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Integrating Brick and Mortar Locations with E-Commerce: Understanding Synergy Opportunities1 Charles Steinfield Michigan State University East Lansing, MI 48824 USA steinfie@msu.edu Thomas Adelaar Telematica Instituut Enschede 7300 AN, NL adelaar@telin.nl Ying-ju Lai Michigan State University East Lansing, MI 48824 USA laiyingj@msu.edu

Abstract
Little empirical work has directly addressed the sources of competitive advantage of the click and mortar e-commerce approach, despite growing recognition of its importance as a business model. In this paper, we introduce a framework to describe the areas of physical and virtual synergy in click and mortar enterprises, the management actions for achieving synergies and avoiding channel conflicts, and the types of benefits that may be obtained. Case studies of ten US companies, including both business to consumer (B2C) and business to business (B2B) cases are used to illustrate the utility of the framework. In this paper, we explore the relationship between traditional and electronic channels through a series of ten case studies of US firms completed in late 2000 and early 2001, exploring the ways that firms found synergies between their traditional outlets and e-commerce. The goal of the case studies was to provide a framework for understanding where the potential payoffs are when integrating physical and e-commerce channels. In addition, the cases illustrate particular management strategies that firms developed to achieve synergy and avoid conflicts between their Internet and physical channels. The paper is organized as follows. First we review theoretical work that establishes the basis for expecting synergy between e-commerce and physical presence in a market. We then introduce a framework that highlights the areas from which synergies stem, the management actions that can help firms avoid channel conflicts and exploit synergy opportunities, and the anticipated benefits. We then summarize our empirical approach, noting how we chose the ten firms to examine, who we interviewed, and what topics we covered. Brief summaries of each case are provided. A discussion focuses on the implications of the framework and the extent to which it captured the variation in the cases. We conclude with limitations of the study, and possible new research directions.

1.

Introduction

With each new reported dot.com failure, there is a growing recognition that the Internet is unlikely to displace traditional channels anytime soon, at least in the world of business to consumer commerce. This does not signal the end of e-commerce, however. Rather, a number of traditional enterprises have moved to integrate ecommerce into their channel mix, using the Internet to supplement brick and mortar retail channels [7, 11, 13, 20, 23]. Indeed, the arrival of big retailers may have contributed to the collapse of many struggling dot.coms [15], while others have recognized that they need a physical outlet in order to survive [14]. Electronic commerce researchers, using terms like “clicks and mortar,” “bricks and clicks,” “surf and turf,” “cyberenhanced retailing,” and “hybrid e-commerce,” now consider the combination of physical and web channels to be a distinct electronic commerce business model [16, 19, 20, 23, 28] 1

2.

Literature review

In the early years of Web-based commerce, much emphasis was placed on sources of competitive advantage that Internet firms had over traditional ones, primarily

The research reported in this paper has been funded by the Telematica Instituut, Enschede, The Netherlands in the PLACE project (Physical presence and Location Aspects of e-Commerce Environments). Copyright 2002 IEEE. Published in the Proceedings of the Hawai’i International Conference on System Sciences, January 7 — 10, 2002, Big Island, Hawaii.

using transaction cost logic [e.g. 5]. Greater operating and transaction efficiencies, coupled with lower search costs are just a few of the many...
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