), "Multi-channel shopping:understanding what drives channel choice," Journal of Consumer Marketing, 19 (1), 42-53. Sinha, Indrajit (2000), "Cost Transparency: The Net's Real Threat to Prices and Brands,"Harvard Business Review, 78 (2), 43. Starr, Martin K (2003), "Application of POM to E-Business: B2C E-Shopping," InternationalJournal of Operations & Production Management, 23 (1), 105-24. Tanskanen, Kari, Hannu Yrjola, and Jan Holmstrom (2002), "The Way to profitable InternetGrocery Retailing Six Lessons Learned," International Journal of Retail & DistributionManagement, 30 (4), 169-78. Teo, Thompson S H and Yuanyou Yu (2005), "Online buying behaviour: a transactional costeconomics," Omega, 33 (5), 451(15). vanHooft, F. and R. A. Stegwee (2001), "E-Business Strategy: how to benefit from a hype,"Logistics Information Management, 14 (issue 1⁄2.). Vanscoy, Kayte (2000), "Unconventional Wisdom The secrets to successful e-businessaren't at all. They're been taught for years in the nation's top business schools.," Ziff DavisSmart Business for the New Economy, Oct 1, 2000, 78. Vijayasarathy, Leo R (2002), "Product Characteristics and Internet Shopping Intentions,"Internet Research: Electronic Networking Applications and Policy, 12 (5), 411-26. Yin, Robert K (2003), Case study Research: Design and Methods (3rd ed.). Thousand Oaks:Sage Publications, Inc. Zinkhan, George M (2005), "The marketplace, emerging technology and marketing theory,"Marketing Theory, 5 (1), 105-15.