You are on page 1of 17

November


09


Term
Paper






































 Sales
and
Distribution
Management



 
 


Internet


An
alternative
channel
of
distribution



















Under
the
guidance
of:
Prof.
K.
R.
Rao


Submitted By: Abhay Negi 2008PGP003D Section B

Indian
Institute
of
Management,
Indore



 



Table
of
Contents

Introduction
 Summary
 Reasons
for
choice
of
subject
 Relevance
 Literature
survey
and
state
of
the
art
 Preparing
for
the
Future
 Web
2.0
 Widgets
 Online
Buzz
Monitoring
 Analysis
and
Observations
 Online
Distribution
Channels
 Shifting
of
Channel
 The
impact
of
the
Internet
on
the
value
chain
of
the
organization
 Technological
Product
Distribution
 Recommendations
for
further
work
 Conclusions
 References
 



3
 4
 4
 5
 5
 6
 6
 6
 6
 7
 7
 9
 10
 12
 15
 16
 17



 
 
 



2
 



 


Introduction


A
distribution
channel
is
a
set
of
interdependent
organizations
involved
in
the
process
of
 making
a
product
or
service
available
for
use
or
consumption
by
the
consumer
or
business
 users.
Distribution
channels
have
been
viewed
as
a
strategic
asset
and
channel
design
has
 been
recognized
as
a
key
to
successful
competition.


E‐commerce
 (particularly
 B2B)
 has
 revolutionized
 and
 fundamentally
 reshaped
 business
 relationships
 and
 has
 caused
 dramatic
 shifts
 in
 channel
 power
 as
 information
 and
 communication
 imbalances
 disappear.
 Online
 exchanges
 are
 infiltrating
 distribution
 channels
at
an
outstanding
rate.
 
 As
growth
in
the
use
of
Internet
accelerates,
distributors
have
been
warned
repeatedly
that
 they
 risk
 being
 cut
 out
 of
 the
 channel
 by
 aggressive
 Web‐savvy,
 and
 purely
 virtual
 competitors.
 In
 recent
 years,
 it
 has
 been
 widely
 accepted
 that
 e‐commerce
 signifies
 the
 dawn
 of
 a
 friction‐free
 market;
 structural
 changes
 in
 markets,
 such
 as
 disintermediation,
 would
occur
due
to
the
impact
of
electronic
trade
and
electronic
information
age.
 
 During
 the
 past
 decade,
 organizational
 theorists,
 telecommunication
 managers,
 business
 consultants,
 have
 directed
 our
 attention
 to
 the
 strategic
 role
 that
 information
 technology
 can
 play
 in
 the
 competitive
 strategy
 of
 firms.
 Throughout
 the
 1980s,
 the
 use
 of
 telecommunication
 networks
 linking
 firms
 to
 their
 suppliers
 and
 distribution
 chains
 conveyed
 important
 first
 mover
 advantages
 were
 discussed.
 The
 Internet
 business‐to
 business
 (B2B)
 space
 is
 gaining
 much
 attention,
 with
 valuation
 for
 publicly
 traded
 B2B
 companies
escalating
rapidly.
 
 On
the
other
hand,
the
existence
of
distribution
channels
has
helped
to
make
society
more
 efficient
in
resource
allocation.
Most
producers
use
intermediaries
to
bring
their
products
 to
 market.
 They
 try
 to
 forge
 distribution
 channel
 –
 a
 set
 of
 interdependent
 organizations
 involved
in
the
process
of
making
a
product
or
service
available
for
use
or
consumption
by
 the
consumer
or
business
users
Intermediary
creates
economics
savings
for
the
system
and
 the
savings
become
more
dramatic
as
the
number
of
producer/consumers
increases.


3
 



 


Summary


 The
 Internet
 has
 traditionally
 been
 a
 communication
 channel
 and
 a
 transaction
 channel.
 But
recently
it
has
also
emerged
as
an
important
channel
for
distribution,.
The
Internet
was
 not
designed
to
be
a
market
channel
nor
for
any
specific
set
of
consumer
services.
Had
it
 been
designed
to
serve
consumers
and
the
marketplace,
it
would
likely
have
been
a
more
 centrally
organized.
But
as
the
channel
functions
of
the
Internet
are
evolving
it
is
seriously
 emerging
as
a
channel
of
distribution
for
some
specific
kinds
of
products.


E‐commerce
 (particularly
 B2B)
 has
 revolutionized
 and
 fundamentally
 reshaped
 business
 relationships
 and
 has
 caused
 dramatic
 shifts
 in
 channel
 power
 as
 information
 and
 communication
 imbalances
 disappear.
 The
 rise
 of
 the
 internet
 has
 fuelled
 discussion
 on
 whether
it
can
replace
the
traditional
channels
of
distribution
completely
in
the
future.
The
 issue
 of
 place
 retention
 by
 traditional
 channels
 or
 its
 replacement
 by
 e‐commerce
 will
 depend
 on
 a
 number
 of
 factors
 chief
 among
 them
 being
 the
 value‐added
 and
 the
 cost
 of
 each
channel.
 
 The
current
study
looks
at
how
has
the
internet
evolved
as
a
distribution
channel
and
the
 possibility
of
it
replacing
the
traditional
distribution
channels.



Reasons
for
choice
of
subject


With
the
advent
of
technology
and
it
becoming
more
easily
accessible
to
the
common
man,
 internet
has
emerged
as
the
backbone
of
a
large
number
of
commercial
transactions.
The
 last
decade
has
seen
a
jump
in
e‐commerce
as
a
popular
mode
of
business.
Due
to
its
easy
 accessibility,
 high
 reach
 and
 cost‐effectiveness
 it
 is
 seen
 as
 a
 big
 threat
 to
 the
 traditional
 distribution
channels.
But
several
attempts
have
failed
in
their
attempts
because
of
lack
of
 understanding
of
the
implications
of
removing
key
elements
of
the
distribution
channel.
 
 Hence,
 evaluating
 the
 impact
 of
 e‐commerce
 on
 the
 roles
 of
 distributors
 in
 the
 times
 to
 come
 is
 of
 utmost
 importance
 for
 every
 business
 in
 designing
 its
 sales
 and
 distribution
 strategy
for
the
future.


4
 



 


Relevance


Internet
 as
 a
 medium
 for
 distribution
 presents
 an
 altogether
 new
 opportunity
 for
 the
 industry.
 For
 the
 customer
 ecommerce
 can
 simplify
 tasks,
 reduce
 time,
 and
 optimize
 the
 customer
experience.
An
online
customer
relationship
contributes
to
the
lifetime
value
of
 customers
by
reducing
acquisition
costs,
increasing
sales,
extending
the
customer
life
cycle,
 and
 strengthening
 customer
 retention.
 The
 rise
 of
 overnight
 delivery
 services
 and
 the
 ubiquity
 of
 the
 Internet
 have
 offered
 increased
 opportunities
 for
 firms
 that
 originate
 products
and
services
to
sell
directly
to
consumers.

 
 E‐commerce
is
hence
been
widely
accepted
as
the
future
of
distribution
for
all
products
due
 to
 the
 clear
 advantages
 it
 entails
 but
 it
 has
 to
 be
 carefully
 used
 to
 replace
 the
 existing
 channels.
Marketing
as
an
exercise
is
increasing
starting
focusing
on
these
newer
channels
 to
promote
their
products.
These
channels
are
expected
to
replace
the
traditional
channels
 in
 the
 next
 few
 decades
 as
 the
 primary
 source
 of
 marketing,
 sales
 and
 distribution
 of
 all
 kinds
of
products.



Literature
survey
and
state
of
the
art


The
 appeal
 of
 the
 internet
 as
 a
 distribution
 channel
 seems
 to
 be
 unstoppable
 –
 the
 eCommerce‐turnover
 has
 been
 growing
 at
 a
 decent
 pace
 for
 the
 last
 decade.
 
 As
 in‐store
 sales
flatten
or
even
decline
for
many
retailers
worldwide,
multi‐channel
sales
continue
to
 grow.

 
 The
 following
 reasons
 can
 be
 mentioned
 as
 an
 impulse
 for
 the
 positive
 development
 and
 the
driving
force
of
the
market:

 o High
transparency
of
price

 o Low
priced
cost
of
distribution
 o Emotional
address
of
customers
 o Motor
 in
 years
 to
 come
 is
 especially
 mobile
 commerce,
 as
 well
 as
 interactive
 participation
of
the
customers
(Web
2.0)


 


5
 



 


Preparing
for
the
Future


As
 a
 critical
 first
 step,
 brands
 should
 improve
 strategies
 and
 fix
 the
 basic
 functionality
 of
 their
websites.
Once
sites
achieve
minimum
levels
of
innovation,
performance
and
quality,
 new
technologies
and
standards
should
be
evaluated,
tested
and
adopted
as
they
become
 available
 and
 practical.
 At
 the
 moment,
 web
 2.0
 functionality,
 widgets,
 mobile
 and
 online
 buzz
 monitoring
 are
 examples
 of
 functionality
 becoming
 increasingly
 common.
 But
 even
 more
 critical
 in
 the
 future
 will
 be
 the
 strong
 integration
 of
 both
 on
 and
 offline
 efforts,
 supported
by
engaging
and
interactive
functions
like
those
highlighted
here.


Web 2.0

Web
2.0,
social
networking
and
crowd
sourcing
will
be
increasingly
relevant
as
advertising
 and
commercial
models
will
become
more
dependent
on
social
media
to
connect
brand
and
 user.
 More
 and
 smarter
 mechanisms
 for
 user
 generated
 content
 will
 also
 be
 key
 differentiators,
 including
 enhanced
 versions
 of
 user
 forums,
 product
 feedback,
 and
 facilitation
of
product
or
vendor
choice.
Web
2.0
may
be
hard
to
produce
but
can
be
highly
 effective
when
successful.


Widgets
Widgets
 allow
 websites
 to
 add
 dynamic,
 customizable
 componentsto
 otherwise
 static
 pages.
 Typically
 third‐parties
 create
 add‐on
 widgets
 that
 are
 especially
 applicable
 to
 e‐ commerce.
They
allow
the
mold
of
store‐to
shopping‐cart
retailing
to
be
broken
by
widgets
 floating
on
a
webpage,
and
are
easily
customized
by
users.
 


Online Buzz Monitoring
New
digital
scanning
technologies
search
the
web
like
a
digital
radar
where
monitoring
of
 online
 buzz
 can
 be
 incorporated
 back
 into
 shaping
 the
 internal
 websites—so
 the
 community
 chatter
 around
 your
 brand,
 competitive
 price
 and
 banner
 monitoring
 can
 be
 added
as
important
measurement
and
optimization
tools
providing
intelligence
in
the
web‐ o‐sphere.


6
 



 


Analysis
and
Observations


Online
Distribution
Channels


A
 web
 enabled
 distribution
 network
 helps
 a
 distributor
 work
 with
 multiple
 business
 models;
 collaborate
 with
 business
 partners
 for
 better
 pricing
 and
 enables
 a
 smoother
 supply
chain.
Selling,
sourcing
and
shipping
constitutes
a
part
of
virtual
operations
and
the
 distributor
is
the
sales
agent
and
the
logistics
coordinator
too.

 


Traditional
Distribution
Channel


Producer/
 Suplier


Distributor


Wholesaler


Retailer


Consumer



 


Online
Distribution
Channel
 


Supplier


 

Supplier


 
 


Customer


New
Intermediaries


Customer


Selling
 is
 accomplished
 through
 the
 Internet
 and
 traditional
 distribution
 channels
 and
 information
 about
 customers
 helps
 forecast
 demands.
 A
 no
 risk,
 no
 title
 approach
 to
 sourcing
and
negotiating
pricing
is
the
current
scenario.
Along
with
collaborated
working

7
 



 


with
 other
 distributors,
 partners
 and
 manufacturers
 can
 create
 demand
 forecasts
 and
 negotiate
allocations.
 
 Some
of
the
key
feautures
of
an
online
distribution
channel
are:
 o Collaboration
‐
between
distributors,
customers,
suppliers,
logistic
providers

 o Consolidation
 ‐
 mergers
 and
 acquisitions
 and
 many
 other
 suitable
 cooperative
 arrangements

 o E‐commerce
initiatives
between
businesses
and
customers

 o Value‐enabled
supply
chains
‐
multiple
methods
to
expand
and
distribute

 o Reduction
in
costs
and
quicker
response
times

 
 The
 Internet
 distribution
 offers
 companies
 the
 coverage
 of
 new
 target
 groups
 and
 a
 potential
sales
volume.



The
configuration
of
the
Internet
channel
of
distribution
implies
multifaceted
challenges.
 Some
of
these
challenges
have
been
listed
below
which
have
stood
in
the
way
of
internet
 becoming
the
preferred
channel:
 o Resistance
by
current
channel
for
the
process
of
shifting
of
the
channels
 o Shop‐Systems
Choices
 o Usability


 o Payment
transaction,
security

 o Online
Marketing
(SEM,
SEO,
E‐Mail‐Marketing,

 o Affiliate‐Marketing,
Web
Analytics,
Web‐Controlling)

 o Mass
 Customization
 (Participation
 of
 the
 visitor/customer
 in
 development
 and
 design)

 o Social
Commerce

 o Mobile
Commerce
(Applications
und
Services)

 o Certification,
seal
of
quality
 The
most
important
among
these
i.e.
resistance
to
the
shifting
of
channels
has
been
 discusses
below.


 


8
 



 


Shifting
of
Channel


Electronic
 commerce
 presents
 opportunities
 to
 expand
 or
 shift
 elements
 of
 existing
 channels
 from
 the
 physical
 marketplace
 to
 the
 virtual
 market
 space.
 However
 the
 bargaining
 power
 of
 buyers
 and
 suppliers
 is
 a
 critical
 force
 shaping
 industry
 competitiveness
and
the
presence
of
such
power
will
remain
vital
in
determining
a
firm’s
 ability
 to
 exploit
 online
 markets.
 In
 particular,
 those
 manufacturers
 that
 have
 dominated
 traditional
 retail
 sales
 may
 be
 undermined
 by
 their
 earlier
 success.
 Their
 reliance
 on
 traditional
 outlets
 makes
 them
 susceptible
 to
 retailer
 pressure
 to
 curb
 online
 experimentation
 and
 limit
 deep
 discounting
 online.
 Maintaining
 both
 channels
 also
 presents
 barriers
 to
 execution
 resulting
 if
 attempts
 to
 straddle
 multiple
 markets
 limit
 operational
optimization.

 
 Compaq
had
faced
during
the
PC
industry's
increasing
shift
to
online
channels.
In
the
first
 quarter
 of
 1999,
 Compaq
 was
 forced
 to
 halt
 sales
 to
 deep‐discount
 online
 retailers
 in
 response
 to
 pressure
 from
 its
 traditional
 (and
 much
 larger)
 retail
 base.
 Dell
 was
 able
 to
 take
use
of
this
opportunity
and
captured
a
major
chunk
of
the
notebook
market
in
a
very
 small
time
span.

 
 Similarly,
 Amazon.com
 has
 suffered
 at
 the
 hands
 of
 non‐complaint
 suppliers
 as
 it
 has
 attempted
 to
 expand
 into
 consumer
 electronics.
 Many
 leading
 electronics
 manufacturers
 refused
 to
 authorize
 and
 supply
 the
 web
 retailer
 for
 fear
 of
 retaliation
 from
 larger
 brick‐ and‐mortar
chains,
forcing
Amazon
to
take
costly
steps
to
secure
popular
items
from
other
 retailers.
 Hence
 formulating
 ecommerce
 plans
 without
 considering
 the
 channel
 partner
 dynamic
can
result
in
financial
loss,
reputation
damage,
and
weaker
partner
relationships.
 
 The
Internet's
ability
to
bring
together
geographically
diverse
buyers
and
sellers
has
led
to
 a
rise
in
leveraging
auction
markets
as
distribution
channels.
However,
the
relative
scarcity
 of
 items
 offered
 has
 significant
 impact
 on
 motivating
 auction
 participants
 as
 well
 as
 in
 creating
competitive
advantage
for
the
auction
operator.

For
providers
of
rare
products
or
 services
 with
 exclusive
 or
 limited
 access
 however,
 auction
 models
 present
 a
 compelling
 alternative
 to
 traditional
 channels.
 Indeed,
 both
 suppliers
 and
 buyers
 as
 markets
 of
 first
 choice
may
view
these
markets.
Suppliers
of
rare
goods
seek
large
markets
because
more
 buyers
will
bid
prices
higher.
 

9
 



 


Similarly,
 buyers
 seeking
 rare
 goods
 first
 visit
 the
 largest
 market
 to
 maximize
 their
 likelihood
 of
 finding
 the
 item
 sought.
 This
 virtuous
 cycle
 creates
 the
 demand‐side
 economies
 of
 scale
 of
 network
 effects.
 eBay's
 success
 provides
 a
 stunning
 example
 of
 the
 strength
of
these
benefits.
Amazon
have
offered
competing
services
with
lower
fees.
eBay
 has
 maintained
 its
 network
 advantage
 via
 an
 online
 rating
 system
 for
 evaluating
 auction
 participants.
The
rating
system
has
helped
lower
the
risk
premium
associated
with
doing
 business
 on
 eBay
 and
 it
 creates
 a
 switching
 costs,
 strengthened
 over
 time,
 in
 that
 participants
 who
 leave
 must
 re‐create
 their
 reputation
 anew
 at
 another
 service.
 The
 success
of
eBay's
market
efficiency
auctions
for
collectables
has
created
a
critical
mass
of
 consumers
 that
 has
 allowed
 the
 firm
 to
 leverage
 this
 client
 base
 to
 expand
 into
 other
 markets.

 
 The
 extent
 of
 the
 collapse
 of
 distribution
 channels
 brought
 about
 by
 the
 advent
 of
 the
 Internet
 appears
 to
 have
 been
 over
 estimated.
 Instead
 we
 are
 faced
 with
 an
 undulating
 distribution
 channel
 that
 can
 contract,
 shift
 into
 cyberspace,
 or
 expand
 depending
 on
 the
 complex
 interaction
 of
 industry
 players,
 value
 delivery,
 product
 offerings
 and
 characteristics,
 and
 market
 power.
 An
 understanding
 of
 the
 interplay
 of
 these
 disparate
 forces
 is
 vital
 for
 those
 seeking
 to
 determine
 how
 e‐commerce
 will
 impact
 a
 firm
 and
 its
 industry.


The
impact
of
the
Internet
on
the
value
chain
of
the
organization

Organizations
 should
 operate
 and
 combine
 different
 activities,
 which
 form
 their
 value
 chain
 in
 order
 to
 offer
 differentiated
 products
 or
 products
 at
 the
 lowest
 cost
 companies.
 Each
of
these
activities
can
add
value
to
their
inputs,
and
as
a
result
the
organization
can
 obtain
sustainable
competitive
advantage.
 
 The
 value
 chain
 of
 an
 organization
 is
 composed
 by
 primary
 activities
 (inbound
 logistics,
 operations,
 outbound
 logistics,
 marketing
 and
 sales,
 service)
 and
 support
 activities
 (procurement,
technological
development,
human
resources
management,
infrastructure)
.
 During
 its
 activity
 an
 organization
 interacts
 with
 its
 suppliers,
 customers,
 other
 organizations
 from
 complementary/related
 industries,
 and
 all
 of
 these
 have
 their
 own
 value
chains.

 

10
 



 


Marketing
has
two
important
roles
in
the
value
chain:
 o Stimulate
the
demand
for
a
product
or
service;
 o Offer
inputs
(data)
for
product
specifications,
including
estimation
of
the
demands.
 
 The
Internet
has
several
characteristics
through
which
it
influences
the
primary
and
 support
activities
of
the
value
chain:
 o Mediating
Technology:
The
Internet
permits
the
organizations
to
try
to
know
much
 better
 their
 customers,
 to
 be
 in
 direct
 relation
 with
 their
 buyers,
 the
 information
 flux
 to
 be
 bidirectional,
 and
 as
 a
 result
 organizations
 through
 their
 marketing
 activities
 can
 better
 evaluate
 the
 needs,
 expectations
 of
 the
 market,
 can
 facilitate
 innovations
 generated
 by
 customers,
 easily
 stimulate
 the
 demands,
 due
 to
 direct
 contact
with
customers.
 o Time
 moderator,
 distribution
 channel
 and
 universal:
 The
 Internet
 permits
 organizations
 to
 address
 customers
 from
 a
 larger
 geographical
 area,
 offers
 a
 new
 way
 of
 distribution,
 local
 companies
 can
 serve
 larger
 markets
 (national
 or
 even
 international),
 increases
 the
 ability
 to
 extend
 the
 area
 of
 sales
 and
 (after
 sales)
 services
 activities,
 without
 the
 necessity
 of
 physical
 contact
 with
 customers,
 it
 allows
 a
 wider
 choice
 of
 inputs,
 geographically
 dispersed
 manufacturing,
 remote
 testing,
 instantaneously
 delivery
 of
 information,
 services,
 sometimes
 instantaneously
 delivery
 of
 products.
 It
 reduces
 the
 costs
 related
 to
 logistics
 and
 delivery,
and
a
part
of
these
economies
of
costs
can
be
offered
for
customers
in
the
 form
 of
 lower
 prices.
 Customers
 will
 get
 value
 through
 prompt
 delivery,
 lower
 prices
and
quality
products.
 o Reducer
of
information
asymmetries
and
transaction
costs:
The
internet
reduces
the
 necessary
 inventories,
 because
 customers
 can
 be
 served
 directly
 by
 the
 manufacturer,
 through
 direct
 delivery.
 A
 general
 fear
 in
 the
 new
 economy
 is
 disintermediation,
which
means
that
manufacturers
can
offer
directly
their
products
 to
 the
 end‐user
 consumers,
 eliminating
 distributors
 from
 the
 value
 system.
 But
 it
 seems
that
distributors
are
not
eliminated
totally,
and
new
types
of
intermediaries
 appear.
 o Being
 scalable
 and
 having
 and
 infinite
 virtual
 capacity
 the
 Internet
 and
 developments
 in
 information
 and
 communication
 technology
 allow
 for
 many
 information
intensive
businesses
to
operate
at
larger
scale,
as
a
result
the
effect
of
 economies
of
scale
will
appear.
 

11
 



 


We
 can
 observe
 that
 the
 Internet
 has
 important
 impact
 on
 many
 of
 primary
 and
 support
 activities
of
companies
from
industries
based
on
information
and
of
distributors.
In
other
 industries
 the
 Internet
 has
 impact
 first
 of
 all
 on
 the
 marketing
 and
 sales
 activities,
 which
 can
generate
changes
in
the
whole
value
chain
of
the
organization.


Technological
Product
Distribution


High
 technology
 products
 have
 been
 the
 frontrunners
 in
 accepting
 internet
 as
 a
 distribution
 medium.
 Technological
 products
 are
 novel
 technologies
 developed
 to
 satisfy
 known
customer
needs.
Such
products
and
services
compete
on
the
basis
of
performance,
 rather
 than
 price
 or
 quality.
 The
 development
 of
 multimedia
 products
 and
 services
 is
 a
 recent
example
of
such
a
co‐evolution
of
technologies
and
markets.

Competition
is
based
 on
 serving
 specific
 market
 niches
 and
 on
 close
 relations
 with
 customers.
 Innovation
 typically
originates
or
is
in
collaboration
with
potential
users.
 
 



 
 
 Differentiated
products
are
those
in
which
both
the
technologies
and
markets
are
mature,
 and
most
innovations
consist
of
the
improved
use
of
existing
technologies
to
meet
a
known
 customer
need.
Products
and
services
are
differentiated
on
the
basis
of
packaging,
pricing
 and
support.
 
 Next,
the
emergence
of
Internet
financiers
and
lenders,
increased
lending
by
financial
and
 other
 institutions,
 and
 decreasing
 need
 for
 storage
 occasioned
 by
 computerized
 stock

12
 



 


management
systems
and
JIT,
could
have
impacted
the
likelihood
of
the
roles
of
traditional
 distributors
 to
 producers
 being
 replaced.
 Lastly,
 availability
 of
 truck
 transportation
 and
 increased
efficiency
may
have
contributed
to
the
likelihood
of
traditional
distributors
being
 replaced
in
providing
safe
and
timely
transportation.
 
 Customers
 and
 producers
 may
 not
 need
 to
 rely
 on
 brick
 and
 mortar
 distributors,
 but
 depend
on
forwarders
or
couriers
for
reliable
shipment.
 
 For
undifferentiated
products
(i.e.
architectural,
technological,
and
complex
products),
it
is
 less
 likely
 (compared
 to
 differentiated
 products)
 that
 disintermediation
 will
 occur.
 Customers
and
producers
are
not
yet
ready
to
take
over
the
distributor’s
roles
even
after
 the
clear
financial
benefits
it
presents
to
the
parties.
On
the
other
hand,
e‐shoppers
are
less
 likely
to
close
a
transaction
using
the
Internet
when
the
product
is
somewhat
complicated.
 



 
 

13
 



 


Thus
 far,
 most
 of
 the
 producers
 are
 still
 unprepared,
 either
 technologically
 or
 from
 a
 business
 process
 perspective,
 to
 pipe
 a
 large
 portion
 of
 their
 B2B
 transactions
 over
 the
 Internet
to
promote
complex
products
that
are
often
difficult
to
describe.
The
transaction
 costs
involved
may
be
too
high
to
be
absorbed
by
both
the
customers
and
producers.

 
 From
the
producers”
standpoint,
the
extra
costs
incurred
may
include
the
need
to
provide
 immediacy,
 flexible
 pricing
 structure,
 advanced
 customer
 support,
 digital
 signatures
 or
 financial
 clearing
 for
 large‐sum
 transactions.
 From
 the
 customers”
 perspective,
 sourcing
 information
from
multiple
Web
sites
for
a
single
non‐standardized
product
may
not
be
cost
 effective.
 This
 may
 be
 a
 carry
 over
 effect
 of
 single
 supplier
 source
 era.
 Also,
 the
 effectiveness
 of
 distributors
 in
 getting
 critical
 mass
 could
 be
 apparent
 to
 producer
 and
 cannot
 be
 underestimated.
 On
 top
 of
 that,
 the
 efficiency
 and
 value
 added
 by
 performing
 these
 functions
 could
 be
 one
 of
 their
 concerns.
 Unless
 the
 producers
 have
 resources
 to
 internalize
 the
 channel
 activities
 within
 its
 organizational
 boundaries,
 it
 may
 be
 deemed
 more
cost
effective
to
leave
these
functions
to
the
hands
of
distributors.
 
 Several
 implications
 of
 study
 are
 raised
 based
 on
 the
 findings.
 The
 research
 may
 provide
 distributors
an
idea
of
which
of
the
functions
that
can
be
replaced
and
which
are
those
that
 cannot
be
substituted
based
on
types
of
products.
For
those
functions
that
are
more
likely
 to
be
replaced,
distributors
should
collaborate
with
producers
and
customers
to
integrate
 their
operational
activities
in
order
to
achieve
higher
efficiency
level,
which
will
eventually
 benefit
all
parties
in
the
supply
chain.
For
those
functions
that
are
less
likely
to
be
replaced,
 distributors
 may
 continue
 to
 strengthen
 their
 competitive
 edge
 and
 further
 add
 value
 to
 customers
and
producers,
in
particular
in
today’s
world
of
solution
centric
business
model.

 
 Traditional
distributors
should
deliver
solutions
instead
of
just
commodities,
which
is
the
 only
 way
 they
 can
 retain
 an
 important
 place
 in
 the
 channel.
 Distributors
 may
 need
 to
 ensure
that
massive
amount
of
supply
and
demand
data
is
well‐managed
and
near‐perfect
 information
to
buyers
and
sellers
are
easily
available.
The
ability
of
distributors
to
provide
 market
 intelligence
 to
 producers
 will
 be
 considered
 as
 value
 added
 as
 it
 is
 difficult
 for
 producers
 to
 monitor
 each
 and
 every
 one
 of
 their
 customers.
 Furthermore,
 with
 the
 findings,
 distributors
 may
 make
 some
 strategic
 decision
 as
 to
 whether
 to
 concentrate
 on
 demand
fulfillment
business
or
demand
creation
activities.
 
 Therefore,
since
product
simplicity
(i.e.
non‐complication)
is
negatively
associated
to
an
e‐
14
 



 


shippers
 propensity
 to
 use
 a
 vehicle
 other
 than
 the
 Internet
 to
 close
 a
 transaction,
 brick
 and
mortar
distributors
may
wish
to
exploit
this
opportunity
created
by
the
inability
of
e‐ commerce
to
begin
and
complete
delivery
of
complex
products
or
highly
technical
products
 by
 extension.
 Besides
 that,
 the
 findings
 may
 trigger
 discussion
 on
 the
 possibility
 of
 consortia‐like
 electronic
 marketplace
 being
 the
 next
 business
 model
 for
 distribution
 channel
since
it
may
help
to
achieve
to
a
more
efficient
market.
 
 Distributors
 need
 to
 be
 ready
 and
 prepared
 for
 the
 next
 possible
 distribution
 channel
 evolution.
As
much
as
the
functions
of
distributors
of
undifferentiated
products
may
be
less
 likely
 to
 be
 replaced
 in
 near
 term,
 however,
 the
 Internet
 will
 continue
 to
 deliver
 information
 and
 options
 to
 customers
 at
 an
 exponentially
 accelerating
 rate
 that
 may
 change
the
traditional
channel
practices
in
the
long
run.


Recommendations
for
further
work


The
 current
 study
 only
 considered
 the
 high
 technology
 product
 space
 based
 on
 only
 two
 factors
 market
 novelty
 and
 technological
 novelty.
 Further
 work
 should
 cover
 wider
 industry
 sectors
 including
 more
 independent
 factors
 for
 a
 more
 comprehensive
 study.
 Some
 of
 the
 factors
 suggested
 are
 how
 well
 verse
 are
 customers
 in
 using
 Internet,
 investment
 in
 information
 technology
 by
 producers
 and
 customers,
 readiness
 of
 the
 infrastructure
 in
 supporting
 usage
 of
 Internet,
 and
 cultural
 differences
 in
 different
 countries.
 The
 new
 advances
 in
 the
 Internet
 technology
 with
 the
 advent
 of
 Web
 2.0,
 widgets
 and
 online
 buzz
 should
 be
 studied.
 These
 technologies
 present
 a
 more
 dynamic
 and
 collaborative
 environment,
 which
 changes
 the
 distribution
 and
 sales
 environment
 currently
used.

 
 The
future
success
of
e‐commerce
depends
on
high
levels
of
online/offline
integration,
as
 consumers
 make
 use
 of
 mobile
 technologies
 in‐store,
 and
 also
 continue
 to
 use
 online
 retailing
 as
 research
 for
 in‐store
 purchases.
 For
 example,
 loyalty
 cards
 present
 an
 important
 opportunity
 to
 be
 utilized
 as
 a
 vehicle
 to
 integrate
 on
 and
 offline
 customer
 experiences,
given
the
amount
of
data
compiled
about
customers
in
loyalty
programs.


15
 



 


Conclusions


Consumers’
 are
 living
 in
 an
 increasingly
 digital
 world
 where
 the
 traditional
 channels
 of
 digital
media
are
converging,
E‐commerce
as
we
know
it
is
coming
to
its
end
with
branding,
 marketing
 and
 retail
 converging
 in
 integrated
 experiences
 that
 cut
 across
 traditional
 and
 digital
 channels
 with
 mobile
 playing
 an
 ever
 more
 important
 role.
 This
 has
 ensured
 that
 digital
 distribution
 is
 a
 channel
 not
 just
 for
 advertising
 and
 brand
 building,
 but
 also
 for
 price,
 promotions
 and
 merchandising.
 Those
 companies
 that
 are
 ahead
 of
 the
 curve
 in
 prioritizing
digital
strategy
are
likely
to
be
the
most
successful
in
addressing
the
needs
of
 the
digital
consumer.
 
 E‐commerce
has
important
impact
on
the
roles
of
distributors,
but
it
is
far
from
replacing
 the
 traditional
 channels
 as
 the
 primary
 source
 of
 distribution.
 The
 likelihood
 of
 distributors’
functions
(for
producers,
for
customers,
and
for
both)
being
replaced
is
higher
 for
 differentiated
 products
 followed
 by
 architectural
 product,
 technological
 products,
 and
 subsequently
 complex
 products.
 
 Companies
 can
 leverage
 digital
 as
 more
 than
 merely
 another
 channel
 but
 as
 an
 enabler
 for
 business
 transformation
 that
 can
 complement
 the
 other
 channels
 of
 distribution
 for
 the
 time
 being
 and
 maybe
 replace
 it
 completely
 in
 the
 future.
 But
 for
 now,
 we
 need
 to
 leverage
 the
 internet
 as
 an
 important
 marketing
 and
 distribution
complementing
the
traditional
channels.




 
 
 
 
 
 
 
 
 
 
 


16
 



 


References


 o Viability
of
e‐commerce
as
an
alternative
distribution
channel,
 www.nasstrac.org/.../NASSTRAC_Visibility_eCommerce_As_Alternative_Distribution_Channel. pdf
 E‐Commerce
and
the
Undulating
Distribution
Channel,
 www2.bc.edu/~gallaugh/cacmundulating02.pdf
 Using
E‐Commerce
to
Leverage
Your
Products
Upstream,
www.clickin.com/clickin‐report‐ ecommerce.pdf
 The
impact
of
the
internet
of
the
organisation’s
internal
marketing,
 http://imtuoradea.ro/auo.fmte/files‐2008/MIE_files/KANYA%20HAJNALKA%202.pdf


o o o

17