Leveraging Physical and Virtual Presence in Electronic Commerce:
The Role of Hybrid Approaches in the New Economy
Dirk de Wit
Delft University of Technology
Author contact information:
Presented to the International Telecommunications Society,
Buenos Aires, Argentina, July 2-5, 2000.
A recent trend in electronic commerce is the recognition that, at least in many
traditional product markets, having some physical infrastructure is necessary to
effectively meet customer needs (Economist, 2000a; Lindsay, 1999). Indeed, as the
so-called all Internet "pure-plays" (cite) continue to rack up large losses,
many e-commerce observes are refocusing their attention on hybrid "click and
mortar" strategies as the likely winner in the new competition between traditional
and virtual firms. This stands in stark contrast to the initial expectations that
surrounded the emerging Internet-based economy. Rather, it was assumed that older firms
would face stiff competition from more nimble virtual players who were not saddled with
the higher costs associated with buildings, large and duplicated inventories, and other
vestiges of the "old economy (Steinfield, Mahler and Bauer, 1999)."
To date there has been little research on click and mortar approaches (see Steinfield
and Klein, 1999; Steinfield and Whitten, 2000). We suggest here that hybrid e-commerce
strategies can take many forms, ranging from approaches with limited interaction between
the physical and virtual entities to those in which the two modes are tightly coupled. We
refer to these tightly coupled approaches as synergy models, where e-commerce applications
and physical infrastructure jointly meet consumer needs. In this paper, we provide
investigate the theoretical strengths of synergy models, present a series of case studies
illustrating different synergy approaches in diverse industries, and draw some conclusions
about the types of synergies that exist and how they may relate to firm and industry
Electronic Commerce Models
In developing an Internet strategy, firms can choose among many alternative approaches,
including those that are explicitly linked to their existing physical presence in a market
and those that are not. Following Venkatesh (1999), in this section we introduce six types
of Internet strategies. This categorization is useful, in that it highlights the main
differences between synergy-oriented strategies and those that do not seek to exploit
complementarities between physical and virtual activities. (synergy, mirror, anti-mirror)
and those that are not (parallel, virtual). Venkatesh's (1999) six categories are:
- Pre-Internet: Firms that explicitly choose to avoid developing an Internet-based
channel to their customers or other trading partners fall into this category. This may be
due to lack of resources, but can also be a rational strategy for firms that believe
having a Web channel adds little value to their current distribution channels. There may
be little added value for those firms who cater to a geographically local market (with a
service consumed on premises, for example, such as hair cuts) when there is little to no
Internet penetration among their target market (as in some countries). Some firms may also
be attempting to differentiate their product or service by emphasizing richer, in-person
channels, and may feel that developing a Web channel would harm their image.
- Mirror: Often firms that do develop a Web channel to their customers or trading
partners elect to make this channel resemble their physical channels as closely as
possible. For example, a firm might establish a Web store that has the same look and feel
as their physical outlets, offering identical goods and services. It is, in essence, a
mirror-image of their physical outlets, but does little to exploit the new capabilities of
the Web or to seek out any synergies that might exist between the virtual and physical
channels. Catalogue firms often developed a Web channel that duplicated their existing
mail order and phone channels, but did not interact with these earlier modes of customer
- Parallel: Firms that develop an Internet channel that is explicitly separate
from, and unrelated to, their physical channels are following a parallel strategy. Firms
may choose this approach because they believe that the Internet enables them to offer a
different set of goods and services, or to reach an entirely distinct customer base
(either geographically or demographically) due to the Web's unique capabilities. They may
feel that it is necessary to avoid explicit reference or linkage to their physical
outlets, perhaps because they seek to convey a new or different image in their Web
channel. In some cases, small firms may tried to mask their limited size, and develop an
Internet brand to compete against larger, more established firms.
- Synergy: A synergy strategy is one where firms explicitly link their virtual and
physical presence, exploiting each channel's strengths. Firms may, for example, rely on
their physical outlets to establish trust, while extending service and convenience through
their virtual channel. In true synergy models, the two channels interwork and complement
each other in various ways. A firm may allow customers to gather information and to order
products online, and then pick up or obtain after-sales service at the physical store.
- Virtual: In virtual models, firms forsake their physical presence, and pursue an
all virtual channel strategy (perhaps outsourcing the distribution of physical goods to
courier services). Although it is largely the new digital actors that typically start with
this approach, there are examples of firms that have relinquished their physical presence
for the lower costs they believe they will find on the Internet.
- Anti-Mirror: An anti-mirror strategy is one in which firms develop an Internet
channel, and remake their physical presence to take better advantage of the capabilities
of the Internet. This may involve restructuring business processes in their physical
outlets to make them more "Web-aware." The important distinction here is that
the physical presence is fundamentally altered as a result of the firm's virtual channel
Of the categories proposed by Venkatesh, three describe electronic commerce approaches
where firms seek to leverage prior investments in physical assets and presence with their
virtual presence. These are, in essence, hybrid physical-virtual models. At the simplest
level, mirror approaches leverage physical investments by capitalizing on customers'
recognition of a Web site's similarities to an established physical entity. Essentially,
we can consider this a hybrid approach that relies on consumers' familiarity with an
existing physical establishment to encourage greater trust and reduced perception or risk
when accessing their Web channel. Synergy and Anti-Mirror models are more sophisticated
strategies, which not only gain from greater trust and reduced perception risk, but also
use their combined physical and virtual presence to add value for customers in ways that
the two channels separately could not achieve. In the following section, we develop the
theoretical rationale for the strength of these latter hybrid approaches.
Transaction Cost Economics and Electronic Commerce
Analyses of the economics of electronic commerce often rely on a transaction costs
perspective to identify the advantages virtual firms have over physical/traditional firms
(see Choi, Stahl and Whinston, 1996 for an overview of e-commerce economics). Transaction
costs include those associated with pre-purchase (e.g. search and evaluation), purchase
(e.g. negotiation and settlement), and post-purchase (e.g. after-sales service)
activities. Networks reduce the constraints imposed by distance by permitting the rapid
exchange of information between distant buyers and sellers (Malone, Yates & Benjamin,
1987). For many economists, lower transaction costs associated with electronic commerce in
particular make it easier for buyers to find new sellers and for sellers to access new
markets (Malone et al., 1987; Wildman & Guerin-Calvert, 1990). As a result, according
to the prevailing wisdom, the Internet is reshaping all industries by stimulating the rise
of electronic marketplaces. These new marketplaces are characterized by strong price
competition and greater choice for buyers (Bakos, 1997; 1998; Smith, Bailey and
Brynjolfsson, 1999; Economist, 2000b; The New York Times, January 18, 2000). At the same
time the Internet enables the producers of goods and services to develop more direct
relationships with their buyers, bypassing most former intermediaries (Wigand and
Benjamin, 1995, Choi et al., 1996). Moreover, it supports the provision of goods and
services at a lower cost, but it can potentially enable greater customization to the needs
of individual buyers (Choi et al., 1996; Kalakota & Whinston, 1996). As the argument
typically goes, physical proximity to buyers becomes irrelevant for goods and services
that can be produced anywhere and either delivered electronically or physically by courier
to buyers. Ultimately, it is argued that relatively low cost of creating a Web presence,
which is then accessible to those connected to the Internet worldwide, enables firms to
use their electronic site as a surrogate to establishing a physical presence in a local
Steinfield and Whitten (1999), in explaining why firms seek to shift to the Internet as
their distribution channel, offer the following list of advantages that Web-based
businesses are perceived to hold over those confined to physical channels. Many of these
advantages are based upon a transaction cost perspective.
- Access to a wider potential market.
- Lower sunk costs because a building or rented space in each market is not required, and
they may operate with less or no inventory, while still offering much higher depth of
product selection than any physical firm.
- Better economies of scale arising from a larger customer base, and consequent volume
discounts on inputs.
- Ability to set up facilities near important factors of production, which would not be
available to an "offline" physical business in a given community.
- Lower costs due to the ability to bypass many of the intermediaries in the retail
distribution value chain (Wigand & Benjamin, 1995; Wigand, 1997).
- A higher degree of transaction automation, leading to improved service and lower labor
- Ability to rapidly respond to changes in the market, through price adjustments which can
be almost in real time (Bailey, 1998), and well as changes in product mix and marketing
- Ability to easily capture and use market relevant data generated during routine
interactions with customers (Steinfield et al., 1993).
- Ability to add value to products and services by offering links to complementary
producers (Steinfield et al., 1993).
- Ability to offer 7 day by 24 hour access with little additional cost.
- No limitation on the depth of information provided to customers, which can aid in
product selection and potentially reduce return rates (New York Times, August 23, 1999).
These economies can potentially enable Web-based retailers to easily undercut the
prices of local retailers who formerly faced little or no competition. Despite some
empirical evidence to the contrary (Bailey & Brynjolfsson, 1997; Palmer, 1997), there
is a general expectation that prices will be lower on the Web (Bakos & Brynjolfsson,
1999; Smith, Bailey and Brynjolfsson, 1999).
Despite these potential advantages for the all-virtual firms, the preceding analysis
suffers from taking too limited a view of the types of costs that consumers face in the
marketplace. For example, it is often pointed out that a significant inhibitor for
electronic commerce growth is the lack of trust consumers have towards Internet merchants
(Palmer, Bailey and Smith, 2000). The potential risk associated with the opportunistic
behavior of suppliers is a traditional cause of higher transaction costs in the market,
and illustrates the need for e-commerce approaches that build trust. The previous analysis
further ignores important aspects of consumer needs and behavior that may neutralize many
of the hypothesized competitive advantages of virtual firms. For example, consumers who
need immediate gratification may be reluctant to rely on electronic commerce vendors who
ship goods by courier. The next section elaborates the theoretical advantages of hybrid
(i.e. physical and virtual) approaches to electronic commerce.
Hybrid Electronic Commerce Approaches
As discussed earlier, hybrid electronic commerce involves the use of both virtual and
physical presence to meet the needs of buyers. By physical presence, we include any assets
that enable potential buyers to interact in person (i.e. not via the Internet, although
perhaps at a call center) with a firm's personnel or on a firm's premises in the support
of an economic exchange. This is similar to, but slightly broader than the definition of
local electronic commerce developed by Jupiter Communications (Swerdlow, Kim, Cassar and
Johnson, 2000), which includes any exchange where the fulfillment of either local or
national brands is handled within ten miles of a consumer's home or workplace. Our broader
definition of physical presence can include, for example, instances such as catalogue
firms or traveling sales representatives, which may not involve local fulfillment, but do
utilize existing (pre-Internet) physical assets as sales channels.
There are a number of reasons why we might expect hybrid electronic commerce to be more
successful than either purely physical or purely virtual approaches to the market. An
earlier analysis by Steinfield and Whitten (2000) focused on the opportunities for firms
to combine their physical presence and e-commerce channels to 1) build trust, 2) meet
diverse consumer needs and preferences, 3) exploit natural complementarities between
virtual and physical capabilities to enhance value for buyers, and 4) use their greater
knowledge of the local community to offer more targeted products and services. The various
strategies can be broadly categorized into four groups: 1) cost reduction strategies, 2)
trust building strategies, 3) value-adding strategies, 4) market extension strategies.
Each category is briefly described below.
- Cost reduction strategies: When virtual and physical channels are harmonized
effectively, a number of potential savings become possible, particularly involving labor
costs. Many pre and post purchase activities, for example, that formerly required the time
of a sales person can be handled via the Internet. In essence, these labor costs are
switched (or outsourced) to consumers for such activities as looking up product
information on their own, filling out forms, and relying on online technical assistance
for after-sales service. Customers are willing to take on these tasks for the increased
convenience and control that the virtual channel offers. Sales personnel can then shift
their activities from order taking (e.g. as in typical call centers) to order generation
or higher-margin sales activities. For catalogue firms, shifts to the Internet offer very
real cost savings, since Internet orders are far cheaper than telephone orders and there
may be savings from needing to print fewer catalogues (New York Times, May 15, 2000).
Another area of cost savings includes opportunities to reduce local inventory for
infrequently purchased goods, while still offering them on a delayed (that is, via the
Internet channel) basis. Finally, in terms of delivery costs, hybrid firms have a cost
advantage over all virtual firms. The hybrid firm with a physical outlet in the community
can offer goods with no delivery charge, using their physical presence as the pick-up
location. If they do offer delivery, there may be some savings if the delivery is
initiated from the local point of presence.
- Trust building strategies: Hybrid firms have enhanced opportunities to build
trust due to their physical presence in the markets they serve. A commonly cited
impediment to online shopping is consumers lack of trust in the legitimacy of the
Web-based store (Bollier, 1995; Coates, 1998). The fact that there is a recognized
physical entity reduces the perceived risk that the virtual site is a fake. Moreover,
consumers' perceived risks may be lower since there is an easy to access location to which
goods can be returned or complaints can be registered. Additionally, businesses in
community can be embedded in a variety of social networks (e.g. in the chamber of
commerce, or as a sponsor of youth organizations), which can enhance trust (Steinfield,
Mahler and Bauer, 1999; Steinfield and Whitten, 2000). According to Granovetter (1985),
such embeddedness is often considered a problem by economists, who argue that when
economic exchange is determined by social relations, inefficient allocation of resources
can result. However, he also notes that social relations often facilitate trust,
permitting exchanges without expensive contracts or legal fees and thereby reducing costs.
DiMaggio and Louch (1998) show that, particularly for risky transactions, consumers are
likely to rely on social ties as a governance mechanism. Social ties create obligations
that can be a powerful force for controlling opportunistic behavior. Consumers in their
study were willing to limit their choice of suppliers for highly risky purchases in order
to purchase from someone with whom they knew or who was recommended by someone they knew.
To the extent that such personal relationships are more likely to exist between
geographically proximate buyers and sellers, this may be a countervailing force in
electronic commerce, resulting in a preference for doing business with firms that are
already physically present in the local market, at least for high risk transactions.
Hence, hybrid firms that pursue this approach would rely extensively on their physical
presence and social embeddedness to build trust, and would feature these forms of
community connection prominently on their virtual channels.
- Value adding strategies: Physical and virtual channel synergies can be exploited
in various ways to help differentiate products and add value in various ways without
necessarily increasing costs. The end result of these strategies is both to retain
customers and hopefully to increase revenue. Many opportunities for differentiation arise
from the use of the virtual channel to offer information and services that complement the
goods and services offered in physical outlets. Offering pre-purchase conveniences such as
the opportunity to make advance orders and reservations can, depending upon the product or
service, help to enhance value for customers. Moreover, allowing customers to have virtual
access to their account information (e.g. online account management) eases access to the
firm. Virtual channels may offer complementary new services (e.g. based on organizing and
synthesizing data on purchase histories) that not only make it easier to for customers to
manage their own activities, but that also bring in revenue. There are also many ways to
actively use each channel to promote traffic in the other. Cross promotions can include
advertising as well as the provision of incentives (e.g. coupons, credits towards future
purchases) to use the opposite channel. Various forms of after sales service (e.g.
installation and repair, accessories, instructions and tutorials for effective use, etc.)
and loyalty programs also can differentiate one provider from another while increasing
- Market Extension/Reach: A particular set of value-adding strategies emphasizes
the use of the virtual channel to help extend the reach of a firm beyond their traditional
physical outlets. The role of the Internet in making it possible to access new geographic
markets is widely recognized. Virtual channels can also extend the product scope and
product depth of physical channels. These uses of the virtual channel complement and
strengthen rather than compete with the physical channel by allowing firms to make offers
to new customers, and to offer new products to existing customers. It also enables firms
to continue serving customers who move outside the reach of existing physical channels.
Based on this conceptual overview, we next turn to an empirical analysis of several
cases of firms that effectively illustrate a synergy approach between their virtual and
physical channels. In the next section the methods and results of the PLACE (Physical
presence and Location Aspects of e-Commerce Environments) project of the Telematica
Instituut are described.
In the spring of 2000 we conducted several of case studies of firms in the Netherlands
that had established an electronic commerce channel with the goal of exploiting synergies
with their existing physical market presence. We chose three firms to present below that
illustrate varying click and mortar approaches. The firms were selected based upon news
and trade journal reports highlighting their e-commerce undertakings. Interviews with
executives in charge of Internet strategy in each firm were conducted during March, April
and May of 2000. We also reviewed each firms' web site to verify that their case would
help to illustrate hybrid e-commerce strategies. For each case, we briefly describe the
firm, its e-commerce strategy, and the ways in which it is attempting to leverage its
physical and virtual presence.
Bruna. Bruna is a large book retailer selling general interest books, magazines,
newspapers, software, and assorted writing supplies. Bruna bookstores are located in all
major Dutch cities. They are affiliated with the Dutch Post Office and all major train
stations in the Netherlands have Bruna bookshops, with many shops offering postal services
as well. This location strategy means that Bruna benefits from the generated traffic of
those using rail and post services. Other stores are generally in the shopping areas of
the city centers, also near high pedestrian traffic zones. An important aspect of the
Bruna organization is that the shops are normally franchises managed by independent
shopkeepers. Hence a parallel e-commerce approach (where the virtual and physical channels
are separate and in competition) would be difficult to establish due to potential
cannibalism from the Web channel on franchise sales.
In 1996, in the face of skepticism and some resistance by shopkeepers, they began to
develop their e-commerce applications. They attempted to create a strategy that explicitly
avoided cutting out the local Bruna shops, and indeed, helped to increase traffic at the
physical points of presence. First, all books ordered on the Bruna Web site
(http://www.bruna.nl) can be picked up and paid for at any Bruna shop. This is
particularly useful for people passing by Bruna shops in the train stations on their way
to and from work. Approximately 50% of the book orders made on the Bruna site are picked
up at a local Bruna shop. This has two benefits. Not only does it attract purchases even
from those who are reluctant to make payments over the Internet, it brings additional
traffic into the store where customers may purchase other items in addition to the ordered
book. A second hybrid strategy explicitly integrates the physical shop with the virtual
offerings. At a number of Bruna shops, a kiosk called the Infopoint has been placed.
Customers can search for and order books from the database right in the store. This gives
customers access to a larger inventory of titles than is available in the shop. The third
hybrid strategy is the use of mobile e-commerce. Bruna offers their web services through
the Wireless Application Protocol (WAP) to reach customers with suitably equipped mobile
phones. Not only does this allow customers in transit to more easily order books, but it
will provide a short message indicating that an ordered book is ready to be picked up at
the preferred shop. All three access methods rely on the same back-office system, and so
represent an integrated channel to the customer.
A fourth strategy is being developed that will further enhance the integration of
e-commerce and the physical Bruna shops. Bruna plans to offer
"printing-on-demand" services for their on and offline patrons. This can be
particularly useful for out-of-print books. Excerpts may be offered online as a marketing
Free Record Shop. Free Record Shop is the largest music and entertainment
retailer in the Netherlands with 162 shops under this label. They sell music CDs, DVDs,
computer games, and various accessories. They also have several other store brands
catering to diverse target markets. As with Bruna, many Free Record Shops are located at
major train stations, due to a joint venture with the Dutch National Railway. They have
expanded to several other international markets. Unlike Bruna, Free Record Shops are
wholly owned by the parent organization and are not franchises. However, they still
explicitly are pursuing a hybrid e-commerce strategy.
Free Record Shop (FRS) began their e-commerce Web service in 1998, focusing on
complementarities with their physical outlets in various ways. As with Bruna, FRS uses
their Web presence (http://www.freerecordshop.nl) to attract more customers to their
shops. They also allow customers to make their orders online, but with in-store payment
and pickup. The Web site identifies the closest FRS by post code. FRS ships all orders
from their central distribution center to the desired store on the following day. This
encouragement for customers to pick up the product and pay for it in the store benefits
the individual shop managers, who receive credit for the sale, and earn bonuses based upon
the amount of store sales. There is some element of channel conflict, however, in that
online orders that are delivered to the customer's home bypass the shops entirely. This is
less of an issue, though, because the shops are owned by FRS.
FRS plans to integrate the databases of each local shop's inventory with their online
database. In this way, they hope to speed up fulfillment, while still making use of the
physical shop. Customers would be able to check online if a desired product is in the
preferred shop. This capability would also benefit fulfillment of home delivery orders as
well, by allowing the delivery service to begin from the closest FRS.
FRS plans to introduce various "on-demand" services in their shops in the
near future. In the near term, they hope to install CD recorders in their shops, so that
customers can, either from home or in the shop, legally assemble their own CD from FRS'
available titles. The rights to use these titles will have been acquired by FRS from the
music publishing companies. This has several advantages for the physical shop. It allows
them to offer buyers a customized product, differentiating their store from others. It
also enables stores to offer a wider and deeper selection with less in-store inventory. In
the long term, as technology permits, they hope to provide the same on-demand service for
FRS estimates that approximately 20% of their online shoppers come from outside the
Netherlands. They noted, however, that many of these are purchasing Dutch titles and so
are likely to be Dutch expatriates living or working abroad. This suggests that an
important effect of the Internet for FRS is to retain customers who have moved away from
the Netherlands. They cannot easily find Dutch titles while abroad, and obviously cannot
personally visit a physical FRS.
Rabobank. Rabobank is one of the largest banks in the Netherlands. They have a
particular structure, in that it is a cooperative banking network, with independently
owned branches sharing the Rabobank brand name, supported by a common central
organization. The independent banks are owned by their members, who are not shareholders
as in a traditional corporation. Profits are not redistributed to the members, but are
used to extend additional services and reduce the cost of banking services to all clients.
A critical issue is that these banks have very strong ties to the communities in which
they are located. Indeed, profits are reinvested into the communities to maintain their
economic health. Rabobanks are often the sole bank located in small farming towns, and
were started by farmers who had a difficult time gaining access to credit. This history
explains the strong desire by the central Rabobank organization (Rabobank NL) to develop
e-commerce in such a way that it does not harm the physical community banks.
There are 439 local member banks, including 1789 branches serving 7 million clients in
the Rabobank group. E-commerce activities are managed by the central organization,
Rabobank NL, which includes an information technology support organization called
Rabofacet. They established an Internet site at the beginning of the Web, mainly as an
Their synergy approach began when they established a series of locally-oriented portal
sites focusing on the regions surrounding member banks. They essentially used these sites
to provide an Internet presence for their business clients, helping them to enhance their
own e-commerce activities. These sites, called Trefpunten (Meeting
Points)(http://www.tref.nl), highlighted local information and local activities
extensively. The Rabobank functioned as the Internet Service Provider for their local
clients. The goal of Trefpunt was to have an indirect revenue model, improve ties to the
local community, and strengthen relations with clients. A secondary goal was to derive
direct revenue from the use of online banking services. Rabobank banking services such as
direct payments from clients' bank accounts for online purchases were available.
Trefpunts, due to their early introduction before significant Internet penetration and
e-commerce development, were only marginally successful.
Today, Rabobank NL offers a variety of centralized online banking services
(http://www.rabobank.nl). Their synergy strategy is based on the desire to lower the high
costs of maintaining branches, enabling them to keep community-based bank offices open.
They do this by offering mass market online services, which are today provided at a loss
in the physical branches. These are banking services that are low in complexity and do not
require the advice of a financial service professional (e.g. such as payments, deposits,
etc.). The banks themselves have asked for the central organization to offer these
services online. However, users are all clients of a particular Rabobank, and any fees
derived from online banking are shared with that bank. Hence, local banks benefit from the
ability to offer services at a lower cost without losing revenue from their clients. If
someone wishes to open an online account, they are always directed to their local Rabobank
(based on their address) to first establish an account there. Because it is in the
interests of all players to have most mass market transactions completed using automated
channels, Rabobank will offer incentives (e.g. better interest rates, lower fees) to
encourage their clients to use these online services. They do not wish to enforce it by
closing branches as that would harm their relations with the community. Bank personnel are
also cross-promoting the online banking services by showing customers how to make routine
transactions by the various direct channels (online and phone).
The physical branches will concentrate more on providing advice-sensitive services that
Rabobank feels people will not wish to undertake online. This includes estate planning,
mortgages and other services where trust and complexity play a role. These are higher
margin services, making it easier to justify the expense of maintaining personnel in
Intermediate services, such as stock purchasing, will increasingly occur online because
of the lower transaction costs. These services may be also be provided in the banks,
particularly for those who wish to have personal advice. This creates interesting
competitive dynamics in the channel.
We can derive a number of lessons from these cases. They each illustrate specific
synergy strategies that fit the four categories provided above: cost savings, trust
building, added value, and market extension.
Cost savings was evident in each of the cases. FRS plans to use e-commerce to lower
local inventory, without diminishing customer's access to the full range of products.
Rabobank hopes to reduce their costs for handling mass market banking services by
migrating high overhead transactions to the Internet. Bruna lowers costs by giving
customers advice and access to book inventory without taking up the time of store
Trust building is also clearly evident in each case. FRS and Bruna reduce customers'
perceived risks by allowing online ordering with payment and pickup at the shop. Rabobank
has clearly pursued a community involvement strategy, using e-commerce in their Trefpunt
program to strengthen customer relations. They all exploit their highly visible brand
name, and did not elect to establish a parallel Web brand.
Value adding strategies included the expansion of inventory (both product scope and
product depth) by FRS. The added convenience of a 24 hour channel, of course, is an
additional value for consumers, and can bring in new revenue. For the Rabobank, this may
be of particular importance for stock trading on global exchanges. The integration with
WAP, both for ordering and pickup notification at Bruna are value added services that will
potentially grow in-store traffic. New products, such as customized CDs by FRS also
illustrate how the virtual channel can directly be exploited by the physical shop.
For all of the cases, of course, the Web site enables an extension of their reach into
new markets. We can see, particularly from the FRS example, however, that an important
aspect of this market extension is the ability to retain former customers who have moved
beyond the reach of physical outlets. Each of the cases can also easily use their virtual
channel to serve markets where they had limited prior physical presence in the
The cases, however, also suggest that synergy strategies require explicit attention.
Each had to develop policies that helped to avoid conflicts in their channels. For
example, the decision by Rabobank to require online customers to have an account in a
local member bank, and the reallocation of fees back to the member bank avoids the
impression of bypass. Each recognized that the virtual channel offered cost savings, and
therefore provided some opportunities for differentiation of product offerings by channel.
Of course, this means that in the long run, it may be difficult to avoid conflicts. FRS,
for example, may ultimately offer music and video over their Web channel for home
downloading. More and more financial services may be handled by the Rabobank Direct
Channels. In this case, the smaller outlets may not survive. This is clearly a
policy-relevant research issue.
The cases also suggest that synergy approaches may be more common with larger chains,
who can capitalize on their convenient physical access. FRS and Bruna both illustrate the
importance of having locations that were frequented by customers. It is not clear that the
pick-up strategy would work without this accessibility.
Finally, some emerging synergy approaches are dependent on the development and
deployment of new e-commerce infrastructures. The creative uses of mobile e-commerce will
depend upon the continued deployment of Internet-capable mobile networks and devices at
costs that encourage widespread penetration.
In summary, we believe the e-commerce pendulum has shifted away from pure digital
e-commerce actors, and parallel Internet strategies, to an increasing reliance on hybrid
approaches. These approaches have strong advantages, in terms of cost reduction, trust
building, opportunity to offer value-added goods and services, and market extension. They
illustrate that contrary to the former e-commerce rhetoric, distance is not dead and
geography still influences much e-commerce retail activity. Electronic commerce therefore
does not have to be a threat to local communities, but can be used in a way that enhances
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