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Editor's Introduction


Expert Competition and the Internet

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The Internet has become a channel for experts offering their services. We investigate the optimal online channel adoption strategy of a high-quality expert with a brick-and-mortar presence in the face of potential entry by an expert with just an online presence. We find that the high-quality expert does not have the incentive to adopt the online channel unless new entry is imminent. If the incumbent high-quality expert cannot offer a sufficiently high-quality online service, the incumbent expert accommodates entry and provides only a face-to-face service. However, a satisfactory level of online quality allows the incumbent expert to deter entry and to limit what would otherwise be a more intense competition. This paper thus establishes an entry deterrence role for the adoption of the online channel in expert markets. In addition, the results partially explain the reasons behind the quick adoption of the online channel in tax preparation services and physicians' reluctance to offer online consultations.

  • Content Type Journal Article
  • Pages 11-44
  • DOI 10.2753/JEC1086-4415180101
  • Authors
    • M. Tolga Akçura, TUBITAK
    • Zafer D. Ozdemir, Farmer School of Business, Miami University
    • Sanjay Jain

Optimal Product-Sampling Strategies in Social Networks: How Many and Whom to Target?

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Using an agent-based model to study the success of product-sampling campaigns that rely on information about social networks, this paper investigates the essential decisions of which consumers and how many of them to target with free product samples. With an unweighted and a weighted real-world personal communication network, we show that the decision of which consumers to target is more important than that of how many consumers to target. Use of social network information increases profits by at least 32 percent. Companies should use a high-degree targeting heuristic to identify the most influential consumers. Use of social network information increases profit for single-purchase products mainly because it supports targeting more influential consumers and therefore speeds up diffusion throughout the network. For repeat-purchase products, social network information decreases the optimal number of samples and thus the cost of the campaign.

  • Content Type Journal Article
  • Pages 45-72
  • DOI 10.2753/JEC1086-4415180102
  • Authors
    • Christian Schlereth, Faculty of Business and Economics, Goethe University, Frankfurt, Germany
    • Christian Barrot, Kühne Logistics University, Hamburg, Germany
    • Bernd Skiera, Faculty of Business and Economics, Goethe University, Frankfurt, Germany
    • Carsten Takac, Boston Consulting Group, Perth, Australia

Context Similarity Metric for Multidimensional Service Recommendation

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Recommender systems support online customers by suggesting products and services of likely interest to them. Taking into consideration the context of customers is believed to produce better recommendations, yet it poses unique challenges. If a recommendation is generated through previous ratings, narrowing down the set of ratings to those under the target context will limit the number, producing poor-quality recommendations. A common approach to improving the quality of recommendations is to aggregate ratings from a number of similar context segments; however, establishing which segments to aggregate by unguided enumerations is too computationally intensive. In this paper, we propose a novel context similarity metric to guide the aggregation process and show how it can be extended across multiple context dimensions. The metric underpins another contribution: a guided aggregation approach to context-based recommendation. This approach can be combined with traditional recommendation algorithms to improve their prediction accuracy through guided selection and inclusion of data segments for training of prediction models. We demonstrate the effect of our approach on the prediction accuracy of a popular memory-based collaborative filtering algorithm. The metric and the approach are validated using a set of data on hotel service ratings under different contexts. Four sets of validating experiments demonstrate the effectiveness of the approach.

  • Content Type Journal Article
  • Pages 73-104
  • DOI 10.2753/JEC1086-4415180103
  • Authors
    • Liwei Liu, Manchester Business School, University of Manchester, United Kingdom
    • Nikolay Mehandjiev, Manchester Business School, University of Manchester
    • Dong-Ling Xu, Decision and Cognitive Sciences Research Centre, Manchester Business School, University of Manchester

Consumer Responses to SMS Advertising: Antecedents and Consequences

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Mobile phone advertisements, in the form of text messages (SMS, or short message service), have been recognized as an important form of product promotion. The purpose of this paper is to investigate factors that influence the effectiveness of SMS advertising by using a hierarchy of effects approach. We employ a simulated experiment with 736 respondents to examine how consumers react to SMS advertisements and identify factors that influence their attitude toward the ad, their attitude toward the brand, and their purchase intention. Perceived ad credibility, attitude toward mobile advertising, message appeal, argument quality, incentive, product involvement, and interactivity were found to be antecedents of the attitude toward the ad. Moreover, there is a clear link between attitude and behavioral intention. The study is among the first to provide an experimental-based assessment and a unified model linking consumer attitudes toward mobile text ads with brand attitudes and purchase intentions.

  • Content Type Journal Article
  • Pages 105-136
  • DOI 10.2753/JEC1086-4415180104
  • Authors
    • Dimitris A. Drossos, Department of Information and Communication Systems Engineering, University of the Aegean, Greece
    • George M. Giaglis, Department of Management Science and Technology, Athens University of Economics and Business, Greece
    • Pavlos A. Vlachos, ALBA Graduate Business School, American College of Greece
    • Efpraxia D. Zamani, Department of Management Science and Technology, Athens University of Economics and Business, Greece
    • George Lekakos, Department of Management Science and Technology, Athens University of Economics and Business, Greece

Introduction to the Special Issue: Business Value Creation Enabled by Social Technology

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Viewing social commerce as settings that offer users an electronic commerce platform to specifically support participation and co-creation activities, we present five rigorously conducted empirical research studies that quantitatively measure business value contributions generated from consumer co-creation activities. The studies are based on business data from five different social commerce settings: a social gaming site, an e-book recommendation system, a social news site, a social network fan page, and a social buying platform. The specific co-creation activities examined consist of, respectively, user collaboration in playing online games, user-driven book recommendations, implicit relationship building in social network communities, online discussions in a consumer brand community, and consumer coordination in social shopping.

  • Content Type Journal Article
  • Pages 5-10
  • DOI 10.2753/JEC1086-4415180200
  • Authors
    • Karl R. Lang, Zicklin School of Business, Baruch College, City College of New York
    • Ting Li, Rotterdam School of Management, Erasmus University, the Netherlands

Valuation of Participation in Social Gaming

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This study examines the value of the time that a user spends to participate in a social game. We focus on how a massive multiplayer online role-playing game (MMORPG) vendor can establish prices to encourage participation and retain its players. We estimate value through an application of the hedonic pricing model and analyze a data set for an MMORPG in Korea. The results permit us to estimate the value of game-playing time in monetary terms. Based on our empirical results, we propose an economic model and conduct numerical simulation to show how a game vendor can apply differential pricing in this context. This enables us to design a pricing scheme to maximize a game vendor's profit. Our study affirms the long-standing finding that building network effects associated with other game players' participation is a critical source of benefits for the vendor. Going beyond this, we also find it is appropriate to use differential pricing, by subsidizing a participant's game play initially and then charging more aggressively to extract the available consumer surplus over the player's life cycle in the game, in order to reinforce a vendor's ability to maintain a healthy number of game participants.

  • Content Type Journal Article
  • Pages 11-50
  • DOI 10.2753/JEC1086-4415180201
  • Authors
    • Kwansoo Kim, Graduate School of Business, Seoul National University
    • Byungjoon Yoo, College of Business Administration, Seoul National University
    • Robert J. Kauffman, School of Information Systems, Singapore Management University

From Accuracy to Diversity in Product Recommendations: Relationship Between Diversity and Customer Retention

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Recommending diverse products to consumers is a new strategy for the next generation of recommender systems. However, no existing studies have empirically identified the impact of product diversity on consumer behavior. The aim of this study is to explain how product category diversity affects customer retention rates. To answer this research question, we examine how the number of product categories purchased by consumers is related to customer retention rates at a large digital content distributor. We use panel data consisting of product characteristics, purchase transactions, and customer retention rates from the company. Through segment-level and individual-level panel data analyses, we find that purchase quantity is positively associated with customer retention rates, and that variety of purchased digital content categories is positively associated with customer retention rates. That is, customers who have purchased digital content from multiple categories are more likely to stay longer than those who purchased digital content from a single category or from fewer categories. Put differently, as a complement to the conventional wisdom that just recommending products with similar features that a customer values highly (i.e., similar content from the same category) is important, our results imply that recommending products with different features (i.e., different content across different categories) is also important.

  • Content Type Journal Article
  • Pages 51-72
  • DOI 10.2753/JEC1086-4415180202
  • Authors
    • Sung-Hyuk Park, New York University's Stern School of Business
    • Sang Pil Han, Information Systems Department, City University of Hong Kong

Identifying Implicit and Explicit Relationships Through User Activities in Social Media

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Social commerce has emerged as a new paradigm of commerce due to the advancement and application of Web 2.0 technologies including social media sites. Social media sites provide a valuable opportunity for social interactions between electronic commerce consumers as well as between consumers and businesses. Although the number of users and interactions is large in social media, the social networks extracted from explicit user interactions are usually sparse. Hence, the result obtained through the analysis of the extracted network is not always useful because many potential ties in the social network are not captured by the explicit interactions between users. In this work, we propose a temporal analysis technique to identify implicit relationships that supplement the explicit relationships identified through the social media interaction functions. Our method is based on the homophily theory developed by McPherson, Smith-Lovin, and Cook [31]. We have conducted experiments to evaluate the effectiveness of the identified implicit relationships and the integration of implicit and explicit relationships. The results indicate that our proposed techniques are effective and achieve a higher accuracy. Our results prove the importance of implicit relationships in deriving complete online social networks that are the foundation for understanding online user communities and social network analysis. Our techniques can be applied to improve effectiveness of product and friend recommendation in social commerce.

  • Content Type Journal Article
  • Pages 73-96
  • DOI 10.2753/JEC1086-4415180203
  • Authors
    • Christopher C. Yang, College of Computing and Informatics, Drexel University
    • Xuning Tang, Drexel University
    • Qizhi Dai, LeBow College of Business, Drexel University
    • Haodong Yang, College of Computing and Informatics, Drexel University
    • Ling Jiang, College of Computing and Informatics, Drexel University

Corporate Twitter Channels: The Impact of Engagement and Informedness on Corporate Reputation

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We examine communication via a corporate Twitter channel and its effects on corporate reputation. We identify the importance of user engagement and informedness in explaining corporate reputation and examine three design factors that likely affect user engagement in a corporate Twitter channel. We conduct an exploratory 2 x 2 x 2 experiment among Twitter users to collect data. We find that the depth of the relationship among users, the level of corporate involvement, and the purpose of the channel interactively influence user engagement. Our findings suggest that deeper relationships among users of a corporate Twitter channel lead to higher user engagement when the level of corporate involvement with the channel is high and when the channel has a specific purpose, but not when the level of corporate involvement is high and the channel has a generic purpose. Surprisingly, when the channel has a generic purpose, a high degree of corporate involvement actually decreases user engagement. This finding implies that, under certain circumstances, a lower degree of corporate involvement in a social media channel may be more desirable. We also find that channel credibility positively influences user informedness. This is the first study that examines the dynamics of communication through a corporate Twitter channel. It contributes to the previous research related to social media by identifying engagement and informedness as two major factors that influence firms' reputation. Our research can help marketing and social media managers to decide on channel design aspects, such as whether to require users to register with an identity or to allow anonymous participation, whether to allocate dedicated employees to respond to user requests, and whether to set up different channels for different purposes.

  • Content Type Journal Article
  • Pages 97-126
  • DOI 10.2753/JEC1086-4415180204
  • Authors
    • Ting Li, Rotterdam School of Management, Erasmus University, the Netherlands
    • Guido Berens, Corporate Communication Centre at Rotterdam School of Management, Erasmus University, the Netherlands
    • Maikel de Maertelaere, Rotterdam School of Management, Erasmus University, the Netherlands

Social Buying: The Effects of Group Size and Communication on Buyer Performance

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Viewing social communication on group-buying platforms as a new form of IT -enabled coordination mechanisms, we examine the impact of group size and communication capacity on buyer performance on group-buying platforms. Using an economic experiment, we found that although larger groups were able to extract moderately higher surplus on average than smaller groups, there was also a negative impact of group size on group coordination for time to task completion. Interestingly, when a private communication channel was introduced for buyers, it actually lowered group surplus. We explain this unexpected finding as caused by the increased task complexity that arises from the additional needs for information processing of the exchanged messages. In general, adding communication capacity slowed down task completion, and this effect was stronger for larger groups than smaller ones. Our study suggests that business managers of group buying sites should be concerned about both the level and the kind of communication tools they want to offer and they need to be mindful that larger buyer groups may need different kinds of communication support from those needed by smaller groups.

  • Content Type Journal Article
  • Pages 127-157
  • DOI 10.2753/JEC1086-4415180205
  • Authors
    • Alexander Pelaez, Zicklin School of Business, Baruch College, City University of New York
    • Martin Y. Yu, IS&M team at the School of Information Systems, Singapore Management University
    • Karl R. Lang, Zicklin School of Business, Baruch College, City University of New York

Editor's Introduction

Search Engine Advertising Effectiveness in a Multimedia Campaign

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Search engine advertising has become a multibillion-dollar business and one of the dominant forms of advertising on the Internet. This study examines the effectiveness of search engine advertising within a multimedia campaign, with explicit consideration of the interaction effects between search engine advertising and television and banner advertising. An advertising tracking study with about 300 respondents interviewed before and about 4,700 respondents interviewed after the advertising campaign examines the effects on four consumer metrics: advertising awareness, brand awareness, brand image, and brand consumption. We estimate advertising effectiveness and control for correlations across the four ordinal response metrics using a multivariate ordered probit model. The results show that search engine advertising has significant effects on several consumer metrics, even among consumers who do not click on the sponsored advertisement. Television advertising also affects the consumer metrics. However, a negative interaction effect emerges between search engine advertising and television advertising. Banner advertising exerts a positive impact, but only in combination with television advertising. These substantial interaction effects indicate that firms must consider the investments in various media channels simultaneously when they design multimedia campaigns.

  • Content Type Journal Article
  • Pages 7-38
  • DOI 10.2753/JEC1086-4415180301
  • Authors
    • German Zenetti, Marketing Institute, Humboldt-University Berlin
    • Tammo H. A. Bijmolt, Faculty of Economics and Business Administration, University of Groningen, the Netherlands
    • Peter S. H. Leeflang, University of Groningen
    • Daniel Klapper, Institute of Marketing at the School of Business and Economics, Humboldt-University Berlin

Budget Planning for Coupled Campaigns in Sponsored Search Auctions

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Budget-related decisions in sponsored search auctions are recognized as a structured decision problem rather than a simple constraint. Budget planning over several coupled campaigns (e.g., substitution and complementarity) remains a challenging but important task for advertisers. In this paper, we propose a dynamic multicampaign budget planning approach using optimal control techniques, with consideration of the substitution relationship between advertising campaigns. A three-dimensional measure of substitution relationships between campaigns is presented, namely, the overlapping degree in terms of campaign contents, promotional periods, and target regions. We also study some desirable properties and possible solutions to our budget model. Computational simulations and experiments are conducted to evaluate our model using real-world data from practical campaigns in sponsored search auctions. Experimental results show that (1) our approach outperforms the baseline strategy that is commonly used in practice; (2) coupled campaigns with a higher overlapping degree in between reduce the optimal total budget level, then reduce the optimal payoff, and reach the budgeting cap earlier than those with a less overlapping degree; and (3) the advertising effort can be seriously weakened by ignoring the degree of overlapping between campaigns.

  • Content Type Journal Article
  • Pages 39-66
  • DOI 10.2753/JEC1086-4415180302
  • Authors
    • Yanwu Yang, Internet Sciences and Economic Computing research group at the School of Management, Huazhong University of Science and Technology, China
    • Rui Qin, State Key Lab of Management and Control for Complex Systems, Institute of Automation, Chinese Academy of Sciences
    • Bernard J. Jansen, College of Information Sciences and Technology, Pennsylvania State University
    • Jie Zhang, State Key Lab of Management and Control for Complex Systems, Institute of Automation, Chinese Academy of Sciences, Beijing
    • Daniel Zeng, Department of Management Information Systems, University of Arizona

Beyond the Credibility of Electronic Word of Mouth: Exploring eWOM Adoption on Social Networking Sites from Affective and Curiosity Perspectives

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Social networking sites (SNSs) are one of the Web 2.0's most utilized services, and the influential force of electronic word of mouth (eWOM) on SNSs deserves our unequivocal attention. This study aims to explore how users of SNSs adopt information embedded in eWOM reviews shared by other users. Using the stimulus-organism-response model and affect-as-information theory, we devised and tested a theoretical framework linking both a cognitive path and an affective path to approach eWOM adoption on SNSs. Two curiosity constructs—informational deprivation epistemic curiosity (D-EC) and interest-type epistemic curiosity (I-EC)—are regarded as moderators of the cognitive path and the affective path, respectively. Data collected from 445 respondents support all of our hypotheses. The results show that beyond the conventional cognitive path (cognitive stimuli and the credibility of eWOM), the affective path (affective stimuli and arousal) can also contribute to eWOM adoption. We also find that SNS users focus on different stimuli of SNSs, depending on their levels of D-EC and I-EC. Our findings provide new perspectives to SNS designers and users on how to manage eWOM reviews on SNSs.

  • Content Type Journal Article
  • Pages 67-102
  • DOI 10.2753/JEC1086-4415180303
  • Authors
    • Yu-Hui Fang, Department of Accounting, Tamkang University, New Taipei City, Taiwan

Assessing Strategic Behavior in Name-Your-Own-Price Markets

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Name your own price (NYOP) is an interactive pricing mechanism in electronic commerce that lets both buyers and sellers influence the selling price of a product. Until now, research has focused mainly on optimizing either the buyer's or the seller's strategy, without considering learning effects or interactions between the two sides in the process. However, these aspects are vital: If participants behaved as game theory suggests (i.e., anticipating their counterpart's actions), buyers would place their bids very close to their assumption about the seller costs. In the long run, this may lead to deals at low prices, leaving sellers little surplus and thus no incentive to sell via NYOP. In this paper, we present a game-theoretical model that incorporates interactions between buyers and sellers as well as learning effects. We assess its applicability in a laboratory experiment simulating a common NYOP design. We find that sellers quickly learn to set lower reservation prices, which ultimately increases the total surplus. Buyers, realizing that they can close deals at lower prices, place lower bids over time. Their bids are based mainly on their knowledge of the seller's costs, not on their own willingness to pay. However, buyers are risk averse in that they prefer to settle a deal rather than break it off. These findings are good news for NYOP sellers and show that NYOP can be a sustainable pricing mechanism even in the long run.

  • Content Type Journal Article
  • Pages 103-124
  • DOI 10.2753/JEC1086-4415180304
  • Authors
    • Sebastian Voigt, Chair of Information Systems—Electronic Markets, TU Darmstadt, Germany
    • Oliver Hinz, Chair of Information Systems—Electronic Markets, TU Darmstadt, Germany

Managing Service Quality in Multiple Outsourcing

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Service operations, such as call centers and various business processes, are often outsourced by e-commerce companies and others to offshore locations for many operational reasons, including cost savings. The trade-off these companies face is lack of control over the service quality, which has affected customer satisfaction in many cases. When a customer's call is routed to a third-party call center rather than handled by the firm itself, the perception of quality loss could be a source of customer dissatisfaction. The problem intensifies when multiple call centers are involved. In our analytical model, the firm uses a contract for the allocation of quantity to motivate the two suppliers to improve their quality. Our results show that such a contract can induce an improvement in service quality in the market. In this way, the outsourcing firm's customers who use the call centers are assured of a higher level of consistent quality even if their calls are routed to one of the third-party call centers. We present analytical results on the optimal policies of both the buyer and the suppliers in a two-supplier market. We also study a more realistic asymmetric information case in which the buyer does not know the value of the suppliers' cost parameter and the buyer has to design a contract under information asymmetry. We also present numerical results. The paper contributes to theory by providing a game-theoretic model for a two-supplier outsourcing case with and without information asymmetry in which a new volume allocation strategy is proposed. The results provide practical guidelines to an outsourcing firm for ways to manipulate market variables to influence the suppliers and obtain higher service quality and profit levels.

  • Content Type Journal Article
  • Pages 125-149
  • DOI 10.2753/JEC1086-4415180305
  • Authors
    • Guangliang Ye, Hanqing Advanced Institute of Economics and Finance, Renmin University of China
    • Xiaowei Zhu, West Chester University of Pennsylvania
    • Samar K. Mukhopadhyay, Graduate School of Business, Sungkyunkwan University, Korea

Introduction to the Special Issue Information Technology in Retail: Toward Omnichannel Retailing

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The increased deployment of new technologies such as smart mobile devices and social networks and the growing importance of in-store technological solutions create new opportunities and challenges for retailers. As the line between online and physical channels is blurred, a new approach to channel integration is emerging—the omnichannel, which aims to deliver a seamless customer experience regardless of the channel. This introduction presents the results of focus group discussions on the role of information technology in retail, new business models, and the future role of traditional stores as e-commerce advances. Key issues that emerged from the discussion include the need for channel integration, the impact of mobile technologies, the growing role of social media, the changing role of physical brick-and-mortar stores, the need to respond to diverse customer requirements, the balance between personalization and privacy, and, finally, supply chain redesign. The four papers in this Special Issue explore these themes further.

  • Content Type Journal Article
  • Pages 5-16
  • DOI 10.2753/JEC1086-4415180400
  • Authors
    • Wojciech Piotrowicz, Faculty of Management, Saïd Business School and Wolfson College, University of Oxford
    • Richard Cuthbertson, Saïd Business School, University of Oxford, UK

Engineering the Value Network of the Customer Interface and Marketing in the Data-Rich Retail Environment

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In this paper we use a mixed-methods engineering approach to analyze how traditional retailers can use mobile commerce services to enable data-driven marketing and thus compete with the pervasive end-customer ownership of companies controlling the mobile channel. The paper provides the first systematic analysis of the implications of the virtual world market players Apple, Google, Facebook, eBay/PayPal, and Amazon on traditional retailers' business. We use case study research to identify the elements that are required for and suitable to such a strategy. In a second step, we use design science in order to identify and develop the necessary value creation roles, their activities, and the value flows between them. The paper provides two major outcomes: (1) a set of 12 building blocks for generating and applying customer data for traditional retailers adding mobile services and (2) a role-based reference model for the value network of the future retail customer interface and marketing (CIM). The reference model is validated with expert interviews. As an exemplary application of the model, we show two extreme scenarios with strong and weak retailer market positions. As an additional contribution to practice, we present a further introspective analysis of the value network's key new role—that of mobile customer relationship management service provider—and propose a corresponding functional component architecture that fulfills the information technology requirements for the role's complex functionality.

  • Content Type Journal Article
  • Pages 17-42
  • DOI 10.2753/JEC1086-4415180401
  • Authors
    • Key Pousttchi, Business School, University of Augsburg
    • Yvonne Hufenbach, Wi-Mobile Research Group

Drivers and Technology-Related Obstacles in Moving to Multichannel Retailing

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Multichannel retailing has emerged as a key strategic issue for most retailers. Yet, while there are many drivers associated with retailers' going multichannel, so too are there technology-related obstacles. By using a multicase approach to understand the key drivers and technology-related obstacles associated with retailers' moving to multichannel retailing, our study makes two key contributions. First, we extend prior theory by providing novel empirical insights into the main drivers underpinning retailers' use of a multichannel strategy. We find that meeting customer needs and increasing sales are the primary drivers behind retailers' use of the strategy, although there is diversity in the way retailers respond to these motives. Second, we provide empirical support for a proposed theoretical framework that summarizes the key technology-related obstacles retailers encounter, by stage of implementation, when going multichannel. The framework reveals that retailers face technology-related obstacles when implementing a multichannel strategy due to the need to switch/acquire resources and achieve channel integration. Furthermore, the framework highlights that these resource and channel integration issues are often interrelated with one another and with other staff engagement and cultural issues, vary by retailer and stage of implementation, and pose greater obstacles to retailers' use of new and multiple channels than the extant literature suggests.

  • Content Type Journal Article
  • Pages 43-68
  • DOI 10.2753/JEC1086-4415180402
  • Authors
    • Julie Lewis, Nottingham Trent University
    • Paul Whysall, Nottingham Business School, Nottingham Trent University
    • Carley Foster, Nottingham Trent University
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