Succeeding in the Dotcom Economy: Challenges for Brick & Mortar Companies

Abstract

The internet is evolving into a powerful new channel for traditional stores or so called brick and mortar companies to expand upon their existing business models. While the physical stores have certain inherent advantages over the pureplay internet companies, the former's transition into cyberspace is a journey that many have faltered. This study examines the challenges faced by traditional companies in their quest to compete successfully in the digital economy. Introduction The internet has changed the way we do business. No longer is there a need to have face-to face contact with a supplier, salesperson or customer service representative to purchase goods when this can be done with the click of a mouse. The internet has made inroads into both the business to consumer (B2C) and business to business (13213) segments and online business is predicted to be the biggest growth area in the next decade or so. Traditional companies, the so called brick and mortars (B&M), are being pressured to respond to the competitive threats by new e-business upstarts. These internet pureplays have been able to create strong online brand recognition, provide good customer service, and are open 24 hours a day, 7 days a week, and 365 days a year. Some of them even give customers the option of customization and allow them to communicate with other customers through communities or discussion forums. The ability to customize service allows customers to build a relationship with the company while also being able to purchase merchandise that they like. Physical stores can provide customers with good service but they cannot provide customers with the convenience and easy accessibility of purchasing online. In order for B&Ms to remain competitive and regain market share in their industries they have to make sense of how to best utilize the internet. Why Should Brick and Mortars Go Online? The reason is quite simple: to remain competitive, to increase profits, to increase market share. Research done by Forrester Research estimated that in 1999 there were 17 million households shopping online and that online sales were expected to top $20.3 billion. By 2004, it is predicted that 49 million U.S. households will spend $184 billion online. On the B2B front, the Gartner Group estimates that the worldwide B2B market will grow from $145 billion in 1999 to $403 billion in 2000 and that by the end of 2003, global B2B revenues will reach $3.95 trillion. By 2004 B2B e-commerce will represent 7% of the forecasted $105 trillion total global sales transactions.' With these alarming statistics B&M companies need to realize that the internet is another channel of distribution for businesses to increase revenue and market share. Shoppers are more confident in the security of shopping online today and are more willing to buy products online as opposed to a year or two ago. With the trend toward online shopping on the rise, B&Ms may feel their instore business being threatened. By going online B&Ms can potentially have the best of both worlds that is, by retaining their existing customers who buy from their physical stores and also increase their customer base by tapping into customers who wish to buy online. However, the road to becoming a successful online company for B&Ms is not as easy as it sounds. Indeed the journey is fraught with traps and pitfalls, as many B&Ms have experienced. In this paper, we will first review the advantages that B&Ms have over the pureplay internet companies. Following that, we will examine some of the challenges that B&Ms have to overcome in order to successfully embrace the internet as an integral part of their business. Advantages of Brick and Mortars In going online, B&Ms enjoy some significant advantages over pureplay internet competitors. B&Ms enjoy lower costs per order and can attract customers at as little as one fourth the cost of the pureplays. …

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